Euro Finds Support as Stock Selling Continues

Last week’s currency trading review

The Dollar fell sharply against the majors as US economic data soured investor appetite for the safe haven. June CB Consumer Confidence fell to 52 vs. 62 previously and May ISM Manufacturing slipped to 56.2 vs. 59.7 previously. Also very weak, May Pending Home Sales -30% m/m. US Jobs data was little better with -125k losses vs. +433k previously. As stock market fell however, the Dollar was stronger then risk currencies which tracked the slumping Oil lower. The Euro rallied aggressively as Eurozone banking concerns receded after successful refinancing from the ECB on Wednesday and Thursday. When US data weakened as well the catalyst for a major rally saw the Major move from 1.22 to 1.26 in 48 hours. EUR/GBP was also on the move as short covering pushed the pair back to 0.8300. The EUR/USD gained +1.56% closing at 1.2565, after opening the week at 1.2369.

The Japanese Yen fell aggressively through support at Y89 and Y88 as data in the US pushed interest rate expectation back and crosses such as the AUD/JPY came under heavy selling pressure. On a positive note the Q2 Tankan came in +1 vs, -14 previously. The GBP was initially under pressure from risk aversion before the large move in the Euro pushed the pair back to 1.5200. Also helping the GBP to rally was the UN report stating they wanted an alternative to the US dollar as the reserve currency. The GBP/USD gained +0.88% closing at 1.5192 after opening at 1.5058. The AUD was the worst performing currencies in the market with stock market weakness and slumping Oil and Gold pushing the Aussie nearly 4% lower. AUD/CHF was the biggest move in the market down 6% as the Swiss pushed towards higher across the board on safe haven flows. Australian data was mixed with May Retail Sales +0.2% vs. 0.6% previously and building Approvals -6.6% m/m. The AUD/USD lost -3.82% closing at 0.8414 after opening at 0.8735.

The forex trading week preview

In the States On Tuesday, June ISM Services forecast at 55 vs. 55.4 previously. On Thursday, Weekly Jobless Claims are forecast at 460k vs. 472k previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Wednesday, Q1 GDP Final forecast unchanged at 0.2%. On Thursday, ECB rate announcement forecast to remain at 1.0% and President Trichet will comment after. Also released, May German Industrial Production is forecast at 0.8% vs. 0.9% previously. On Friday, June CPI Final is forecast at 0.9%. In the UK, on Thursday we have the BOE rate decision forecast to remain at 0.5% with focus on Asset Purchase Program and if any new members vote for a rate hike. Also released, May Industrial Production is forecast at 3.2% vs. 2.1% previously. On Friday, May Trade Balance is forecast at -71bn vs. -7.2bn previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Thursday, May Trade Balance are forecast at 478bn vs. 859bn previously. Also on Thursday, June Preliminary Machine Tool Orders are released. In Australia On Tuesday, RBA Rate Decision forecast to remain at 4.5% with focus on the statement. On Thursday, June Unemployment Rate is forecast at 5.2% vs. 5.2% previously and an Employment change at 15k vs. 27k previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.2490

Initial support at 1.2194 (July 1 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2672 (May 21 high) followed by 1.2803 (May 11 high)

Yen – 87.55

Initial support is located at 86.97 (July 1 low) followed by 85.87 (Nov 30, 2009 low). Initial resistance is now at 88.56 (July 1 high) followed by 89.42 (June 28 high).

Pound – 1.5090

Initial support at 1.5000 (Psychological level) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5242 (38.2% retrace of 1.6878-1.4231) followed by 1.5391 (April 30 high).

Australian Dollar – 0.8340

Initial support at 0.8263 (June 9 low) followed by the 0.8067 (May 25 low). Initial resistance is now at 0. 8566 (June 30 high) followed by 0.8722 (June 29 high).

Gold – 1208

Initial support at 1196 (July 1 low) followed by 1185 (May 25 low). Initial resistance is now at 1244 (July 1 high) followed by 1265 (June 25 high).

Oil – 71.10

Initial support at 70.00 (Intraday Support) followed by 69.50 (Intraday Support). Initial resistance is now at 72.50 (Intraday Resistance) followed by 75.00 (Intraday Resistance).