London Forex Report: The risk rally continued yesterday. Fading concerns over Britain’s vote to exit the European Union boosted the stock markets around the world, which rebounded for the second straight day.
US data continues to affirm that monetary policy will be staying still in the near term as spending, income and PCE all slowed, while home sales fell more than expected. USD extended its retracement of the post Brexit recent rally, sliding amid continued recovery in market sentiment retreating refuge demand as well as on the back of relatively softer US data. The USD Index slipped steadily throughout trading and ended 0.49% lower at 95.76
FX Majors: EUR EU government chiefs took the historic step of meeting without one of the bloc’s members for the first time, they lamented the British decision to part ways then began to lay plans for a new union without the UK.
That included setting the parameters of Britain’s future relationship with the EU, and insisting that negotiations to finalize secession won’t be started until the UK gives official notification of departure. GBP extended its advance from a three-decade low as investors took advantage of the global market rout to go on a buying spree. Brexit is currently in deadlock because the UK itself must trigger the exit process following its 23 June referendum.
Cameron has said the government must honor the result of the vote, while German Chancellor Angela Merkel has said in Brussels that she sees “no way back” from the Brexit vote. JPY Japan’s gauge of small business confidence rose 0.9 point to 46.5 in June, but sentiments remained broadly cautious amid stalling domestic growth. In a preliminary report, industrial production fell 2.3% MOM in May after inching 0.5% higher in Apr. Annually, output dipped 0.1% YOY, softening from a 3.3% drop previously, but nonetheless showed a continually weak state of the Japanese economy.
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 the spike low of Friday, a close over 1.12 is required to ease near term bearish bias. Intraday support is sited at 1.1030/50
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now targeting a test of psychological 1.30 level. Bears have the ball while 1.3698 symmetry resistance remains in place. Inraday support is sited at 1.3280
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: While 102.70 contains upside reactions expect bears to target a retest of bids sub the pivotal 100 level. A sustained move through 103.50 is required to ease immediate downside pressure. Intraday support is sited at 101.40
Retail Sentiment: Bullish
Trading Take-away: Short
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 111.40.
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold closed 0.5% higher to $1,319.15 with investors still accumulating the safe haven asset on dips to hedge against longer-term financial uncertainty over Brexit. Oil settled $2.03 higher, or 4.24%, at $49.88 a barrel after EIA report that stated crude stockpiles falling for the sixth straight week, by 4.1 million barrels for the week ending 24-June.
AUD ahead of next weeks RBA , focus should be on tomorrow’s China manufacturing PMI which could impact AUD. CAD gained against the USD as global financial markets stabilized for a second straight day following volatility triggered by Britain’s vote to leave the European Union in last week. Stock markets and oil prices built on a recovery as traders bet central banks would ultimately ride to the rescue with more stimulus.
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Recovery from Brexit lows stalls at the pivotal .7480 the midpoint of the broader .7660/.7300 range. While .7480 caps upside reactions expect a further attempt to breach range lows.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.29 supports price appears to be in a bullish consolidation with risk to the upside, with bulls targeting a 1.32 test. Below 1.29 opens 1.2680 range lows.
Retail Sentiment: Bullish
Trading Take-away: Short
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Next level to watch on the upside is 1361 en route to a broader 1390 with 1303 near term support now. Only below 1290 concerns near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USOIL
Outlook: Short Term (1-3 Days): Bullish – 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 51.60’s highs
Retail Sentiment: Neutral
Trading Take-away: Neutral
