Free FX Trading Analysis

G10 FX Economic for Wednesday 24/5
The US DoE crude inventory data showed a change of -4.43mn compared to -2.4mn expected; the Brent crude front-month jumped testing $54.60 but we haven’t yet seen a break as the DoE data is on the similar lines as API data last night. We don’t see much correction as risk seems skewed to the upside for oil and commodity bloc currencies as a 9-month extension deal from OPEC meeting on Thursday is very much likely. For OPEC timeline click here. For what is expected from OPEC meeting click here.





The BoC downplayed the uncertainty stemming from US political turmoil and recent inflation rate miss. We see a further CAD upside given that the BoC was fairly hawkish; Governing Council judges that the current degree of monetary stimulus is appropriate at present, and maintains the target for the overnight rate at 1/2 per cent” earlier it said “significant uncertainty on the outlook.”. That said, OPEC meeting on Thursday is also a big event for CAD and this may temper gains.

The [US 10 year yields also rallied] late last night to close above 2.27%. Fed’s Harker last night was bullish and the probability of a Fed rate hike still remains high (83%) and hence, it is unlikely that [FOMC minutes] will be able to push the probability of a June rate hike significantly higher given that FOMC minutes are likely to be stale by the recent US political developments. That said, we will look for any indication of future the pace of tightening and plans for balance sheet tapering. Also, there is a slight downside risk to USD from the FOMC minutes coming in slightly dovish given that FOMC statement had erred on the hawkish side; this scenario, however, is least likely. Elsewhere, [ECB President Draghi] will speak at 1245 GMT however, we are unlikely to get any hints on ECB June 8th meeting as he is speaking on financial stability.

G10 #FX performance 26 May 17 Asian Session #FX $EUR $USD $GBP $JPY $NOK $SEK $CAD $CHF $NZD


USDJPY approaching support


GBPUSD approaching an uptrend


EURUSD consolidating above support


Trending Update for Friday 26/5

The key data for the day remains the US durable goods orders at 1230 GMT but with weak numbers expected we don’t see much downside risk to USD. We will also have the US Q1 GDP 2nd estimate at 1230 GMT followed by Michigan consumer sentiments (final) later on. The USD remains subdued but we didn’t see a large scale sell-off despite the FOMC meeting minutes coming on the dovish side. In our view, the USD risks are now skewed to the upside as most of the bad news is priced in and June rate hike is still very much going ahead (given messages from Fed Bullard and Williams last night).
GBP has taken a turn for the worse exiting a bull channel versus USD; with the UK election poll 2017 narrowing and the UK GDP second estimate getting revised down on Thursday we see upside as limited. That said, the overall trend on GBPUSD is still intact and fall versus EUR have now gone beyond what could be explained by fundamentals alone.
In terms of market sentiments, we have seen Nikkei close 0.61% lower and USDJPY drop 0.64%. JPY is now the top performer in the G10 currencies following above expected Tokyo CPI. The Crude prices have consolidated today after falling sharply yesterday post-OPEC extending oil output cut by 9-month. That said the volatility still remains high and this will continue to impact commodities currencies. In our view, both Oil and commodities currencies (AUD, NZD, CAD and NOK) are likely to improve over the coming days as global outlook looks positive and short-term risks from the US politics are abating.

GBPUSD turning bullish


USDJPY momentum indicators are turning bearish


$EURUSD momentum indicators bearish but support near


AUDUSD moving towards our target


Trending Update 30th May G10 FX outlook
Nikkei fell 0.5% initially but recovered late in the Asian session to close almost flat (-0.02%) for the day. The European equities have also opened sharply lower with FTSE, DAX and CAC40 down 0.6%, 0.4% and 0.9%, respectively. In terms of the G10 FX, GBP is number one and USD is number 8 followed by SEK at number 10 (the weakest currency today). SEK weakness was due to the Swedish Q1 GDP miss (0.4% vs. 0.9% expected). The Swedish Q4 GDP growth rate was also revised down from 1% to 0.7%. The saving grace was SEK was the April retail sales which came in strong (1.3% vs. 0.5% expected)
Overnight, the Japanese retail sales came in strong above expectations while unemployment rate came in unchanged at 2.8% as expected. Elsewhere Norway’s retail sales were also above expected.
The EUR TWI fell sharply on Monday but is flat for Tuesday with a Doji candlestick pattern seen so far. In our view short-term risk to the EUR downside have increased; that said, there are some key releases today including the Euro-area business confidence at 0900 GMT and German Inflation rate (flash) at 1200 GMT. We will need improved numbers to keep the positive EUR sentiments going.
As for USD risks are now skewed to the upside as most of the bad news is priced in and June rate hike is still very much going ahead (given messages from Fed speakers last week). Also, there is PCE data and the US Non-farm payrolls due later in the week (expected to show strong numbers).


