London Forex Report
US new home sales surprised with a hefty 16.6% MoM jump to 619k units in April, its highest in eight years. Adding to the positive data, the last two month's sales were revised up by a net 39k. This, in line with recent spikes in housing starts and to a lesser extent, continuous albeit more moderate increase in existing home sales, bolstered hopes the US economy is on a steadier growth path that could reinforce the case for a June Fed rate hike. dx approached a 10-week high against EUR. The USD Index is approaching the 95.80 level after the release of new home sales data.
FX Majors: Eurozone ZEW survey showed a less optimistic outlook with the expectation reading retreating to 6.4 in May from 11.2 in April, even though the current situation index were more upbeat at 53.1 in May from 47.7 in April, suggesting improvement in Euro-area GDP growth. Yesterday’s release showed the German economy expanded further by 0.7% QOQ, boosted by acceleration in investment growth. GBP Sterling strengthened for the first time in three days amid evidence that the campaign to keep Britain in the European Union is gaining strength as a poll showed that older voters, previously found to back leaving the bloc, are switching sides. The pound scored a three-month high against the euro as Bank of England Governor Mark Carney told lawmakers that the 23 June referendum is creating “substantial” uncertainty for the economy, while insisting he has a responsibility to highlight risks. Japanese Finance Minister Taro Aso said Japan has no intention of seeking to depreciate the yen sharply and consistently, and that it would be desirable from Japan’s point of view if the USD/JPY settled at around 109 or approximately where it is now and markets believe that Japan may take further steps to curb recent strong appreciation in the yen.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: Prior support at 1.1180 now becomes resistance while this area contains upside reactions, bears target symmetry support at 1.1065, only over 1.13 eases immediate downside bias.
Retail Sentiment: Bullish
Trading Take-away: Short
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Whipsaw price action resolves to the upside as 1.4550 supports downside reactions anticipate a retest of 1.4660 offers and stops above en route to 1.4770. Failure at 1.4530 opens retest of 1.4440 bids.
Retail Sentiment: Bearish
Trading Take-away: Long
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Retest of offers at 110.60/90 see sellers emerge, the subsequent failure at 109.50 opens a move to retest bids back towards 107.50, a close over 111.90 eases immediate bearish bias. Current price action suggest the move from105.50 is the first leg of a larger correction.
Retail Sentiment: Bearish
Trading Take-away: Long
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.20 only a close above 126.80 eases immediate downside pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold fell to the lowest in more than five weeks as hawkish comments from Fed officials in the previous session sent the dollar to a two-month high against a currency basket. Oil prices fluctuated during the session, but showed signs of recovery as traders awaited US stockpiles data. Prices have been weighed down by a strong dollar, and glut concerns as production from top exporters increases. AUD RBA Governor Steven defended the central bank’s inflation target and said the framework had proved a successful tool in deciding interest rates. The RBA cited low, broad based inflation as the trigger behind reducing the cash rate to a current low of 1.75% on May 3. Steven added that “nobody could control inflation in the “very short term and should not try”. CAD Higher oil prices aided the Canadian dollar to stabilize against the broadly firmer USD after the currency weakened to an earlier seven-week low on Tuesday. Canada’s central bank is expected to hold interest rates at 0.50 percent tonight but strike a more doveish tone due partly to the wildfire in Alberta that interrupted oil production.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: .7240/60 support erased now becomes intraday resistance as bears target .7050 as the next downside objective. Only a close over .7400 eases immediate downside pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.30 supports bulls target offers at 1.3210 as the next upside extension target. Only a close below 1.2760 eases immediate bullish pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: The medium term bullish bias is under assault with the close below symmetry support at 1230. While 1240 acts as intraday resistance 1207 is the next downside objective ahead of 1190.
Retail Sentiment: Bullish
Trading Take-away: Short
US OIL
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 51.07, only a close below 43.00 threatens bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
