- Dollar Stumbles against the Euro but Holds Firm Elsewhere Despite Risk Trends, Data
- Euro: Has the Greece Situation Been Solved and are Rates Expectations More Encouraging?
- Australian Dollar Rallies after a Greater-Than-Expected Quarterly GDP Drop
- Canadian Dollar Surges after the BoC Governor Offers a Distant View of a Rate Hike
- British Pound Traders Look to See What Manufacturing, Consumer Credit can do for Volatility
- New Zealand Dollar Sustains its Run; Is Data Really the Catalyst for this Climb?
- Gold Gains Little Ground as Euro Strength More Pervasive than Greenback’s Weakness
Dollar Stumbles against the Euro but Holds Firm Elsewhere Despite Risk Trends, Data
We need to take a critical look at the performance of the US dollar. On the trade-weighted standard, we see that the benchmark currency closed at a fresh three-week low. However, with the Dow Jones FXCM Dollar Index, the benchmark seems to have shown a solid recovery from intraday losses. Where do these differences come from and which is a better reflection of the greenback? The deviation is related to the weightings of the indexes. A trade-weighted composite gives more influence to EURUSD which reported remarkable strength thanks to the euro’s reaction to ‘headway’ on the Greek crisis. Yet, when we look at the benchmark currency’s performance against its other counterparts; it is clear that the dollar fared much better. The bullish close against the pound, yen, franc and Australian dollar through Tuesday’s close should have a greater bearing in gauging the overall health of the greenback.
With the performance measure in mind, we should refer to fundamentals. The docket was not very encouraging for dollar bulls. The Conference Board’s consumer confidence survey, S&P/Case-Shiller housing price indicator and Chicago PMI readings would all offer disappointments. The most market-moving indicator was the sentiment survey for May which dropped to unexpectedly dropped to a six-month low 60.8. More discouraging though was the breakdown which showed the weakest forecast for expectations since October of last year along with a weakening of labor conditions, employment forecast, sales projections and an outlook for income reductions. This is not the mix we would expect from an economy that is expanding at a healthy pace. As for the biggest drop in Chicago-area business expectations since the Lehman Brothers collapse and the eight-year low from the lagging housing indicator – they confirm a measured pace of growth but don’t do much to stir volatility.
If this data was universally disappointing, why did the dollar show such resiliency? Because a controlled pace of growth is already expected; and the market is currently tuned into underlying themes. The surge from the S&P 500 carries far more weight as a contradiction to greenback’s safe haven status. That said, volume on this seemingly important advance was otherwise week. We have discussed why the dollar is not necessarily a safe haven currency in the past weeks and months; but this stability may also reflect a growing interest in the forthcoming monetary policy shift with the end of QE2. In the upcoming New York session we will be looking at the ADP and ISM manufacturing report for activity.
Related:Discuss the Dollar in the DailyFX Forum, John’s Picks: GBPCAD and USDCAD Perform but We Have to Wait for EURUSD, NZDUSD
Euro: Has the Greece Situation Been Solved and are Rates Expectations More Encouraging?
The euro has staged an impressive recovery where it counts the most: against the US dollar and Swiss franc. Surging against the most liquid currency and its primary counterpart, the euro is showing an appetite for yield that trumps between the two largest developing economies. Furthermore, a climb from EURCHF reflects an improved reflection of the Euro Zone’s fundamental health as the franc is the favored safe haven alternative to the shared currency. Does this mean the market believes that the Greece situation is behind us and interest rates are the primary concern once again? Not likely. Since the EU’s emergency meeting over the weekend, we have found that Germany is willing to ease up on calls for an early Greece restructuring and the group is discussing a second round of assistance for the Mediterranean nation that will be decided on by the end of June. Yet, that does not necessarily answer the nation’s short-term funding needs or the IMF’s threats to withhold its own portion of support until the EU decides how the money will be raised. This is another effort to push the inevitable back. We may be temporarily distracted and thereby preoccupied with rate expectations (which are themselves well off of levels from two months ago); but not for long.
Australian Dollar Rallies after a Greater-Than-Expected Quarterly GDP Drop
The Australian economy reported its biggest quarterly contraction in two decades with its first quarter report; and yet, the Aussie dollar advanced immediately after the reading. What is the disconnect? While the drop was sharp, the 1.2 percent decline was just a tick worse than the official consensus. What’s more, this contraction is unlikely to lead to a sustained recession; and more importantly, it won’t weigh lead to a rate cut.
Canadian Dollar Surges after the BoC Governor Offers a Distant View of a Rate Hike
The Canadian dollar has had a remarkable star to this week. On Monday, the nation’s first quarter GDP reading showed activity for the world’s 11th largest economy was running at a clip that was far more impressive than its US and developed world counterparts. This past sessions, rate expectations returned with the BoC’s suggestion that rates will rise “eventually.” This is a very tentative warnings; so its influence will likely ease.
