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FOREX WEEK AHEAD

Brexit_back_Forex-week-ahead_FXPIG

One word perfectly sums up the events of this week. Disappointing.  For some it began with the uninspiring conclusion of Game of Thrones, long-term stock investors grimaced at the lack of progress with the US-China trade war, and FX traders will see the British pound remain in limbo after Prime Minister May admitted defeat in failing to deliver a Brexit deal.

Theresa May’s watch will end on June 7th and the Brexit process basically goes back to square one.  The short-term fate of the British pound will depend on the final candidates preference for type of Brexit (soft/hard) and if they appear capable of negotiating across party lines to secure the votes in getting a deal pushed through Parliament.

  • Brexit Aftermath: New PM to decide on hard or soft Brexit
  • Trade talks need to resume before irreparable damage to confidence
  • Oil geopolitical risks to heat up this summer

European politics remain front and centrer as Nationalist and far-right parties are expected to make progress in gaining European Parliamentary seats.  The result from the elections will likely deliver further friction within the bloc and more hurdles on integration.  The trade war has delivered a major blow to risk appetite with all three major US indexes posting weekly losses, as well big monthly declines.  Both the Chinese and Americans appear poised to ramp up domestic support/stimulus in the event of a prolonged standoff.  Someone will blink and lead the return to the negotiating table, both sides are motivated, but we may need to see more market carnage before that happens.  Key upcoming events include a rate decision from the Bank of Canada, the annual budget release for New Zealand, US preliminary Q1 GDP reading, China’s Manufacturing PMI reading and Canadian GDP.

PM Boris Johnson unlikely

Theresa May’s announcement means Brexit is right back to where we were right after the Referendum. The Brexit outcomes are still plentiful: We could see the Brexit deadline extended beyond Halloween, a general election is very possible or a second referendum asking for a no-deal or to remain.

Uncertainty will remain in place until we learn more about who will take over the negotiations and that process will take almost two months.  The current favourite to replace Theresa May is former Foreign Secretary Boris Johnson, a hardliner that would suggest a greater risk for a no-deal Brexit.  History however is not on Mr. Johnson’s side, as he was the odds on favourite last time.

The British pound is likely to remain volatile and the risks could be to the upside following the recent precipitous drop.  The markets will likely expect an orderly exit, and that should prove supportive for cable.

Dollar bottom in place

The latest reports on housing and durable goods is not pointing an optimistic outlook for the US economy.  US economic data points still outperform the other advanced economies, but its strength is heavily priced in FX markets, which could mean we may have just seen a key bottom put in place for the dollar.

While the financial markets have been hit with a wave of risk aversion that has sent bond market yields plummeting.  Despite the recent optimism from the Fed and their minutes, risks to the downside are growing and the Fed may need to deliver another dovish message in the coming months that cement rate cut bets in the nearer future.  Current expectations are at 55% for a rate cut at the September meeting, but that could increase as growth has been dealt a strong blow from the US-China trade war and cautious tones from this past earnings season. 

Oil

Crude prices have been battered by global demand concerns, rising stockpiles in the US and fading expectations that OPEC and their allies will unanimously be on board and deliver an extension of production cuts this year.  The markets have been closely paying attention to the trade war between two largest economies and the lack of progress is likely to put an unexpected dent in demand forecasts for the second quarter.

The wildcard for oil remains geopolitical risks as tensions remain high between the US and Iran.  The US appears set on showing Iran they are prepared for an escalation in the region.  President Trump is sending 1,500 troops to assure freedom of navigation in the area.  While both sides appear not interested in starting a war, tensions are flaring up and the risks for some conflict are growing.

Spare capacity and output at risk should support for a stabilisation in prices in the short-term, but if we see another multi-million barrel build with US inventories, oil could see the bearish correction continue. 

Gold

Gold prices remain in a quagmire as wave of risk aversion that has sent bond market yields plummeting has yielded minuscule gains for the safe-haven.  The last six weeks of yellow metal trading has seen alternative bullish/bearish trading that for the most part has been kept in a tight $1,270 to $1,300 range.  The deflationary conditions globally have hurt the inflationary pressure reason for owning gold.  With US equities hovering within 5% of their record highs, gold is likely to have difficulty breaking out.  Gold may need the Fed to confirm what markets are pricing in already and signal rate cuts are coming.  That however may not happen anytime soon, if we see a resumption of constructive trade talks between the US and China. 

Bitcoin

Some past Bitcoin sceptics, such as JP Morgan and Facebook are becoming believers in cryptocurrencies.  The recent surge with Bitcoin was supported on the continued progress with mainstream commerce adoption.  First, we saw JP Morgan create the first US bank-backed cryptocurrency, then we saw Fidelity launch plans for institutional bitcoin trading, and E-Trade intends to offer cryptocurrency trading on their platforms.  The financial community is seeing more companies want to take advantage of the digital currency and the latest to join is Facebook.  The social media giant aims at competing with banks in offering secure and cheaper ways of sending money.

