London Forex Report: Markets remained roiled in the aftermath of Brexit, although the selloffs in global equities and the sterling were more moderate vs Friday. UK Finance Minister George Osborne sought to calm markets by saying the UK economy was strong enough to weather the volatility triggered by last week’s referendum outcome but I supposed markets have their own views. Flight to safety persisted. Back on the data front, US data was decent but yet, nothing to shout about. PMI services sustained a 51.3 reading in June while Dallas Fed manufacturing contracted at a slower pace. Data suggesting moderate growth outlook reaffirmed that the Fed would be in no hurry to hike. USD remained higher against as demand for refuge continued to rally. USD Index bounced off a moderate retreat in European trade to close higher at 1.15% at 96.54 following extended declines in the markets.
FX Majors: EUR was trading sideways at 1.1000 handle as the markets did not have clear direction after the Brexit referendum, All eyes are now on the European Central Bank Forum. ECB President Mario Draghi will speak on “The future of the international monetary and financial architecture” today GBP dropped to lows of 1.3118 on Monday, the record low which has not seen before due to the uncertainties of the Brexit’s aftermath. Two top ratings agencies have downgraded the Britain’s sovereign credit score, judging last week’s vote to leave the European Union. S&P dropped the grade from AAA to AA and warned more downgrades could follow. The Bank for International Settlements said central banks are ready to cooperate to support financial stability in the wake of Brexit . JPY strength remains a concern for Japanese officals, Bank of Japan said it would respond to extremely volatile exchange-rate moves, signaling a readiness to intervene to stem the JPY strength.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – 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.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Grind lower to retest Fridays spike low achieved as anticipated, with bears now targeting a test of psychological 1.30 level. Near term resistance is site at 1.3350.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: While 102.30 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.
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
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold rose to session high of $1,335.55 an ounce before settling at $1,324.60, up 0.67% for the day as traders continue to seek safe haven in the bullion. Oil fell 2.75% to settle at $46.33, down $1.31 a barrel, weighed by a strengthening dollar and the fallout for the Brexit vote. AUD closed at 0.7322 due to heavy sales overnight as markets were digesting the referendum outcome which has shocked global markets by voting to leave the European Union. CAD weakened to a three-week low against the USD yesterday as Britain’s vote to leave the European Union propelled new shockwaves through financial markets, weighing on Canada’s risk-sensitive currency. Traders cut bullish bets on the loonie for the third straight week, according to the Commodity Futures Trading Commission statistics showed on last Friday. Net long Canadian dollar positions tumbled to 2,595 contracts in the week ended June 21 from 18,440 contracts in prior week
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): Neutral – 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: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Technical: Sharp reversal higher next level to watch on the upside is 1361 en route to a broader 1390 with 1303 near term support now. Only below 1240 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 51.60’s highs.
Retail Sentiment: Neutral
Trading Take-away: Neutral
