London Forex Report:
Market risk sentiments improved following renewed surge in equities and oil prices, while dataflow remained very much mixed.
US Empire manufacturing index staged a surprised contraction, pointing to extended brittleness in manufacturing activities as global demand remained lackluster. Slowing new orders exerted a drag on shipment and delivery time. Meanwhile, the firm NAHB housing market index confirmed steady trajectory in the housing market.
USD slipped as risk sentiment improved, buoying commodity majors. The US Dollar Index eased 0.04% to 94.57 at closing, but was visibly off lows after rebounding in US afternoon. USD remains bid as markets anticipate a retreat in market risk sentiment ahead of FOMC minutes to provide upside support; expect bullish bias to accelerate on improvement in US data.
FX Majors:
EUR with a lack of macroeconomic data on Monday. Today, markets focus on the ECB’s Praet's speech due this afternoon, as well as the Eurozone trade balance and the US CPI data due today.
GBP dropped to a three-week low against the USD on Monday while the cost of hedging against the falls in the coming two months surged, amid warnings about the impact of a potential Brexit. Most recent polls about the June’s referendum show the outcome is still too close to call. The latest poll from an agency showed “In” camp holding an eight-point lead over its “Out” rivals.
Japan’s top currency diplomat Masatsugu Asakawa said excess volatility in currency markets may have adverse effects on the economy, the Nikkei newspaper reported on Monday, signaling Tokyo’s readiness to intervene in the currency market if yen rises were excessive.
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Prior support at 1.1350 now becomes resistance while this area contains upside reactions, expect a test of 1.1240 as interim support as bears now target symmetry support at 1.1065, only over 1.1450 eases immediate downside bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Bids ahead of 1.4316 primary symmetry support see GBP surge over night. The short squeeze now targets range resistance at 1.4530. Only over 1.4550 eases immediate bearish bias
Retail Sentiment: Bearish
Trading Take-away: Long
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: As 108.20 supports, expect a retest of offers at prior highs en route to symmetry swing resistance at 109.80, where trend selling should re-emerge. Over 111 eases immediate bearish bias
Retail Sentiment: Neutral
Trading Take-away: Neutral
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.65. Only a close above 126.80 eases immediate downside pressure.
Retail Sentiment: Bearish
Trading Take-away: Long
Commodities FX:
Gold finished almost unchanged at $1,274.16 an ounce, after as much as 1.2% to a one-week high of $1,288.83 in early NY trade, as a building risk-on sentiment on Monday trade reduced the appeal for gold.
Oil hit six-month highs overnight, with WTI futures rising by $1.51, or 3.3%, to end at $47.72, near session highs of $47.98.
AUD slumped to multi-month lows against major currencies on Monday after soft Chinese economic data and falling iron ore prices knocked out the commodity currencies.
CAD gained against USD yesterday amid oil prices rallying to a six-month high yesterday, and Canadian home sales jumped in April to their highest level ever.
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: .7240 level survives on a closing basis, and the anticipated window to correct the recent pullback to test symmetry resistance sited at .7580 is in play. Intraday resistance is sited at .7400
Retail Sentiment: Bullish
Trading Take-away: Sidelines
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.30 upside objective achieved expected a correction to retest 1.2740/60 is underway. This level should now act as support for further upside corrective action.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Gold has tested and held the 1260 symmetry swing level. 1283 is now resistance for a further leg of corrective price action to set up a test of the pivotal 1240. A close over 1285 suggests early upside reversal targeting a retest of 1303 next.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: As 46.70 supports 50.00 becomes the material upside objective, with a symmetry swing target sited at 50.51 ahead of the larger AB=CD swing objective at 51.09. Only a close below 43.00 threatens bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
