FOREX Newsletter
Pulse of the Market
· Greenback outperformed as the uncertainties surrounding the global economy bears down market sentiment
· Euro may face additional selling pressures as the economic outlook remains clouded with high uncertainty
· BoE said there’s ‘good chance’ inflation will reach 5% this year even the bank lowered its outlook for growth
· Australian employers unexpectedly cut workers in April by the most since 2009 sending the currency tumbling
The Greenback gained against most of its major counterparts in yesterday’s trading session. Data showed that the U.S trade deficit widened by more than expected as surging oil prices boosted imports. The gap grew by 6% to $48.2B, the largest reading since last June, outpacing the best foreign sales in the past 17 years. A weaker Dollar and fast growth in emerging markets has buoyed U.S exports, which in turn has largely led the nation's economic recovery. In the near term, the Dollar has remained well supported as the best alternative to the Euro as the region comes under renewed analysis due to its several members' continued struggles with debt. With commodities also paring some of their recent gains yesterday, the Dollar remained well supported against most of its peers. The Euro pushed back towards the bottom of its recent ranges on continued concerns over Greece's debt woes. It's been long said that the Euro can only be as strong as its weakest link, and the struggle between Euro buying based on its yield advantage and Euro selling based on the region's continued struggle with debt has produced quite a volatile month. However, while a restructuring of Greek debt could be unfavorable for the Euro Zone economy, investors still expect the ECB to be aggressive in combating rising inflation. While ECB President Trichet signaled that expectations of imminent rate hikes need to be tempered, futures markets are still pricing in a further 0.95% in increases this year. Cable started yesterday’s trading session higher and rose as much as to six week high against the Euro after the BoE signaled that while their outlook for British economic growth has weakened, they see inflation "markedly higher" in the near term. But the gains were limited and British Pound ended the day slightly lower. It appears that the BoE may not have the room after all to wait for economic growth to rebound before moving rates higher if it wants to maintain its credibility. The Japanese Yen and Swiss Franc both traded lower regardless of falling equity and commodity prices. In recent weeks, a selloff in parallel markets prompted gains in both the Yen and Franc as safe haven currencies.
Time(GMT) | Economic Release | IM | Actual | Forecast | Prior |
| | GBP NIESR Gross Domestic Product Estimate (APR) | High | | | 0.7% |
| 01:30 | AUD Employment Change (APR) | High | -22.1K | 17.0K | 37.8K |
| 08:00 | EUR ECB Publishes May Monthly Report | Medium | | | |
| 08:30 | GBP Industrial Production (MoM) (MAR) | Medium | | 0.8% | -1.2% |
| 12:30 | USD Advance Retail Sales (APR) | High | | 0.6% | 0.4% |
| 12:30 | USD Retail Sales Less Autos (APR) | High | | 0.6% | 0.8% |
| 12:30 | CAD New Housing Price Index (MoM) (MAR) | Medium | | 0.3% | 0.4% |
| 12:30 | USD Producer Price Index (MoM) (APR) | Medium | | 0.6% | 0.7% |
| 12:30 | USD Initial Jobless Claims (MAY 7) | Low | | 430K | 474K |
Euro
The Single Currency reversal continued in yesterday’s trading session with new month lows back to 1.4200. Wide ranging U.S Dollar strength and ongoing concern about Greece being the main catalyst but investors are cautious to call a new downtrend. Overall, the EUR/USD traded with a low of 1.4171 and a high of 1.4422 before closing the day around 1.4191 in the New York session.
Yen
The Japanese Yen actually did well breaking above 81.00 Yen even in risk aversion as the U.S Dollar performed well and vanished assurance that 80.00 Yen would not be broken. The outlook is mixed with crosses closely related to the performance of stocks which are also under pressure. Overall, the USD/JPY traded with a low of 80.60 and a high of 81.31 before closing the day around 81.03 in the New York session.
British Pound
The British Pound gained against the Single Currency on the Bank of England inflation report which increased the short term expectation of inflation. Pound gains were reversed in the U.S session with the Dollar revival but the market was able to hold at opening levels. Overall, the GBP/USD traded with a low of 1.6321 and a high of 1.6516 before closing the day at 1.6347 in the New York session.
Canadian Dollar
The Canadian Dollar remained well supported regardless of the drop in the price of oil, the country's primary export, after a report showed that the U.S trade gap widened largely due to rising oil prices. Gains in the Loonie have however been tempered by comments from Canadian Finance Minister yesterday that the government wants to "avoid extreme currency fluctuations." Overall, the USD/CAD traded with a low of 0.9511 and a high of 0.9637 before closing the day at 0.9611 in the New York session.
Australian Dollar
The Australian Dollar fell yesterday as commodities and stocks twisted. Support was found eventually ahead of 1.0650. Australian employers unexpectedly cut workers in April by the most since 2009. The number of people employed declined by 22,100, after a revised 43,300 gain in March, the statistics bureau said in Sydney today. Overall, the AUD/USD traded with a low of 1.0663 and a high of 1.0887 before closing the day at 1.0699 in the New York sessionEuro-Yen
EUR/JPY is trading below 14, 50 and above 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The RSI is above 39 and lies below the neutral zone. Overall, the cross has lost 1.30%.
Sterling-Yen
Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bullish and MACD is indicating a bearish stance. The RSI is above 45 reading and lies below the neutral zone. The pair has gained 0.11%.
Aussie-Yen
Currently, the cross is trading below 14 and above 50, 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 46 reading and lies below the neutral region. The pair has lost 1.07%.
Euro-Sterling
This cross is trading below 14, 50 and above 100 days moving average. Fast stochastic is indicating a bearish and MACD is also issuing a bearish signal. The RSI is above 40 reading and lies below the neutral region. The pair has lost 1.41%.
Sterling-Swiss
This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The RSI is above 48 and lies below the neutral region. The pair has gained 0.78%.
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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