New York Forex Report: Last week saw sharp JPY volatility as the BOJ kept policy at current levels, disappointing market expectations for further action, and this week has commenced with heavy AUD volatility as the RBA slashed their headline cash rate a further .25% to stand at 1.75%. Markets fluctuated over the European morning amidst a lack of tier one data as we head into the NFPs at the end of the week.
EUR/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: EUR continued to gain over the European morning benefiting from further USD weakness. No key US data over the NY session today so likely to be a quiet session.
Technical: EUR bulls now target a weekly AB=CD target of of 1.1766, intraday support is now sited back at prior resistance which should now act as support 1.1460/80 area, while this holds expects a grind higher to test previous reaction highs at the 1.1710 level.
Retail Sentiment: Bearish
Trading Take-away: Long
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Fundamental: Sterling retreated from session highs following the release of the lastest UK manufacturing PMI data which printed beneath expectations at 49.4 vs 49.8 expected marking a new three year low.
Technical: 1.4670 achieved bulls now set their sites on the psychological 1.50 levels. Near term support is sited at 1.45. While this area contains downside reactions expect continued upside pressure
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/JPY dropped to an 18-month low printing sub 106. The Bank of Japan governor Kuroda said on Monday that the recent strengthened yen may hurt the local economy while there will have no hesitation to take additional policy if needed to achieve 2% inflation target. Besides, he underlined his readiness to add stimulus if BoJ could not reach its 2% inflation target
Technical: The violent breach of 110 support suggests false upside break and opens a move to retest year to date lows, en-route to the weekly downside objectives of 106.50/105.50. Only over 111.80 eases immediate downside pressure, intraday 107.50 now become resistance.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: Pace of recovery in the manufacturing sector diverged in the euro zone and Japan, suggesting that growth will pick up at varying speed in 2Q with downside risks weighing further on the Japanese economy. Final report from euro area affirmed that the sector expanded at a slightly quicker pace with the index ticking up 0.1 point to 51.7 in April. On the contrary, Japan’s index was down by 0.9 point to 48.2 according to a Nikkei report.
Technical: Bears now target weekly symmetry objective at 120.60. Only a close over 126.80 eases immediate downside pressure. Intraday resistance now sited at 123.30.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bullish
Fundamental: RBA surprised markets overnight with a 0.25% cut in headline interest rates and reduced its inflation outlook. Prior to the rare cut the AUD strengthened against the USD and regained some ground on the JPY in quiet trading with much of Asia closed for the May Labour Day holiday. Post rate cut the AUD fell hard losing over 1%.
Technical: Price re testing .7550 ahead of pivotal .7470/50 support. While .7550 holds expect a recovery and grind higher to retest .7830 resistance
Retail Sentiment: Bearish
Trading Take-away: Long
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Fundamental: USD/CAD rebounded higher over the session as oil continued to move lower in the wake of further data weakness from China at the start of the week.
Technical: With price trading through 1.25, 1.1590 now become intraday resistance, bears now target 1.2350 as the next downside objective. Only a close over 1.2750 eases immediate downside pressure.
Retail Sentiment: Bullish
Trading Take-away: Short
