London Forex Report: Risk assets continue to rally as anticipation of fresh BOJ stimulus takes over from positive spillover from NFP to drive risk appetite. Major equities continued to advance from the Asian to the European and US markets with the Dow and S&P ended at record high levels. UK FTSE was the only index that stood out in the red with small losses. Overnight data bag was mixed while two Fed Presidents downplayed risks of Brexit on the US economy. Fed Bullard said impact of Brexit on the US economy will be “close to zero” while Fed Mester said she does not expect Brexit to have a big effect on the US. USD Index slipped 0.13% to 96.44 but managed to narrow sharp losses suffered in Asian trade.
FX Majors: EUR failed to benefit from improvement in global risk sentiment while an attempted move beyond 1.1130 handle got rejected. European Central Bank won’t provide its estimate of impact that UK vote to leave EU will have on euro-area economy until September “at the earliest”, ECB Governing Council member Luis Maria Linde said in Zaragoza Inflation in euro area continues to be “too low” and ECB’s “key objective” is to ensure it reaches goal of just below 2%, he also commented. GBP Mark Carney signaled he is comfortable with the pound’s drop to a 31-year low, telling UK lawmakers the slide may aid an economy grappling with the impact of its decision to quit the European Union. Testifying in parliament on Tuesday, the Bank of England governor said the currency’s depreciation will shrink the UK current-account deficit and may also aid growth as the nation carves out a new relationship with its biggest trading partner. Sterling is 11% weaker than before the referendum, despite recovering some losses since Theresa May would take over as prime minister. JPY hit a fresh two week high of 104.97 amid the risk on sentiment dominated financial markets after Japan’s ruling coalition won a weekend election. Japan’s government is expected to cut its consumer inflation forecast for the current fiscal year and produce an estimate for fiscal 2017 which is much lower than the central bank 2% inflation target, according to the government sources yesterday.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Range trade persists, 1.12 resistance 1.10 support, over 1.12 sets target at symmetry swing resistance sited at 1.13, below 1.10 opens 1.09 reaction lows.
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: The sharp relief rally seen yesterday duly breached 1.32 opened the anticipated 1.3340 which capped the advance. While 1.32 acts as near term support 1.3490 becomes the next upside objective. Below 1.32 opens 1.30 base retest.
Retail Sentiment: Bearish
Trading Take-away: Long
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: The sustained move through 103.50 eases immediate downside pressure. As 103 now acts as support expect a test of 105.50.
Retail Sentiment: Bearish
Trading Take-away: Long
EUR/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Daily symmetry and structure resistance is sited at 116.15 and stalls the advance witnessed this week, as 114.80 supports near term expect another leg higher to test corrective AB=CD objective at 116.77.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
Commodities FX: Gold fell for a second straight session as global equities rallied on easing political uncertainty in Britain and hopes for more economic stimulus, which in turn curbed demand for assets perceived as a safe haven. Oil prices surged as much as 4 percent in a technical correction and on short-covering after hitting two-month lows in the previous session. There are talks that gasoline and diesel were in oversupply despite summer driving demand in the US and that could pressure the broader petroleum complex again. Saudi Arabia’s energy minister also said there were hundreds of millions of barrels of surplus crude oil in the global market, although a price above $50/bbl was required to ensure continued investment in the space. Meanwhile, OPEC said it was optimistic of seeing balance in supply-demand next year even as it lowered its expectations for 2016 global growth due to the uncertainties caused by Britain’s exit from the EU. AUD NAB showed both business conditions and confidence increased in June, as businesses showed increased optimism over most prospects from profitability to employment, forward orders, and exports. Recent decent Australian data means there is no urgency for the RBA to ease. 2Q CPI data due later this month would be key to gauge the RBA’s next move. CAD strengthened against the USD aided by higher oil prices. Traders expect the Bank of Canada is likely to sound a dovish tone but hold rates steady when it presents its quarterly monetary policy report tonight, directing to global uncertainties like Brexit and indebted consumers in own country as economic risks.
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: .7648 range high test achieved profit takers emerge, a renewed push through here sets bullish sites on .7830 next. Intraday support is sited at .7550.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Expected near term breach of 1.31 resistance attracts fresh profit taking/selling, below 1.30 opens move back to test range support at 1.28.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Bulls now target 1391 with 1334 near term support. Only below 1300 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: 44 acts as pivotal support while this level survives 48.30 become the upside objective. Below 44 opens 41.87 as the downside objective.
Retail Sentiment: Bullish
Trading Take-away: Sidelines
