New York Forex Report: Quiet start to the week with US traders out for Independence Day. USD continues to weaken amidst a broad recovery in risk assets fueled by growing expectations of further global easing. Key focus of the week is the US employment reports on Friday with traders eager to see if the US labour market has recovered following last month’s shockingly low NFP print.
FX Majors: EUR comments from ECB chief Mario Draghi suggested that the central bank would deploy a more aggressive monetary easing policy to cope with the impact brought about by Brexit. EUR/USD was hit hard trading as low as 1.1022 following the speech on Thursday. EUR/USD then recovered all its losses from Thursday and posted strong gains amid a raft of satisfying manufacturing PMI data across Europe and reduced expectation for a Fed rate hike this year. GBP was dragged down as traders began to price in expectations that the BoE will likely cut interest rates and even expand its quantitative easing program in August. GBP/USD took a dive to reach post-referendum low of 1.3202 on Thursday before slowly crawling back to end the week at 1.3261. UK Manufacturing PMI rose to 52.1 in June from 50.4 in May, its strongest reading since January. The upbeat data failed to provide the sterling with enough stimulus as the data was collected before the referendum. JPY Japan’s consumer confidence index rose to 41.8 in June after May’s 40.9 reading and was the highest since Jan. The index coincides with earlier surveys from Tankan which indicate better outlook in 2Q particularly in the manufacturing sector.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: While 1.1170 caps upside reactions expect a grind south to retest post referendum lows, a close over 1.12 is required to ease near term bearish bias. Intraday support is sited at 1.1090
Retail Sentiment: Bearish
Trading Take-away: Sidelines
GBP/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now targeting a test of psychological 1.30 level. Bears have the ball while 1.3698 symmetry resistance remains in place. Inraday support is sited at 1.3240.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: A sustained move through 103.50 is required to ease immediate downside pressure. Intraday support is sited at 102.40
Retail Sentiment: Bullish
Trading Take-away: Sidelines
EUR/JPY
Outlook: Short Term (1-3 Days): Neutral – 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. Near term support is sited at 113.40
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold rallied strongly on Friday as traders looked past the strong US manufacturing data and focused on the weak China data and the implications to global growth outlook and the impact of Brexit which is likely to keep global monetary easier and for longer. The gold price jumped higher by US$19.45 to US$1,341.35 on Friday (1 Jul). Oil ended a choppy week higher on Friday (1 Jul) after the Bangladesh hostage crisis reignited worries about political risk and the implications for oil supply even as Baker Hughes reported another increase in US oil rigs. According to oil-related service provider, Baker Hughes, US rigs for drilling oil increased by 11 to 341, the fourth increase in last 5 weeks. AUD performance of manufacturing index inched 0.8 point higher to 51.8 in June. The sector is holding up well despite bruises from strong Australian dollar and weak global demand. The RBA will hold its rate decision meeting this Tuesday. Amid concerns over the global economic outlook and risks associated with too strong its domestic currency, some market participants expect the central bank to further cut rates. Australian election cliff-hanger leaves nation in limbo, vote closed, Turnbull still confident of forming government. CAD Despite falling oil prices, the Canadian dollar gained and ended last Friday at 1.2915 against the USD as concerns over Brexit continued to fade away. Canadian GDP for April grew in line with market expectations by 0.1% MoM, in which notable gains in manufacturing, utilities and the public sector were recorded.
AUD/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Breach of .7480 the midpoint of the broader .7660/.7300 range places renewed emphasis on a test of upper end of the range. Intraday support is sited at .7430
Retail Sentiment: Bearish
Trading Take-away: Sidelines
USD/CAD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: While 1.29 support now acts as resistance expect rotation into lower end of the broader 1.30/1.2680
Retail Sentiment: Bullish
Trading Take-away: Sidelines
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Next level to watch on the upside is 1361 en route to a broader 1390 with 1303 near term support now. Only below 1300 concerns near term bullish bias.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
US OIL
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Only a close below 46 threatens medium term bullish bias, below .46 opens a test of 44 as next downside objective. As 46.70 supports expect a retest of 51.60’s highs.
Retail Sentiment: Neutral
Trading Take-away: Neutral