Bitcoin is meteoric rise immediately was followed by a tulip-mania crash.  The current rally is seeing price trade around the $8,000 level and further mainstream acceptance could prove vital for the bullish momentum to continue.  To the upside the psychological $10,000 level provides key resistance, while $6,500 remains major support.

Source: marketpulse

One word perfectly sums up the events of this week. Disappointing. For some it began with the uninspiring conclusion of Game of Thrones...

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Forex Tech Targets

Bulls-and-Bears_Forex_FXPIG_24.05.2019

EUR/USD:

24-HOUR VIEW: Rebound in EUR has scope to extend but 1.1210 is expected to offer solid resistance. Expectation for EUR to trade sideways was incorrect as it dived to 1.1106 before rebounding strongly. While the rapid recovery appears to be running ahead of itself, there is scope for it to extend higher. That said, any further advance in EUR is expected to face solid resistance at 1.1210 (next resistance is at 1.1230). On the downside, 1.1130 is likely strong enough to hold any intraday pull-back (minor support is at 1.1160).

1-3 WEEKS VIEW: EUR is likely to trade sideways. While we indicated yesterday (23 May, spot at 1.1155) that the “risk of a break of 1.1130 has increased”, we were of the view “it is too soon to expect EUR to crack last month’s low at 1.1110”. Expectation for a “break of 1.1130” was correct but the move below 1.1110 (low of 1.1106) and the subsequent sharp rebound that hit an overnight high of 1.1187 came as a surprise (the 81-pips range registered yesterday is the largest 1-day range in a month). The price action yesterday has clouded the outlook even though the manner of which EUR rebounded ahead of 1.1000 suggests we may have seen a short-term bottom at 1.1106. That said, it is premature to expect a sustained rebound. For the next couple of weeks, EUR is more likely to consolidate and trade sideways, likely within a 1.1130/1.1230 range.

GBP/USD:

24-HOUR VIEW: Short-term bottom in place, GBP is expected to trade sideways to slightly higher, likely within a 1.2630/1.2710 range. Yesterday, we expected GBP to “retest the 1.2625 level but oversold conditions suggest a drop below 1.2600 is unlikely”. In line with expectation, GBP touched 1.2605 before staging a surprisingly robust recovery (NY close of 1.2657). The combination of oversold conditions and dissipating downward momentum suggests 1.2605 is likely a short-term bottom (GBP is not expected to move below this level for today). That said, it is too soon to expect an extended recovery. GBP is more likely to consolidate and trade sideways to slightly higher, likely within a 1.2630/1.2710 range.

1-3 WEEKS VIEW: Weakness is severely oversold but 1.2600 is beckoning. There is not much to add to the update from yesterday (see reproduced update below). GBP came very close to 1.2600 as it touched 1.2605 before staging a robust recovery. After yesterday’s price action, the beckoning call of 1.2600 has softened.While we indicated on Tuesday (21 May, spot at 1.2735) that the “focus is at 1.2670”, we were of the view “oversold conditions suggest the prospect for further extension to the next support at 1.2630 is not high”. However, GBP extended its decline as it plummeted to 1.2625 during NY hours before recovering. Despite the relatively large drop, we still have doubts on whether the current ‘negative phase’ that started in mid-April (see annotations in chart below) could extend further. From here, the next support is at 1.2600 but once below this level, the next significant support is another 100 pips lower at 1.2500. On the upside, only a move above 1.2760 (‘key resistance’ previously at 1.2840) would indicate that the ‘negative phase’ has ended. Meanwhile, the round number support of 1.2600 is beckoning.

AUD/USD:

24-HOUR VIEW: Room for AUD to advance but lackluster momentum suggests any up-move could be limited to 0.6925. AUD traded between 0.6865 and 0.6900 yesterday, right within our expected range of 0.6865/0.6900. The firm daily closing in NY (0.6899) suggests there is room for AUD to advance from here. That said, lackluster momentum indicates that any up-move is likely limited to a test of 0.6925. The next resistance at 0.6945 is a solid level and is unlikely to be challenged. Support is at 0.6885 followed by the 0.6865 low. The latter level is acting as a very strong support now.

1-3 WEEKS VIEW: Prospect for a move to 0.6835 has diminished. There is no change to our latest narrative from Tuesday (21 May, spot at 0.6925) wherein the “prospect for a move to 0.6835 has diminished”. We added on Wednesday (22 May), “AUD has to ‘punch’ below last week’s 0.6865 low and accelerate lower or the risk of a short-term bottom would increase quickly”. It is worth noting that AUD touched 0.6865 yesterday (23 May) before rebounding strongly. While it appears increasingly likely that the ‘negative phase’ in AUD that started in late April (see annotations in chart below) is close to ending, confirmation of a short-term bottom is only upon a move above the ‘key resistance’ at 0.6945 (no change in level).

