- Dollar Stumbles Further Ahead of Greece Vote, S&P 500 Resistance
- Euro Traders Now Turn to Greece’s Austerity Vote – Resolution or Temporary Relief?
- British Pound Slumps as BoE’s Posen Leverages His Dovish Tone, Trade Disappoints
- Canadian Dollar Readies for Inflation Data, Interest Rate Speculation
- Australian Dollar Rebounds as Market Rates Ease from Biggest Drop in 8 Months
- US Oil Stabilizes at Long-Term Trend as Market Wonders if Reserve Dump Priced In
- Gold: Positive Vote or Not, Uncertainty in Europe, Asia and US Finances Prominent
Dollar Stumbles Further Ahead of Greece Vote, S&P 500 Resistance
There was little to support the US dollar Tuesday; but the maintenance of a high volatility regime would require price action from the benchmark currency. It just so happened, that active market conditions were staged against the backdrop of a build in risk appetite and positive outcome for the upcoming European event risk. These particular catalysts tap into the deeper fundamental concerns behind the dollar – its role as a safe haven and its unprecedented value as the world’s reserve currency. Between these two particular concerns, EURUSD would be one of the top benefactors for the session with a second consecutive advance; but the carry sensitive AUDUSD and NZDUSD pairs would find substantial strength out of the sentiment shift on their own. For the dollar’s overall performance, the Dow Jones FXCM Dollar Index (ticker = USDollar) would chalk up its first back-to-back decline in two weeks. That said, at 9,671 the Index has not yet been knocked off its June bull trend.
To establish the greenback’s bearing going forward, we need to first look at the prevailing risk appetite winds. We have indeed seen a notable rebound from the S&P 500 and similar benchmarks in Europe and Asia. Yet, this recent upswing has not substantiated a true bull trend. The US Index itself is facing still capped by this month’s well-tested zone of resistance between 1,300 and 1,295; while other benchmarks for risk (equity baskets, speculative commodities, yields) are still generally anchored to congestion. The recent swell in optimism and the consistency in this risk appetite across the market increases the potential for a further break of near-term resistance (bearish break for the dollar); but follow through will be quickly called into question. Feeding investor confidence in today’s markets is exceptionally difficult given the global slowdown in economic activity, the worldwide drop in the expectations for returns and the prevalence of financial risks (Greece, China, even the US). Therefore, rather than position for long-term bull trends, we should be cautious of short-term relief rallies that fade quickly as reality sinks back in.
The short-term swings in risk appetite trends and the indirect impact of the Greece budget vote (more on that below) should be our immediate concern for dollar direction and volatility. However, for the lasting trends; we should make reference to USDJPY’s performance through Tuesday’s close. While it would be easy to simply assign this pair’s advance to an anti-carry move weighing on the Japanese currency more than its alternative; the more appropriate account refers to the aggressive rally in the two-year US Treasury note yields. This benchmark for returns has surged more than 50 percent in the past two days (currently at 0.4732 percent). While this may have more to do with the disappointing five-year auction; it nonetheless shows the sensitive of rates at these low levels and the impact a shift in rate expectations can have with the end of the QE2 buildup this week. As for Tuesday’s sentiment index and the upcoming pending home sales, don’t expect much.
Euro Traders Now Turn to Greece’s Austerity Vote – Resolution or Temporary Relief?
The euro’s future seems to be running day to day rather than playing towards long-term expectations for growth and fundamental developments. In the upcoming session, we will hit the next milestone in the Greece sovereign debt crisis saga. After Prime Minister Papandreou’s shake up of his cabinet and his success at the confidence vote; it is now time to put the country back on the pace for action towards austerity. Parliament is scheduled for its first of two votes this week (11:00 GMT) with a decision on whether the proposed 28 billion euros in additional budget cuts should be adopted. The market is already expecting this legislation to pass; so we should be weary of follow through. Even if this effort is approved, there are still many cliffs for the country to fall off of into default. For an alternative view; if the vote is shot down, the euro would reel.
British Pound Slumps as BoE’s Posen Leverages His Dovish Tone, Trade Disappoints
There is little chance that UK monetary policy officials will either tighten or loosen monetary policy over the coming months. Yet, the economy is starting to show the real difficulty in dealing with austerity measures. With that in mind, BoE member Adam Posen’s ongoing dovish rhetoric (he said BIS calls for higher rates were nonsense) speaks to a shift in the financial backdrop where further easing may deemed be necessary.
Canadian Dollar Readies for Inflation Data, Interest Rate Speculation
In the past few weeks and months, we have seen Canadian market-based rates (Libor and government bond yields) drop off aggressively. A similar reflection is seen through the 12 month interest rate forecast which has dropped from nearly 100 bps to a current 35 basis points. CPI figures tomorrow will weigh the need for hikes; but without positive rate bearings, why should the loonie be so strong against the greenback.
