London Forex Report: Markets remained in risk-on mode with major stock indices largely higher and Brent crude oil prices inching up further to $52.5/ barrel on expectations of easing oversupply following sabotage in Nigerian oil facilities, overshadowing an increase in US gas inventories. No cheer in the global economy sphere. World Bank has cut its global growth forecast to 2.4% yesterday, down 0.5ppt from the 2.9% estimated in January, citing extended weakness in commodity prices, sluggish demand in advanced economies, weak trade, and diminishing capital flows. Growth in the US and EU were downgraded to 1.9% and 1.6% respectively while that of China was maintained at 6.7% for 2016. USD extended its decline in line with retreat in rate hike expectations. The USD Index fell going into US session before rebounding modestly to narrow its losses to 0.08% at 93.82.
FX Majors: EUR The ECB’s Nowotny said the environment of extremely low interest rates is not the norm, that inflation should be a lot better in 2017, and that he does not expect the oil price to weaken significantly again GBP UK data was much stronger than expected, with industrial production rising 2.0% m/m. The data argue against the need for future rate cuts. JPY Japan’s Eco Watchers current survey for May eased lower by more than forecast with the survey coming in at 43.0 (from 43.5 in April while the forecast is 43.4) but the outlook survey was more positive than expected, coming in at 47.3 (better than the 45.5 in April and the forecast of 45.9).
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Testing symmetry swing resistance sited at 1.140 Below 1.12 suggests false upside break and resets attention on 1.1065
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Volatility pervades GBP trading, avoid positioning mid pre Brexit referendum range of 1.4770/1.4330, play the edges with tight stops
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Downside ratchet now targeting a retest of 105.55 lows with the potential for a daily double bottom pattern to develop. Failure at 105 opens 103 as the next downside objective. 108.50 is the near term pivotal resistance
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: While 122.60 contains upside reactions expect a grind lower to breach last weeks lows enroute to a weekly equality objective at 117.36. A close over 122.70 suggests a broader recovery targeting 124.30 as the next upside objective.
Retail Sentiment: Bullish
Trading Take-away: Short
Commodities FX: Gold price rebounded after a brief marginal decline in the earlier session as the broadly weaker US dollars signaled lower probability that the Fed will hike rates in the coming months. The gold price increased by US$15.40 to US$1259.80 on Wednesday. Oil hit new 2016 highs for the third straight session on Wednesday as there are still continued news flows about Nigerian oil facing potentially lengthy supply disruptions (which already have slashed output in Nigeria from 2.2 million barrels a day to 1.6 million barrels a day) while the latest US crude inventory data confirmed a tightening market picture, with US commercial stocks dropping by 3.2 million barrels for the week ending on 3rd June. AUD China’s exports slipped 4.1% YOY to USD 181.06 billion in May, extending the 1.8% YOY decline in April. Depreciation in renminbi offered some reprieve to exports in yuan terms but prevailing trend suggests that exports will not be a significant contributor to growth this year, heightening concerns that China along with other emerging markets will drag global growth this year. On the other hand, imports fell at a much softer pace of 0.4% YOY last month (April: -10.9% YOY) amid subdued domestic demand. CAD remained bid as oil climbed above $50 a barrel once again.
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Testing symmetry and structure resistance sited at .7480/.7500 where fresh selling is expected to emerge. Failure at .7210 suggest early reversal with bears targeting .7140 lows and stops below.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Close below 1.2740 negates near term bullish pressure and suggests a grind back to test bids at 1.2459 and stops below. A close today over 1.2760 suggest a false break of support.
Retail Sentiment: Bullish
Trading Take-away: Short
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Close over 1250 opens pivotal 1280 resistance as 1230 acts as support. Failure at 1190 opens 1140/50 symmetry targets.
Retail Sentiment: Neutral
Trading Take-away: Neutral
US OIL
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: AB=CD swing objective at 51.07 achieved, only a close below 46 threatens bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
