Market Commentary
Central banks take centre stage this week with the FOMC undoubtedly the key event of the week. Markets are still undecided on whether the Fed is going to lift the target fund rate by 25bps. Traders remain seemingly confident that the Fed will not raise interest rate in September. Implied Futures shows that markets are only pricing in a 28% probability of a hike at this week’s meeting.
USD remains soft, tracking softer than expected PPI, Uni. of Michigan consumer sentiment (fallen to lowest level for 2015). The euro was almongst the best performers in the currency market last week while the USD finished lower ahead of the Fed decision. EUR/USD ended last week 150 pips above last weeks open and traded at the highest level in two weeks.
GBP/USD maintained its bid tone above the 1.54 handle. MPC members voted 8-1 in favour of keeping policy rate and asset purchase unchanged, as expected. BoE minutes last Thursday revealed recent global events hadn’t altered the MPC’s central view, but that they require close monitoring.
USD/JPY remains bid, trading above the 120 handle as speculations renewed that the BoJ could move to ease policy further at its October meeting. This followed from the comments by a PM Abe advisor and ruling party lawmaker on Thursday that the BoJ should act to meet its 2% inflation target.
Technical Commentary
EUR/USD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- Testing the upper end of the broader 1.14/1.11 range as offers towards 1.14 cap upside advance look for retest of bids towards 1.1250
- Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology bullish but stalling
- Monitoring intraday price and Order Flow indicators on a test of 1.1250 or 1.14
GBP/USD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- The close above 1.54 targets pivotal 1.5550 while 1.5350 caps intraday downside reactions expect sustained upside to test 1.5550 offers ahead of 1.57
- Daily Order Flow bullish; OBV sideways, Linear Regression and Psychology bearish but positively orientated towards retesting midpoint from below
- Monitoring intraday price action and Order Flow indicators on a test of 1.5350 or 1.5550
USD/JPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
- As 121.50 caps upside expect retest of 119.50. Only a close back above 122.50 relieves downside pressure
- Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology bullish but rolling over to test midpoints from above
- Monitoring intraday price action and Order Flow indicators on a test of 119 or 122
EUR/JPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- While 135 supports intraday downside reactions expect a retest of range resistance towards 138.50. A failure at 135 would target a breach of 132 next
- Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology bullish but stalling
- Monitoring intraday price action and Order Flow indicators at 138 or 132
