New York Forex Report: USD Stable Ahead of FOMC Statement

New York Forex Report: USD Stable Ahead of FOMC Statement

New York Forex Report: The USD is marginally higher on the session so far and while movement is limited overall, the big dollar continues to show tentative signs of a stabilisation in its recent decline. On the session so far, global stocks are (mostly) positive and developed market bonds have recovered some of yesterday’s losses. Crude is firmer after the API inventory data while gold is lower. The “risk on” mood has weighed on the CHF (after the SNB said the currency was over valued yesterday) while weaker than expected CPI data undercut the AUD. For the session ahead, look for calm markets at least until the Fed policy decision this evening. There is no press conference and no forecast update, leaving markets to scrutinise the policy statement itself for clues on the Fed’s state of mind with regard to two main issues—inflation and the balance sheet. The statement does not allow for an expansive view of the economy but the USD will take its cue from any reference to the inflation outlook and/or firmer indications regarding when the Fed will start to wind down the balance sheet.

USD US senate passes procedural measure that allows further action on healthcare bill, only small step forward politically but comes against a backdrop of no good news priced into dollar, US yields make higher high for first time in eight days. On the data front the S&P CoreLogic Case-Shiller gauge of house prices in 20 US cities showed that values increased more moderately by 5.58% YoY in May, a tad softer than 5.77% in April; this is in line with recent reports suggesting that the housing sector remains somewhat on a backpedal of late. On the brighter side US consumer confidence and manufacturing growth improved in July. Conference Board index climbed to 121.1 in July, up from 117.3 in June and against an expected dip to 116.5, a sign of better sentiment amongst consumers that could potentially translate into increased spending. Meanwhile, manufacturing sector in the Richmond Fed district grew at a quicker pace, as indicated by an increase in the index to 14 in July, up from 11 previously. Growth in the US manufacturing sector sustains at a relatively robust level as revealed by recent data.

EUR The IMF has urged the ECB to maintain its stimulus programme, backed by warnings of downside risks to growth in the Eurozone and soft inflation. Published in a report, the IMF stated that current policy should be maintained “until there is a sustained rise in the inflation path towards the ECB’s price stability objective”. Nonetheless, the IMF shares a similar view with ECB’s recent upbeat outlook, stating that the region’s recovery is “firming and becoming broad-based

GBP UK’s CBI business survey reflected strong optimism amid rising output and growing exports but markets are keeping expectations in check ahead of Wednesday’s Q2 GDP data which is expected to the economy picking up modestly (+0.3% QoQ, versus Q1’s +0.2%). BoE economist Haldane is speaking this evening.

JPY Spreads remain a dominant driver for JPY however the lack of any significant movement in response to the release of the BoJ minutes for June. Risk is elevated into the completion of the FOMC’s two day meeting as market participants assess balance sheet plans and consider the implications for long-term yields. Domestically, there are no major releases ahead of Friday’s CPI release

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

Technical: 1-3 Day View – 1.1713 achieved as 1.1610 supports expect a retest of offers and stops above the cycle high with 1.1684 act as the key intraday upside hurdle , only a daily close below 1.1480 concerns the near term bullish bias setting a top for a test of 1.1370

1-3 Week View – While 1.0830 supports 114.30 becomes the primary upside objective. The weekly close over 1.1450 sets upside focus on 1.1876. Weekly close below 1.08 neutralises bullish objectives.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – As 1.3060/80 now acts as resistance 1.2810 becomes the downside objective over 1.3080 resets focus on pivotal 1.3238, a daily closing breach of 1.2810 concerns the medium term bullish bias.

1-3 Week View – The weekly close above 1.3045 targets the broader symmetry swing objective sited at 1.3238 only a close back below 1.28 would jeopardise the bullish advance
Retail Sentiment: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – Pull back extends and threatens reversal with the breach of 112.10 delaying the bullish target at 115.50 and opening a move back towards 109, 112.40 is the immediate upside hurdle with 111.40 the near term support.

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: Neutral
Trading Take-away: Neutral

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

Technical: 1-3 Day View – 128 provides platform for a move through 130.70/80 en-route to 133.36, below 129.40/20 resets 130/128 range trade

1-3 Week View – The weekly close above 118.50 arrested the immediate downside risk, 129.44 upside objective achieves as 128 supports bulls look for a move to test 133.36 as the broader upside objective.
Retail Sentiment: Bearish
Trading Take-away: Long

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