FOREX Newsletter
Pulse of the Market
· Greenback suffered its worst weekly performance in a month as fundamentals failed to gain traction
· Euro firmed past week but is not fundamentally stronger, appropriately labeled as Dollar weakness
· Pound got confidence in BoE Dale’s growth outlook as MPC member Sentance period comes to an end
· Franc rose to a record high against the Dollar, Euro and Cable making it year’s best performing currency
The U.S Dollar traded lower against every major currency on Friday and the selling was so aggressive that high points were reached against the Swiss Franc and New Zealand Dollar. The U.S Dollar fell to a record low against the Swiss Franc which suggests that even though investors are bailing out of the low yielding currency and buying higher yielding currencies, they are still very nervous. The recent price action in the Forex market suggests that the bears are returning to sell Dollars. The Greenback was pressured by the disappointments in U.S economic data. Personal incomes rose 0.4 percent last month which was in line with expectations but the 0.4 percent rise in spending was weaker than forecast. Between March and April, personal income and spending growth eased with spending reaching its lowest level in 3 months. Although the University of Michigan consumer sentiment survey was revised higher, whereas pending home sales fell 11.6 percent, which was the sharpest decline in a year. U.S markets are closed today for Memorial Day so it should be a relatively quiet trading session. The Euro ended Friday’s trading session higher against the U.S Dollar supported by the weakness in the Greenback. The latest numbers showed confidence in the Euro Zone deteriorating and inflationary pressures easing but that mattered little at a time when sovereign debt is the Euro’s main driver. Comments from China expressing support for Portuguese bail out bonds helped the Euro to tick higher. Europe’s sovereign debt problems will remain in focus this week but Euro investors should also keep an eye on incoming economic reports including Germany’s retail sales and employment numbers. If the momentum in the German economy sustained, it will help support the currency. The Swiss Franc rose to a fresh record high against the U.S Dollar, Euro and British Pound, making it the year’s best performing currency. The British Pound traded higher against the U.S Dollar for the fourth consecutive trading session. Stronger economic data and broad Dollar weakness has led the Cable higher. The recovery in the Cable in the last week has been impressive and it is due to the Royal Wedding in the U.K that has helped to restore optimism. Japanese Yen traded lower against the Euro, Swiss Franc and higher against the U.S Dollar. Mixed Japanese economic data has led to mixed performance for the Japanese Yen. The biggest story for Japan was the credit warning by Fitch who lowered the country’s credit outlook from stable to negative.
| Time(GMT) | Economic Release | IMP | Actual | Forecast | Prior |
| 01:00 | AUD HIA New Home Sales (MoM) (APR) | Medium | 0.2% | | 4.3% |
| 12:30 | CAD Gross Domestic Product (MoM) (MAR) | High | | 0.2% | -0.2% |
| 23:15 | JPY Market/JMMA Manufacturing Purchasing Manager Index (MAY) | Medium | | | 45.7 |
| 23:30 | JPY Household Spending (YoY) (APR) | Medium | | -2.8% | -8.5% |
| 23:30 | JPY Jobless Rate (APR) | Medium | | 4.7% | 4.6% |
| 23:50 | JPY Industrial Production (MoM) (APR) | Medium | | 2.2% | -15.5% |
Euro
The Single Currency was able to shrug off concerns that the Greece bailout will be invalidated with Greece reportedly missing fiscal saving targets. Strong risk appetite supported the Single Currency but EUR/GBP and EUR/CHF selling suggest broad underperformance. Overall, the EUR/USD traded with a low of 1.4125 and a high of 1.4302 before closing the day around 1.4283 in the New York session.
Yen
The Japanese Yen fell below 81.00 Yen on Greenback weakness but was relatively unchanged on most of the crosses. April Consumer Price Index was strong at 0.6% vs. -0.1% previously. U.S economic data is still very important for the major and is responsible for most of the direction. Overall, the USD/JPY traded with a low of 80.69 and a high of 81.40 before closing the day around 80.85 in the New York session.
