FOMC Set Up September Nail Biter

Market Commentary

Much awaited FOMC was largely a non-event. Statement was largely balanced. It noted improvements in labour market – “solid” job gains, declining unemployment, “diminished” labour market slack but partially countered the hawkish take on labour market with inflation, which remains below the FOMC’s longer term objective of 2%, partly attributing this to falling energy prices. strong majority of economists/dealers see September move while futures market prices only 36% chance; sets up September meeting as a nail-biter. With FOMC out of the way, focus is now back of data. Focus shifts to US GDP data. USD firmed post FOMC meeting as players took the balanced statement to suggest a September lift-off remains possible.

EURUSD eased below 1.10-handle as post FOMC saw a resurgence of USD strength. Market views EUR as a funding currency play, the pattern where risk on sees EUR lower while risk off sees EUR higher continues to pan out. The ECB’s issuance of ELA funding to Eurozone central banks lifted to its highest level since January 2013 at €139.7 billion while most of the ELA funding is to the central bank of Greece.

GBP reversed earlier gains, from 1.5690 to trade below 1.56 this morning amid broad USD strength. Medium term remains positive for UK outlooks amid ongoing economic recovery setting the stage for BoE to hike possibly as soon as 2Q 2016. That said near term GBP remains vulnerable to the downside, given that many positives have been priced in including some BoE members adopting a slight tinge of hawkish stance at recent speeches.

USDJPY is back above the 124-handle following the resurgence in the dollar as thea Fed fund rate hike lift-off remains on track. Japan’s industrial output increased 2% YoY in June, beat the market consensus of 1.3%.

Technical Commentary

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

• Testing near term pivotal support at 1.0960/40 a failure here would concern near term bullish bias. While 1.09 stems downside reaction expect a base for retest of 1.11. Failure at 1.09 opens retest of 1.08.

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

•  Monitoring intraday price and Order Flow indicators on a test of 1.12 or 1.09.

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

• A fourth failure toward 1.57 frustrates bulls a close below 1.55 would suggest bearish symmetry target at 1.5285 remains in play. While intraday downside reactions are contained by pivotal 1.5550 another assault on 1.57 is possible.

• Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology rotate around midpoints.

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

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

• Bulls target 125.85 and 128 in extension, intraday downside reactions remain supported towards 123 only a failure at pivotal 122.50 concerns medium term bullish view, failure here opens 120 in retest of ascending triangle trend line.

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

• Monitoring intraday price action and Order Flow indicators on a test of 128 or 122.50.

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

• 133/34 range support continues to hold while intraday downside reaction remain supported at the 1.35 trendline this suggests a retest of 138, advance above here opens 143.

• Daily Order Flow bullish; OBV sideways to down, Linear Regression and Psychology rejected at midpoints from below.

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