Daily Market Report: EURUSD, GBPUSD, USDJPY
Yen outperforms as yields plummet, pound lags following bearish BoE Carney comments.
EURUSD: Yields continue to plummet as both EUR and USD underperform
Little difference in the pair’s price as both euro and greenback underperformed yesterday against most of the remaining FX majors, though plenty of intraday movement following midday reports of ECB policymakers being in no rush for a July rate cut. Otherwise, the plummet in yields was most noticeable, with US yields dropping to two-year lows and German yields plunging further into record negative territory. In terms of the ECB, Lagarde was nominated to lead the ECB as other top jobs were filled after a marathon session, with parliamentary approval needed. In the meantime, today’s service PMI figures are the main item to look out for following Monday’s disappointing manufacturing PMIs, while on the US side ISM’s non-manufacturing and ADP’s estimate will be released prior to Friday’s NFP.
GBPUSD: Bearish BoE comments and negative data keep the pound lagging against its FX peers
The pound lagged the most yesterday as the BoE’s Carney highlighted Brexit and trade risks, and took market probabilities of a rate cut out of the UK central bank higher despite inflationary risks. Furthermore, construction PMI was well below expectations at 43.1 and at lows unseen since 2009. Services data is set to be released today, and as it stands the previous PMI figures this week have both disappointed and contracted. The recent fundamental outlook has been in line with its current bear trend technical overview where most of its indicators are bearish and combined with a trending ADX, reducing the likelihood of its technical overview being undone. In terms of bias, retail sentiment has risen 5% on short profit-taking to an extreme long 78%.
USDJPY: Yen outperforms while the greenback lags as US yields move lower
The yen was the top performer amongst the FX majors yesterday as US yields dropped, with the latter taking the greenback with it against most of the remaining FX majors. While a 0.25% rate cut is fully priced in for the end of July, the probability of a 0.5% cut is starting to rise slightly according to Fed Fund Futures, with that likelihood rising further if US data such as this Friday’s NFP disappoints further. From a technical standpoint, the recent drop breathed some life into its stalling bear trend technical overview, and the mid to long-term outlook remains more bearish but holding at a mid-term support level. In terms of bias, while institutional yen shorts are closing out and taking majority long bias lower, retail bias is ticking higher instead as shorts take profit and longs hold on.
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