London Forex Report: Markets saw risk-off trades across the board yesterday. Global equities dropped and benchmark US government bond yields touched fresh lows yesterday amid concerns over Britain’s voting to exit European Union pushed the pound to a 31-year low, initiating demand for the safe haven assets.
FX Majors: EUR came under renewed pressure and broke below 1.1100 handle to touch fresh daily lows at 1.1058 as the dollar picked up pace across the board on Tuesday. The European Union put its landmark free-trade accord with Canada on a slow track for approval, increasing the risk of a veto amid an anti-globalization backlash across Europe. GBP extended losses at a 31-year low after Bank of England chief Mark Carney’s speech. He pledged to shore up financial stability as he warned that the risks attached to Brexit had started to crystallize. The governor had also pledged to make sure banks have access to all the liquidity they need, and signaled rate cuts could be in the offing this summer. Under his leadership, the Financial Policy Committee lowered the so-called counter cyclical buffer for UK banks to zero from 0.5% of risk-weighted assets, a move it said would raise the capacity for lending to companies and households by as much as 150 billion pounds. JPY demand for safe haven assets gave the yen a broad lift. However, the pair managed to hold above the 24 June low of 99.08. Kenji Nakanishi, an election candidate for Abe’s ruling Liberal Democratic Party (LDP), suggested he sees no need for the BOJ to top up stimulus in the near-term
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.1170 caps upside reactions expect a grind south to retest post referendum lows, a close over 1.1250 is required to ease near term bearish bias. Intraday support is sited at 1.1020 with 1.11 the upside hurdle
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears achieve breach of psychological 1.30 level. Bears have the ball while 1.3698 symmetry resistance remains in place. Inraday support is sited at 1.2790 with 1.3120 near term resistance.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: A sustained move through 103.50 is required to ease immediate downside pressure, as this area capped upside test of near term support sited at 101.40 didn't provoke buy, bears will look to test 99.90 next with intraday resistance sited at 101.40
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Next downside level to watch is 107 with 115.50 near term resistance now. A close over 116 would ease near term bearish bias. Near term support is sited at 110.60, with symmetry swing resistance sited at 112.45
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold classic risk-off move emerged overnight with equities, GBP selling-off; the USD, Treasuries (yields down), gold and volatility rebounded. Oil price fell amid wider market turmoil set off by mounting concerns over the economic impact of Britain’s vote to leave the European Union. AUD The RBA noted in yesterday meeting that any effects on the global economy from the UK referendum remained to be seen. The renewed Brexit fears and Italian bank stability concerns soured risk sentiment yesterday, triggered commodities, equities and emerging assets sold off CAD weakened against a broadly stronger USD, with uncertainty about the resiliency of global economic growth. The Canadian dollar is expected to weaken further over the coming months as uncertainties boosts the US dollar and with oil prices set to remain weak.
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Breach of .7480 the midpoint of the broader .7660/.7300 range places renewed emphasis on a test of upper end of the range. Intraday support is sited at .7430, below here opens move back to .7300 range support.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Range trade persists 1.30/1.28. While above 1.28 expect breach of 1.31 resistance below 1.28 opens broader 1.2660 support
Retail Sentiment: Bullish
Trading Take-away: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: 1361 achieved bulls now target 1391 with 1315 near term support now. Only below 1300 concerns near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Long
US Oil
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Only a close below 46 threatens medium term bullish bias, below .46 opens a test of 44 as next downside objective. As 46.70 supports expect a retest of 51.60s highs.
Retail Sentiment: Neutral
Trading Take-away: Neutral
