FOREX Newsletter
Pulse of the Market
· Greenback was firmer as stocks slumped and commodities advanced as Greek bond yields surge
· Single Currency tumbled as Norway suspends aid to Greece and Fitch downgrades further
· BoE member Sentance leaving central bank at the end of the month, the MPC could find them less hawkish
· BoJ members voted to keep monetary policy unchanged despite the fact that Japan is in a recession
The U.S Dollar ended Friday’s trading session on a mixed note. In the past week there have been a number of headline grabbing stories in the world of finance, some of which had a more direct impact on the markets than others. The arrest and then resignation of IMF Chief Dominque Strauss-Kahn was the biggest story of the week and it initially raised concerns about how it would affect the discussions on Greece. The week ended with Fitch downgrading Greece’s sovereign debt rating, bringing back concerns about Europe’s sovereign debt troubles. The lackluster recovery in the U.S and the prospect of further trouble in the Euro Zone has capped the move in the EUR/USD. Past week, the Fed outlined the most likely steps that they would take to unwind the emergency stimulus imposed on the U.S economy. Initially this was interpreted as a step towards normalization and was therefore positive for the Greenback even though the Fed said talking about an exit strategy does not mean they are ready to implement one. With anticipation this week will be a more important for the U.S Dollar with new home sales, durable goods, the second release of GDP, personal income, personal spending, pending home sales and the final University of Michigan consumer confidence reports scheduled for release. Euro ended the session lower against the Greenback. Better than expected economic data failed to help the Euro which was sold aggressively after Fitch downgraded the country’s sovereign debt rating. The 3 notch downgrade from BB+ to B+ came with a warning of more if the country does not receive additional aid. The problem is that European nations have been unwilling to provide the country with additional support unless they take privatization measures and cut spending. The problems in Greece have overshadowed the prospect of higher interest rates from the ECB. The British Pound ended the day sharply higher against the Euro and slightly higher against the U.S Dollar. It has been a busy week for the U.K, there was little volatility in the currency with the GBP/USD trapped in a 200 pip trading range for most of the week. Higher consumer prices and retail sales were offset by a rise in jobless claims. The recent improvements in U.K economic data are expected to be temporary and with BoE member Sentance leaving central bank at the end of the month, the MPC could find them less hawkish. The Japanese Yen had a mixed trading session on Friday after it initially headed for a weekly loss against all of its major counterparts following the BoJ policy meeting previous to changing course against some currencies. The biggest news affecting the direction of the Yen was BOJ Monetary Policy announcement. The central bank’s board members unanimously voted to keep monetary policy unchanged
| Time(GMT) | Economic Release | IMP | Actual | Forecast | Prior |
| 05:00 | Japan Leading Index (MAR) | Low | | | 99.5 |
| 07:30 | German Purchasing Manager Index Manufacturing (MAY) | Medium | | 61.0 | 62.0 |
| 08:00 | Euro Zone Purchasing Manager Index Manufacturing (MAY) | Medium | | 57.5 | 58.0 |
| 12:30 | U.S Chicago Fed National Activity Index (APR) | Low | | 0.20 | 0.26 |
Euro
The Single Currency tumbled in Friday’s trading session after Fitch downgraded Greek debt and the region's core economies showed signs of slowing. While the Greek downgrade was to be expected, investors are increasingly concerned by the implications of a potential debt default. The Single Currency has come under selling pressure as investors reduce their bets of higher yields. Overall, the EUR/USD traded with a low of 1.4138 and a high of 1.4344 before closing the day around 1.4156 in the New York session.
Yen
The Japanese Yen was very stable against the U.S Dollar with both strong given risk aversion flows. EUR/JPY led the crosses lower with most falling over 1 Yen. The outlook for the Japanese economy is weak but investors are in no mood to sell Yen while the relationship with stock remains so strong. BoJ maintained monetary stimulus to support the Japanese economy, which recently slipped back into recession. Overall, the USD/JPY traded with a low of 81.47 and a high of 81.85 before closing the day around 81.67 in the New York session.
British Pound
The British Pound outperformed as the heavily beaten down Cable found support on the crosses helping to limit losses against the U.S Dollar and Japanese Yen. EUR/GBP reversed sharply towards 0.8700 and GBP/AUD grinded above 1.5200. Investors will pay particular attention to an upcoming GDP report, expected to show that the U.K economy is recovering after contracting in fourth quarter of 2010. Overall, the GBP/USD traded with a low of 1.6166 and a high of 1.6303 before closing the day at 1.6248 in the New York session.
Canadian Dollar
The Canadian Dollar ended Friday’s trading session lower against the Greenback pressured by weaker than expected economic data from Canada. Consumer spending was flat in the month of March and excluding the increase in auto purchases, retail sales actually fell 0.1 percent. Canadian CPI gained by 0.3%, short of the 0.5% expected, and down from the previous 1.1% reading. Unlike other G10 nations, inflation has been modest in Canada. Overall, the USD/CAD traded with a low of 0.9639 and a high of 0.9770 before closing the day at 0.9728 in the New York session.
Euro-Yen
EUR/JPY is trading below 14, 50 and above 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The RSI is above 42 and lies below the neutral zone. Overall, the cross has lost 1.22%.
Sterling-Yen
Currently GBP/JPY is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing bullish and MACD is also indicating a bullish stance. The RSI is above 48 reading and lies below the neutral zone. The pair has gained 0.17%.
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 49 reading and lies below the neutral region. The pair has gained 0.11%.
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 41 reading and lies below the neutral region. The pair has lost 1.16%.
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 40 and lies below the neutral region. The pair has lost 0.13%.
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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