FOREX Newsletter
Pulse of the Market
· The Greenback staged a late session rally as Single Currency quandary complimented a risk reversal
· The Euro plunged against the U.S Dollar after Moody's cut Greece's credit rating by three notches
· British Pound fell against the Greenback as U.K growth outlook sours and BoE Fisher talks further QE
· The Canadian Dollar loses all the ground gained with interest rate speculation
The U.S Dollar ended yesterday’s trading session higher against most of the major currencies. According to private sector payroll provider ADP, only 38k jobs were created in the month of May, the smallest amount in 8 months. Although ADP has a poor track record of forecasting NFP and if non-farm payrolls come anywhere close to 100k let alone 38k, the Greenback will fall sharply. The U.S recovery is losing momentum and jobless claims have been on the rise, but no one expected such a weak ADP number. The U.S 10 year yield has fallen to 3 percent following the ADP report to its lowest level since December. Challenger Grey & Christmas reported a smaller decline in job cuts which is also in line with weakness in the labor market. Manufacturing ISM declined to 53.5 from 60.4 to its lowest level since Sept 2009. This week’s U.S economic data shows just how feeble the U.S recovery is and among some circles, there is talk of QE3. The data shows that the recovery is not strong enough to end asset purchases and reinvestments at the same time. The Euro traded lower against the U.S Dollar following weaker Euro Zone economic data and risk aversion. Slower than initially reported manufacturing activity in Germany and France caused the Euro Zone PMI index to be revised down from 54.8 to 54.6 in the month of May. The ECB proposed the option of rolling over Greek debt which would prevent a default. The European Bank Stress test results have been delayed until July because the European Banking Authority has requested the banks to submit more information. Meanwhile the Swiss Franc rose to a fresh record high against the U.S Dollar and Euro on the heels of stronger economic data. Retail sales jumped 7.2 percent, the strongest gain in nearly 3 years while manufacturing activity accelerated last month. Cable fell against the U.S Dollar pressured by disappointing economic data. Manufacturing activity slowed in the month of May. The PMI index dropped to 52.1 from 54.4 due to the first decline in output and new orders in 2 years. Although retail sales and consumer confidence were boosted by the holidays in April and the Royal Wedding, manufacturing production was hurt as factories shut down for public holidays. The decline in mortgage approvals conversely indicates that the housing market remains weak but that was distorted by the temporary factors. Japanese Yen rose against the U.S Dollar following risk aversion and a flight to safety.
| Time(GMT) | Economic Release | IMP | Actual | Forecast | Prior |
| 01:30 | AUD Trade Balance (Australian Dollar) (APR) | High | 1597M | 2100M | 1691M |
| 08:30 | GBP Purchasing Manager Index Construction (MAY) | Medium | | 53.5 | 53.3 |
| 12:30 | USD Initial Jobless Claims (MAY 28) | Medium | | 417K | 424K |
| 14:00 | USD Factory Orders (APR) | Medium | | -1.0% | 3.4% |
| 14:30 | USD DOE U.S Crude Oil Inventories (MAY 27) | Low | | -1600K | -15K |
| 23:30 | AUD AiG Performance of Service Index (MAY) | Medium | | | 51.5 |
Euro
The Single Currency traded at fresh weekly highs in European session before slumping on risk aversion due to the sharp fall in U.S stocks. PMI Manufacturing for the month of May fell further on revisions to 54.4 vs. 54.6 initially. EUR/CHF slumped towards fresh all time lows near 1.2000 on continued demand for the safe haven Swiss Franc. Overall, the EUR/USD traded with a low of 1.4320 and a high of 1.4458 before closing the day around 1.4332 in the New York session.
Yen
The Japanese Yen did well from its safe haven status in yesterday’s trading session with the market still buying when stock markets fall. USD/JPY broke below 81.00 Yen and the key 80.00 Yen level is back on the cards if heavy selling comes through the Yen crosses. Overall, the USD/JPY traded with a low of 80.65 and a high of 81.55 before closing the day around 80.93 in the New York session.
British Pound
The British Pound tracked the risk on and off trading falling sharply on a drop in U.K PMI for the month of May which dropped to 52.1 vs. 54.4 previously. EUR/GBP popped above 0.8800 before reversing. Overall, the GBP/USD traded with a low of 1.6329 and a high of 1.6495 before closing the day at 1.6335 in the New York session.
Canadian Dollar
The Canadian Dollar slid against the U.S Dollar in yesterday’s trading session and bond prices surged as market players reacted to a raft of disappointing global economic data and a subsequent selloff in riskier assets. Overall, the USD/CAD traded with a low of 0.9665 and a high of 0.9766 before closing the day at 0.9765 in the New York session.
Australian Dollar
Australian Dollar reacted negativity chomping lower back to 1.6000 in yesterday’s trading session before finding support. The Australian Dollar is very closely linked to global investor risk appetite and a further correction could lead to a major slow down. Overall, the AUD/USD traded with a low of 1.0669 and a high of 1.0751 before closing the day at 1.0611 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 49 and lies below the neutral zone. Overall, the cross has lost 1.15%.
Sterling-Yen
Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bearish and MACD is indicating a bullish stance. The RSI is above 44 reading and lies below the neutral zone. The pair has lost 1.37%.
Aussie-Yen
Currently, the cross is trading below 14, 50 and above 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 45 reading and lies below the neutral region. The pair has lost 1.25%.
Euro-Sterling
This cross is trading above 14, 100 and below 50 days moving average. Fast stochastic is indicating a bullish and MACD is also issuing a bullish signal. The RSI is above 53 reading and lies above the neutral region. The pair has gained 0.25%.
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 23 and lies below the neutral region. The pair has lost 2.06%.
Appendix
| Daily Pivot Points | |||||||
| | Trading Range | | |||||
| Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| EUR/USD | 1.4144 | 1.4232 | 1.4282 | 1.4370 | 1.4420 | 1.4508 | 1.4558 |
| USD/JPY | 79.64 | 80.14 | 80.54 | 81.04 | 81.44 | 81.94 | 82.34 |
| GBP/USD | 1.6112 | 1.6220 | 1.6278 | 1.6386 | 1.6444 | 1.6552 | 1.6610 |
| USD/CHF | 0.8190 | 0.8286 | 0.8351 | 0.8447 | 0.8512 | 0.8608 | 0.8673 |
| USD/CAD | 0.9597 | 0.9631 | 0.9698 | 0.9732 | 0.9799 | 0.9833 | 0.9900 |
| EUR/JPY | 113.51 | 114.69 | 115.34 | 116.52 | 117.17 | 118.35 | 119.00 |
| GBP/JPY | 129.09 | 130.56 | 131.39 | 132.86 | 133.69 | 135.16 | 135.99 |
| CHF/JPY | 94.22 | 94.69 | 95.40 | 95.87 | 96.58 | 97.05 | 97.76 |
| AUD/JPY | 83.36 | 84.55 | 85.21 | 86.40 | 87.06 | 88.25 | 88.91 |
| EUR/GBP | 0.8678 | 0.8710 | 0.8742 | 0.8774 | 0.8806 | 0.8838 | 0.8870 |
| EUR/CHF | 1.1713 | 1.1884 | 1.1974 | 1.2145 | 1.2235 | 1.2406 | 1.2496 |
| GBP/CHF | 1.3324 | 1.3533 | 1.3642 | 1.3851 | 1.3960 | 1.4169 | 1.4278 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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