FOREX Newsletter
Pulse of the Market
· The Greenback might appreciate further as risk aversion grips the financial market
· Slowing inflation in Europe paired with the ongoing weakness in the economy bear down EUR/USD
· The larger than expected drop in U.K retail sales weighed on the British Pound
· Japan’s number of new condominium sales in the greater Tokyo area rose less than forecast in May
The Greenback ended yesterday’s trading session on a mixed note. Regardless of the sluggish pace of U.S growth, the U.S Dollar is still a safe haven currency and in times of heightened uncertainty, investors will buy Dollars despite how grim the outlook for the U.S economy may be. Yesterday’s economic reports were not all bad, making some investors more comfortable with holding Dollars. Jobless claims dropped to 414k, which is a relief because it indicates that claims are moving in the right direction. Continuing claims also declined from an upwardly revised 3.696 million to 3.675 million. Housing starts grew less than expected but with the upward revision to last month's report. Building permits also jumped 8.7 percent last month, which was the largest increase since the beginning of the year. The Philadelphia Fed manufacturing index turned negative in the month of June with the index falling to its lowest level in nearly 2 years. The Single Currency rebounded to end the day higher against the U.S Dollar as there was both fear and hope in the financial markets. The fear comes from the challenges that the EU and IMF face in crafting a deal for Greece. In order for members of the European Union to agree on a rescue plan for Greece, tough austerity measures need to be taken. Unfortunately the latest political troubles not only slowed down the talks but could put the country’s next aid payment at risk. However the problem is that Greek Prime Minister Papandreou is having a very difficult time gaining support within his own government for the austerity measures and his people have responded with violent protests. And the hope was that there was widespread speculation that China will come and bailout Greece. Although this has not yet confirmed, but this is not the first time that China has come to the aid of Europe as they have been big buyers of Europe’s bailout bonds. The euro also benefitted from the IMF’s confidence that a deal will be reached, allowing them to make their next aid payment in early July. The British Pound extended its losses against the U.S Dollar after the retail sales report printed two times worse than expectations. High commodity prices, deterioration in labor conditions, volatility in the financial market and austerity measures by the government have restrained consumers from spending. Retail sales dropped 1.4 percent in May, erasing the past month’s gains. The Japanese Yen strengthened against all of the major currencies except the Swiss franc, as risk aversion flows came back to the market.
| Time(GMT) | Economic Release | IMP | Actual | Forecast | Prior |
| 08:00 | Italian Trade Balance (Total) (Euros) (APR) | Low | | | -3943M |
| 09:00 | Euro Zone Trade Balance (Euros) (APR) | Medium | | -1.9B | 2.8B |
| 12:30 | Canada Wholesale Sales (MoM) (APR) | Low | | -0.3% | 0.1% |
| 13:55 | U.S U. of Michigan Confidence (JUN) | High | | 74.0 | 74.3 |
| 14:00 | ECB Publishes June Monthly Report | Medium | | | |
| 14:00 | U.S Leading Indicators (MAY) | Low | | 0.3% | -0.3% |
Euro
The Single Currency ended the day slightly higher but with contained gains as the Greek Prime Minister reshuffled his cabinet and put him forward for a vote of no confidence. While many expect that the EU/IMF will likely throw Greece a lifeline, any further "bailout" does not take default or exit from the Euro Zone, but rather provides a bit of breathing room. Overall, the EUR/USD traded with a low of 1.4072 and a high of 1.4218 before closing the day around 1.4211 in the New York session.
Yen
The Japanese Yen was stronger in yesterday’s trading session as investors remain generally risk averse. Regardless of an economy in recession, the yen remains a risk aversion tool with sufficient domestic demand for Japanese government debt. With a default looming in Greece, and weak economic data out of the US, the Yen may likely continue to perform well. Overall, the USD/JPY traded with a low of 80.47 and a high of 81.04 before closing the day around 80.65 in the New York session.
British Pound
The British Pound was lower against the U.S Dollar and the Euro yesterday after disappointing U.K retail sales data. Sales fell 1.4% in May, exceeding the 0.6% decline that was expected. BoE Governor Mervyn King told reporters that officials should hold rates at a record low because weak growth in wages and the struggling economy signal the above target prices will ease. Overall, the GBP/USD traded with a low of 1.6077 and a high of 1.6224 before closing the day at 1.6156 in the New York session.
Canadian Dollar
The Canadian Dollar traded lower as investors' expectations for global growth ease. Canadian Finance Minister Jim Flaherty, urged his counterparts to address waning investor confidence in both the U.S and Europe, Canada's two main export markets. Falling oil prices have also weighed on the Loonie. Overall, the USD/CAD traded with a low of 0.9771 and a high of 0.9896 before closing the day at 0.9812 in the New York session.
Australian Dollar
The Australian Dollar also ended the session lower. The New auto sales drop from -4.1 percent in April to -7.6 percent in May signaling that consumers remained cautious of buying big-ticket items. Overall, the AUD/USD traded with a low of 1.0476 and a high of 1.0589 before closing the day at 1.0555 in the New York session.
Appendix
| Daily Pivot Points | |||||||
| | Trading Range | | |||||
| Contract | S3 | S2 | S1 | Pivot | R1 | R2 | R3 |
| EUR/USD | 1.3970 | 1.4021 | 1.4116 | 1.4167 | 1.4262 | 1.4313 | 1.4408 |
| USD/JPY | 79.83 | 80.15 | 80.40 | 80.72 | 80.97 | 81.29 | 81.54 |
| GBP/USD | 1.5934 | 1.6005 | 1.6081 | 1.6152 | 1.6228 | 1.6299 | 1.6375 |
| USD/CHF | 0.8375 | 0.8424 | 0.8450 | 0.8499 | 0.8525 | 0.8574 | 0.8600 |
| USD/CAD | 0.9632 | 0.9701 | 0.9757 | 0.9826 | 0.9882 | 0.9951 | 1.0007 |
| EUR/JPY | 112.29 | 112.88 | 113.76 | 114.35 | 115.23 | 115.82 | 116.70 |
| GBP/JPY | 128.00 | 128.86 | 129.59 | 130.45 | 131.18 | 132.04 | 132.77 |
| CHF/JPY | 93.94 | 94.20 | 94.67 | 94.93 | 95.40 | 95.66 | 96.13 |
| AUD/JPY | 83.49 | 84.04 | 84.58 | 85.13 | 85.67 | 86.22 | 86.76 |
| EUR/GBP | 0.8665 | 0.8693 | 0.8743 | 0.8771 | 0.8821 | 0.8849 | 0.8899 |
| EUR/CHF | 1.1772 | 1.1858 | 1.1952 | 1.2038 | 1.2132 | 1.2218 | 1.2312 |
| GBP/CHF | 1.3416 | 1.3530 | 1.3613 | 1.3727 | 1.3810 | 1.3924 | 1.4007 |
Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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