We remain faithful to our core fundamental views and expect a slightly hawkish FOMC tomorrow. We prefer to be long USD against the commodity currencies into the FOMC and remain neutral on USDJPY. We are short AUD, NZD, CAD and CHF vs the greenback and short EURGBP.
{EU} EURUSD Lower => We like the pair lower from here throughout later in the summer. We find support at 1.1030, resistance at 1.1197.
{JN} USDJPY Neutral => We are still neutral in the pair with key levels of the session: Resistance at 124.00, with support coming in 123.00.
{GB} GBPUSD Neutral => We think the jump in EURGBP should be faded, but the technical outlook for Cable is starting to look vulnerable. Levels: 1.5470/90 support in Cable with 1.5595 topside. EURGBP 0.7055 support with 0.7160/95 resistance on the topside.
{NZ} NZDUSD Lower => We still like to be short here with key levels for the session: Resistance at 0.6690/6700 (21dma) and support 0.6600 before 0.6550.
{AU} AUDUSD Lower => We still favor the pair lower with key levels for the session: 0.7350/40 resistance and 0.7257 as support on the downside.
{CA} USDCAD Higher => We like the pair higher with important technical levels: support levels at 1.2949, with 1.3103 the resistance area.
{SZ} USDCHF Higher => We like the pair higher with key technical levels: support at 0.9550, then. Resistance above lies at 0.9650/9720.
USD:Few events ahead of Wednesday FOMC, with house price data today unlikely to rock the boat. We see hawkish risks on the Fed and with investors consolidating positioning at present, it could spur another leg higher in USD.
EUR:Holiday season setting in with no major data or events this week. We favor a continued downtrend in EURUSD, but may have to wait on USD specific drivers. IFO showed a stronger print than expected at 108 vs 107.2 expected, adding fuel to EUR rally as USD consolidates.
GBP: GDP today will see some focus, with market looking for pickup to 0.7% QoQ. However, data may be viewed as dated. Combined with recent MPC hawkishness this should limit GBP downside and we would buy dip on surprising weakness. MPC’s Cunliffe speech this evening worth attention (19:00BST).
JPY: Equity market pressure led to some JPY bid but the lack of major event triggers may result in weak follow-through. Limited data flow over next two sessions, so USDJPY may trade in line with broad USD trend for the time being. This leaves risks on the topside (in USDJPY) with less risk of verbal intervention with external price pressures moderating. Escalating M&A flow we’ve seen recently is also supportive of USDJPY steadiness.
CAD:Commodities moves, positioning and broad dollar swings look likely to drive CAD given the dearth of domestic events in the days ahead. With short CAD positioning not yet stretched, we favor selling.
AUD:Lighter week on data flow, with only Stevens speech likely to draw strong focus. We doubt that Stevens will shift tone vs. policy speech last week, so doves could again be disappointed. However, with market still not overly short AUD and the dollar picking up broadly there should be further downside.
NZD:Likely risk for further NZD-favorable position adjustment on AUDNZD. Few domestic events to look forward to.
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