Dollar Shies Away from 1.3000 Against Euro, 100 Versus Yen

DailyFX

  • Dollar Shies Away from 1.3000 Against Euro, 100 Versus Yen
  • Japanese Yen: USD/JPY Destined for a 100 Break if Risk Behaves
  • Euro Mixed Between Deficit Data and Fading Structural Risk Pressure
  • New Zealand Dollar: Choose Your Pair Carefully for RBNZ Reaction
  • Australian Dollar Slips after China Manufacturing Data Cools
  • British Pound: London Markets Little Moved by Fitch Downgrade
  • Gold Advances a Fifth Straight Day, Yet to Retrace Half of Preceding Decline

Dollar Shies Away from 1.3000 Against Euro, 100 Versus Yen

The edge of the market’s angst last week was dulled Monday – helping risk trends stabilize for a mild bounce from US equities and notable slip from the safe haven US dollar. Yet, while the regular hallmarks of risk appetite were readily visible (equities rise, implied volatility readings drop, safe havens falter), there was very conviction in the appetite for risk exposure. For the benchmark dollar, tempered appetite for liquidity – top priority when fear grips the broader markets – meant that the move to fresh two-and-a-half year highs was shut down. From the Dow Jones FXCM Dollar Index (ticker = USDollar), an intraday advance to 10,579 established a technical high; but the currency was beat back before the close. That same restraint was handed down through the dollar-denominated ‘majors’. EURUSD bounced just after coming within 15 pips of 1.3000, AUDUSD recovered 30 pips from its session low at six-week lows and even USDJPY failed on a run to 100.

It should come as little surprise that the dollar’s ambitions were capped through the start of this week. It takes a greater level of conviction and momentum to drive markets through significant technical support/resistance and compel the next stage of a prominent trend. And, this is a deeper resistance than mere technical boundary. To provoke the USDollar to overtake the mid-point of the past five year’s range and definitely shift momentum to equity bears with an S&P 500 break below 1,535, we would need to see a concerted change in risk appetite. There are loose elements to support risk aversion: rich pricing, fading global growth trends, near-record low rates of return and distortions caused by excessive stimulus; but none of these aspects were particularly novel or capital intensive.

Looking for a unifying banner for risk trends to rally behind through the opening session of the trading week, the pinnacle of event risk was the G20’s commitment to support growth (though there was no agreement on how), the Chicago Federal Reserve activity index’s dip back below zero and the housing sector offering an ambiguous shirk as existing home sales dipped due to low inventory levels. We’ll look for more of a concerted effort to be made in the upcoming session perhaps on Apple earnings. Though, the probability of a data driven risk trend is low.

Japanese Yen: USD/JPY Destined for a 100 Break if Risk Behaves

While the positive risk lean this past session was tepid, the yen crosses should still have taken advantage of the halfhearted bid due to the Bank of Japan’s vow to see the yen lower and the appeal of a consistent carry payout. Yet, the funding currency is now universally – though moderately – higher against all of its major counterparts through early trading this morning. This deviation from a uniform read of risk appetite trends is another sign that we are lacking a serious drive in sentiment – bullish or bearish. Nevertheless, at this pace, USDJPY is still more likely to overtake 100 without a committed risk aversion move that sees important technical levels from key benchmarks give way. In the meantime, knowledge that there is a dense range of entry and exit orders just above 100 will draw the market – like gold’s approach to $1,500.

Euro Mixed Between Deficit Data and Fading Structural Risk Pressure

Headlines for the euro were mixed. On the data front, the Eurozone government debt-to-GDP ratio for 2012 reported by the Eurostats revealed deficits soared to a record 90.6 percent despite the austerity measures enforced at the expensive of multiple member recessions. On the other hand, the advanced April reading from the consumer confidence report offered a modest tick higher. Data-wise, we will find something far more intriguing in the upcoming session with the April PMI figures – considered timely GDP updates. Meanwhile, keep an eye on the newswires. Spain’s deficit ballooned, Italy is struggling to form a working government and Greece will have to vote on austerity measures this week.

New Zealand Dollar: Choose Your Pair Carefully for RBNZ ReactionThe New Zealand has offered a tentative retreat in the early hours of trading this morning, but it will be difficult for the currency to find drive behind bullish or bearish move ahead of the meaningful event risk due late in the upcoming US trading session. The Reserve Bank of New Zealand (RBNZ) is scheduled to deliver its monetary policy decision at 21:00 GMT, and the off-chance of a policy change will keep speculators from taking unnecessary risk. That said, the probability of a measurable hawkish or dovish change in tone is low. ‘No change’ can be market moving under some circumstances but not likely here. To leverage the most response from the event, avoid pairs that have high risk sensitivity.

Australian Dollar Slips after China Manufacturing Data Cools

Though it was tepid, there was a notable easing on the Australian dollar through the opening session. This morning, the push looks to be a little more resolute thanks to the encouragement of the Chinese manufacturing data. The first (‘flash’) reading of the April factory PMI report printed well below expectations (50.5), though it was still in growth territory above 50 and better than February’s print. Nevertheless, a softening in this dominate source of demand for Australian raw materials presents a fundamental concern that adds to speculative issues on thin carry.

British Pound: London Markets Little Moved by Fitch Downgrade

This past Friday, the sterling’s mild reaction to Fitch’s downgrade of the United Kingdom’s sovereign rating (from AAA to AA+) could have been pinned to the absence of London liquidity during its release. Well, the entire market had a chance to respond to the second hit to the country’s perfect reading, and there was little sign of speculative lament due to the move. Risk trends seemed more influential with GBPJPY and GBPUSD lower on the day – and we have discussed how tepid that fundamental wind was.

