FOREX Newsletter
Pulse of the Market
· Greenback got little encouragement on ISM Factory Report, but currency quickly followed risk aversion
· Euro sheltered following ECB decision as officials confident in Portugal bailout and no Greek restructure
· British Pound fell regardless of holiday, thanks to BoE Governor King’s testimony on monetary policy
· Australian Dollar improbable to find guidance momentous changes for monetary policy from RBA
The U.S Dollar ended yesterday’s trading session on a mixed note as investors are seeing higher yielding assets while the FED is forecast to keep interest rates at record lows. The Institute for Supply Managements manufacturing index fell to 60.4 in April from 61.2 a month earlier. The reading was somewhat lower than expected, with several regional indices and the new order index both declining. Slower growth in consumption and weaker demand from China also weighed on ISM. Non-farm payrolls data is due for release this Friday and should continue to rise, with 200k expected as signaled by strong survey data. The U.S construction sector found momentum as the first quarter ended with spending on projects posting the largest gain in 11 months with an increase of 1.4% in March. The Euro traded at 17 month highs against the U.S Dollar as the European economy continues to show signs of strength. The Single Currency rose as much as $1.4901 yesterday following a better than expected Purchasing Managers Index report at 58, moving the region further above the 50 threshold separating growth from contraction. Economic recovery along with persistent inflation is setting the stage for further rate increases in Europe and underpinning Euro strength. Euro Zone inflation was reported at 2.8% in April last week, above the ECB's 2% target. Meanwhile, Fed Chairman Bernanke's comments last week that rates would continue to remain low in the U.S during his press conference provided further momentum to sell the Dollar against the Euro and other currencies. The British Pound ended the day slightly lower against the Greenback after all eyes switched from the Royal wedding to the BOE meeting on Thursday. While the market expects no change in interest rates, it is important to note that inflation readings have been higher than the 2.0% target rate for the past 16 months. Regardless of the forecast for no move on Thursday, it is still anticipated that the BoE will move before the Fed. The Japanese Yen weakened and Japanese stocks climbed after President Obama said al-Qaeda leader Osama bin Laden was killed by U.S operatives, damping demand for the safest assets. Japanese government bond yields pushed to a six week low at 1.195% as spectators observed the extent of the slowdown and judged that the Bank of Japan might further extend monetary easing. The government meanwhile approved a $49 billion budget to help start rebuilding its devastated economy following the twin ravages of earthquake and tsunami.
| Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
| 04:30 | AUD Reserve Bank of Australia Rate Decision (MAY 3) | High | | 4.75% | 4.75% |
| 08:30 | GBP Purchasing Manager Index Manufacturing (APR) | Medium | | 57.0 | 57.1 |
| 09:00 | EUR Euro-Zone Producer Price Index (MoM) (MAR) | Medium | | 0.7% | 0.8% |
| 14:00 | USD Factory Orders (MAR) | Medium | | 2.0% | -0.1% |
| 21:00 | USD Total Vehicle Sales (APR) | Low | | 13.00M | 13.06M |
| 23:01 | GBP BRC Shop Price Index YoY (APR) | Low | | | 2.4% |
Euro
The Single Currency tested 1.4900 level in yesterday’s trading session but reversed sharply from the key level, leading the rest of the market lower in an appealing technical signal. Several are looking for the European Central Bank to provide the bulls fuel for a 1.5000 test as the contradictory monetary policy is out in the open. Overall, the EUR/USD traded with a low of 1.4762 and a high of 1.4901 before closing the day around 1.4829 in the New York session.
Yen
The Japanese Yen ended yesterday’s trading session on a strong note with crosses and majors falling with U.S stocks. USD/JPY once again tested 81.00 Yen but again the level held. Below this key 80.00 Yen level and talk of Bank of Japan intervention will resume. Overall, the USD/JPY traded with a low of 80.99 and a high of 81.68 before closing the day around 81.22 in the New York session.
British Pound
The British Pound was weaker than most of the major currencies with the market selling the Pound first against the resurgent Dollar. EUR/GBP took advantage moving above 0.8900 and the looking strong as the uptrend continues. Overall, the GBP/USD traded with a low of 1.6635 and a high of 1.6737 before closing the day at 1.6651 in the New York session.
Canadian Dollar
The Canadian Dollar eased off its recent three year highs as investors speculate that the New Democratic Party will deny Conservatives a majority as Canadians head to the polls. Despite the fact the Loonie has remained well supported by its relatively high yield and the rising prices of raw materials; it has struggled to breach it’s all time highs reached back in 2008. Overall, the USD/CAD traded with a low of 0.9446 and a high of 0.9517 before closing the day at 0.9503 in the New York session.
Australian Dollar
The Australian Dollar begins the week by reaching a fresh all time high above the key 1.10 level. However, while Australia's high interest rates have attracted significant demand over the past year, the resulting high borrowing costs are having a negative effect on the Australian housing market. Overall, the AUD/USD traded with a low of 1.0921 and a high of 1.1011 before closing the day at 1.0943 in the New York session.
Appendix
| Daily Pivot Points | |||||||
| | Trading Range | | |||||
| Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| EUR/USD | 1.4164 | 1.4246 | 1.4383 | 1.4465 | 1.4602 | 1.4684 | 1.4821 |
| USD/JPY | 81.32 | 81.78 | 82.17 | 82.63 | 83.02 | 83.48 | 83.87 |
| GBP/USD | 1.6212 | 1.6259 | 1.6331 | 1.6378 | 1.6450 | 1.6497 | 1.6569 |
| USD/CHF | 0.8707 | 0.8791 | 0.8834 | 0.8918 | 0.8961 | 0.9045 | 0.9088 |
| USD/CAD | 0.9424 | 0.9460 | 0.9491 | 0.9527 | 0.9558 | 0.9594 | 0.9625 |
| EUR/JPY | 116.52 | 117.38 | 118.64 | 119.50 | 120.76 | 121.62 | 122.88 |
| GBP/JPY | 133.64 | 134.15 | 134.79 | 135.30 | 135.94 | 136.45 | 137.09 |
| CHF/JPY | 90.87 | 91.29 | 92.13 | 92.55 | 93.39 | 93.81 | 94.65 |
| AUD/JPY | 85.68 | 86.24 | 87.34 | 87.90 | 89.00 | 89.56 | 90.66 |
| EUR/GBP | 0.8696 | 0.8737 | 0.8794 | 0.8835 | 0.8892 | 0.8933 | 0.8990 |
| EUR/CHF | 1.2776 | 1.2831 | 1.2862 | 1.2917 | 1.2948 | 1.3003 | 1.3034 |
| GBP/CHF | 1.4386 | 1.4472 | 1.4518 | 1.4604 | 1.4650 | 1.4736 | 1.4782 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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