Market Outlook for 18th July 2016

Market Outlook for 18th July 2016

Coup attempt in Turkey that started in late Friday was the top theme during the weekend worldwide. In immediate reaction, after the news hit wires, Turkish lira collapsed against the dollar for 5%. Safe-haven Japanese yen and Gold benefited on renewed risk-aversion in late Friday, hitting highs at 104.61 and $1338 respectively.
However, gains were short-lived, as Turkish government regained control after coup failed. Lira regained ground and recovered about 2% in early Monday trading, while the dollar bounced against yen on Monday’s gap-higher opening and trades near 106 barrier that was approached overnight.
Gold also came under pressure after demand for safe-haven eased, trading above session low at $1323.
Japanese yen slid over 4% against the dollar last week, marking its worst weekly performance since late 2009. The yen came under strong pressure on speculation that Japan might adopt more aggressive economic stimulus, so called ‘helicopter money’, however, analysts remain skeptical about imposing such policy. Focus is turning towards BoJ’s monetary policy, due in late July, when the central bank may unveil monetary easing.
The Euro remains under pressure, with near-term focus turning again towards 1.1000 base, following last week’s recovery rejection and short-lived break above 200SMA barrier at 1.1100 zone. The negative momentum was regained on Friday’s strong close in red, as well as bearish weekly close that maintains negative tone in technical studies.
However, possibility of extended directionless trading would remain in play while the pair holds within near-term 1.1000/1.1100 congestion.
Antipodean currencies showed mixed performance during past week, with Aussie dollar holding steady and consolidating under fresh 10-week high, which was hit on acceleration after solid Chinese data. Investors are expected to stay sidelined ahead of minutes of the Reserve Bank of Australia’s July policy, which are due on Tuesday.
On the Other side, New Zealand dollar extended weakness against the US dollar for the four straight day on Monday and ended last week in strong bearish tone, following strong rally in past six weeks.
The Kiwi dollar was pressured by surprisingly soft inflation numbers that rises probability of rate cut in the policy meeting next month.
Crude oil price traded in narrow range in early Monday’s trading, following last Friday’s rally that peaked at $46.31, on news from Turkey, but markets dismissed initial bid on Friday’s coup attempt.
However, oil price regained ground and holds above fresh 2 ½ month low at $44.41, after optimistic data from US and China.
Highlights of the day

Monday’s calendar is light, with BoE’s MPC member due speak at 08:15GMT and German BUBA monthly report at 10:00 GMT being the highlights of European session.
Canada’s Foreign Securities Purchases at 12:30 GMT, being the highlight of American session. Forecast for May is at 15.39 billion C$, compared to 15.52 billion C$ in April.

Important levels

USDTRY
The pair retraced 61.8% of Friday’s strong rally that peaked 3.0125 and marks the strongest one-day rally in recent years, bigger than 04 May’s acceleration.
Fresh reversal on easing tensions dipped to 2.9262 (Fibo 61.8%), however, technicals remain bullish and only firm break below pivots at 2.9262 and 2.9121 (200SMA), would soften the structure.
Friday’s low at 2.8728 marks key near-term support, while initial resistance lies at 2.9534, followed by session high at 2.9712 and Friday’s peak at 3.0125.
GBPUSD

Repeated upside rejection at1.3474 and Friday’s close in red, keep the pair at the back foot. Near-term technicals are mixed, while overall structure remains bearish. Initial support lies at 1.3200 zone (session lows), ahead of downside pivot at 1.3137 (daily Tenkan-sen line).
At the upside, 1.3300 zone marks initial resistance, ahead of Fibonacci 61.8% barrier at 1.3345, while double-top at 1.3474 marks firtst upside trigger for retest of key short-term resistance at 1.3531 (29 June recovery rejection).

USDJPY
The pair remains supported and returns close to 106 barrier, after Friday’s upside rejection at 106.29 and subsequent dip to 104.61 that resulted in Friday’s close in red.
Near-term price action focuses key barriers at 106.67/78, to confirm resumption of recovery rally from 98.98.
Initial support lies at 105.29, followed by 105.00 and 104.61, loss of which would expose strong 104.00 support zone., Market Analysis