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US FX Market Open – Tuesday May 30, 2017: GBP shrugs off narrowing polls

Posted by Marge Maresca on May 30, 2017 7:43:27 AM

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Overnight Events

• EUR/USD -0.04%, USD/JPY -0.22%, GBP/USD +0.15%, AUD/USD +0.13%
• DXY +0.03%, DAX -0.09%, FTSE -0.41%, Gold -0.22%
• EZ May business climate falls to 0.90 (Rtrs poll 1.11) from 1.10 in April
• EZ May economic sentiment falls to 109.2 from 109.7 in April (Rtrs poll 110.0)
• EZ May industrial climate rises to 2.8 from 2.6 in April
• EZ May services sentiment drops to 13.0 from 14.2
• EZ May consumer sentiment at -3.3 vs -3.6 in April
• EZ May consumer inflation expectations drop to 12.8 from 13.9 in April
• EZ May producer price expectations stable at 8.2
• UK PM May says prepared to leave EU without a Brexit deal
• UK Conservatives on 43 pct, Labour on 37 pct - Survation poll
• Centre-left UK coalition might be positive for pound - JP Morgan
• FR May consumer confidence at 102 (f'cast 101) vs 100 in April, near 10-yr high
• Negotiated wages in Germany rose by 2.8 percent on average in the first quarter
• German inflation slows more than expected in May, state data suggest
• Spain inflation in line with ECB target for 1st time since December
• Greece denies report it may opt out of receiving more bailout money
• ECB's main issue is how quickly stimulus can be reduced: Hansson
• Spain's PM says sees growth of at least 2.7 pct y/y in 2017
• Swedish Q1 growth slower than expected, cbank seen unmoved 

EUR/USD
• EUR 1.1110-59 in Europe. Opened 1.1128. Near highs ahead NA open
• Asia 1.1110-67 dominated by long liquidation
• Softer EUR on assumptions ECB changes nothing in June
• Germany's states' inflation and Belgian CPI data, softer in May
• Eurozone May sentiment series sub f/c. Inflation expectations dip
• Many EUR/USD longs will be losing of pair breaks 1.11

USD/JPY
• Bearish outlook, but large strikes may prevent further falls in London
• Cluster of NY cut expiries between 111.00/35 worth just shy ot 2 yards dollars
• Bias remains on downside, stops said to be is size below 110.50
• Long liquidation earlier saw drop to 110.77 from 111.29, before finding support
• Japan Apr retail sales +3.2% y/y, +2.3% eyed, Mar +2.1%, lge retailers +1.1%
• Japan Apr household spending +0.5% m/m, -1.4% y/y, +1.1/-0.7% eyed, weak
• Japan Apr unemployment 2.8%, jobs-applicants ratio 1.48, 2.8% and 1.46 eyed
• Jobs availability best since 1974, retail sales good on China/Asia buys
• Japan Apr crude imports +10.8% y/y, LNG +3.0%, thermal coal +8.7%

EUR/CHF
• Stocks struggling, N.Korea missile testing and broad EUR-cross drift cited
• Draghi comments also blunting the EUR: ECB unlikely to move in June
• EUR/USD longs at 3-year highs also in the mix: http://reut.rs/2r65n5I
• Latest EUR/CHF dip likely to stir the SNB as it maintains its brake on the CHF
• Cross cancels out Monday 1.0888-1.0920 gain: eyes recent 1.0867 low
• Drop under 1.0860 to ignite bear run: Chart: forex http://reut.rs/2qBCiLD

GBP/USD
• GBP/USD a little higher to 1.2871 in Europe
• Asia today 1.2795-1.2863. May 26 reached 1.2775. May 18 1.3048
• Nothing news or data wise to inspire the bounce
• Tighter election polls and softer UK rates should limit GBP rise
• 10 year yield dipped below 1%. Only 6 points between Tory/Labour
• Tomorrow is month-end with usual EUR/GBP buying likely

USD/CAD
• USD/CAD holds close session highs as oil slips, range 1.3463-79
• Oversupply worries see WTI fail to sustain gains over US 50bbl, today -0.5%
• Massive USD long positions continue to limit USD/CAD bounce
• USD/CAD longs nearly represent the whole G10 long USD position
• One-month highs for gold may work in loonie's favour
• Substantial rise f/c Canada's c/a deficit today, 12bln from 10.73bln

