Market Commentary
US equities reversed initial losses to close in positive territories. This was due to NAHB housing market index data, which surged to its highest level since Nov 2005, offsetting disappointing Empire manufacturing data. 10Y UST yields eased by about 2bps to 2.17%. CRB index continues to decline to fresh 13-year lows. Brent/WTI spread also widened to near $7/bbl due to fast declining WTI prices. Oil prices (WTI crude) slumped to fresh 11-year low on strong rig count.
EUR remained soft amid a firm USD. German media reported that Greece may need additional EUR6.2bn more than what was earlier expected (EUR85bn). There was also talk of Greek PM Tsipras calling for confidence vote following the parliamentary approval for the third bailout last week. Opposition parties are expected not to back PM Tsipras in the no-confidence vote but didn’t rule out abstaining. Market sees possible elections as soon as in September after the 3 rd bailout deal concludes.
GBP initially surged to a high of 1.5688 on BOE Kristin’s comments that policy rate would need to be raised well ahead of 2% inflation target, before reversing gains below 1.56-handle as July inflation data is due for released today. GBP was last sighted at 1.5560 levels with all focus on inflation data. If this reading comes in below expectations, cable could be vulnerable for a deeper correction as BOE expectation will be wound back once again.
USD/JPY reached a peak of 124.60, before correcting to lows in 124.20 area, the catalyst being disappointing US Empire State index. Flash Japanese GDP figures showed the economy contracted 0.4% inter-quarter, less than the 0.5% contraction forecasted, while the annual contraction reached 1.6%, less than the forecast of 1.80%. Likely range trade will persist ahead of tomorrow’s FOMC minutes release.
Technical Commentary
EUR/USD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- Testing primary 1.1060 support while intraday downside reactions are contained here, bulls target 1.1250 next, failure to hold primary support, suggests a run to 1.1010/30 to test buyers at the 50% retracement of the advance. loss of 1.10 threatens a return to range support at 1.08
- Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology bearish
- Monitoring intraday price and Order Flow indicators on a test of 1.1250 or 1.10
GBP/USD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- Range trade persists, rejected on the fourth attempt to capture 1.57 on a closing basis. Failure at 1.5550 would embolden bears and refocus attention back on the 1.5285 bearish symmetry objective
- Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology testing midpoints from below
- Monitoring intraday price action and Order Flow indicators on a test of 1.5550 or 1.5750
USD/JPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish
- Bulls target 125.85 and 128 in extension, intraday downside primary support is at 124; only a failure at pivotal 122.50 concerns medium term bullish view
- Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology supported at midpoints
- Monitoring intraday price action and Order Flow indicators on a test of 125.85 or 124
EUR/JPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
- While 136.50 caps downside reactions, bulls now target symmetry objective at 141.70, a failure at 136 opens a retest of range support at 134/33
- Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology pierce midpoints from above
- Monitoring intraday price action and Order Flow indicators at 141 and 137
