New York Forex Report: UK Services Data Supports Sterling

New York Forex Report: UK Services Data Supports Sterling

New York Forex Report: The USD is trading mostly lower in the aftermath of the FOMC meeting; no change in rates was expected but the Fed noted that the Q1 slowdown in the economy was likely to be “transitory”, suggesting that policy makers were sticking with the base case referred to by many on the FOMC of two additional rate hikes this year. Markets moved quickly to factor in more fully the risk of a 25bps tightening in June (now more or less priced at 100% probability) via Fed funds futures. The USD is struggling to benefit from wide or widening spreads, however; the USD is gaining against the yield-sensitive JPY (USDJPY near 113). GBP popped higher from the low 1.28s on better than expected UK CIPS services data for April (55.8 vs 55.0 expected). The composite CIPS reading of 56.2 was well ahead of March’s reading and market expectations (of slightly slower growth for April at 54.5) and tentatively suggests slightly stronger Q2 growth. Final Eurozone PMI data came in a little higher than the preliminary report for services (56.4 vs. 56.2) and the composite reading (56.8 vs. 56.7) in April. March retail sales rose a slightly stronger than expected 0.3%. A contentious Macros/Le Pen debate saw the centrist candidate emerge with the perceived “win” ahead of this weekends second and final round elections.

USD Services sector in the US expanded at a quicker pace in April, two separate reports showed. The ISM services PMI rose from 55.2 in March to 57.5 in April while final Markit services PMI surged 0.3 point to 53.1 last month. Previous release from the Commerce Department indicated that unemployment rate dropped to 4.50% in March but ADP employment number was showing signs of slower pace of job gains in 2Q. ADP report indicated that private firms added 177k to payrolls last month followed a downwardly revised 255k in March.

EUR Eurozone GDP rose 0.5% in Q1 (1.7% YoY), in line with expectations. PPI fell a larger than expected 0.3% in March. German unemployment fell a slightly larger than expected 15k in April, maintaining the unemployment rate at 5.8%. Eurozone growth data is positive but has little or no implication for ECB policy makers in the near-term as, ultimately, inflationary pressures remain weak.

GBP UK’s Markit construction PMI signalled an upturn in building activities in April even amid Brexit’s negotiation with the European Union. The final composite output index was revised to 53.2 from the provisional reading of 52.7 and 53.0 for March. There was a slight strengthening in new business growth for April, although it was the second-weakest reading for seven months.

JPY Japan’s Golden Week holidays running for the rest of the week, could keep activity in the JPY somewhat subdued, overall sentiment remains fragile and markets could quickly revert to a risk-off mode in the event of renewed concerns on the geopolitical front.

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

Technical: 1-3 Day View – As 1.0850 supports expect a grind higher to test 1.0982 as the next upside objective. Only below 1.0820 concerns near term bullish bias.

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – As 1.2860/30 supports bulls will focus on a test of psychological 1.30 magnet , only below 1.2750 concerns near term bullish bias.

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

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

Technical: 1-3 Day View – As 1.1080 supports potential to retest 113 descending trend line resistance pivot, only back below 110 would concern the near term bullish bias

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: Bearish
Trading Take-away: Long

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

Technical: 1-3 Day View – Near term support sited at 120.35 as price prepares to test pivotal trend line resistance at 122.35 a close over this level opens 124.40.

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, resetting focus on pivotal 124.40.
Retail Sentiment: Bearish
Trading Take-away: Long

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