JPY Volatility Not Seen Since 2008
Littlefish FX | Jul 29, 2016 05:50AM ET
BOJ disappointed market expectation this morning and perhaps market expectations had been raised overnight on the back of the Reuters story that the MOF had prepared a press statement to coincide with BOJ easing. some of this USD/JPY decline has been cushioned by the news of an expansion in ETF purchases, doubling in the size of its USD lending program to USD 24bn and setup of a new facility to lend JGBs. But not what the market was looking for with the QQE program and monetary base unchanged at Yen 80 tln and the policy rate holding steady at -0.10% Indications are that opposition is growing within the BOJ to a costly and ineffective policy. US manufacturing and jobless claims took a turn for the worse while that of the EU and UK surprised on the upside. Contrary to improvement seen in manufacturing activities recently, Kansas City Fed manufacturing index slipped back into negative territory again while initial jobless claims climbed more than expected by 14K to 266K, but both had had little dent on Fed rate outlook.
FX Majors: EUR: slew of confidence indicators staged surprised upticks in July, signaling immediate impact from Brexit may be more contained although longer run downside risks remain valid. Economic confidence index was up 0.2 point to 104.6 this month while business climate indicator edged 0.17 point higher to 0.39. GBP: UK’s average house prices climbed 5.2% YOY to £ 205.7k in July (June: +5.1% YOY) according to Nationwide Building society but momentum in Britain’s property market may slow after Brexit. Despite low mortgage rates and housing supply shortages, a turn in homebuyers' sentiment weighed down by Brexit could soften demand for homes in the near term. JPY: Spending among Japanese households fell for four straight months, strengthening the case for Prime Minister Shinzo Abe recently announced expansion of fiscal spending to spur growth. Household spending tumbled 2.2% YOY in June (May: -1.1% YOY) while retail sales rose less than expected last month (+0.2% MOM vs consensus: +0.3% MOM). Consumer prices also dropped for four consecutive months before BOJ’s monetary policy disappointment.
EUR/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: Breach of 1.1060 reestablishes range trade and refocuses attention on 1.1185 range resistance as the major near term upside hurdle a close above this level opens 1.14 next.
Retail Sentiment: Bearish
Trading Take-away: Long
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GBP/USD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Bearish
Technical: 1.3260 represents symmetry resistance while this area caps expect a retest of 1.30 base, with an equidistant swing objective sited at 1.2875. Over 1.3330 shifts attention back to 1.3550 symmetry swing objective.
Retail Sentiment: Neutral
Trading Take-away: Neutral
USD/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: The overnight breach of 104.09 symmetry swing support has opened anticipated test 103.50 as the next downside objective a close below 103 will see bears target a retest of cycle lows below 100.
Retail Sentiment: Neutral
Trading Take-away: Neutral
EUR/JPY
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Symmetry swing support sited at 114.49 under pressure overnight, currently price is holding above this level as it survives on a closing basis expect retest and breach of 118.46 cycle highs, below 113 opens 110.80 as the next downside objective
Retail Sentiment: Neutral
Trading Take-away: Neutral
Commodities FX: Gold consolidates between $1,333 and $1,345 after having rallied 1.5% on the prior day, before ending Thursday 0.3% lower at $1,335.75. Crude Oil settled down 1.86% to $41.14 a barrel, entering a bear market having fell more than 20% from its June’s high of $51.67, after U.S. government data showed a surprise rise in crude and gasoline inventories, adding to concerns of a supply glut. AUD climbed back to 0.7500, but traders are still concerned that the Reserve Bank of Australia wants to restrain the buoyant currency. The low inflation could prompt the central bank to cut interest rates at its policy meeting next week. CAD firmed against the USD as the USD was pressured after the Federal Reserve stopped short of signaling a forthcoming US interest rate hike. The loonie held relatively firm against the falling price of oil, while investors eyed domestic economic data due today.
AUD/USD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: .7430 supports, as we continue to rotate in a broader .7660/.7340 range, with .7330 representing symmetry swing support. Near term resistance sited at .7570 continues to cap upside attempts.
Retail Sentiment: Bullish
Trading Take-away: Short
USD/CAD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bearish
Technical: As 1.3080 supports bulls target an equidistant swing objective at 1.3381. Below 1.3060 opens 1.2965 symmetry swing support.
Retail Sentiment: Neutral
Trading Take-away: Neutral
XAU/USD
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish
Technical: Testing symmetry swing support sited at 1305, while this area attracts buyers will set a potential platform to challenge and breach 1360 highs en-route to 1391. Below 1300 opens 1270 as next downside objective
Retail Sentiment: Bullish
Trading Take-away: Sidelines
US OIL
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish
Technical: Breach of bids at 41.87 opens 38.19 as the next downside objective, expect 43.10 prior support to act as resistance, a close over 47.80 required to ease bearish pressure.
Retail Sentiment: Bearish
Trading Take-away: Sidelines
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