FX Daily Wrap: Subdued, Sideways Summer

FX Markets have been subdued throughout the session, with focus set to be on Thursday’s ECB meeting. NZD traders will await New Zealand’s CPI data: CPI Y/Y Exp. 1.9% and Q/Q Exp. 0.20%.

Key levels to watch ahead of the aforementioned CPI data: NZD/USD will look to break the 0.737 area to indicate any continued upside. However, with many traders currently short USD, the risk could be to the downside, with NZD/USD bears looking for a break through 0.72. AUD/NZD indicated its upward intention last week, with bulls firmly in control of the market, however, a strong NZD number could see some moment on the downside.

Tomorrow sees a flurry of UK data: CPI and RPI figures, with inflation a concern for the BoE and an upcoming decision, the inflation figures will be under increased scrutiny. Cable trades once again in last month’s trading range, and any strong inflation figures from the UK could see us test 1.3485 (2016 July high). EUR/GBP is also evident of the recent sterling strength, as last week did see Wednesday, Thursday and Friday all print down days. Sterling bulls will look to continue the downward pressure, likely to target the 0.88 – 0.84 Q1 trading range.

The dollar has failed to gain any real recovery today, despite trading off lows and above the 95.00 handle. Volume could pick up later in the week, with the USD likely to be affected by Thursday’s ECB decision. EUR/USD did see buying into the end of last week, however, has slowed around last week’s high (1.1490), confirmation of a tightening ECB on Thursday could really see a push toward 1.50. However, with many short the USD, and long EUR/USD, any disappointment from the ECB, or lack of
mention of tightening intentions, could see a test back down toward 1.132.

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Dollar Index H4

WM2 holding as support with resistance for a lower high eyed at our previous low marked by WPP. Note that price is setting up a double bottom on H1 though the bearish trend will continue if price fails to break above WPP. Confluence between weekly WM1 target and MS2.

US10Y H4

The 61.8% fib holding as support with a target of 138.2%, might as well call it WM4. We will continue to monitor price action as WM3 is our current level of resistance.

Gilts H4

Bottom of the range marked by WM2 with the top of the range, and the target, marked by WM4. Very tight range which indicates low volatility on Pound. Of course, inflation data later this week could heat things up a bit.

Bunds H4

WPP held as support with price challenging WM3. Top of the range at WR1 with a target of WR2/ MPP.

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