FOREX Newsletter
Pulse of the Market
· Greenback risks to downside on disappointing data fueled concerns about a slowdown in global growth
· Euro was a top performer across currency markets squeaking out a modest gain despite Greek worries
· Cable advanced against the U.S Dollar after better than expected retail sales which advanced 1.2% in April
· Aussie was the third best performer on a day for forex markets, mostly tracking moves in gold and silver
The U.S Dollar ended yesterday’s trading session lower against all the major currencies. Weaker than expected U.S economic data played a large role in the pullback as the disappointments may possibly delay the tightening by the Federal Reserve. A month ago, the market was pricing a rate hike from the Federal Reserve in the first quarter of 2012 and now a rate hike is not expected until the second quarter. Regardless of the better than expected weekly jobless claims report, existing home sales, leading indicators and the Philly Fed survey showed just how weak the U.S recovery really is. The data shows the U.S recovery moving ahead at a hostile pace and explains why the Federal Reserve has been slow to normalize monetary policy. Existing home sales fell 0.8 percent in the month of April, against expectations for a 2.0 percent rise. Leading indicators also dropped 0.3 percent, which was the steepest decline in 10 months while the Philadelphia Fed manufacturing index fell to 3.9 from 18.5 to its lowest level since October 2010. Euro traded sharply higher against the U.S Dollar helped by talk about normalizing monetary policy by ECB member Tumpel Gugerell. Once again, Euro investors have shrugged off sovereign debt troubles in Euro Zone including continued concerns about Greece and a weak Spanish bond auction. No major economic reports were released from the Euro Zone yesterday, but German producer prices and Euro Zone current account figures are scheduled for release today. The British Pound performed the best against the U.S Dollar, of all the major currencies. It is appealing to credit the strength of the currency to yesterday’s better than expected economic report. Last month was an exceptionally good month for retailers who reported a sharp 1.1 percent rise in retail sales that brought annualized sales up 2.8 percent from 1.1 percent the previous month. The Japanese ended the day almost unchanged against the Greenback. The Japanese economy has officially moved back into recession. In the first quarter, the Japanese economy contracted by 0.9 percent which was a steeper decline than economists had anticipated. The biggest drag came from inventories but production, supply chain and consumer spending were also affected by the quake.
| Time(GMT) | Economic Release | IMP | Actual | Forecast | Prior |
| 03:14 | Bank of Japan Interest Rate Decision (MAY 20) | High | 0.10% | 0.10% | 0.10% |
| 04:30 | Japan All Industry Activity Index (MoM) (MAR) | Low | | -6.1% | 0.7% |
| 06:00 | German Producer Prices (MoM) (APR) | Medium | | 0.6% | 0.4% |
| 11:00 | Canada Consumer Price Index (YoY) (APR) | High | | 3.4% | 3.3% |
| 12:30 | Canada Retail Sales Less Autos (MoM) (MAR) | Medium | | 0.7% | 0.7% |
| 12:30 | Canada Retail Sales (MoM) (MAR) | Medium | | 0.9% | 0.4% |
| 14:00 | Euro Zone Consumer Confidence (MAY) | Medium | | -12.0 | -11.6 |
Euro
The Single Currency ended yesterday’s trading session higher against the U.S Dollar. EU finance ministers are apparently now considering a debt "reprofiling" for Greece in which the maturity dates of outstanding debt instruments would be unconditionally extended. In the near term, barring any debt restructuring or reprofiling in Greece the Euro might remain well supported by its relatively high yield. Overall, the EUR/USD traded with a low of 1.4205 and a high of 1.4324 before closing the day around 1.4311 in the New York session.
Yen
The Japanese Yen was relatively flat yesterday as Japan officially entered its third recession in the past decade. Japanese GDP registered a sharp decline of 0.9 in the first quarter, but the contraction was widely expected after the devastating natural disasters that hit the nation's Northern coast earlier this year. Overall, the USD/JPY traded with a low of 81.45 and a high of 82.22 before closing the day around 81.60 in the New York session.
British Pound
The British Pound remained well supported in yesterday’s trading session as U.K retail sales beat forecasts. Sales gained by 1.2% from the previous month. With swiftly rising U.K prices seen in segments other than the volatile grocery and fuel segments, investors have begun to add bets that the BoE will be forced to raise interest rates sooner rather than later. Overall, the GBP/USD traded with a low of 1.6130 and a high of 1.6242 before closing the day at 1.6235 in the New York session.
Australian Dollar
The Australian Dollar traded higher against the U.S Dollar. The Aussie appeal as a high yielding currency has provided much support over the past six months. The energy sector has been worst hit due to their commodity exports being priced in U.S Dollar. Overall the AUD/USD traded with a low of 1.0594 and a high of 1.0680 before closing the day at 1.0669 in the New York session.
Canadian Dollar
The Canadian Dollar gained in yesterday’s trading session as stocks and commodities, including crude oil, rebounded, and increasing demand for currencies tied to economic growth. The Canadian currency gained for the third day against its U.S counterpart. The currency retreated against the Euro. Overall, the USD/CAD traded with a low of 0.9652 and a high of 0.9712 before closing the day at 0.9675 in the New York session.
Euro-Yen
EUR/JPY is trading above 14, 100 and below 50 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The RSI is above 48 and lies below the neutral zone. Overall, the cross has gained 0.39%.
Sterling-Yen
Currently GBP/JPY is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing bullish and MACD is indicating a bearish stance. The RSI is above 46 reading and lies below the neutral zone. The pair has lost 0.36%.
Aussie-Yen
Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic gives bullish and MACD is indicating a bearish stance. The RSI is above 52 reading and lies above the neutral region. The pair has gained 0.29%.
Euro-Sterling
This cross is trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish and MACD is issuing a bearish signal. The RSI is above 51 reading and lies below the neutral region. The pair has gained 0.02%.
Sterling-Swiss
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is indicating a bullish tone. The RSI is above 43 and lies below the neutral region. The pair has gained 0.43%.
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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