Australian Dollar Rebounds as Market Rates Ease from Biggest Drop in 8 Months
Interest rates are the Australian dollar’s primary draw. Beyond financial stability and steady economic expansion; it is the potential for return that attracts capital flow into local assets and the currency. That said, in the past session; we have seen a sharp rebound in the Australian 3-month Libor rate from its recent eight-month low. A rate this competitive could continue to draw capital even if risk aversion kicks in.
US Oil Stabilizes at Long-Term Trend as Market Wonders if Reserve Dump Priced In
After three consecutive declines (which notably failed to produce progress in further selling below $90), US oil found its way to a bullish bounce. Follow through on this move depends on the conviction in risk trends going forward as well as the market’s efficiency with pricing in the recent IEA announcement of a 60 million barrel release of reserves. The sharp selloff is slowing; but the bear trend was in place before the notice.
Gold: Positive Vote or Not, Uncertainty in Europe, Asia and US Finances Prominent
Gold managed its first positive performance through Tuesday’s close in four days. That said, the rebound was exceptionally small given the preceding tumble. The Greece vote offers a short-term catalyst for price action through this commodity; but follow through will likely be limited on this event. The longer-term issues with the Euro Zone’s financial health and the relative strength of the dollar carry far more weight.
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ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
1:00 |
AUD |
DEWR Skilled Vacancies (MoM) (JUN) |
-0.4% |
Vacancies may widen due to slower econ |
|
|
5:30 |
EUR |
French Gross Domestic Product (QoQ) (1Q F) |
1.0% |
1.0% |
French output expected to remain steady as investment lags |
|
5:30 |
EUR |
French Gross Domestic Product (YoY) (1Q F) |
2.2% |
2.2% |
|
|
8:30 |
GBP |
Mortgage Approvals (MAY) |
46.3K |
45.2K |
More approvals likely from cheaper houses |
|
8:30 |
GBP |
Index of Services (3Mo3M) (APR) |
1.3% |
0.9% |
Service industry improvement expected, may lead entire economy |
|
8:30 |
GBP |
Index of Services (MoM) (APR) |
0.6% |
||
|
8:30 |
GBP |
M4 Ex OFCs 3M Annualised (MAY) |
-2.0% |
Short term M4 money supply has slowed decline, showing only moderate recovery despite still low interest rates |
|
|
8:30 |
GBP |
M4 Money Supply (MoM) (MAY) |
0.1% |
||
|
8:30 |
GBP |
M4 Money Supply (YoY) (MAY) |
-0.9% |
||
|
8:30 |
GBP |
Net Lending Sec. on Dwellings (MAY) |
0.7B |
0.7B |
Consumer credit, lending still facing headwinds |
|
8:30 |
GBP |
Net Consumer Credit (MAY) |
0.4B |
0.5B |
|
|
9:00 |
EUR |
Euro-Zone Business Climate Indicator (JUN) |
0.9 |
0.99 |
Confidence surveys indicate mild decline heading into slower summer months, persisting peripheral worries |
|
9:00 |
EUR |
Euro-Zone Consumer Confidence (JUN F) |
-10 |
-10 |
|
|
9:00 |
EUR |
Euro-Zone Economic Confidence (JUN) |
105 |
105.5 |
|
|
9:00 |
EUR |
Euro-Zone Industrial Confidence (JUN) |
3.5 |
3.9 |
|
|
9:00 |
EUR |
Euro-Zone Services Confidence (JUN) |
9 |
9.2 |
|
|
9:30 |
CHF |
KOF Swiss Leading Indicator (JUN) |
2.23 |
2.3 |
Expected fall due to strong Franc |
|
11:00 |
USD |
MBA Mortgage Applications (JUN 24) |
-5.9% |
Higher rate may indicate housing recovery |
|
|
11:00 |
CPI (MAY) (MAY) |
119.8 |
At-level expected headline and core inflation may delay the Bank of Canada’s rate hikes |
||
|
11:00 |
CAD |
CPI (MoM) (MAY) |
0.3% |
0.3% |
|
