London Forex Report: Following Yellen’s hawkish comments that a rate hike in the US in the coming months will be appropriate given that economic data continue to point to recovery of the US economy, St Louis Fed President James Bullard said on Monday global markets appear to be well prepared for a rate hike in the summer. Time of the move however was not specified but the string of comments from top officials indicates that a policy move may happen as soon as June. The USD index pared Asian session gains to end the day flat at 95.52 amid little action as the US markets were out for Memorial Day holiday.
FX Majors:
EUR
Ahead of ECB’s meeting this Thursday, gauge of economic confidence surged to 104.7 in May (April: 104.0) the highest in four months. Business climate index was also at a four month high (May: 0.26 vs April: 0.15) while consumer confidence index registered a smaller negative of -7.0 this month (April: -9.3). The surveys showed that assessment of economic outlook improved in the retail and construction sectors.
GBP
Despite the recent broad theme of USD strength, driven by expectations of a Fed rate hike in June or July, sterling has been a relative out performer among major currencies as opinion polls have swung more decisively against Brexit.
JPY
Slew of data strengthened the case for a second delay in sales tax hike. Overall household spending extended its declines, tumbling 0.4% YoY in April (March: -5.3% YoY). Industrial production slipped into negative territory, falling 3.5% YoY in April (March: +0.2% YoY). Mining posted the biggest drag to overall production, contracting 12.1% YoY last month. Declining output was weighed down by the fall in steel, suggesting capital spending remained subdued amid bleak economic outlook.
EUR/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears target symmetry support at 1.1065, 1.1240 remains resistance level only over 1.13 eases immediate downside bias
Retail Sentiment: Neutral
Trading Take-away: Neutral
GBP/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Expect a test of 1.4770. Only a failure at 1.4530/50 support threatens near term bullish bias.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: Testing trend resistance at 111.30 as this area contains the upside correction expect a rotation back towards 108.40. A close over 112 targets 113.14 as the next upside hurdle, a close above this level negates medium term bearish bias.
Retail Sentiment: Bearish
Trading Take-away: Long
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Bears now target weekly symmetry objective at 120.60. Intraday resistance at 124.20 only a close above 126.80 eases immediate downside pressure
Retail Sentiment: Bearish
Trading Take-away: Sidelines
Commodities FX:
Subdued markets as the key exchanges in UK and US were closed on Monday. Oil futures edged higher to US$49.50 per barrel (from last Friday’s close of US$49.33). The key event for crude oil markets this week will be the upcoming OPEC ordinary meeting in Vienna, Austria, on 2 June and although most analysts expect no action to be taken to address the ample global oil supplies situation, markets participants are still remaining cautious.
AUD
Australia new home sales dropped 4.7% MoM in April, reversing the 8.9% MoM climb in March. Home sales declined in most regions, most prominently in Western Australia.
CAD
CAD dipped against the broadly stronger USD as traders expected for a potential increase in US interest rates soon, but some losses were pared as oil turned higher.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: 7240/60 support now resistance as bears target .7050 as the next downside objective. Only a close over .7400 eases immediate downside pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/CAD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: While 1.2940 symmetry swing supports bulls target offers at 1.3210 as the next upside extension target. Only a close below 1.2760 eases immediate bullish pressure.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bullish
Technical: The medium term bullish bias is under assault While 1240 acts as intraday resistance 1207 is the next downside objective ahead of 1190.
Retail Sentiment: Bullish
Trading Take-away: Short
US OIL
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: As 46.70 continues to support symmetry swing target sited at 50.51 ahead of the larger AB=CD swing objective at 51.07 are the next upside objectives, only a close below 43.00 threatens bullish bias
Retail Sentiment: Bearish
Trading Take-away: Sidelines
