Daily Forex Bullteins and Market News Analysis: Forex Bulletin, June 06, 2011

FOREX Newsletter

Pulse of the Market

· The Greenback fell on disappointing NFPs and would set further back from a recovery

· EU’s Juncker said that the Euro Zone had approved a new aid package for the troubled economy

· U.K service sector PMI index dropped from 54.3 to 53.8 in May, the second month of slower growth

· Canadian Dollar faces volatility from employment, business activity and trade data

The Greenback ended Friday’s trading session lower against the basket of major currencies following appallingly weak non-farm payrolls report. The sharp slowdown in job growth last month poses a big problem for the U.S Dollar. Over the past few weeks, the disappointments in U.S economic data suggested that the recovery was losing momentum and Friday’s labor market report confirms that the economy has hit a soft patch. As a result, the Federal Reserve has no choice but to keep monetary policy extremely easy which could lead to further losses for the U.S Dollar in the coming week. Non-farm payrolls printed at 54k in Friday’s session, 3 times weaker than the market’s expectations and uncomfortably close to ADP’s estimate. Job growth in the month of May was the weakest since September 2010 and the rise in the unemployment rate to 9.1 percent only made things worse. The fact is that the labor market remains very weak and if it stays this way, the Federal Reserve may not raise interest rates for another 12 months. The Single Currency ended the day sharply higher as U.S economic data surprising to the downside and Greece receiving approval for much aided from its Euro Zone partners. On Friday, Euro Zone President Juncker announced that not only Greece would receive the next installment of their bailout but a new aid plan has also been approved. The plan will be dependent upon the development of a new privatization fund, a positive review by the EU/IMF, significant structural reforms such as cutting public sector employment, higher property taxes and fewer tax exemptions. Euro Zone service sector activity was also revised slightly upwards which could prompt hawkish comments from ECB President Trichet this week. The British Pound extended its gains against the U.S Dollar following the appalling non-farm payrolls report. Like the U.S, the recovery in the U.K is losing momentum but the data ignored in non-farm payrolls was so significant that the weakness of the Dollar overshadowed the pull back in service sector activity. The service sector PMI index dropped from 54.3 to 53.8 in May, marking the second back to back month of slower growth. The Japanese Yen rose against all of the major currencies with the exception of the Euro and Swiss Franc. Safe haven flows continued to drive the Yen higher as the global economic picture worsens.

Time(GMT)	Economic Release	IMP	Actual	Forecast	Prior
08:30	EUR Euro-Zone Sentix Investor Confidence (JUN)	Low		8.6	10.9
09:00	EUR Euro-Zone Producer Price Index (MoM) (APR)	Medium		0.8%	0.7%
12:30	CAD Building Permits (MoM) (APR)	Low		-7.5%	17.20%
14:00	CAD Ivey Purchasing Managers Index (MAY)	Medium		60.0	57.7
23:30	AUD AiG Performance of Construction Index (MAY)	Medium			37
23:50	JPY Official Reserve Assets (MAY)	Low			$1135.5B

Euro

The Single Currency surged above 1.4600 late in Friday’s trading session after hitting day lows post U.S data. The market is positioned to resume the uptrend back towards 1.5000 with the Euro seen as passing the 'Greece test'. All the crosses were very strong with EUR/GBP breaking above 0.8900. Overall, the EUR/USD traded with a low of 1.4450 and a high of 1.4642 before closing the day around 1.4633 in the New York session.

Yen

The Japanese Yen fell sharply towards 80.00 Yen after the weak U.S data but the crosses began to rally with stocks bouncing and EUR/JPY surging higher. USD/JPY ended close to 80.00 Yen and a break here could lead quickly to further losses. The market will be closely watching any talk of BOJ intervention below this level. Overall, the USD/JPY traded with a low of 80.04 and a high of 81.00 before closing the day around 80.23 in the New York session.

British Pound

The British Pound bounced with the Euro but underperformed with EUR/GBP pushed higher. The market is not much eager to buy the Pound with the U.K economy under a cloud of high inflation rate. The Possibility of high inflation and low growth is a toxic mix that will make it hard for the Bank of England to raise rates. Overall, the GBP/USD traded with a low of 1.6284 and a high of 1.6437 before closing the day at 1.6429 in the New York session.

Canadian Dollar

The Canadian Dollar failed to participate in the rally because of the country’s reliance on U.S demand. Although Canada has increased trade activity with other countries, it is still closely tied with the U.S and for that reason, what is bad for the U.S is bad for Canada. Overall, the USD/CAD traded with a low of 0.9742 and a high of 0.9850 before closing the day at 0.9778 in the New York session.

Australian Dollar

The Australian Dollar was hurt from the weak U.S jobs numbers and stock market reaction but was able to find support at 1.0600 and rally back above 1.0700 to close on a strong footing. Investors are also watching the AUD/JPY which found support at the key 85.00 Yen level. Overall, the AUD/USD traded with a low of 1.0593 and a high of 1.0773 before closing the day at 1.0721 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 54 and lies above the neutral zone. Overall, the cross has gained 0.19%.

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 43 reading and lies below the neutral zone. The pair has lost 0.44%.

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 47 reading and lies below the neutral region. The pair has lost 0.35%.

Euro-Sterling

This cross is trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish and MACD is also issuing a bullish signal. The RSI is above 61 reading and lies above the neutral region. The pair has gained 0.63%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is indicating a bearish tone. The RSI is above 23 and lies below the neutral region. The pair has lost 0.50%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.4316	1.4383	1.4508	1.4575	1.4700	1.4767	1.4892
USD/JPY	78.89	79.46	79.85	80.42	80.81	81.38	81.77
GBP/USD	1.6177	1.6230	1.6330	1.6383	1.6483	1.6536	1.6636
USD/CHF	0.8197	0.8266	0.8308	0.8377	0.8419	0.8488	0.8530
USD/CAD	0.9622	0.9682	0.9730	0.9790	0.9838	0.9898	0.9946
EUR/JPY	114.69	115.30	116.35	116.96	118.01	118.62	119.67
GBP/JPY	128.90	129.77	130.80	131.67	132.70	133.57	134.60
CHF/JPY	94.64	95.08	95.56	96.00	96.48	96.92	97.40
AUD/JPY	83.48	84.21	85.11	85.84	86.74	87.47	88.37
EUR/GBP	0.8781	0.8812	0.8859	0.8890	0.8937	0.8968	0.9015
EUR/CHF	1.1989	1.2047	1.2134	1.2192	1.2279	1.2337	1.2424
GBP/CHF	1.3433	1.3524	1.3622	1.3713	1.3811	1.3902	1.4000