Last week’s Currency Trading Review

The Dollar continued to be sold off in a broad based fashion after key levels on multiple currencies was breached. South Korean state pension fund exacerbated the negative mood stating that it was planning to reduce exposure to US treasuries. Also hurting was talk that the next BRIC meeting of the world’s biggest commodity bloc will consider de-dollarization as part of its agenda. Q1 GDP was revised lower to -5.7% vs. -6.1%. The Euro broke above 1.4000 and held the gains well into the weekend. Risk appetite and USD weakness the main catalyst in the move higher with EUR/JPY enjoyed good gains. German IFO improved to 84.2 vs. 83.7 previously and CPI came in flat 0.0% y/y in May. The EUR/USD gained 1.15% closing at 1.4159, after opening the week at 1.3996.

The Japanese Yen was even weaker than the USD as stock market gains helped encourage investors to sell the low yielding Yen. Jumps in Long term US interest rates help to keep the pair buoyant as did fresh gains on most of the crosses with GBP/JPY touching new year highs above 150 Yen. The USD/JPY gained 0.46% closing at 95.21 after opening at 94.77. The GBP continued higher against the dollar but also made fresh lows against the Euro as the riskier currency got more support during the week. A break of 0.8500 in the EUR/GBP could provide fresh selling towards 0.8000. GBP/USD gained 1.61% closing at 1.6188 after opening at 1.5927. The AUD broke above the key psychological level of 0.8000 as the pair received support form heavy AUD/JPY gains and commodity markets continued to surge. Q1 Capex fell -8.9% vs. -6.0% forecast. The AUD/USD closed up 2.31% at 0.8010 after opening at 0.7825.

For the week starting 02/06/09.

This Forex Trading Week Preview

In the States; big data week with Nonfarm Payrolls on Friday the Highlight. On Wednesday, ADP Unemployment Report forecast at -530K vs. -491k previously. Also on Wednesday, Non-manufacturing ISM forecast at 45 vs. 43.7 previously. On Friday, Non Farm Payrolls are forecast at -530K vs. -539K previously. Unemployment Rate is forecast at 9.2% vs. 8.9%. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Wednesday, EUGDP is forecast to unrevised at -2.5% in Q1. EU PPI is forecast at -0.8% m/m in April. On Thursday the ECB meet and are forecast to hold at 1.00% although the market will be listening to Trichet closely in the press conference afterwards. In the UK; On Wednesday, PMI services are forecast at 49.4 vs. 48.7. On Thursday, BOE rate announcement widely expected to hold at 0.5%. Last meeting they did expand the QE program with negative implication for the GBP. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Q1 Capex is forecast at -27.1% vs. -17.3% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; RBA meeting on Tuesday forecast to hold at 3.0% and Q1 GDP forecast at 0.2% vs. -0.5% previously. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: The GBP Continued Higher Against The Dollar

Euro (EUR)

Euro – 1.4170 : Initial support at 1.3926 (May 29 low) followed by 1.3793 (May 28 low). Initial resistance is now located at 1.4364 (Dec 29 high) followed by 1.4621 ()

Yen (JPY)

Yen – 96.40 : Initial support is located at 94.43 (Mar 25 low) followed by 93.52 (Mar 19 low). Initial resistance is now at 97.24 (May 28 high) followed by 98.82 (May 11 high).

Pound Sterling (GBP)

Pound – 1.6455 : Initial support at 1.5855 (May 28 low) followed by 1.5757 (May 22 low). Initial resistance is now at 1.6497 (June 1 high) followed by 1.6672 (Oct 30 high).

Australian Dollar (AUD)

Australian Dollar – 0.8105 : Initial support at 0.7803 (May 26 low) followed by the 0.7703 (May 29 low). Initial resistance is now at 0.8152 (76.4% retrace 0.8814 to 0.6009) followed by 0.8378 (Sep 26 high).

