London Forex Report: The Fed is expected to leave interest rate unchanged in the two day FOMC meeting. With the Fed’s current preferred gauge of inflation at 1.6%, strong job gains in June and somewhat upbeat US economic data this quarter, global events and other external headwinds would be the biggest hurdles to raising rates anytime soon.
The slew of US data pointed to a robust housing market and slower pace of expansion in the services sector as markets wait for the Fed’s decision in its two day FOMC meeting to gauge future pace of tightening.
New home sales surged to its highest level in eight and a half years last month and average home prices growth in 20 US cities pointed to resilient demand in the property market spurred by low mortgage rates.
On the other hand, services PMI pointed to slower pace of expansion in July, a divergence from quicker momentum in the manufacturing sector. USD advanced on the back of general weakness in European majors. USD Index reversed an early downtrend and narrowed sharp losses but nonetheless closed 0.13% lower at 97.15
FX Majors: The Fed is expected to leave interest rate unchanged in the two day FOMC meeting. With the Fed’s current preferred gauge of inflation at 1.6%, strong job gains in June and somewhat upbeat US economic data this quarter, global events and other external headwinds would be the biggest hurdles to raising rates anytime soon.
The slew of US data pointed to a robust housing market and slower pace of expansion in the services sector as market waits for the Fed’s decision in its two day FOMC meeting to gauge future pace of tightening.
New home sales surged to its highest level in eight and a half years last month and average home prices growth in 20 US cities pointed to resilient demand in the property market spurred by low mortgage rates.
On the other hand, services PMI pointed to slower pace of expansion in July, a divergence from quicker momentum in the manufacturing sector. USD advanced on the back of general weakness in European majors. USD Index reversed an early downtrend and narrowed sharp losses but nonetheless closed 0.13% lower at 97.15
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Bears look to challenge of 1.09 post Brexit reaction lows. Intraday resistance is sited at 1.10, while 1.1060 caps expect further downside.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.3260 represents symmetry resistance while this area caps expect a retest of 1.30 base, with an equidistant swing objective sited at 1.2875. Over 1.3330 shifts attention back to 1.3550 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Yesterday’s close below pivotal 105.50 threatens near term bullish bias although price action reversed sharply overnight. While above 104 on a closing basis expect another test of 107.50 offers. Below 104.09 symmetry swing support opens 103.50 as the next downside objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Symmetry swing support sited at 114.49 supports expect retest and breach of cycle highs, below 113.50 opens 110.80 as the next downside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold climbed close to $5 per ounce to $1,320.26 ahead of the FOMC decision due early tomorrow. Oil settled down $0.21 (-0.5%) at $42.92 a barrel on Tuesday for a 3-month low as concerns over excess supply still lingered. AUD higher on stronger than trimmed mean CPI this morning while the trimmed mean CPI higher than expected at 1.7% Y/Y vs 1.5% expected.
Though the pair jumped then eased as Q2 headline CPI cools to 1.0% Y/Y sidelines ahead of inflation figures which could reinforce the occasion for another rate cut as early as next month. Underlying inflation is expected to dip to a fresh trough of 1.4% expected by markets while the figures due tomorrow.
The market is pricing in around a 64% chance of a rate cut in August, proposing the biggest move would come if inflation surprised on the high side. CAD retreats from four month low against the USD. Domestic economic calendar is light this week except the GDP due Friday. It is expected to show that economic growth pulled back in May, likely due to the disruption caused by wildfires in Alberta
AUD/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: .7430 supports, as we continue to rotate in a broader .7660/.7340 range, with .7330 representing symmetry swing support. Intraday resistance is sited at .7570
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: 1.32 upside objective achieved, as 1.3140 supports bulls target an equidistant swing objective at 1.3381
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Testing symmetry swing support sited at 1305, while this area attracts buyers will set a potential platform to challenge and breach 1360 highs en-route to 1391. Below 1300 opens 1270 as next downside objective
Retail Sentiment: Neutral
Trading Take-away: Long
US OIL
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: Break below 44 opens 41.87 as the downside objective, expect 44.50 prior support to act as resistance, a close over 47.80 required to ease bearish pressure.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
