Home Sales Data Helps USD

Market Commentary

USD up modestly but FX price action across many pairs random and choppy indicative of thinner summer trading; commodities in lead position as copper falls to six year lows; stocks fall on disappointing earnings.

Strong US home sales data yesterday provided some initial dollar strength however momentum was relatively short lived as EURUSD bounced off support at 1.0869 (overnight low) possibly attributable to some short covering in euro crosses with EURGBP back up to the 0.7000 handle. The key data today is unemployment claims which could set some direction for the dollar ahead of FOMC next week.

USDJPY finds support ahead of indicated 123.50 support level yesterday, strong housing data from the US has helped push the pair back towards 124 anticipate the USD to remain supported on dips ahead of FOMC next week as market pre-­positions for a potential hawkish tone.

The BOE minutes released yesterday was hawkish as expected by the market, and cable maintains its bid tone. Market consensus is calling for a rate hike as soon as this November, and given that market is pricing in a mere seven bps for that policy meeting, we could see further upside risks in both the GBP and UK rates if domestic data holds up well and as market starts repricing in a possibility of a hike this year. Cable is trading quite constructively as well, breaking the string of lower lows yesterday all eyes on today’s retail sales data for next clues.

Technical Commentary

EURUSD Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

• Against yesterdays pivot low at 1.0860’s there is potential to test a near term symmetry objective at 1.1030/50, a break here opens 1.1150 next. Failure at yesterdays low opens second test of bids at 1.08

• Daily Order Flow bearish; OBV sideways, Linear Regression and Psychology bearish but attempting midpoint test form below.

• Monitoring intraday price and Order Flow indicators on a test of 1.13 or 1.0760/80.

GBPUSD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish

• While 1.57 caps upside a break back below 1.5550 suggests bearish symmetry target at 1.5285 remains in play a close above 1.57 negates near term bearishness and resets focus on the 1.60 upside psych objective.

• Daily Order Flow bullish; OBV sideways to up , Linear Regression and Psychology pierce midpoints from below but lack momentum.

• Monitoring intraday price action and Order Flow indicators on a test of 1.5285 or 1.5750.

USDJPY: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bullish

• Bulls target 125.85 next and 128 in extension, expect intraday downside reactions to be supported at 123.50 a failure at pivotal 122.50 again opens 120 in retest of ascending triangle trend line.

• Daily Order Flow bullish; OBV sideways to up, Linear Regression and Psychology test midpoints from above.

• Monitoring intraday price action and Order Flow indicators on a test of 128 or 120.

EURJPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish

• Range trade persists, 133/34 range support a breach of 133 opens retest of 2015 lows while above 138 range resistance, opens 143.

• Daily Order Flow bearish; OBV sideways to up, Linear Regression and Psychology pierce midpoints from below.

• Monitoring intraday price action and Order Flow indicators at 138 and 133.