GBP bulls have emerged this week, sterling seeing a 500 pip bullish week. Cable now trades in Brexit night’s range and also above the pre-BoE cut level. GBP gained ground against its major counterparts, with a hawkish BoE rhetoric on Thursday, stating: “A majority of the MPC judge that, if the economy continues to follow a path consistent with the prospect of a continued erosion of slack and a gradual rise in underlying inflation pressure then, some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainability to target (key addition)” Thursday evening saw confirmation of the hawkish tone from the Bank, with Governor Carney emerging later in the session, implying that the probability of a hike has definitely increased. MPC rhetoric continued on Friday, with noticeable dove Vlieghe saying that an appropriate time for a hike may be as early as the coming months.

The US was flooded with data this week, as the Fed’s interest rate decision approaches; a strong CPI report on Thursday led to continued greenback buying into Friday, as the optimism toward the US economy continued this week. However, tone was quickly dampened on Friday, as a poor US Retail Sales report resulted in some position unwinding. This was then followed by poor US Industrial Output data. However, the Fed stated that Hurricane Harvey was estimated to have reduced the rate of change in total output by roughly 0.75%, seemingly quelling concerns. The DXY continues to trade around key levels, with a struggle of consolidation above or below the 92.00 handle evident.

The USD strength, and lack of Yen confidence emerged in Friday’s Asia session, as North Korea fired a missile which passed through Japan’s airspace and over Hokkaido, before landing in the Pacific Ocean. This initially prompted Japan to issue an emergency warning for its residents to seek shelter, while there were also reports that South Korea conducted its own missile firing test as a show of readiness. The geopolitical concerns saw USD/JPY briefly spike below 110.00, as unfazed bids were stacked around 109.50, bouncing back through 111.00. The JPY safe-haven flow has become a concern of late, as threats against Japan could lead to flows outside of the JPY, and some traders looking for other safe-haven assets. This could be indicated by the lack of aggression in the bounce in USD/CHF, with the cross remaining other the 2017 downward resistance trendline.

The SNB slightly altered their rhetoric in the unchanged Interest Rate decision on Thursday, removing the term ‘significantly overvalued’ and replacing with ‘remains highly valued’ and stated that they will remain active in FX market if necessary. The aforementioned move of safe haven flows could potentially affect the SNB more than most, with USD/CHF and EUR/CHF seeing Friday downward pressure.

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Dollar Index Daily

Nothing difficult about this. Reaching the monthly target half way into the month is the same as reaching the weekly target on a Tuesday or Wednesday. By the end of the month we expect price to be back at the monthly central with the extreme target of MM3 when coming off of MS2. While price has come off the 21 and this does predict a lower low, the reversal pivot of MS2 is definitely support and a likely price for a reversal with a double bottom for good measure. If you are using this Dxy then pay careful attention to weekly bull entry pivots/ zones at 11750 and confluence of weekly targets with MMP/ MM3.

S&P 500 Daily

Once again, nothing out of the ordinary. Bulls bought in the monthly bullish zone between MM2 and MPP with a target of MM4 and aggressive target of MR2.

US10Y Daily

Also very straight forward. Price came off MR1 at the start of the month giving us a target of MS1.

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