NZD/USD:

24-HOUR VIEW: Further up-move would not be surprising but a move beyond 0.6545 appears unlikely. Expectation for NZD to “drift lower to 0.6465” did not materialize as it rebounded strongly after touching 0.6482. The rapid rise is running ahead of itself and while further up-move would not be surprising, a move beyond 0.6545 appears unlikely (there is another strong resistance at 0.6560). On the downside, the 0.6482 low is not expected to come into the picture (minor support is at 0.6505).

1-3 WEEKS VIEW: NZD could be close to making a short-term bottom. NZD dipped to 0.6485 yesterday (23 May) before rebounding strongly to end the day higher by +0.36% at 0.6519 (largest 1-day gain in 3 weeks). The price action is not surprising as we indicated on Wednesday (22 May) that “NZD could continue to edge lower but 0.6465 is expected to offer solid support”. The combination of waning momentum and oversold conditions suggests the ‘negative phase’ that started earlier this month is close to completion. In other words NZD could be close to making a short-term bottom even though confirmation is only upon a move above the 0.6560 ‘key resistance’ (no change in level). From here, unless NZD can ‘punch’ below 0.6485 within these 1 to 2 days, a breach of 0.6560 would not be surprising. Looking ahead, a move above 0.6560 would indicate that NZD has moved into a ‘sideway-trading phase’.

USD/JPY:

24-HOUR VIEW: USD could dip below the strong 109.40 support but last week’s low near 109.00 is unlikely to come under threat. While we highlighted yesterday “upward pressure has dissipated”, we expected USD to “trade sideways within a 110.00/110.50 range”. The ease of which USD cracked 110.00 and the subsequent plunge to 109.45 came as a surprise. The sharp decline is running too fast, too soon but the weakness is not showing sign of stabilizing just yet. From here, barring a move above 110.00 (minor resistance at 109.75), USD could dip below the strong 109.40 support but last week’s low near 109.00 is unlikely to come under threat.

1-3 WEEKS VIEW: USD has moved into a sideway-trading phase. We have held the same view since Tuesday (21 May, spot at 110.05) that USD has “moved into a sideway-trading phase”. USD subsequently came close to the top of our expected 109.40/110.80 sideway-trading range (high of 110.67) before diving yesterday to an overnight low of 109.45, just above the bottom of our expected range. For now, there is no change to our view but we are not ruling out a dip below 109.40. That said, only a break of 109.00 would indicate that the current ‘sideway-trading’ phase has morphed into a ‘negative’ one.

Source: efxdata

Rebound in EUR has scope to extend but 1.1210 is expected to offer solid resistance. Expectation for EUR to trade sideways was incorrect as it dived to 1.1106 before rebounding strongly...

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GBP/USD clings to modest recovery gains

GBPUSD_clings-to-modest-recovery-gains_Forex_FXPIG

•  A modest USD pullback from two-year lows helped bounce of multi-month lows.
  •  The recovery got an additional boost following the release of UK retail sales data.
  •  Investors now await the UK PM May’s statement for hints on her departure date.

The GBP/USD pair held on to its mildly positive tone and is currently placed at the top end of its daily trading range, around the 1.2680 region post-UK monthly retail sales data.

With investors still digesting the recent Brexit-related UK political chaos, a modest US Dollar pullback on Thursday helped the pair to stage a modest rebound from the 1.2600 neighbourhood and highly oversold conditions.

The steady recovery extended through the early European session on Friday and got an additional boost from the UK macro data, showing that monthly retail sales remained flat in April as compared to a 0.3% decline expected.

On the other hand, core retail sales came in to show a contraction of 0.2% and the yearly growth rate eased to 5.2% from 6.7%, still better than consensus estimates pointing to a reading of -0.5% and 4.6% respectively.

It would now be interesting to see if the pair is able to capitalise on the positive move as investors now look forward to the UK PM Theresa May's statement for hints on her departure date amid disagreements on her revised Brexit deal.

Source: fxstreet

The GBP/USD pair held on to its mildly positive tone and is currently placed at the top end of its daily trading range, around the 1.2680 region post-UK monthly retail sales data...

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EUR/USD Technical Analysis

EURUSD_tech-analysis_resistance_Forex_FXPIG
  • EUR/USD dropped and recorded fresh 2019 lows near 1.1100 the figure on Thursday, although it managed not only to close the day with gains but also reverse that drop and reclaim the 1.1200 barrier and above.
  • The continuation of the corrective rebound carries the potential to extend and re-test the 55-day SMA ahead of 1.1240.
  • The broader perspective, however, remains bearish as long as the multi-month resistance line at 1.1275, caps the upside.

Source: fxstreet

EUR/USD dropped and recorded fresh 2019 lows near 1.1100 the figure on Thursday, although it managed not only to close the day with gains but also reverse that drop and reclaim the 1.1200 barrier and above...