Gold Advances a Fifth Straight Day, Yet to Retrace Half of Preceding Decline

Gold managed a 1.6 percent advance Monday – the best showing for the commodity in over two weeks. Further encouraging, the session’s bullish close represents the fifth consecutive advance for the precious metal – the longest string of gains this year. And yet, despite the progress, gold has yet to retrace even half of the losses that swelled after $1,500 support was blown up. Talk of demand for physical gold in Asia and a slide in Gold futures based volatility doesn’t seem to offset the absolute collapse in ETF holdings (the lowest level since November 2011).

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

GMT

Currency

Release

Survey

Previous

Comments

0:00

AUD

Conference Board Leading Index

0.20%

Consists of eight indicators to forecast short to mid-term growth

1:45

CNY

HSBC Flash Manufacturing PMI

51.4

51.6

Preliminary leading indicator; Indicative of growth in 2Q.

5:00

JPY

Small Business Confidence

49.7

Surged the most since 05/11.

6:00

CHF

Trade Balance (Swiss franc)

2.00B

Swiss exports primarily bought with Francs, increasing currency value.

6:00

CHF

Exports (MoM)

-2.60%

6:00

CHF

Imports (MoM)

-5.40%

7:00

EUR

French Purchasing Manager Index Manufacturing

44.1

44

Germany and France 2 biggest EU economies. GE and FR PMI contractionary. Overall EU PMI remains contractionary, bolstering ECB’s comment of dovish monetary policy to lower its main refinancing rate amid falling inflation rate.(1.7% in Mar)

7:00

EUR

French Purchasing Manager Index Services

42

41.3

7:30

EUR

German Purchasing Manager Index Manufacturing

49

49

7:30

EUR

German Purchasing Manager Index Services

51

50.9

8:00

EUR

Euro-Zone Purchasing Manager Index Manufacturing

46.7

46.8

8:00

EUR

Euro-Zone Purchasing Manager Index Services

46.5

46.4

8:00

EUR

Euro-Zone Purchasing Manager Index Composite

46.5

46.5

8:30

GBP

Public Finances (PSNCR) (Pounds)

18.0B

-1.5B

Net deficit in borrowing is pound negative due to capital outflow.

8:30

GBP

PSNB ex Interventions

15.5B

2.8B

8:30

GBP

Public Sector Net Borrowing (Pounds)

13.8B

4.4B

10:00

GBP

CBI Trends Total Orders

-13

-15

Measure of manufacturing trends. Positive 37 of last 39 months.

10:00

GBP

CBI Trends Selling Prices

5

5

10:00

GBP

CBI Business Optimism

2

0

12:30

CAD

Retail Sales (MoM)

0.30%

1.00%

Direct gauge of consumption and consumer confidence.

12:30

CAD

Retail Sales Less Autos (MoM)

0.50%

0.50%

12:58

USD

Markit US PMI Preliminary

53.5

Provide further insight for the Fed on the possibility of abating the asset purchases as Q2 data came in mostly disappointing.

13:00

USD

House Price Index (MoM)

0.70%

0.60%

14:00

USD

Richmond Fed Manufacturing Index

2

3

14:00

USD

New Home Sales

416K

411K

Q2 sentiment data signals slowing recovery pace; May mirror the lower existing home sales in march.

14:00

USD

New Home Sales (MoM)

1.90%

-4.60%

21:00

NZD

Reserve Bank of New Zealand Rate Decision

2.50%

2.50%

Overheating housing market is key to the possibility of rate hike, though strong kiwi and drought effect add tension to decision.

23:50

JPY

Corporate Service Price (YoY)

-0.30%

0.10%

Positive following 8M of negative data since 06/12.

GMT

Currency

Upcoming Events & Speeches

-:-

EUR

Greek Fin Min Briefs Coalition Partners on Austerity Requirements

12:45

CAD

BoC Governor Carney Speaks to Senate Standing Committee

-:-

USD

|| US Earnings – Apple (Est $10.02)

23:00

EUR

Dutch Parliament Votes on Cyprus Aid Package

23:00

EUR

Bank of Portugal Releases Bank Lending Survey

-:-

EUR

Portugal Releases Year-to-Date Budget

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT

SCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

15.0000

2.0000

9.8365

7.8165

1.3650

Resist 2

7.5800

5.8950

6.1150

Resist 1

12.9000

1.9000

9.5500

7.8075

1.3250

Resist 1

6.8155

5.8300

5.8620

Spot

12.1752

1.7929

9.0974

7.7651

1.2401

Spot

6.4509

5.7383

5.7299

Support 1

12.0470

1.6500

8.7750

7.7490

1.2000

Support 1

6.0800

5.6075

5.5000

Support 2

11.5200

1.5725

8.5650

7.7450

1.1800

Support 2

5.8085

5.4440

5.3040

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

1.3101

1.5448

98.87

0.9419

1.0242

1.0460

0.8510

128.69

151.42

Resist. 2

1.3074

1.5420

98.54

0.9400

1.0226

1.0441

0.8490

128.21

150.95

Resist. 1

1.3046

1.5392

98.22

0.9382

1.0209

1.0422

0.8471

127.74

150.48

Spot

1.2991

1.5336

97.57

0.9344

1.0176

1.0383

0.8432

126.79

149.55

Support 1

1.2936

1.5280

96.92

0.9306

1.0143

1.0344

0.8393

125.84

148.61

Support 2

1.2908

1.5252

96.60

0.9288

1.0126

1.0325

0.8374

125.37

148.15

Support 3

1.2881

1.5224

96.27

0.9269

1.0110

1.0306

0.8354

124.89

147.68

v

--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

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