London Forex Report: IMF cut this and next year’s growth forecasts by 0.1% to 3.1% and 3.4% respectively, citing uncertainties stemming from Brexit that could have negative impact on the markets, investment, and consumer confidence. USD gained ground against other major currencies as US housing starts rose more than markets’ expectations of 1.17 million, underpinning a theme of strength in the US economy. The USD Index climbed to its highest level since 10 March to 97.148.
FX Majors: EUR Euro zone’s construction output dropped 0.5% MOM in May and marked its fourth straight monthly declines as building projects stalled in Germany, France and Italy. Another survey showed that sentiments hit the lowest level since Aug 2012 after Britain’s vote to leave the EU last month. The index fell from 20.2 in June to -14.7 in July. GBP UK’s consumer prices rose 0.5% YOY in June, exceeding the expected 0.4% YOY increase and quicker than the 0.3% YOY growth in May. Retail prices climbed 1.6% YOY (May: +1.4% YOY) while producers prices fell 0.4% YOY (May: -0.6% YOY), underscoring the rise in price pressure even before sterling’s sharp depreciation after Brexit. With market anticipation BOE to increase its stimulus measures next month, cutting interest rate at this juncture may cause a spike in inflation. Hence, the central bank may resort to increasing its asset purchase size instead of cutting its interest rate. JPY After extending its rally to a fresh 4-week high of 106.52 in early American session, the USD/JPY pair turned south and consolidated overnight, closed firm above the 106 handle. The International Monetary Fund downplayed the need for Japan to weaken its currency to boost economic growth and inflation, saying the yen’s moves have been orderly and that government intervention isn’t advised.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Testing stops below 1.10 range support, sustained move opens 1.09 post Brexit reaction lows. Intraday resistance is sited at 1.1040.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Break below 1.3170 opens 1.30 base retest. Intraday resistance is sited at 1.3130 ahead of pivotal 1.3170.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: While 104 acts as support 106.70 becomes the next upside objective. Only a close below pivotal 103.50 threatens near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: As 116.40 supports bulls target 119.30 as the next upside objective.Only below 115 threatens near term bullish bias
Retail Sentiment: Bearish
Trading Take-away: Sidelines
Commodities FX: Gold moved higher as European shares hit a one-week low after data that showed Britain’s vote on EU membership dented German business confidence. Oil fell as much 1% for a second session in a row as a rallying dollar and a global fuel glut offset forecasts for lower US crude stockpiles. US crude stockpiles fell by 2.3mn barrels last week, trade group American Petroleum Institute (API) reported. That was just above a 2.1mn barrels draw forecast in a Reuters poll. The US government’s Energy Information Administration (EIA) will issue inventory data on Wednesday. AUD RBA July meeting minutes left rooms for easing in the central bank’s next meeting in August. Staff will provide update on inflation, labor market and housing market activity outlook in the Statement of Monetary Policy, allowing the Board to “make any adjustment to the stance of policy that may be appropriate”. With inflation expected to remain quite low for some time and Australian dollar stronger than preferred level, RBA may ease again next month to spur growth. CAD weakened to a nearly one-week low against the US dollar, tracking losses for fellow commodity currencies as oil prices fell and a recent improvement in risk appetite stalled.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Attention shifts back to .7430 as we continue to rotate in a broader .7660/.7340 range. Intraday resistance is sited at .7550
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: 1.2850 pivotal for carving out a potentially bullish base, with higher lows targeting a push higher to 1.32. Below 1.28 opens move back to range lows 1.2650.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Bulls now target 1391 as 1320 bids continue to support. Only below 1300 concerns near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
US OIL
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: 44 acts as pivotal support while this level survives 48.30 become the upside objective. Below 44 opens 41.87 as the downside objective.
Retail Sentiment: Bullish
Trading Take-away: Short
