New York Forex Report: Risk Reassessment Into Triple Threat Thursday

New York Forex Report: Risk Reassessment Into Triple Threat Thursday

New York Forex Report: The USD is mixed against most of its G10 peers this morning but the mood feels a little risk averse overall as European equity markets are broadly lower, developed market bonds are well bid (US 10Y bond yields falling 2 -3bps) while the JPY (+0.9% versus the USD) and gold have stormed ahead in otherwise quiet trade. Traders are perhaps pre-empting this week’s key events, the UK election, the ECB policy meeting and former FBI Director Comey’s testimony, as there is no obvious catalyst for the move towards safe haven assets. The move is not universal; the NZD is a notable out performer on the day despite the broader mood swing and weak NZ construction data for Q1. The AUD is under-performing modestly after the RBA left policy unchanged but the Q1 current account posted a larger than expected deficit. The North American data schedule is limited to the JOLTS data from the US and Canada’s Ivey PMI data today so markets are likely to stick with the current theme and trends, unless US equity markets can turn the mood around.

USD US services sector will remain a catalyst for growth this quarter, underlying details from ISM services suggest. The index softened to 56.9 in May (April: 57.5) but remained well above 50, the threshold separating expansion from contraction. New orders pulled back from more than a ten-year high reached in April but services providers were increasing the size of their work forces amid brighter economic outlook. A final reading of the Markit services PMI surged to 53.6 in May (April: 53.1), affirming the trend of economic recovery. Factory orders dropped 0.20% MoM in April, snapping four straight months of expansion. In March, orders increased 1.00% from a month ago. Disappointing durable goods orders, which declined 0.80% MoM in April, the heaviest drag to overall factory orders

EUR Eurozone remained in expansion territory, signalling that downside risks from Brexit negotiation remains broadly contained at this juncture. Eurozone services PMI stood at 56.3 in May (April: 56.4). The services sector expanded at its quickest pace in six years in April.

GBP The UK’s Markit PMI services-sector index declined to 53.8 for May from 55.8 the previous month. This was below expectations of a smaller decline to around 55.0 and the weakest reading for three months. On the political front opinion polls have been all over the place with some showing a resounding victory by UK PM Theresa May while other see a closer battle between Conservative and Labour that could make calling the snap election the worst mistake under her watch. UK pollsters have not endeared themselves to markets by missing the victory of David Cameron in 2015 and the results of Brexit in 2016. The snap election on June 8 may curb the near-term recovery in GBP should Ms. May fail to establish a more unified government.

JPY Japan Nikkei services PMI climbed to a 21-month high of 53.0 in May (April: 52.2) as new work rose at a quicker pace, leading to an increase in work backlogs and encouraging companies to increase the size of their workforce.

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

Technical: 1-3 Day View – Breach of 1.12 refocuses bulls on equidistant swing objective of 1.1291 en-route to a test of broader symmetry swing objective at 114.30. Only below 1.11 concerns near term bullish bias opening a move back to test 1.1020.

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. A weekly close over 1.14 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Symmetry swing objectives at 1.3060 & 1.3118 are targeted a close below 1.2750 concerns near term bullish bias and opens a move back to test the 1.26 pivot, the near term upside hurdle is sited at 1.2920

1-3 Week View – The weekly closing breach of 1.2880 opens 1.30 as the next upside objective ahead of the broader symmetry swing objective sited at 1.3238.
Retail Sentiment: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – 110.20 breach negates near term upside prospects opening a retest of 1.0940, near term as 110.30 contains upside reactions 108 will be a key downside objective.

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

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

Technical: 1-3 Day View – 129.44 is the medium term upside objective, near term support is sited at 123.10, near term upside objective of 126.84 equidistant swing objective, only below 122 concerns near term bullish bias.

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, resetting focus on pivotal 124.40 a weekly breach of this level opens 129.44 as the broader upside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral

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