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Gold in search of a firm direction

GOld-firm-direction_forex_FXPIG

  •  The USD remains supported by the Fed’s patient stance and caps gains.
  •  Risk-off mood underpins safe-haven demand and limits the downside.

Gold lacked any firm directional bias and continued with its sideways consolidative price action, well within this week's broader trading range.

The precious metal struggled to capitalise on its attempted recovery from two-week lows, with a combination of diverging forces failing to provide any meaningful impetus and leading to a subdued price action for the second consecutive session on Thursday.

The US Dollar held steady near the 98.00 handle and remained supported by the fact that the latest FOMC meeting minutes reaffirmed the Fed’s patient stance, which was eventually seen as one of the key factors keeping a lid on every attempted positive move.

However, a further escalation in the US-China trade tensions continued denting the global risk sentiment and the same was evident from the prevailing risk-off mood across equity markets, which underpinned the precious metal's safe-haven demand and helped limit deeper losses.

Meanwhile, the global flight to safety triggered a fresh leg of a downfall in the US Treasury bond yields and provided a minor lift to the non-yielding yellow metal, albeit bulls still seemed to lack any strong conviction and awaited a fresh catalyst for any further up-move.

In the absence of any major market moving economic releases from the US, it would be prudent to wait for a convincing break in either direction before traders start positioning for the commodity's near-term trajectory.

Source: fxstreet

Gold lacked any firm directional bias and continued with its sideways consolidative price action, well within this week's broader trading range.

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EUR/USD remains under pressure

EURUSD-post-German-GDP_Forex_FXPIG
  • EUR/USD stays vulnerable in the mid-1.1100s today.
  • German final Q1 GDP came in at 0.4% QoQ, 0.6% YoY.
  • Advanced PMIs next of significance in Euroland.

The sentiment around the European currency remains fragile so far in the second half of the week, prompting EUR/USD to keep business around the 1.1150 region for the time being.

EUR/USD now looks to data, trade

The pair remains reluctant to extend the downside on a convincing fashion below the key 1.1150 level for the time being. However, the persistent demand for the greenback and rising political risks ahead of the European parliamentary elections in the next days threaten this current stance.

Further out, the absence of fresh headlines around the US-China trade dispute appears to be lending a tepid support to the pair somehow.

Data wise in the euro area, German final GDP figures showed the economy expanded 0.4% QoQ during the January-March period and 0.6% on an annualised basis. Later in the day, key preliminary prints from manufacturing and services PMIs in core Euroland will grab all the attention.

Across the pond, usual Claims, flash PMIs and speeches by Bostic, Kaplan, Daly and Barkin are coming up later in the NA session.

What to look for around EUR

Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. In the meantime, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italy has re-emerged as a source of uncertainty and volatility, while investors’ focus has now shifted to the EU parliamentary elections due later this week.

EUR/USD levels to watch

At the moment, the pair is gaining 0.01% at 1.1151 and a break above 1.1183 (21-day SMA) would target 1.1217 (23.6% Fibo of the 2019 drop) en route to 1.1236 (55-day SMA). On the downside, the next support lines up at 1.1135 (low May 3) seconded by 1.1109 (2019 low Apr.26) and finally 1.0839 (monthly low May 2017).

Source: fxstreet

The sentiment around the European currency remains fragile so far in the second half of the week, prompting EUR/USD to keep business around the 1.1150 region for the time being...

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FOREX Tech Targets

Bulls-and-bears_Forex_FXPIG_22.05.2019

EUR/USD:

24-HOUR VIEW: EUR is expected to trade sideways, likely within a 1.1150/1.1195 range. EUR traded between 1.1140 and 1.1187 yesterday, wider than our expected range of 1.1150/1.1190. Momentum indicators are showing mixed signals which suggest EUR could continue to trade sideways. Expected range for today, 1.1150/1.1195.

1-3 WEEKS VIEW: EUR is expected to continue to trade sideways. No change in view from yesterday, see reproduced update below. EUR touched a 2-1/2 week low of 1.1148 yesterday (20 May) before recovering to close higher by +0.13% in NY (1.1170). The price action is more or less in line with our expectation from last Wed (15 May, spot at 1.1205) wherein EUR is in a “sideway-trading phase” even though “the immediate bias is tilted to the downside” but “1.1130 is a solid support and is unlikely to yield so easily”. While downward pressure has waned after yesterday’s price action, a break of 1.1130 is not ruled out just yet. Only a move above 1.1210 (‘key resistance’ level was previously at 1.1225) would indicate that a short-term bottom is in place. Meanwhile, EUR could trade sideways for a couple of days before making another attempt to move towards 1.1130.

