London Forex Report: The US markets return from their 4th of July Independence Day holiday with a moderately packed data docket on Tuesday (5 Jul) but the focus is likely on the New York Fed President William Dudley (permanent FOMC voter) speaking in New York on Tuesday. The USD Index fall throughout the US holiday session was cushioned by a moderately higher opening to close unchanged at 95.64.
FX Majors: EUR continued to move with a bullish bias, recovering after the decline that followed the UK referendum. Despite rising for the fourth time in the last five trading days, it only accumulated a gain of less than 150 pips. GBP UK Chancellor of the Exchequer George Osborne told lawmakers that more money might be made available to banks for lending to companies, and floated the idea of a lower corporate tax rate in an interview.
Bank of England Governor Mark Carney is set to make his third appearance in 12 days today to address the threats facing the financial system. He’ll outline the macroprudential tools available to support the economy and may ease capital requirements for lenders. JPY companies’ inflation expectations dropped slightly in June from three months earlier, according to Bank of Japan’s tankan survey showed, adding growing concerns over its argument that QQE will help boost the price growth to its 2 percent goal. Investors believe BoJ will probably have to cut its inflation forecasts again in this month.
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 post referendum lows, a close over 1.1250 is required to ease near term bearish bias. Intraday support is sited at 1.1090
Retail Sentiment: Bearish
Trading Take-away: Sidelines
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 1.3120.
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 caps upside reactions expect a test of near term support sited at 101.40.
Retail Sentiment: Bullish
Trading Take-away: Short
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – 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 113.40, with pivotal corrective support at 111.90
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold rallied strongly on Monday as investors digested BOE Governor Mark Carney’s comment last week as signaling more BOE monetary stimulus could be on the way this summer while Bank of Japan will also add more monetary easing soon. The gold price increased by US$9.44 to US$1,350.79.
Oil futures fell 0.5% to $48.76 after comments by Saudi Energy Minister Khaled Al-Faleh that the market was heading toward balance were counterbalance by signs of decelerating demand in Asia.
AUD RBA taking account of the available information, the Board judged that holding monetary policy steady would be prudent at this meeting. Over the period ahead, further information should allow the Board to refine its assessment of the outlook for growth and inflation and to make any adjustment to the stance of policy that may be appropriate CAD strengthened to a 10-day high against the USD as traders grew more comfortable with Brexit, while soft domestic figures was insufficient to raise prospects of a Bank of Canada rate cut.
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – 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): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.29 support now acts as resistance expect rotation into lower end of the broader 1.30/1.2680.
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 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 51.60’s highs.
Retail Sentiment: Neutral
Trading Take-away: Neutral
