New York Forex Report: Risk Assets Rally As Easing Expectations Grow

New York Forex Report: Risk Assets Rally As Easing Expectations Grow

New York Forex Report: Extending gains from Friday’s bumper NFP reading, risk markets continue to rally over the first half of the week boosted by growing expectations of further easing. The re-election of Japanese PM Abe to the Upper House gives the green light to further stimulus for the failing economy with officials noting over night that a full stimulus package will be compiled by the end of July, in time for the BOJ’s July rates meeting. Traders are also expectant of further easing to be announced by the BOE on Thursday, which alongside the confirmation of new British PM Theresa May, is adding further support to risk sentiment seeing GBP soaring across the board.

FX Majors: EUR International Monetary Fund (IMF) calls for action over concerns relating to bail-in of retail investors in Italy, in statement after regular review of the country’s economy. IMF notes “very high” amounts of non-performing loans and slow judicial processes are straining bank balance sheets. Italy’s economic recovery “is likely to be prolonged and subject to risks”, with growth projected to reach 1.1 percent this year and 1.3 percent in 2017, the IMF said . GBP strengthened against the USD as UK Prime Minister David Cameron said his replacement would be installed by Wednesday night, lifting the uncertainty over the nation’s leadership following the Brexit vote. Theresa May, already a senior minister in Cameron’s government, is the sole candidate to replace him after Conservative Party Andrea Leadsom announced she was withdrawing from the contest. JPY Japan’s core machine orders failed to turnaround, extending its decline for a 2nd straight month, falling 1.4% MOM in May, signaling businesses were not yet willing to increase capital spending amid a highly uncertain growth environment. In a separate release, PPI fell 0.1% MOM and 4.2% YOY in June as expected, proving last month’s 0.1% MOM increase as just a blip and that deflation persisted in Japan which warrants further BOJ easing. Indeed, PM Shinzo Abe pledged his plans to increase stimulus to the tune of ¥10 trillion after the ruling party’s victory over the weekend’s election.

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

Technical: Range trade persists, 1.12 resistance 1.10 support, over 1.12 sets target at symmetry swing resistance sited at 1.13, below 1.10 opens 1.09 reaction lows
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Next downside objective is equality swing objective sited at 1.2720. A breach of 1.32 opens 1.3340 as next upside objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Retest of reaction lows attracts anticipated buying interest. A sustained move through 103.50 is required to ease immediate downside pressure.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Daily symmetry and structure resistance is sited at 116.15, this becomes the corrective objective with a breach of near term resistance sited at 115. Near term support comes in at 113.80
Retail Sentiment: Bearish
Trading Take-away: Long

Commodities FX: GOLD price retreated on Monday after the better than expected US jobs report sank in. The gold price declined by US$10.93 to US$1,355.40 on Monday Oil ended lower on Monday (8 Jul) on re-emerging supply worries with prices retreating 2- month lows. Analysts are worried about Asian demand while Baker Hughes reported another increase of US oil rig counts by 10 to 351, the fifth increase in the last 6 weeks. The US Nymex WTI futures declined by US$0.65 to US$44.76. AUD NAB published the June business confidence rising to +6 from +3. Business conditions improved as well to +12 from +10. CAD seasonally adjusted housing starts were 218k in June, compared with a revised 186.7k unit in May. This data, however, only gave a very little support to weakening loonie. The loonie is expected to stay quiet before the BoC rate decision meeting due this Wednesday.

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

Technical: Renewed emphasis on a test of upper end of the range breach of .76 opens .7648 range highs, through here sets bullish sites on .7830 next. Intraday support is sited at .7575.
Retail Sentiment: Bearish
Trading Take-away: Sidelines

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

Technical: Expected near term breach of 1.31 resistance attracts fresh profit taking/selling, below 1.30 opens move back to test range support at 1.28.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: Bulls now target 1391 with 1334 near term support now. Only below 1300 concerns near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: Another sub 46 close threatens medium term bullish bias, below 44 opens 41.87 as the next pivotal downside objective
Retail Sentiment: Bullish
Trading Take-away: Sidelines