London Forex Report: The Fed left rates unchanged at 0.50% as expected but left the door ajar for rate hike this year, citing diminished near term risks to the US economy. The Fed has also turned more upbeat about growth assessment although officials remained cautious on the consequences of rate hike as inflation remains below the Fed’s 2% target.
While the FED acknowledge that recent dataflow from the US has turned more encouraging, they prefer to err on the safe side pending more concrete signs of sustainable recovery in growth and prices before changing our view on rate pause this year. Yesterday’s US data was not impressive as durable goods orders extended its declines and pending home sales rose less than forecasted in June.
Durable goods orders tumbled 4.0% MOM in June amid a sharp decline in capital goods orders and showed still lackluster investment that would remain a drag on 2Q growth. USD Index tumbled post-FOMC announcement and erased early gains to close 0.11% lower at 97.02 as markets began to doubt the Fed’s commitment to normalize policy as quickly as initially expected
FX Majors: EUR Federal Reserve’s statement was not strongly pointing toward a September rate hike. The major component in dollar index, euro, surged almost 0.8% after the FOMC meeting GBP UK’s economy grew more than expected before Brexit but may mark a directional turn from stable growth as the vote last month delivered an immediate blow to business and consumer sentiment.
The country expanded 0.6% QOQ in 2Q which was quicker than the 0.40% QOQ pace in 1Q as industrial production registered its biggest increase since 1999. JPY Japan’s Prime Minister Shinzo Abe said that the government will roll out stimulus package worth 28 trillion yen ($ 265.3 billion) which include 13 trillion yen in “fiscal stimulus” comprises of spending by national and local governments as well as loan programs.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Breach of 1.1060 reestablishes range trade and refocuses attention on 1.1185 range resistance as the major near term upside hurdle a close above this level opens 1.14 next.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.3260 represents symmetry resistance while this area caps expect a retest of 1.30 base, with an equidistant swing objective sited at 1.2875. Over 1.3330 shifts attention back to 1.3550 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: While above 104 on a closing basis expect another test of 107.50 offers. Below 104.09 symmetry swing support opens 103.50 as the next downside objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Symmetry swing support sited at 114.49 supports expect retest and breach of 118.46 cycle highs, below 113.50 opens 110.80 as the next downside objective.
Retail Sentiment: Bearish
Trading Take-away: Long
Commodities FX: Gold jumped 1.5% to $1340.08 an ounce, highest levels in 2 weeks, as the dollar lost ground after FOMC. Oil settled down 2.3% to $41.92 a barrel, a fresh 3- month low with most of the losses sustained after the Fed kept rates unchanged.
AUD consumer prices rose at the slowest annual pace since 1999 last quarter while core inflation kept at a record low of 1.5%, well under the Reserve Bank of Australia’s (RBA) target band of 2 to 3% CAD sharp fall in the price of oil weighed on the loonie.
Oil tumbled 3% hitting three-month lows as US crude and gasoline stocks surged on weak demand. The Canadian gross domestic product data will be released Friday. The economy is forecasted to have shrunk 0.4% in the month, hurt by wildfires in Alberta.
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: .7430 supports, as we continue to rotate in a broader .7660/.7340 range, with .7330 representing symmetry swing support. Intraday resistance is sited at .7570
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.32 upside objective achieved, as 1.3080 supports bulls target an equidistant swing objective at 1.3381. Belwo 1.3060 opens 1.2965 symmetry swing support.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Symmetry swing support sited at 1305 prompts reversal, while this area attracts buyers will set a potential platform to challenge and breach 1360 highs en-route to 1391. Below 1300 opens 1270 as next downside objective
Retail Sentiment: Neutral
Trading Take-away: Long
US OIL
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Testing bids at 41.87 downside objective, expect 44.50 prior support to act as resistance, a close over 47.80 required to ease bearish pressure.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
