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Overall, the major pairs traded split during the overnight session, as investors shifted from risk-aversion to tolerance depending on regional macroeconomic strength ahead of the FOMC meeting. As such, the euro, the Japanese yen and the Swiss franc advanced compared with the dollar overnight, the cad and aussie posted small declines, while the pound tumbled from the Tuesday session open. The market is expected to retain strong momentum, but also remain volatile, during the U.S. open, as investors prepare for the Existing Home Sales report at 10:00 EDT.
The Euro (Eur/Usd) gained 60 pips throughout the European session, and was able to hold against the dollar even though S&P futures retraced some of the gains made overnight. For now, the euro trades near an area packed with important support points, something that might provide a strong momentum for the European currency.
During the European session, a release showed that the German and Euro-area Manufacturing PMI improved in June, even though the gains were smaller than expected. On the other hand, the Services PMI for the Euro-area and for Germany consolidated near the value reached in May.
The Pound (Gbp/Usd) broke under the low set on Monday during the early Asian session, and since then the pair has traded in the red, even though some of the other major currencies advanced compared to the dollar. Moreover, the pound was unable to break above Monday’s low even though it tested the resistance area a couple of times, on a strong volume. Eventually, the pound break below TheLFB R1 (1.6270), tumbling 100 pips from Tuesday’s open.
The number of mortgage approvals in the U.K. improved much more than expected in May. However, analyzing the report from a longer-term perspective, the number of mortgages approved is still hovering near very low historical levels.
The Aussie (Aud/Usd) continued the move lower during the Asian session, extending the declines seen in the prior day of trading, on Monday. However, during the European session, the aussie managed to break above the intra-day trend-line that sent the pair lower over the last few trading sessions, and even posted some small gains.
The Cad (Usd/Cad) extended the range seen in the late U.S. session during overnight trade. As such, the cad traded a 40-pip side-ways channel since the Tuesday session begun, being unable to pull any important moves. On the daily chart, the pair is trading near the 50-day moving average, a resistance point that held the pair for nearly seven weeks.
The Swissy (Usd/Chf) had a relatively calm Asian session, trading in a 25-pip range slightly above the neutral pivot point (1.0850). However, shortly before the London open, the Swiss franc gained approximately 60 pips, posting the biggest advances among the major currencies compared to the dollar. Swissy’s downtrend came in response to the pair being unable to break above the 1.0900 area in the last four trading sessions.
A report showed this morning the Swiss trade balance released at 2.01B for May, one of the strongest numbers seen over the last few years. To some extent, this may provide strong support for the Swiss franc.
The Yen (Usd/Yen) lost as much as 95 pips during the overnight session and tested TheLFB S3 (95.05) around the London open. Overnight declines came after the pair traded in a 40-pip range, unable to break any important price points. Moreover, on Tuesday, the pair broke below the trend-line that connects the 01.21 and the 05.22 lows, something that may be a crucial point in the future.
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