AUD/USD
AUD opened firmer having ended a thin Mond session marginally off-side
• USD strength main feature in Asia, primed by early EUR and GBP losses
• Not much of a bear run to reverse but techs are hinting at a bull signal
• From an early 0.7416 lo a reasonable rebound in Europe to 0.7455
• 4.4% lift in AU Apr bldg approvals had little impact given data volatility
• Return of UK & US participants coupled with looming mth-end seen dictating
• 0.7401 61.8% Fib retrace 0.7329/0.7517 rally as next tech supp
• Res. 30DMA at 0.7456 and 0.7525 55DMA: Chart: forex http://reut.rs/2qBzvlZ

Comment

Swedish Q1 GDP could delay Riksbank rate hike
A significant miss in Swedish Q1 GDP data could push a Riksbank rate hike further down the road until the economic recovery gains traction. The SEK's modest fall after annual growth came in at 2.2% compared with a 2.8% Riksbank call and 2.8% consensus in the Reuters poll highlights that the market remains comfortble with the economy's performance. Standout factors were a fall in public consumption and fixed investments and a surprising 4.3% drop in service exports on the quarter. A late Easter brought calendar factors into play and it argues the case for looking at Q1 and Q2 GDP together to gauge the growth trend. Overall, the Swedish economic picture is a positive one but one that might force the Riksbank to further delay a change in policy direction.

Chart - (Source:ThompsonReuters)

Cable upswing likely at an end
Cable is set to falter as the likelihood grows that bulls will fail to close the month above the 1.3032 Fibonacci level - 76.4% retrace of the 1.0520 to 2.1162 (1985 to 2007) rise. Fourteen-month momentum remains negative which has been the case since November 2014, highlighting the underlying downside risk. Cable is likely to fall towards 1.2500 initially on the way to the 1.1983 2017 low. While the market rose to a 2017 1.3048 peak recently, marginally overshooting the aforementioned 1.3032 level, failure to sustain the break is a substantial obstacle for bulls. Only sustained trading above 1.3032, on a monthly basis, will signal that medium-term bulls have the upper hand. Chart: http://reut.rs/2r6JW4l

Today’s events

Option Expirations (Source:ThompsonReuters)

An expiring FX option heading into the New York Cut, if close enough to the strike price, can act as a magnet for selling/buying.  If the option is large, it can generate enough trading to move the market.  

• EUR/USD: 1.1145-50 (1.3BLN), 1.1200 (1.2BLN), 1.1250 (2.8BLN)
• USD/CHF: 0.9700 (251M). GBP/USD: 1.2700 (265M)
• AUD/USD: 0.7400 (690M), 0.7450-55 (605M)
• NZD/USD: 0.7000 (710M), 0.7050 (595M), 0.7100 (394M)
• USD/CAD: 1.3340 (275M), 1.3500 (367M), 1.3725 (500M)
• USD/JPY: 110.00 (1BLN), 111.35-45 (440M), 111.50-55 (455M)

Economic Data (GMT) - (Source:ThompsonReuters)

• 12:30 Personal Income (Apr) (mkt +0.4% m/m, prev +0.2% m/m)
• 12:30 Consumption Expenditures (Apr) (mkt +0.4% m/m, prev 0.0% m/m)
• 12:30 PCE Price Index (Apr) (prev -0.2% m/m, +1.8% y/y)
• 12:30 -- Core PCE Price Index (Apr) (mkt +0.1% m/m; prev -0.1% m/m, +1.6% y/y)
• 13:00 Dallas Fed Trimmed-Mean PCE Price Index (Apr) (prev +1.8% y/y)
• 13:00 S&P CoreLogic Case-Shiller House Price Index (Mar) (mkt +5.8% y/y, prev +5.9% y/y)
• 14:00 Consumer Confidence (May) (mkt 119.5, prev 120.3)
• 14:30 Dallas Fed Texas Manufacturing Outlook Survey (May) (prev 16.8)

Events, Other Releases (GMT) - (Source:ThompsonReuters)

• 17:00 Fed’s Brainard speaks at NYABE luncheon; New York, NY
• 18:00 Fed releases minutes of recent discount rate meetings
• 18:30 FedTrade operation 30-year Fannie Mae / Freddie Mac (max $1.45 bn)

 

Topics: US FX Market Open

 

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