British Pound Traders Look to See What Manufacturing, Consumer Credit can do for Volatility
The sterling is a reflection of whatever counterpart it is priced against. If we are looking at GBPUSD, the comparison is risk. For EURGBP, we are evaluating the Euro-area’s stability against UK austerity. Yet, the pound has influence over its own destiny as BoE rate expectations fluctuate and confidence in the austerity effort is measured. For that reason, we watch the factory activity and consumer credit data with tame outlook.
New Zealand Dollar Sustains its Run; Is Data Really the Catalyst for this Climb?
Once again, the New Zealand dollar is the top performer through yesterday’s session. We can attribute an advance in risk appetite to the climb in capital markets; but the kiwi’s own correlation to this trend doesn’t fit well. Taking a look at market rates, interest expectations, growth potential and other standard measures; the kiwi has little to work with. This leaves us highly skeptical of the currency’s advance and waiting for reversal.
Gold Gains Little Ground as Dollar, Currency Market Keeps Speculators’ Attention
Gold edged modest gains against European currencies through Tuesday’s session; but its primary performance against the dollar was less impressive. On a generally restrained day for activity; the metal edged lower as the confidence in the FX market was steady enough to keep the greenback steady. As the ‘alternative store of wealth,’ the precious metal wasn’t catching much of a bid.
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ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
1:00 |
NZD |
ANZ Commodity Price (MAY) |
1.6% |
Expected to rise with soft commodities |
|
|
1:00 |
CNY |
PMI Manufacturing (MAY) |
51.6 |
52.9 |
PBoC effects may finally show effects |
|
1:30 |
AUD |
Gross Domestic Product (QoQ) (1Q) |
-1.1% |
0.7% |
Growth may slow as manufacturing, construction hit by strong dollar |
|
1:30 |
AUD |
Gross Domestic Product (YoY) (1Q) |
1.0% |
2.7% |
|
|
2:30 |
CNY |
HSBC Manufacturing PMI (MAY) |
51.8 |
Expected to fall in tandem with official |
|
|
5:00 |
JPY |
Vehicle Sales (YoY) (MAY) |
-51.0% |
Recovery may provide more demand |
|
|
5:30 |
EUR |
French ILO Mainland Unemployment Rate (1Q) |
9.0% |
9.2% |
French unemployment moderately lower on labor demand, government laxing |
|
5:30 |
EUR |
French ILO Unemployment Rate (1Q) |
9.4% |
9.6% |
|
|
6:30 |
AUD |
RBA Commodity Price Index (MAY) |
106.1 |
Continued rise in commodity prices with stable AUD could benefit index |
|
|
6:30 |
AUD |
RBA Commodity Index SDR (YoY) (MAY) |
32.2% |
||
|
7:15 |
CHF |
Retail Sales (Real) (YoY) (APR) |
-0.2% |
Domestic sales may decline further as strong franc reduces Euro-spending |
|
|
7:30 |
CHF |
SVME-Purchasing Managers Index (MAY) |
57.5 |
58.4 |
Raw material prices fall from strong franc |
|
7:45 |
EUR |
Italian PMI Manufacturing (MAY) |
53 |
55.5 |
Overall zone-wide PMI expected flat, may reduce pressure for ECB to raise rates |
|
7:50 |
EUR |
French PMI Manufacturing (MAY F) |
55 |
55 |
|
|
7:55 |
EUR |
German PMI Manufacturing (MAY F) |
58.2 |
58.2 |
|
|
8:00 |
EUR |
Euro-Zone PMI Manufacturing (MAY F) |
54.8 |
54.8 |
|
|
8:30 |
GBP |
PMI Manufacturing (MAY) |
54.1 |
54.6 |
Lower expectation may confirm slowdown |
|
8:30 |
GBP |
Net Lending Sec. on Dwellings (APR) |
0.7B |
0.4B |
Stronger lending could mean turn in slowdown, forecast future rate increases |
|
8:30 |
GBP |
Net Consumer Credit (APR) |
0.2B |
0.1B |
|
|
8:30 |
GBP |
M4 Ex OFCs 3M Annualised (APR) |
1.0% |
Money supply growth still slow despite interest rates at historical lows |
|
|
8:30 |
GBP |
M4 Money Supply (MoM) (APR) |
0.1% |
||
|
8:30 |
GBP |
M4 Money Supply (YoY) (APR) |
-1.1% |
||
|
8:30 |
GBP |
Mortgage Approvals (APR) |
47.0K |
47.6K |
Weaker real estate data may point to additional trouble for British economy |
