London Forex Report
Markets remained in risk-off mode in the absence of major economic releases as last Friday’s soft headline payroll data continued to stir concerns over the timing and pace of Fed rate normalization. This coincides with dovish comments by Fed Evans calling for continued wait and see approach in monetary policy to ensure growth sustainability and that he would welcome a temporary overshoot in inflation. Minneapolis Fed Chair Neel Kashkari also signalled his support for cautious approach to rate hikes as keeping interest rates low would continue to boost jobs growth. USD advanced supported by speculation that the Fed remains on track for rate hike and amid extended weakness in commodities majors. The USD Index climbed steadily through all sessions, somewhat backed by risk aversion in JPY, to close 0.26% higher at 94.12.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: EUR fell to a low of 1.1373 in the European session, but momentum was lacking either side of the board and the subsequent bounce was capped by the 1.1420 barrier. European finance ministers debated for the first time measures to ease Greece’s massive debt burden amid concern the International Monetary Fund might withdraw from the bailout talks.
Technical: EUR bulls back under pressure with the failure at 1.1450, the next support level to be tested will be the symmetry support at 1.1368 failure here opens a return to retest 1.1240 support,
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: GBP dropped to a two-week low against USD on Monday since polls showing that the outcome of a race between those who want to stay in European Union and those who want to leave was on a knife edge. Traders dumped Sterling based on a report on Sunday pointing that BoE Chairman Carney would cut rates in the event of Britain choosing to leave in the June referendum.
Technical: The failure at 1.4470 opens a deeper correction to 1.4280 next. Intraday resistance is now sited at 1.4540/60
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: The USD/JPY hit a one-week high of 108.60 yesterday after Japanese Finance Minister Taro Aso said that BoJ is ready to intervene in the currency market if JPY moves are volatile enough to hurt the country’s trade and economy.
Technical: 105.50 weekly swing objective achieved, 107.50 resistance now becomes support as the corrective move aims to retest 110 from below.
Retail Sentiment: Bearish
Trading Take-away: Long
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: A survey on Japanese households showed most households felt that economic conditions were worsening in April. Consumer confidence index tumbled to 40.8 last month (March: 41.7) and remained well below the threshold separating expansion from contraction. A downturn in confidence level may hamper household spending, posting drag to growth in Q2.
Technical: Bears now target weekly symmetry objective at 120.60. The breach of intraday resistance at 123.30/50 targets 126.80 a close above here eases immediate downside pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: AUD bounced off lows in morning session yesterday after recent sharp falls but failed to hold the gains. The Aussie fell more than 3% last week after the Reserve Bank of Australia (RBA) lowered its inflation forecasts, prompting markets to price in more rate cuts. Australian job advertisements eased in April, providing further signs demand for labour had peaked after the strong run in 2015.
Technical: The failure at .7450 opens .7330 as the next downside objective intraday resistance is sited at .7490, this level is pivotal for the upside correction to be maintained.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Fundamental: CAD weakened to a more than four-week low against the USD as China’s trade figures disappointed and oil prices turned lower. The loonie dropped 4% from a ten month high last week after weaker-than-expected domestic trade figures and wildfire-driven oil production cuts in Alberta’s oil sands region hurt Canada’s economic outlook.
Technical: 1.30 upside objective achieved expected correction to retest 1.2740/60 from above as this level should now act as support for further upside corrective action.
Retail Sentiment: Bearish
Trading Take-away: Long
