New York Forex Report: May Calls June Election, Sterling Soars

New York Forex Report: May Calls June Election, Sterling Soars

New York Forex Report: Out performer during London trade was GBP which sold off on the announcement of an unscheduled Downing Street statement, the statement saw UK PM May call for a snap election on June 8th, post announcement sterling has surged to three month highs. The PM had previously indicated little support for an early vote but considers the decision a chance to strengthen her government’s hand in the Brexit negotiations. It also takes advantage of the lamentable state of the main opposition Labour party; recent polling has put support for the Conservatives 21 points ahead of Labour (44% versus 23%, according to a Times survey Monday). Elsewhere USD mixed against its major peers. The JPY is a modest out performer on safe-haven demand while the AUD has slipped sharply on weak commodities and dovish RBA minutes. The CAD has slipped alongside the AUD on lower crude but strong data from China earlier this week are perhaps helping keep the NZD better supported.

USD US markets finally saw a relief rally. Fed Vice Chair Stanley Fischer said that the Fed’s plan to shrink its balance sheet size is not likely to result in major market disturbance as the case of taper tantrum back in 2013. On the data front, Empire manufacturing index dropped from 16.4 in March to 5.2 in April, suggesting that pace of acceleration in the manufacturing sector is softening at the start of the second quarter as strong dollar weighs down on demand for US made goods overseas. On another report, NAHB housing market index slipped from 71 in March to 68 in April. March reading was the highest in eleven years and even with a weaker reading in April, the property market remained resilient as job gains and low mortgage rates fuelled demand for properties. The Dollar Index bounced off its intraday low and narrowed losses to 0.22% at 100.29 as buying support returned in US trade.

EUR Final market positioning ahead of the French primary election on Sunday April 23rd may combine with key data to drive European markets toward the forefront of international market risks over the coming weeks. The first round of French Presidential elections is turning into a four-horse race complete with late inning momentum shifts favouring what was previously a dark horse candidate. The latest polling gives a very slight edge to National Front Leader Marine Le Pen with Emmanuel Macron nipping at her heels. The close polling results and the lacklustre track record of pollsters across key global elections leave just about any combination of two candidates as possibilities for the second round on May 7th.

GBP Friday brings UK retail sales data for March. Some of the solid gain in February are expected to be taken back. Recall that sales volume excluding auto fuel climbed by 1.3% MoM in February. If sales cooled, it could tamp down some of the hawkish enthusiasm that characterised the prior report and lean more in the direction of concerns about the sustainability of consumer spending given weak inflation adjusted income gains.

JPY US Treasury Secretary Steven Mnuchin lauded that dollar strength is good for the long term. He also further commented that President’s Trump remark on excessive USD strength was referring to the short term. The walk back on Trump’s comments saw a sharp reversal in USDJPY yesterday in thin trading conditions, traders will be watching for follow through today as European desks return from the holiday weekend.

Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: -3 Day View – 1.0620 becomes support as this contains corrections 1.0760 becomes the next upside objective, below 1.06 resets focus on downside objectives 1.05 should be tested next, over 1.07 opens 1.0860.

1-3 Week View – While 1.10 contains corrective attempts higher focus remains on a retest of 1.03 ahead of 1.0118 extension objective form 2015/17 consolidation. Only over 1.14 sets upside focus on 1.1876
Retail Sentiment: Bullish
Trading Take-away: Short

Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – quick move to symmetry swing resistance sited at 1.2544 achieved 1.2615 is the next upside objective in a return to the established 1.26/1.24 range

1-3 Week View – While below 1.2864 bears set sites on 1.10 as the broader downside objective, a weekly closing breach of 1.2660 will set up a move to test the weekly bearish line in the sand
Retail Sentiment: Bearish
Trading Take-away: Long

Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View 108.43 equidistant swing objective to the achieved, near term resistance is sited at 109.58, only over 112 stems selling pressure

1-3 Week View – as 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Bullish
Trading Take-away: Short

Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View – , 114.65 becomes the next downside objective as 116.50 contains upside reactions. Only over 120.50 arrests near term selling pressure.

1-3 Week View – The weekly close below symmetry swing support sited at 117.69 sets a bearish tone with 113.70 the medium term downside objective , a weekly close above 118.50 would arrest the immediate downside risk.
Retail Sentiment: Neutral
Trading Take-away: Neutral