GBP/USD:

24-HOUR VIEW: GBP is expected to consolidate and trade sideways, likely within a 1.2680/1.2760 range. Brexit headlines sent GBP soaring to an overnight of 1.2815. However, the advance was short-lived as GBP dropped back quickly to end the day slightly lower at 1.2706. The rapid swing has resulted in a mixed outlook. On the downside, the major 1.2670 support is unlikely to come under threat. Conversely, GBP is highly unlikely to move above the 1.2815 high. All in, GBP is more likely to consolidate and trade sideways at these lower levels, expected to be within a 1.2680/1.2760 range.

1-3 WEEKS VIEW: Focus is at 1.2670. We indicated yesterday (21 May, spot at 1.2735) that the “focus is at 1.2670” and added, “shorter-term conditions are severely oversold and any further weakness would likely be at a slower pace”. GBP subsequently touched 1.2685 before Brexit headlines sent it surging to a high of 1.2815. However, the advance was fleeting as GBP dropped back quickly to end the day slightly lower at 1.2706 (-0.11%). As our 1.2840 ‘key resistance’ is still intact, the focus remains at 1.2670 even though oversold conditions continue to suggest the prospect for further extension to the next support at 1.2630 is not high.

AUD/USD:

24-HOUR VIEW: AUD is expected to trade sideways, likely between 0.6865 and 0.6915. Instead of trading sideways, AUD tumbled on talks of rate cut by RBA. Despite the relatively sharp drop, downward momentum has not improved by much and the risk for further sustained decline is not high, at least for today. From here, AUD is more likely to consolidate and trade sideways, expected to be between 0.6865 and 0.6915.

1-3 WEEKS VIEW: Prospect for a move to 0.6835 has diminished. AUD surrendered all the post-election gains made on Monday as talk of rate cut by RBA sent it tumbling to an overnight low of 0.6866. Despite the relatively rapid drop, downward momentum has not improved by much. While the negative phase that started in late April is still intact, the price action over the past couple of days suggests the prospect for AUD to extend its weakness to 0.6835 has diminished. To put it another way, the negative phase to be struggling to maintain its downward momentum. From here, AUD has to ‘punch’ below last week’s 0.6865 low and accelerate lower or the risk of a short-term bottom would increase quickly. Conversely, if AUD were to move above the 0.6945 ‘key resistance’ (level was at 0.6975 yesterday), it would indicate the end of the current negative phase and the start of a ‘sideway-trading’ phase.

NZD/USD:

24-HOUR VIEW: NZD could dip below the major 0.6500 support but 0.6485 is unlikely to come into the picture. Expectation for NZD to trade sideways was incorrect as it dropped sharply and tested the major 0.6500 support (low of 0.6500). The decline appears to be running ahead of itself and while a dip below 0.6500 would not be surprising, the next support at 0.6485 is unlikely to come into the picture. On the upside, only a move above 0.6530 would indicate that the current weakness has stabilized (stronger resistance level is at 0.6545).

1-3 WEEKS VIEW: NZD could continue to edge lower but 0.6465 is expected to offer solid support. We have maintained the same narrative for about two weeks (see update on 08 May, spot at 0.6560) wherein NZD is “expected to test the rising weekly trend-line at 0.6500”. NZD finally touched 0.6500 yesterday (21 May) and is currently holding just above this solid support level. While the 2-week down-move is moving into oversold territory, it is too soon to expect an end to the current negative phase. Only a move above 0.6560 (‘key resistance’ previously at 0.6600) would indicate that a short-term bottom is in place. Until then, NZD could continue to edge lower but 0.6465 is expected to offer solid support. The next support below 0.6465 is at the 2018 low of 0.6425. Unless NZD can ‘accelerate’ downwards within the next few days, the odds for a move to 0.6425 are not high for now.

USD/JPY:

24-HOUR VIEW: Room for advance in USD to test 110.80 first before easing off. We expected USD to “retest 110.30” yesterday but the subsequent advance exceeded our expectation as it surged to an overnight high of 110.67. While the rapid rise appears to be running ahead of itself, there is room for a test of the 110.80 resistance first before easing off (next resistance is at 111.10). Support is at 110.30 followed by 110.00.

1-3 WEEKS VIEW: USD has moved into a sideway-trading phase. We indicated yesterday (21 May, spot at 110.05) that USD has “moved into a sideway-trading phase” and added, “the immediate bias is tilted to the upside but for now, any USD strength is unlikely to move significantly above the top of the expected 109.40/110.80 range”. We continue to hold the same view but the rapid rise yesterday suggests USD could trade sideways at a higher range than currently expected. That said, USD has to break the strong 110.80 level in order to indicate that it has moved into a higher trading range.

Source: efxdata

EUR is expected to trade sideways, likely within a 1.1150/1.1195 range. EUR traded between 1.1140 and 1.1187 yesterday, wider than our expected range of 1.1150/1.1190...

