Financial market research and analysis

Cable first slipped to 1.2971 on the back of a broad-based USD appreciation, then gained back the 1.30 level on solid retail sales data.

The UK’s retail sales including auto fuel rose by 0.6% month-on-month in June, versus 0.4% expected by analysts. Sales rose by 2.9% from a year earlier, versus 0.9% printed previously.

The FTSE 100 surpassed the 50-day moving average (7446p). A gradually more business-friendly Brexit rhetoric from PM Theresa May and further depreciation in pound could encourage a further attempt toward the 7500p.


Draghi may dishearten the ECB-hawks

The euro consolidates near the 1.15 level versus the US dollar before the European Central Bank (ECB) meeting and President Mario Draghi’s press conference due today. The ECB is expected to maintain the status quo at today’s meeting. Yet investors are craving for details regarding the ECB’s plans concerning its Quantitative Easing (QE) program due to end in September.

The recent rally in the Eurozone sovereign yields and the euro appreciation has been an interesting opportunity to observe the market’s take on an eventual QE taper. Both the euro and the yields have a decent upside potential waiting to be triggered with the slightest hint on the QE tapering. Therefore, Mario Draghi will likely remain cautious on his comments to contain the ECB-hawks’ enthusiasm at today’s press conference, given that a rapid euro appreciation would weigh on the inflation and push the ECB farther away from its 2% target.

A less hawkish than expected speech could cause a downside correction to 1.1425 (major 38.2% retracement on June 26 to July 17 rise). Below this level, the pair would step in the bearish consolidation zone and could extend losses to 1.1380/1.1329 (50% and 61.8% retracement).


Yen softens on dovish BoJ

As expected, the Bank of Japan (BoJ) kept its policy rate unchanged and extended the time it needed for reaching its 2% inflation target to 2019 in another attempt to halt the rise in JGB yields and the yen.

The USDJPY was better in Tokyo, after having retraced to 50% of the June – July rise (111.65) on Wednesday. The improved US dollar appetite should be supportive of further strength. Gains could prolong toward 112.87 (200-day moving average).


AUD pares gains after jobs data

The Australian economy added net 14’000 jobs in June, slightly lower than the consensus (15K). Though the data was not discouraging given that the full-time jobs increased by 62’000, versus 48’000 part-time job losses.

The AUDUSD edged lower posterior to data, after trading at a new two-year high of 0.7989. Trend and momentum indicators remain comfortably positive, yet the overbought market conditions suggests that it could be time for the Aussie to pause and breath. A tactical downside correction could help gathering a stronger momentum to fight back the solid resistance at 0.8000/0.8015 (200-week moving average). Support is eyed at 0.7900/0.7875. Put options could weigh below 0.7875 at today’s expiry.