Analys från DailyFX
BoE and ECB Announce Policy Within the Hour; EUR/USD and GBP/USD Flat
ASIA/EUROPE FOREX NEWS WRAP
A quiet trading day is around the corner but not before what should be relatively placid price action interrupted by two quite important events: the Bank of England and the European Central Bank Rate Decisions. Thanks to the July 4 holiday in the United States, volatility in FX has been rather subdued overnight, at least in the European and North American currencies, so any disruption caused by the meetings over the next few hours is probably going to be short-lived.
On the BoE: it is new Governor Mark Carney’s first policy meeting but I wouldn’t be anticipating any new changes yet. While Governor Carney has issued a fair amount of dovish warnings in the run up to his ascension, the recent uptick in UK data (notably led by improving PMI surveys) handicaps any further accommodative aspirations at present time. One thing to watch for is if a policy statement is released – Governor Carney appears to be poised to break the habit of silence after a BoE policy meeting.
On the ECB: no new measures are expected and while negative rates will likely be discussed, they will not be implemented. It seems credit is already pricing in a hold, with bond yields across the continent ticking higher; and in context of a mostly unchanged EURUSD (-0.02% at the time this report was written), it’s clear that weakness in European sovereign debt is not reflecting risk aversion, rather positioning for the ECB meeting.
Taking a look at European credit, Portuguese concerns continue to be a negative influence, while the expected inaction from the ECB has also supported higher yields. The Italian 2-year note yield has increased to 1.867% (+6.4-bps) while the Spanish 2-year note yield has increased to 2.138% (+1.7-bps). Likewise, the Italian 10-year note yield has increased to 4.558% (+6.5-bps) while the Spanish 10-year note yield has increased to 4.760% (+1.2-bps); higher yields imply lower prices.
RELATIVE PERFORMANCE (versus USD): 10:45 GMT
AUD: +0.54%
NZD: +0.30%
JPY: +0.20%
EUR:-0.02%
CHF:-0.15%
GBP:-0.22%
CAD:-0.22%
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.14% (+0.60`%prior 5-days)
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— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
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EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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