FOREX PRO WEEKLY, June 19 - 23, 2017

[Sive Morten]

Good morning,

(Reuters) - The dollar eased versus the yen on Thursday as a recent rally tied to bets on another U.S. interest rate hike this year lost steam, while the New Zealand dollar rose after its central bank stopped short of aggressively trying to talk down the currency.

The New Zealand dollar was the big mover during Asian trade, rising 0.4 percent on the day to $0.7248, edging back in the direction of a four-month peak of $0.7320 set last week.

The kiwi rose after New Zealand's central bank played down the recent rise in the currency, while it kept interest rates steady at record lows as analysts had widely expected.

"The main takeaways from the statement were pretty much in line with the last statement. They're still optimistic and positive on the medium-term growth outlook," said Peter Dragicevich, G10 FX strategist for Nomura in Singapore.

"It could be some people were looking for the RBNZ to be a little bit more forceful in their rhetoric around the exchange rate given how it's rallied the last few weeks," he said, adding the absence of such jawboning probably helped give the kiwi a lift.

The U.S. dollar eased 0.2 percent against the yen to 111.15, pulling away from a three-week high of 111.79 yen reached on Tuesday.

"Risk aversion arising out of ongoing decline in oil prices is one of the factors explaining the move in dollar/yen," said Christopher Wong, senior FX strategist for Maybank in Singapore.

A recent narrowing of the U.S.-Japan 10-year yield differential, was also weighing on the dollar, Wong said.

The U.S. 10-year bond yield is now 209 basis points above its Japanese counterpart, compared to levels around 237 basis points seen in the early part of May.

"Yield differentials should continue to drive dollar/yen direction," Wong said, adding that a pick-up in U.S. inflation data is needed for markets to price in higher U.S. Treasury yields and lift the dollar.

Brent crude oil futures eased 0.1 percent after sliding 2.6 percent in the previous session.

The dollar index, which measures the greenback against a basket of six major currencies, was marginally weaker at 97.504, having retreated from a one-month high of 97.871 set on Tuesday.

The euro was little changed at $1.1168

Last week, the Federal Reserve, as expected, raised key borrowing costs by a quarter point to 1.00-1.25 percent, while Fed Chair Janet Yellen downplayed recent signs of inflation softening.

Sterling held steady at $1.2670, after having risen 0.3 percent on Wednesday when the Bank of England's chief economist, Andy Haldane, said he expected to back a British rate increase this year.

Today, guys, we will take a look again at our GBP setup, as it comes to culmination point. In general our suggestion comes to life as market indeed is forming butterfly "Buy" pattern on intraday charts. Thus, here we could get nice bullish setup very soon. But this trade should be very fast and we should not marry any position as actually we trade against major tendency.
According to our expectation price should re-test our major trend line and show tactical bounce. This is our context:

Now, why we think that Cable should drop more? We have two reasons for that. First is butterfly itself. You can see fast acceleration to 1.27 target. Usually this action takes continuation to 1.618. Second - we have large AB-CD pattern, CD leg is very fast and much faster than AB. It tells that GBP should reach 1.618 target with high probability. As you can see all these targets stand in the same 1.2520 area and precisely around daily trendline:

That's being said, here we're waiting for 1.2520 area where chance for short-term long trade should appear.

 

[Sive Morten]

Good morning,

(Reuters) - The dollar was little changed on Friday as traders marked time ahead of next week's U.S. inflation-linked indicators, while commodity currencies such as the Canadian dollar held to gains after crude oil prices bounced.

The dollar index against a basket of major currencies was effectively flat at 97.492

The index peaked at a one-month high of 97.871 on Tuesday after the Federal Reserve hiked interest rates last week and left the door open for further monetary tightening later in the year. But it has been stuck in a tight range since, awaiting fresh catalysts.

"While the market was able to draw incentives from the Fed last week, there really were not a lot of factors for the dollar to move on this week in the absence of major indicator releases and political events," said Shin Kadota, a senior strategist at Barclays in Tokyo.

"But inflation is likely to be the theme that moves currencies next week which will see the release of various U.S. indicators. They will be key as this week's slump in crude oil has clouded the U.S. inflation outlook."

U.S. data due next week include the June consumer confidence indicator, pending home sales, crude oil inventories, revised first quarter GDP and the PCE price index.

"While most U.S. indicators bear watching, what really matters for the dollar are wages and inflation-related data, culminating with the non-farm payrolls in two week's time," said Makoto Noji, a senior strategist at SMBC Nikko Securities.

The dollar was flat at 111.320 yen. It had scaled a near one-month peak of 111.790 on Tuesday before edging down in tandem with U.S. yields, which were nudged lower by falling oil prices. The greenback was still on track for a gain of 0.4 percent this week.

The euro was also steady, at $1.1158. It was poised to lose about 0.4 percent this week.

Commodity-linked currencies held to significant gains made overnight following a rebound in crude oil prices from 10-month lows.

The Canadian dollar was flat at C$1.3223 per dollar after rallying 0.75 percent on Thursday.

The loonie also received a helping hand from solid domestic retail sales which boosted expectations for an interest rate hike in July from the Bank of Canada.

The pound was 0.1 percent higher at $1.2700, its strongest in three days, as it rode momentum gained late on Thursday after Bank of England policymaker Kristin Forbes said "lift-off" of British interest rates should not be delayed any longer.

Conflicting signals from top BoE officials this week, including those by Governor Mark Carney who said it was not the right time to hike rates, have sent sterling on a roller coaster ride.

The currency has gone from a high of $1.2814 on Monday to a low of $1.2589 on Wednesday, its weakest in two months.

The Australian dollar was up 0.1 percent at $0.7547 and the New Zealand dollar was down 0.1 percent at $0.7258.

Today, guys, it makes sense to talk on JPY. Two days ago we've agreed to watch for reversal pattern on intraday chart that could let us to go short. Now we have more inputs and clear understanding of situation.

On daily chart, actually, it doesn't matter in what point price will turn down. It just has to do it below 114.50 top to keep butterfly valid. Of course, for us it is better if reversal happens as closer to 114.50 as possible. It lets us to place tighter stop. Target that we will wait stands at major Fib support and 1.27 butterfly point - 106.50

In our last talk on JPY we said that it is possible that price will form H&S pattern, but right now situation has changed. Now this price action mostly reminds bullish flag consolidation and could mean that before downward reversal yen will show another leg up, probably to 112.25 area. Indeed, overall price action now doesn't have bearish features, now impulse action. Mostly it reminds consolidation. Besides, Double Bottom target has not been achieved and it stands precisely at 112.25 area:

Besides, on hourly chart we have hidden bullish MACD divergence, that also suggests upward continuation. Overall shape here is far from our H&S picture that we've made 2 days ago:

That's being said, it seems that we will not get entry point this week and we should wait a bit more...