Gold (XAU)

Gold – 976 : Initial support at 959 (May 29 low) followed by 941 (May 26 low). Initial resistance is now at 1006 (Feb 20 high) followed by 1032 (Mar 17 high).

Major USD reversal

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) enjoyed a positive day on the back of large corrections on multiple currencies. Large moves in Europe were seen on the back of combined statements from the Japan, India, Korea and China all supporting US debt. US stocks fell after ISM non manufacturing at 44.0 vs. 45.1 forecast. Crude Oil finished down $2.43 to finish the day at $66.12 a barrel. In US share markets, the Nasdaq was down 10 points or -0.59% and the Dow Jones was down 65 points or -0.75%. Looking ahead, Weekly Jobless Claims are forecast at 620 vs. 623K previously.

European Euro

The Euro (EUR) took a major hit in early Europe on the Asian central bank news as traders took profits on the recent rally and ahead of the ECB meeting tonight. Further losses were limited however as the Euro managed to gain against other riskier currencies. Of concern is recent reports of funding crisis in eastern Europe. Overall the EUR/USD traded with a low of 1.4108 and a high of 1.4340 before closing at 1.4150. Looking ahead, ECB meeting tonight.

Japanese Yen (JPY)

The Japanese Yen (JPY) kept inside the recent range around 96 Yen as the crosses took the brunt of the action overnight. Carry trades were sold aggressively from year highs. AUD/JPY and CAD/JPY were especially hard hit. Overall the USDJPY traded with a low of 95.39 and a high of 96.44 before closing the day around 96.05 in the New York session. UPDATE Q1 Capex -25% y/y.

Pound Sterling (GBP)

The Sterling (GBP) dropped hard in the face of better than expected economic data with profit taking in full control. The sharp drop also coincide with a recommendation from Goldman Sachs to exit long cable trades as the 1.6500 level objective has been reached. GBP/JPY was also rejected the 160 Yen level. Overall the GBP/USD traded with a low of 1.6239 and a high of 1.6666 before closing the day at 1.6310 in the New York session. Looking ahead, BOE rate Announcement.

Australian Dollar (AUD)

The Australian Dollar (AUD) had massive falls overnight even as the country officially missed a recession with a Q1 reading of 0.4%. Pullbacks in Oil and Gold and the strengthening USD combined to push the pair right back to 0.8000. Overall the AUD/USD traded with a low of 0.7931 and a high of 0.8266 before closing the US session at 0.8015. UPDATE APRIL Trade Balance -91M vs. 1400M previously.

Gold

Gold (XAU) fell back as inflation fears eased with slips in gold and strengthening USD. Overall trading with a low of USD$960 and high of USD$990 before ending the New York session at USD$964 an ounce.

Technical Analysis: Gold Fell Back As USD Strengthened

Euro (EUR)

Euro – 1.4285 : Initial support at 1.4058 (Jun 2 low) followed by 1.3926 (May 29 low). Initial resistance is now located at 1.4364 (Dec 29 high) followed by 1.4621 (61.8% retrace 1.6038-1.2330)

Yen (JPY)

Yen – 96.25 : Initial support is located at 94.43 (Mar 25 low) followed by 93.52 (Mar 19 low). Initial resistance is now at 97.24 (May 28 high) followed by 98.82 (May 11 high).

Pound Sterling (GBP)

Pound – 1.6315 : Initial support at 1.6243 (Jun 3 low) followed by 1.6163 (Jun 1 low). Initial resistance is now at 1.6672 (Oct 30 high) followed by 1.6739 (61.8% retrace 1.8669- 1.3503).

Australian Dollar (AUD)

Australian Dollar – 0.8035 : Initial support at 0.7933 (Jun 3 low) followed by the 0.7892 (May 27 low). Initial resistance is now at 0.8378 (Sep 26 high) followed by 0.8519 (Sep 22 high).

Gold (XAU)

Gold – 983 : Initial support at 960 (Jun 3 low) followed by 959 (May 29 low). Initial resistance is now at 1006 (Feb 20 high) followed by 1032 (Mar 17 high).