6 July, 2016
Risk aversion resumed after the US returned from holiday with investor sentiment turning sour after a third real estate fund suspended trading after an increase in investor redemptions. Sterling slumped as expected, fueled by BoE lowering capital buffer requirements. Today's main catalyst will be the FOMC meeting minutes.
EURUSD Daily Analysis
EURUSD (1.105): The single currency was bearish yesterday closing in a bearish engulfing pattern. With prices breaking below 1.110, further downside is expected on a confirmation of price action falling below 1.10, unless we see a reversal back above 1.10. The dollar has resumed its strength and quite likely that further downside can be expected in EURUSD as a result. Watch for EURUSD to decline to 1.09 if the 1.10 support fails to hold the declines. The bearish view is seen being validated on the 4-hour chart where EURUSD is seen breaking out strongly from the bearish flat pattern, with further downside on a break below 1.10. Look for short-term retracements to 1.110 of the current 1.105 or 1.10, alternatively a bearish close 1.10.
USDJPY Daily Analysis
USDJPY (100.87): USDJPY closed down below 102 support yesterday with prices extending lower. Next major support is at 100, which makes for a strong psychological level. The daily Stochastics is still forming a bullish divergence and as noted in yesterday's commentary the potential bullish divergence could see price post a correction in the near term. On the 4-hour chart, USDJPY is still making a higher low compared to the June 23 lows of 99.01. To the upside, 102 remains a key resistance level with further upside likely only on a break above this level.
GBPUSD Daily Analysis
GBPUSD (1.288): GBPUSD broke out of its range to the downside at 1.320 and promptly extended its decline below 1.30 with prices seen testing the lows of 1.28 earlier today. On the 4-hour chart, the downside breakout has validated the bear flag pattern confirming further downside. However, watch the bullish divergence on the Stochastics, which could offer a modest bounce back to 1.3121 - 1.320 which previously acted as support. A retest of resistance here will confirm more downside in GBPUSD.
Gold Daily Analysis
XAUUSD (1367.67): Gold prices broke out to the upside above 1350 yesterday with early price action this morning seeing a test of 1371. There is a strong median line resistance at the current levels which could keep gold consolidated in the near term. On the 4-hour chart, 1371.91 target is likely to be achieved, but a close above this level would confirm the view. So far we only had a brief test to this level. Overall, gold looks to have completed its bullish extension following the bullish pennant breakout and a resulting retest back to 1310. We also notice a potential broadening funnel pattern forming which could see a downside back to 1327.50 following a bearish reversal near 1371 - 1375 region.
The U.S. dollar fell sharply across the board yesterday after the U.S. President Trump in an interview...
The U.S. dollar lost ground yesterday amid a slow trading day with lack of any clear catalysts for the markets. The speech by Janet Yellen did not offer anything new for the markets...
Mexico's inflation is likely to be boosted higher as the government announced that it would be hiking fuel prices by nearly one-fifth from January. The government said that fuel price ceilings will be capped between 14.2% - 20% above December's prices...
The Institute of Supply Management's Purchase Managers Index data is one of the most widely watched indicators. It is considered to be a leading indicator which gauges the strength in the U.S. manufacturing sector...
A fairly quiet Monday saw USDJPY retreating from its recent highs ahead of the big events this week. USDJPY has retraced its gains and now trades just above the support level of 104. The markets look to another slow day today with no major events on the tap, leaving the bulk of trading on the technical aspects...
A quiet economic calendar today ahead of the FOMC and BoJ meetings this week could keep prices fairly flat. The US dollar looks well supported moving into the FOMC meeting first which could keep the euro subdued...
The Bank of England's decision to hold monetary policy steady saw the GBP surge against the US dollar, clearing 1.32 with 1.36 now coming into focus...
Political developments in Japan and the UK saw the respective currencies react in the positive. While the GBP managed to close bullish on news that Theresa May is likely to be the new PM...
Markets were trading cautiously yesterday after the initial positive sentiment flipped led by declines in Oil. ADP payrolls report yesterday showed 172k jobs being added to a better than expected jobless claims as well...