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FOMC Minutes to portray a cautious tone

FOMC_minutes-cautious-tone_Forex_FXPIG

According to analysts at TD Securities, the release of the May FOMC minutes on Wednesday should show a cautious Fed with a majority expecting transitory low inflation.

Key Quotes

“Recall that post-meeting Chair Powell emphasized that the current policy was appropriate and that the FOMC saw no reason to change in either direction.”

Source: fxstreet

According to analysts at TD Securities, the release of the May FOMC minutes on Wednesday should show a cautious Fed with a majority expecting transitory low inflation...

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GBP/USD technical analysis

GBPUSD_tech-analysis-vulnerable_Forex_FXPIG

•  The selling pressure around the British Pound picked up the pace during the early European session on Wednesday and dragged the GBP/USD pair to over four-month lows in the last hour.

  •  Despite May's new Brexit deal, the growing market conviction that she won't gather the needed votes to succeed continued denting the already weaker sentiment and kept exerting pressure.

The bearish slide has now dragged the pair below mid-Jan. swing lows support near the 1.2670-65 region and despite near-term oversold conditions, the downward trajectory could further get extended towards challenging the 1.2600 round figure mark.

Alternatively, any recovery back above the 1.2700 handle might trigger some short-covering bounce but might still be seen as a selling opportunity near the 1.2770 region – marking 61.8% Fibonacci retracement level of the 1.2396-1.3381 up-move.

Source: fxstreet

The bearish slide has now dragged the pair below mid-Jan. swing lows support near the 1.2670-65 region and despite near-term oversold conditions, the downward trajectory could further get extended towards challenging the 1.2600 round figure mark...

READ MORE

Forex Tech Targets

Bulls-and-bears-Forex_FXPIG_21.05.2019

EUR/USD:

24-HOUR VIEW: EUR is expected to trade sideways, likely within a 1.1150/1.1190 range. EUR rebounded after touching a 2-week low of 1.1148 yesterday. The combination of dissipating downward momentum and oversold conditions suggests limited downside risk for now. From here, EUR is deemed to have moved into a consolidation phase and is expected to trade sideways to slightly higher, likely within a 1.1150/1.1190 range.

1-3 WEEKS VIEW: Focus is at 1.2670. We indicated last Friday (17 May, spot at 1.2795) that a “NY close below 1.2775 could lead to acceleration lower to 1.2670”. GBP subsequently cracked 1.2775 and plunged to 1.2714 before ending the week down by a whopping -2.20%, the largest 1-week decline since Oct 2017. From here, the focus is at 1.2670 even though shorter-term conditions are severely oversold any further weakness would likely be at a slower pace. In view of the oversold conditions, the prospect for further extension to next support at 1.2630 is not that high for now. On the upside, the ‘key resistance’ has moved lower to 1.2840 from 1.2900.

GBP/USD:

24-HOUR VIEW: GBP is expected to continue to trade sideways, likely within a 1.2710/1.2760 range. GBP consolidated its steep loss from last week as it traded in a relatively narrow range of 1.2715/1.2757 yesterday before settling at 1.2721. The consolidation phase appears incomplete and GBP is expected to continue to trade sideways for now, likely within a 1.2710/1.2760 range.

1-3 WEEKS VIEW: Focus is at 1.2670. We indicated last Friday (17 May, spot at 1.2795) that a “NY close below 1.2775 could lead to acceleration lower to 1.2670”. GBP subsequently cracked 1.2775 and plunged to 1.2714 before ending the week down by a whopping -2.20%, the largest 1-week decline since Oct 2017. From here, the focus is at 1.2670 even though shorter-term conditions are severely oversold any further weakness would likely be at a slower pace. In view of the oversold conditions, the prospect for further extension to next support at 1.2630 is not that high for now. On the upside, the ‘key resistance’ has moved lower to 1.2840 from 1.2900.

AUD/USD:

24-HOUR VIEW: AUD is expected to trade sideways, likely between 0.6895 and 0.6945. AUD gapped up upon opening yesterday and subsequently held on to its gain as it traded sideways. While the downside risk appears to be limited, it is too early to expect a sustained rebound. AUD is more likely to consolidate and trade sideways for now, likely between 0.6895 and 0.6945.

1-3 WEEKS VIEW: Prospect for a move to 0.6835 has diminished. AUD dropped to a 3-1/2 low of 0.6865 last Friday (17 May) before opening with a gap higher yesterday (20 May). While the ‘key resistance’ for our negative phase at 0.6975 is still intact, the strong bounce suggests AUD may not be ready to challenge 0.6835 just yet. That said, only a move above the 0.6975 ‘key resistance’ would indicate that a short-term bottom is in place. In order to reinvigorate the flagging momentum, AUD has to move and stay below 0.6895 within these 1 to 2 days or the prospect for a move to 0.6835 would diminish further. To put it another way, the negative phase that started in late April could be close to ending unless AUD can move and stay below 0.6895 within these few days.