|
11:00 |
CAD |
CPI (YoY) (MAY) |
3.3% |
3.3% |
|
|
11:00 |
CAD |
Bank Canada CPI Core (MoM) (MAY) |
0.2% |
0.2% |
|
|
11:00 |
CAD |
Bank Canada CPI Core (YoY) (MAY) |
1.5% |
1.6% |
|
|
13:00 |
CAD |
Teranet/National Bank HPI (MoM) (APR) |
0.8% |
0.6% |
Canadian housing prices expected to show recovery, may spur construction in the long run |
|
13:00 |
CAD |
Teranet/National Bank HP Index (APR) |
138.94 |
||
|
13:00 |
CAD |
Teranet/National Bank HPI (YoY) (APR) |
3.9% |
4.1% |
|
|
14:00 |
USD |
Pending Home Sales (MoM) (MAY) |
3.0% |
-11.6% |
Higher pending sales remain another indicator that real estate market improving |
|
14:00 |
USD |
Pending Home Sales (YoY) (MAY) |
-26.8% |
||
|
14:30 |
USD |
DOE U.S. Crude Oil Inventories (JUN 24) |
-1500K |
-1711K |
Crude and gasoline inventories mixed, may indicate higher consumer demand but tempered industrial usage |
|
14:30 |
USD |
DOE Cushing OK Crude Inventory (JUN 24) |
273K |
||
|
14:30 |
USD |
DOE U.S. Distillate Inventory (JUN 24) |
1050K |
1173K |
|
|
14:30 |
USD |
DOE U.S. Gasoline Inventories (JUN 24) |
775K |
-464K |
|
|
14:30 |
USD |
DOE U.S. Refinery Utilization (JUN 24) |
0.0% |
3.1% |
|
|
22:45 |
NZD |
Building Permits (MoM) (MAY) |
3.2% |
-1.6% |
Helped by earthquake rebuilding |
|
23:01 |
GBP |
GfK Consumer Confidence Survey (JUN) |
-24 |
-21 |
British consumers remain weary |
|
23:15 |
JPY |
Nomura/JMMA Manu PMI (JUN) |
51.3 |
Manufacturing index may improve |
|
|
23:50 |
JPY |
Loans & Discounts Corp (YoY) (MAY) |
-1.7% |
New cash injects may help loans |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
11:00 |
EUR |
Greek Parliament Votes on Austerity Package |
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 |
1.6600 |
89.00 |
0.9345 |
1.0275 |
1.1800 |
0.8400 |
122.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6300 |
86.00 |
0.8900 |
1.0000 |
1.1000 |
0.8215 |
118.00 |
140.00 |
|
Spot |
1.4363 |
1.5990 |
81.14 |
0.8321 |
0.9825 |
1.0537 |
0.8115 |
116.54 |
129.74 |
|
Support 1 |
1.4000 |
1.5935 |
80.00 |
0.8300 |
0.9500 |
1.0400 |
0.7745 |
113.80 |
125.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.00 |
0.8250 |
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 |
11.8291 |
1.6430 |
6.8528 |
7.7857 |
1.2387 |
Spot |
6.4424 |
5.1932 |
5.4282 |
|
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 |
1.4492 |
1.6116 |
81.63 |
0.8402 |
0.9909 |
1.0607 |
0.8188 |
117.65 |
130.76 |
|
Resist 1 |
1.4428 |
1.6053 |
81.39 |
0.8361 |
0.9867 |
1.0572 |
0.8151 |
117.10 |
130.25 |
|
Pivot |
1.4332 |
1.5982 |
81.02 |
0.8319 |
0.9843 |
1.0504 |
0.8089 |
116.11 |
129.45 |
|
Support 1 |
1.4268 |
1.5919 |
80.78 |
0.8278 |
0.9801 |
1.0469 |
0.8052 |
115.56 |
128.94 |
|
Support 2 |
1.4172 |
1.5848 |
80.41 |
0.8236 |
0.9777 |
1.0401 |
0.7990 |
114.57 |
128.15 |
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 |
1.4562 |
1.6155 |
81.97 |
0.8426 |
0.9922 |
1.0680 |
0.8229 |
118.21 |
131.35 |
|
Resist. 2 |
1.4512 |
1.6114 |
81.76 |
0.8400 |
0.9898 |
1.0644 |
0.8200 |
117.80 |
130.95 |
|
Resist. 1 |
1.4462 |
1.6073 |
81.56 |
0.8373 |
0.9873 |
1.0608 |
0.8172 |
117.38 |
130.55 |
|
Spot |
1.4363 |
1.5990 |
81.14 |
0.8321 |
0.9825 |
1.0537 |
0.8115 |
116.54 |
129.74 |
|
Support 1 |
1.4264 |
1.5907 |
80.72 |
0.8269 |
0.9777 |
1.0466 |
0.8058 |
115.70 |
128.94 |
|
Support 2 |
1.4214 |
1.5866 |
80.52 |
0.8242 |
0.9752 |
1.0430 |
0.8030 |
115.28 |
128.53 |
|
Support 3 |
1.4164 |
1.5825 |
80.31 |
0.8216 |
0.9728 |
1.0394 |
0.8001 |
114.87 |
128.13 |
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