|
11:00 |
USD |
MBA Mortgage Applications (MAY 27) |
1.1% |
Slowdown possible as housing weak |
|
|
11:30 |
USD |
Challenger Job Cuts (YoY) (MAY) |
-4.8% |
Both reports are preliminary indicators of NFPs reported later this week |
|
|
12:15 |
USD |
ADP Employment Change (MAY) |
175K |
179K |
|
|
14:00 |
USD |
Construction Spending (MoM) (APR) |
0.3% |
1.4% |
Shows overall sector still weak |
|
14:00 |
USD |
ISM Manufacturing (MAY) |
57.2 |
60.4 |
Purchasing still declining as US economic outlook continues to face headwinds |
|
14:00 |
USD |
ISM Prices Paid (MAY) |
81.8 |
85.5 |
|
|
16:00 |
EUR |
Italian New Car Registrations (YoY) (MAY) |
-2.2% |
Peripheral data may point to decline |
|
|
17:00 |
EUR |
Italian Budget Balance (euros) (MAY) |
-8.8B |
Expected to continue deficit to record levels |
|
|
17:00 |
EUR |
Italian Budget Balance (euros) (YTD) (MAY) |
-40.1B |
||
|
21:00 |
USD |
Domestic Vehicle Sales (MAY) |
9.8M |
10.2M |
Continued consumer spending decline could be proven with weaker sales |
|
21:00 |
USD |
Total Vehicle Sales (MAY) |
12.45M |
13.14M |
|
|
23:50 |
JPY |
Monetary Base (YoY) (MAY) |
23.9% |
Could slow as government slows injection |
|
|
23:50 |
JPY |
Capital Spending excl Software (1Q) |
-0.8% |
4.8% |
First quarter data undoubtedly hurt by earthquake, slowdown despite robust first months |
|
23:50 |
JPY |
Capital Spending (1Q) |
3.0% |
3.8% |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
4:00 |
JPY |
BOJ to Hold International Conference on Monetary Policy |
|
16:25 |
USD |
Fed’s Pianalto Speaks on Labor Markets in Columbus |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.5160 |
1.6750 |
89.00 |
0.9345 |
1.0275 |
1.1800 |
0.8400 |
117.60 |
146.05 |
|
Resist 1 |
1.5000 |
1.6600 |
86.00 |
0.8900 |
1.0000 |
1.1000 |
0.8215 |
117.24 |
140.00 |
|
Spot |
1.4377 |
1.6444 |
81.42 |
0.8530 |
0.9689 |
1.0659 |
0.8230 |
117.06 |
133.89 |
|
Support 1 |
1.4000 |
1.6160 |
80.00 |
0.8600 |
0.9500 |
1.0400 |
0.7745 |
113.80 |
125.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.00 |
0.8500 |
0.9055 |
1.0200 |
0.6850 |
105.50 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.6575 |
7.4025 |
7.8165 |
1.3650 |
Resist 2 |
7.5800 |
5.6625 |
6.1150 |
|
Resist 1 |
12.5000 |
1.6300 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
11.5676 |
1.5974 |
6.8124 |
7.7773 |
1.2345 |
Spot |
6.1803 |
5.1857 |
5.3939 |
|
Support 1 |
11.5200 |
1.5040 |
6.5575 |
7.7490 |
1.2145 |
Support 1 |
6.0800 |
5.1050 |
5.3040 |
|
Support 2 |
11.4400 |
1.4725 |
6.4295 |
7.7450 |
1.2000 |
Support 2 |
5.8085 |
4.9115 |
4.9410 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4505 |
1.6595 |
82.35 |
0.8595 |
0.9822 |
1.0800 |
0.8321 |
119.04 |
135.95 |
|
Resist 1 |
1.4441 |
1.6519 |
81.89 |
0.8562 |
0.9756 |
1.0730 |
0.8275 |
118.05 |
134.92 |
|
Pivot |
1.4360 |
1.6472 |
81.30 |
0.8515 |
0.9705 |
1.0686 |
0.8219 |
116.81 |
134.10 |
|
Support 1 |
1.4296 |
1.6396 |
80.84 |
0.8482 |
0.9639 |
1.0616 |
0.8173 |
115.82 |
133.07 |
|
Support 2 |
1.4215 |
1.6349 |
80.25 |
0.8435 |
0.9588 |
1.0572 |
0.8117 |
114.58 |
132.25 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.4567 |
1.6606 |
82.32 |
0.8639 |
0.9783 |
1.0803 |
0.8345 |
118.90 |
135.68 |
|
Resist. 2 |
1.4519 |
1.6565 |
82.09 |
0.8612 |
0.9760 |
1.0767 |
0.8316 |
118.44 |
135.23 |
|
Resist. 1 |
1.4472 |
1.6525 |
81.87 |
0.8585 |
0.9736 |
1.0731 |
0.8287 |
117.98 |
134.78 |
|
Spot |
1.4377 |
1.6444 |
81.42 |
0.8530 |
0.9689 |
1.0659 |
0.8230 |
117.06 |
133.89 |
|
Support 1 |
1.4282 |
1.6363 |
80.97 |
0.8475 |
0.9642 |
1.0587 |
0.8173 |
116.14 |
133.00 |
|
Support 2 |
1.4235 |
1.6323 |
80.75 |
0.8448 |
0.9618 |
1.0551 |
0.8144 |
115.68 |
132.55 |
|
Support 3 |
1.4187 |
1.6282 |
80.52 |
0.8421 |
0.9595 |
1.0515 |
0.8115 |
115.22 |
132.10 |
v
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
