New York Forex Report: Britain will continue to have access to the European Union’s single market despite voting to leave the bloc, leading Brexit campaigner and favourite to become the country’s next Prime Minister Boris Johnson said in a newspaper article on Sunday. US durable goods orders fell 2.2% m/m sa (mkt: -0.5%) from 3.3% in April. Excluding transportation orders declined 0.3%, from 0.5%; excluding defence equipment new orders declined 0.9% after a 3.7% jump the prior month. In an effort to calm markets the Fed released this dovish statement: “The Federal Reserve is carefully monitoring developments in global financial markets, in cooperation with other central banks, following the results of the U.K. referendum on membership in the European Union. The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy.” It is likely volatility is not ready to fade yet with GBP continuing lower over the European morning on Monday.
FX Majors: EUR pared losses against the USD after touched its lowest level in three and a half months. The euro is expected to struggle given worries about the impact of Brexit on the euro zone economy. Traders expect months of economic and political turmoil, increasing the pressure on UK markets following sterling’s “Black Wednesday” in 1992, when Britain was forced out of the pre-euro Exchange Rate Mechanism, GBP was last down around 8% against the USD at 1.3678, after it recorded its weakest print since before the 1985 Plaza Accord of 1.3228. The Bank of England chief Mark Carney’s comments that the central bank stood ready to provide extra support helped sterling recover. GBP/USD marked its biggest weekly loss since January 2009. JPY recorded its biggest one-day percentage gain against the USD since October 2008. Traders speculated that the Bank of Japan could act, limiting the JPY advance while the Japanese Finance Minister Taro Aso said that excess volatility in currency markets was undesirable and he would respond to market moves when necessary.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – 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: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: While 1.3970 caps upside reactions expect a grind lower to retest Fridays spike low, with bears likely targeting a test of psychological 1.30 level. A close over 1.40 is required to ease near term bearish pressure.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – 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: Neutral
Trading Take-away: Neutral
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
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold one of the traditional safe-haven assets, soared over 5% to finish at $1,319.86 an ounce. Within the day, it traded as high as $1,358.20 per ounce, the highest in over two years Crude Oil fell 5% or $2.47, to settle at $47.64 a barrel for its largest single-day decline since February. On the week, the losses were much smaller, with U.S crude only down by 0.7%. AUD was down at 0.7458, which came under pressure as the risk-off environment after Brexit. Traders believe a recently more neutral turn for the central bank looks set to be reversed and predict the possibility of a rate cut as soon as July. CAD weakened the most in 17 months against USD as a fall in global financial markets after Britain voted to leave the European Union. Canada’s commodity-oriented economy may suffer a blow from Brexit, which put the prospect of Canadian interest rate cuts back on the table.
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.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – 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: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – 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): Bullish – 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