British Pound
The British Pound surged towards 1.6500 in Friday’s trading session on the back of solid GBP/JPY buying and EUR/GBP selling. U.K House Prices are under pressure still in the U.K with October House Price Index falling -3.7% y/y. Overall, the GBP/USD traded with a low of 1.6377 and a high of 1.6508 before closing the day at 1.6479 in the New York session.
Canadian Dollar
The Canadian Dollar rose strongly against the Greenback in Friday’s trading session. In today’s session GDP is due for release then the Bank of Canada rate decision tomorrow. The central bank is expected to keep interest rates on hold at 1.00 percent. However the tone of the monetary policy statement could still trigger some volatility in USD/CAD. Overall, the USD/CAD traded with a low of 0.9751 and a high of 0.9796 before closing the day at 0.9772 in the New York session.
Australian Dollar
Australian Dollar did well tracking commodities higher to break above 1.0700 and well positioned to move higher after testing the downside for the past two weeks. AUD/NZD is a big mover to the downside with NZD/USD hitting 3 year highs on Friday. Overall, the AUD/USD traded with a low of 1.0607 and a high of 1.0718 before closing the day at 1.0691 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 also issuing a bullish stance. The RSI is above 44 and lies below the neutral zone. Overall, the cross has gained 0.47%.
Sterling-Yen
Currently GBP/JPY is trading above 14, 100 and below 50 days moving average. Fast stochastic is issuing bullish and MACD is also indicating a bullish stance. The RSI is above 50 reading and lies above the neutral zone. The pair has lost 0.05%.
Aussie-Yen
Currently, the cross is trading above 14, 100 and below 50 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 48 reading and lies below the neutral region. The pair has lost 0.12%.
Euro-Sterling
This cross is trading below 14, 50 and above 100 days moving average. Fast stochastic is indicating a bullish and MACD is issuing a bearish signal. The RSI is above 42 reading and lies below the neutral region. The pair has gained 0.51%.
Sterling-Swiss
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The RSI is above 31 and lies below the neutral region. The pair has lost 1.04%.
Appendix
| Daily Pivot Points | |||||||
| | Trading Range | | |||||
| Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| EUR/USD | 1.3994 | 1.4060 | 1.4171 | 1.4237 | 1.4348 | 1.4414 | 1.4525 |
| USD/JPY | 79.85 | 80.27 | 80.56 | 80.98 | 81.27 | 81.69 | 81.98 |
| GBP/USD | 1.6270 | 1.6324 | 1.6401 | 1.6455 | 1.6532 | 1.6586 | 1.6663 |
| USD/CHF | 0.8319 | 0.8414 | 0.8470 | 0.8565 | 0.8621 | 0.8716 | 0.8772 |
| USD/CAD | 0.9705 | 0.9728 | 0.9750 | 0.9773 | 0.9795 | 0.9818 | 0.9840 |
| EUR/JPY | 113.47 | 114.06 | 114.78 | 115.37 | 116.09 | 116.68 | 117.40 |
| GBP/JPY | 131.79 | 132.24 | 132.74 | 133.19 | 133.69 | 134.14 | 134.64 |
| CHF/JPY | 92.63 | 93.14 | 93.97 | 94.48 | 95.31 | 95.82 | 96.65 |
| AUD/JPY | 85.23 | 85.68 | 86.04 | 86.49 | 86.85 | 87.30 | 87.66 |
| EUR/GBP | 0.8553 | 0.8586 | 0.8625 | 0.8658 | 0.8697 | 0.8730 | 0.8769 |
| EUR/CHF | 1.2024 | 1.2085 | 1.2132 | 1.2193 | 1.2240 | 1.2301 | 1.2348 |
| GBP/CHF | 1.3818 | 1.3922 | 1.3987 | 1.4091 | 1.4156 | 1.4260 | 1.4325 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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