EURUSD looking constructive


GBPUSD momentum indicators turning bearish


USDJPY completing a wedge pattern


Trending Update 31st May
GBP is choppy moving from one election poll to the next. We are now seeing some sharp dip in Sterling after the YouGov poll forecasted a hung parliament. We see GBP weaken over the coming days as uncertainty over the UK elections grows. Levels to watch on EURGBP on the top side are .8750 and .8790 and on Cable are 1.2762 (21 April low) and 1.2705 (February highs).
The German retail sales came in weaker than expected (-0.2% actual vs. 0.2% expected) while unemployment rate came in unchanged at 5.7%. The unemployment numbers fell by less than expected (-9K actual vs. -15Kexpected). The EUR has had a muted response and we expect moves to be limited ahead of the composite the Euro-area CPI (flash) at 0900 GMT where any surprise will lead to short-term EUR response. Levels to watch on EURUSD are 1.1150 and 1.1200 just after the release and 1.1100 and 1.1265 by end of the day.
In the US session, the Canadian Q1 GDP is due at 1230 GMT; after a slightly hawkish BoC, the risk to CAD is skewed to the upside. The WTI front month is down 1.5% at $49.10 after testing the $50 mark yesterday. That said, the outlook on oil still remains constructive as Oil is still above the OPEC meeting lows and USDCAD bears are very much in play. Also, we see improvement in commodity currencies as risk appetite returns.


GBP outlook ahead of the UK Election Wednesday 31/05
GBP has come under attack as polls have narrowed ahead of the UK General Election on the 8th of June 2017. The Conservatives have gone from a lead of 18 points over Labour to 7 points (according to some prominent polls) since the general elections were called on 18th April. The fringe parties like the Liberal Democrats, UKIP and Green have been decimated as vote share has concentrated around the two main parties.

The cause of the latest chatter on the trading desks was the You Gov Projection piece for the Times where the pollster predicted a hung parliament on June the 8th. You Gov carried out a projection based on 50000 interviews as supposed to a normal survey with a sample size of a couple of thousands.

The projections showed that PM Theresa May will win 310 seats (out of 650 seats) which mean that conservatives will come down from their previous tally of 331 seats (a majority) in the previous general elections. The Labour will be number two at 257 seats which also means there will be a hung parliament.

The Times reporter Sam Coates who published the predictions has already said that these results will be updated daily which will keep the GBP choppy unless we see a clear trend. That said, there are some questions regarding the methodology used by YouGov with the Independent and the Guardian already calling it controversial. Also, there is an error rate according to which Conservatives may achieve 345 and Labour 227, hence these projections should be taken with a pinch of salt.

YouGov predictions have pushed GBP lower but the market has already started to question these forecasts as the latest polls (PanelBase and Kantar) showed Conservatives still having a healthy lead of over 10 points. The election polls will need to confirm the You Gov predictions and polls will have to confirm each other. The bottom line is that the market will need a consistent trend in polls against PM Theresa May over the next seven days for GBP to drop sharply. In our view, GBP weakness is further to run if polls continue to narrow. That said GBP may remain choppy if poll keeps contradicting each other.

In terms of levels to watch before the results;

                    Support           Resistance

GBPUSD 1.2772 1.2902

EURGBP .8656 .8787




What is likely to happen if Theresa May wins;

We expect GBP to improve because her stance on Brexit is more or less known and the market will see her win as “business as usual”. Also, inferring from the Conservatives manifesto it is likely that public spending cuts will be deep and fiscal discipline will be stringent. That said there can be some risk if May comes in with a slim majority as it will make it difficult for her to negotiate Brexit and pass important legislations through the House of Commons.

Conservative Majority (340 seats or above)

GBPUSD 1.2989

EURGBP .8600

Conservative Majority (340 seats or below)

GBPUSD 1.2800

EURGBP .8787

What is likely to happen if there is a hung parliament?

In a scenario of Conservatives missing the 326 mark, there will a hung parliament with a lot of uncertainty over Brexit and fiscal policy, given Labour and Conservatives divergent views.

Hung parliament (325 seats or below)

GBPUSD 1.2615

EURGBP .8849

We don’t see a majority or a coalition that could see the Labour government in power but in such a scenario GBPUSD and EURGBP could hit 1.2550 (-2%) and .8900 (+2%).

AUDUSD bouncing from support but bearish

$GBPUSD still choppy

$EURUSD consolidating beneath resistance

Trending Update 01/06
In the latest of polls, YouGov has now shrunk Conservatives lead to 4 points over Labour from 10 points earlier. This will weigh on GBP unless other polls continue to contradict this. The Manufacturing PMI came in at 56.7 above the 56.5 expected; we see no real impact as the focus remains on the UK election.
EUR TWI has now started to weaken post weaker than expected CPI even though EURUSD improved. As we have said before, the risk to the EUR downside has increased as the ECB policy meeting on 8th June is too early to give a hawkish message, especially with uncertainty stemming from the UK elections.
The Caixin Manufacturing PMI came in below 50 at 49.6 for the first time in over 11 months and this has pushed AUD to new two-week lows despite the Australian retail sales coming in strong. Elsewhere, the Nikkei 225 rose 1.07% to close at 19860. The European equities also opened higher with FTSE and DAX currently trading +0.35% and +0.44%.
The USD index is up for the day but moves have been choppy. We don’t see much change in the dollar outlook before the US NFP data on Friday. That said we expect USD to improve a little from the lows seen on the last trading day of May. The US ADP employment change and ISM Manufacturing PMI data are due later today at 1215 GMT but we expect moves to be limited whatever the outcome.