NZD/USD:

24-HOUR VIEW :NZD is expected to trade sideways, likely within a 0.6525/0.6560 range. NZD opened on a strong note yesterday and subsequently traded sideways. The current price action is viewed as part of a consolidation phase and NZD is expected to continue to trade sideways for now, likely within a 0.6525/0.6560 range.

1-3 WEEKS VIEW: NZD is expected to test the rising weekly trend-line at 0.6500. No change in view from last Friday, see reproduced update below. Note that NZD touched 0.6514 during late-NY hours on Friday but opened on a strong note yesterday. We have maintained the same narrative since last Wednesday (08 May, spot at 0.6560) wherein NZD is expected to “test the rising weekly trend-line at 0.6500”. After trading sideways for several days, NZD finally staged a relatively strong decline of -0.41% yesterday (close at 0.6536). From here, the risk of a break of 0.6500 has increased and if NZD were to move clearly below this level, the focus would then shift to 0.6465 followed by the 2018 low near 0.6425. All in, there is no early sign that the current negative phase that started earlier this month would end any time soon. Only a move above 0.6600 (‘key resistance’ previously at 0.6630) would indicate that a short-term bottom is in place.

USD/JPY:

24-HOUR VIEW: A retest of 110.30 would not be surprising. USD touched 110.31 early yesterday but eased off quickly. Despite the pull-back, the underlying tone remains positive and another test of the 110.30 level would not be surprising. That said, a sustained move beyond this level appears unlikely (next resistance is at 110.50). On the downside, only a move below 109.70 would indicate the current mild upward pressure has eased (minor support is at 109.90).

1-3 WEEKS VIEW: USD has moved into a sideway-trading phase. We highlighted last Friday that the negative phase in “USD appears to be close to ending” and added, “USD is poised to move into a sideway-trading phase”. USD subsequently took out the ‘key resistance’ at 110.10, which indicates that the current movement is the early stages of sideway-trading phase. That said, the immediate bias is tilted to the upside but for now, any USD strength is unlikely to move significantly above the top of the expected 109.40/110.80 range.

Source:efxdata

EUR is expected to trade sideways, likely within a 1.1150/1.1190 range. EUR rebounded after touching a 2-week low of 1.1148 yesterday. The combination of dissipating downward momentum and oversold conditions suggests...

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RBA: Rate cut in June and August?

RBA-rate-cut_Forex_FXPIG

Analyst at Westpac, suggests that Westpac is now forecasting a rate cut from RBA in June and August, versus August and November.

Key Quotes

“Given the clear guidance in the RBA minutes from the May meeting released today that "in the scenario where there was no further improvement in the labour market in the period ahead ... a decrease in the cash rate would likely be appropriate" and then in today's Lowe speech that "at our meeting in two weeks' time, we will consider the case for lower interest rates", its arguably the case that the FX market would be surprised if the RBA does not deliver a rate cut on June 4.”

“Our fair value framework continues to be helpful in trying to understand what this means for the A$, especially given the backdrop of sharply rising iron ore prices and recovering iron ore export volumes. Even with the highest level for iron ore back to May 2014, the midpoint of our fair value model has dropped by 2.75% in the last 5 weeks (0.7220 down to 0.7018) as markets have moved from circa 25% priced to circa 90% priced for a cut in June.”

“Given the backdrop of the recent moves by Trump to 'clear the decks' on trade/ tension with Europe and Japan but at the same time 'double down' on pressure on China, we remain of the view that the A$ should continue to be capped by the midpoint of our fair value model. This strategy has served us well so far this year - with the A$ not closing above the mid-point since early December. This then argues that the A$ should remain capped on strength towards 0.70 and we remain focused on further weakness down to our long held 0.68 target.”

Source: fxstreet

Given the clear guidance in the RBA minutes from the May meeting released today that "in the scenario where there was no further improvement in the labour market in the period ahead ... a decrease in the cash rate would likely be appropriate...

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EUR/USD resumes the downside

EURUSD_resumes-the-downside_FOREX_FXPIG
  • EUR/USD moves lower and returns to the mid-1.1100s.
  • The greenback appears bid early in Europe.
  • ECB’s De Guindos is due to speak later in the session.

The sentiment around the European currency remains subdued in the second half of the month, with EUR/USD now reversing Monday’s uptick and refocusing on the 1.1150 region.

EUR/USD looks to trade, ECB

Spot is navigating the lower end of the recent range following last week’s sharp sell off, while some decent contention appears to have emerged near 1.1150 for the time being.

In the meantime, the US-China trade dispute continues to drive the mood around the global markets despite the lack of fresh headlines as of late. In this regard, news around Chinese blue chip Huawei has grabbed all the attention in past hours.

In addition, spot remains vigilant on the renewed geopolitical effervescence around US and Iran, which should keep the demand for safer assets well and sound.

