The Yen remained under heavy pressure as risk sentiment improved by breaking above 107.00 in late US trade. Elsewhere in the currency markets, Cable remained underpinned today following the slightly better employment data and has headed back towards 1.3200, while the commodity bloc currencies headed lower, led by the Kiwi following the RBNZ economic announcement that said that a decline in the exchange rate is needed and that an August rate cut is probably coming. Oil jumped higher late in the day after a larger than expected draw in U.S. stockpiles
Today will heat up somewhat, in terms of economic, data with the focus to be on the ECB Interest Rate Decision. Whether the Bank moves to some form of further easing of policy or prefers to remain on hold while watching the fallout from Brexit remains to be seen but Mario Draghi does appear likely to repeat his previous dovish tone, which would keep the downside pressure on the Euro. Other events will include the NAB Australian Q2 Business Confidence, the UK Retail Sales (exp-0.6%mm, +4.9%yy; Ex-Fuel -0.7%mm, +4.7%yy) and the June PSNBR (exp £9.4 bio). There is also a bit to come from the US including the Existing Home Sales, House Price Index, Philadelphia Fed Mfg Survey, Chicago Fed National Activity Index and the weekly Jobless Claims.
EURUSD: 1.1011
24 Hour Bias: Mildly Bearish
Medium Term Bias: Prefer to sell rallies
Today’s direction will depend largely on the outcome of the ECB Meeting. From a technical perspective, the 4 hour indicators still look a little negative, so further downside momentum may be in order in the short term although the dailies remain fairly neutral. If pushed, the preference is still mildly to the downside.
Economic data highlights will include:
ECB Interest Rate Decision/Press Conference/Statement, US Existing Home Sales, CB Leading Economic Index, Chicago Fed National Activity Index, Jobless Claims, Philadelphia Fed Mfg Survey
USDJPY: 107.20
24 Hour Bias: Prefer to buy dips
Medium Term Bias: Prefer to buy dips
Yen has broken the 106.80 post Brexit highs and quickly headed on to 107.40 area before pausing for breath. Direction today will mostly likely come from the swings in EurJpy and associated crosses following the result of the ECB Meeting. Technically, we have now broken above the long term descending trend resistance and with the dailies still pointing higher the theme of looking to buy dips remains intact. As we said before, the markets will increasingly turn their attention to the July 29 BOJ Meeting and the chances of further economic stimulus following the recent comments from the PM, Abe. This should ensure that further Yen strength is rather curtailed unless we see a need for safe haven assets, so buying dips in the dollar remains the preferred medium term strategy.
Economic data highlights will include:
- All Industry Activity Index
GBPUSD: 1.3235
24 Hour Bias: Mildly Bullish
Medium Term Bias: Cautiously Bullish
Cable had been under pressure for the early part of the session before turning higher to finish back above 1.3200 meaning that the current choppy trade is ongoing. Today’s data sees the June UK Retail Sales, which would appear to offer little assistance to Sterling, with a negative result expected following the decision to leave the EU which has caused spenders to be much more cautious in this post-Brexit world.
It looks as though the previously mentioned Head/shoulders formation is back with a chance of succeeding, and although a cautious outlook is required, the dailies do remain positive, so unless we break 1.3000 I prefer to look for a dip to buy into, hoping for another recovery towards 1.3400, and if the neckline is broken, the chance of a move to 1.4000. SL at 1.2950.
Economic data highlights will include:
Retail Sales, PSNBR
USDCHF: 0.9875
24 Hour Bias: Neutral
Medium Term Bias: Mildly Bullish
USDCHF has again been fairly steady but with a mildly bid tone, which has kept the pair pretty much rangebound for the last few days. Today will be entirely dependent on the ECB outcome so we can probably expect an increase in volatility. The momentum indicators are not telling us much although if anything both the 4hour/daily momentum indicators still look mildly positive, so buying dips, trading from the long side remains the preferred plan - but with a tight stop loss placed below 0.9740.
Economic data highlights will include:
- Trade Balance
AUDUSD: 0.7470
24 Hour Bias: Mildly Bearish
Medium Term Bias: Prefer to sell rallies
The Aussie has chopped around either side of 0.7500 but is finishing near its lows, in line with the Kiwi following the dovish RBNZ statement and looks as though it may have further downside ahead. The RBA will begin to come increasingly in to focus as they meet on Aug 2, particularly so after the dovish lean of the minutes of the previous meeting, released yesterday. The market is looking forward to the chances of a cut and possibly to other forms of economic stimulus. We shall see, but in the meantime, thoughts of further easing should limit the upside for the Aud. I still prefer to look for levels to sell into, but from lower levels than before, and 0.7500/20 now looks rather toppish although the nearby Rising trend support may hold the Aud up for a while.
Economic data highlights will include:
-
NAB Business Confidence (Q2)
NZDUSD: 0.6970
24 Hour Bias: Prefer to sell rallies
Medium Term Bias: Mildly Bearish
The Kiwi has sold off heavily over the last couple of sessions as the chances of a rate cut at the next RBNZ Meeting, due 11 August, particularly in light of the dovish outlook from the RBNZ released a couple of hours ago. The dailies remain negative so selling into short term rallies seems to be the theme and I still prefer to trade the Kiwi from the short side.
Economic data highlights will include:
- Visitor Arrivals
Originally published by AxiTrader