Later in the session, ECB’s VP L.De Guindos will speak at ‘The International Financial Services Forum 2019’ in London in an otherwise empty docket in Euroland,

Across the pond, April’s Existing Home Sales and speeches by FOMC’s Evans and Rosengren should keep the focus on the buck.

What to look for around EUR

Recent data releases in Euroland and Germany have poured cold water over the idea that some healing process could be under way in the region, re-shifting the focus to the ongoing slowdown and its probable duration and extension. In the meantime, the current ‘neutral/dovish’ stance from the ECB is expected to persist for the remainder of the year and probable through H1 2020. The broad-based risk-appetite trends and USD-dynamics should dictate the sentiment surrounding the European currency for the time being, all in combination with the now stalled US-China negotiations and potential US tariffs on EU products. On the political front, Italy has re-emerged as a source of uncertainty and volatility, while investors’ focus has now shifted to the EU parliamentary elections next week.

EUR/USD levels to watch

At the moment, the pair is losing 0.12% at 1.1152 and faces the next support at 1.1135 (low May 3) seconded by 1.1109 (2019 low Apr.26) and finally 1.0839 (monthly low May 2017). On the other hand, a break above 1.1239 (55-day SMA) would target 1.1264 (high May 1) en route to 1.1302 (100-day SMA).

Source: fxstreet

The sentiment around the European currency remains subdued in the second half of the month, with EUR/USD now reversing Monday’s uptick and refocusing on the 1.1150 region...

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ECB's de Cos:

ECB-EU-fin-system-fraqile-FXPIG_FOREX

While speaking at a conference in London, European Central Bank policymaker and Governor of the Bank of Spain Pablo Hernandez de Cos said that the European financial system was still fragile and fragmented due to the "doom-loop" between sovereigns and banks.

Key quotes (via Reuters)

  • European financial integration by reinforcing banking union, capital markets union initiatives.
  • Europe needs to address current deadlock on third pillar of banking union, European deposit insurance scheme.
  • National fiscal buffers may not be enough to accommodate severe common shocks.
  • EU still lacks fiscal tools to cushion against asymmetric or large systemic shocks in the euro area.

Source: fxstreet

While speaking at a conference in London, European Central Bank policymaker and Governor of the Bank of Spain Pablo Hernandez de Cos said that the European financial system was still fragile and fragmented due to the "doom-loop" between sovereigns and banks...

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EUR/JPY remains sidelined below the 123.00 handle

EURJPY-remains-sidelines_Forex_FXPIG
  • The upside in EUR/JPY appears limited above the 123.00 mark.
  • Trade jitters, risk appetite trends should drive the mood in the cross.
  • German Producer Prices surprised to the upside in April.

Alternating risk appetite trends are leaving EUR/JPY almost unchanged for the day following the recent failed attempt to extend the breakout of 123.00 the figure.

EUR/JPY still supported near 122.00

The cross continues to trade within a rangebound theme after bottoming out in the boundaries of the 122.00 neighbourhood during last week.

In spite of the recent collapse of US-China trade negotiations, the trade front should remain a key driver of the price action in the risk-associated space. In this regard, it is worth noting that consensus among investors keep pointing to an eventual agreement in the next months, somehow sustaining outflows from the Japanese safe haven.

News from the calendar saw German Producer Prices rising more than initially estimated during April, while the Current Account surplus in the broader euro bloc shrunk a tad to €24.7 billion in March.

EUR/JPY relevant levels

At the moment the cross is gaining 0.04% at 123.83 and faces initial resistance at 123.19 (high May 20) followed by 123.94 (21-day SMA) and finally 125.23 (monthly high May 1). On the other hand, a breach of 122.08 (low May 15) would aim for 120.54 (monthly low Jan.17 2017) and then 118.82 (2019 low Jan.3 ‘flash crash’).

Source: fxstreet

Alternating risk appetite trends are leaving EUR/JPY almost unchanged for the day following the recent failed attempt to extend the breakout of 123.00 the figure...

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EUR/USD seen at 1.15 in 6-month

EURUSD_growing_Forex_FXPIG

EUR/USD could return to the 1.15 region in the medium term, suggested Senior Analyst at Danske Bank.

Key Quotes

EUR/USD will look ahead to Thursday’s release of May’s flash PMIs. We look for a slightly bigger rebound in the Eurozone manufacturing PMI than consensus, which should break the negative trend seen since last summer of EUR/USD plummeting on disappointing flash Eurozone PMIs”.

“In the bigger picture, a US-China trade deal is not in the cards before late Q3 and a recovery in Chinese PMIs not due before Q4. These are important prerequisites for a sustained uptick in EUR/USD. We forecast EUR/USD at 1.12 in 1M, 1.13 in 3M and then rising to 1.15 in 6M”.

Source: fxstreet


EUR/USD could return to the 1.15 region in the medium term, suggested Senior Analyst at Danske Bank.

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