News and Events:
The news monopolizing the financial newswires yesterday was the massive jump and subsequent selloff in U.S Government yields. US10Y jumped 20bps and closed above the important resistance of 3.70%. This could potentially be disastrous for the mortgage market, which is widely seen to be the major to an economic recovery in the U.S; furthermore high govt. yields stunt domestic growth and weighs on equities. The dollar was constructive throughout the night as continued worries GM will file for bankruptcy this week refocused the Greenback and its haven status. With initial jobless claims out today we will be looking for the ramifications of the widespread layoffs from the auto-sector.
In Europe we see the German Unemployment numbers today, after consumer prices fell in several German states and preliminary national CPI was lower than expected – this corroborates the ECB's continued fears of deflation – a recurring theme to the rhetoric surrounding the course of action undertaken by the ECB throughout this crisis. While EURUSD moves have seen the Euro gain significantly against the dollar recently this doesn't mean that the EUR is a preferred vehicle for the global path to growth. The Yen dropped by the most in eight weeks against the dollar and declined versus the euro on speculation investors in Japan would be focusing their investment strategy on overseas assets – this comes as a sign that domestic investors are ready to take on more risk – a weaker Yen will benefit Japanese exports.
The Yen dropped 1.7% to 96.97 against the dollar as of 09:05 CET. Focus today will be on whether the dollar can break out of it's current ranges especially against the Euro. The balance between the continued risk aversion regarding the GM debacle, North Korea will go head to head with the continued will for the market at large to recover rapidly from the gallows of this economic recession.
Focus today will be on whether the dollar can break out of it's current ranges especially against the Euro. The balance between the continued risk aversion regarding the GM debacle, North Korea will go head to head with the continued will for the market at large to recover rapidly from the gallows of this economic recession.
Today's Key Issues (time in GMT):
12:30 USD Durable Goods Orders (APR) 0.5% Vs. -0.8%
12:30 USD Initial Jobless claims (May 23) 628K Vs. 631K
12:30 USD New Home Sales 360K Vs. 356K
14:00 USD New Home Sales (MoM) 1.1% Vs. -0.6%
23:30 JPY Jobless Rate 5.0% Vs. 4.8%
23:50 JPY Industrial Production (MoM) 3.3% Vs. 1.6%
The Risk Today:
EurUsd Constructive above 1.3740 (38.20% retracement on 1.2315 – 1.3040 move). Short term focus remains on 1.4051 but yesterday's break below 1.3900 shifted focus from the upside to a more corrective stance. Initial resistance stands at 1.3881 with a daily focus on 1.3939 – short term target remains 1.4051. On the downside initial support at 1.3840 (recent low) with a floor in at 1.3740.
GbpUsd pair is poised for a retracement on the dollar rally of last night with and initial resistance at 1.5952 but a confirmation would come at 1.5975. Strong resistance at 1.6087 with a target at 1.6120. On the downside initial resistance comes at 1.5900 with a crucial level at 1.5856 – floor at 1.5780.
UsdJpy Yen drops more than 1.7% against the dollar on outflows of capital. Resistance at 97.04 tested twice this morning. Break past this will focus 97.85 (12th May resistance) however mid-term target stands at 99.59. On the downside we see soft resistance at 96.63 (23.60% Fib level on 95.12 – 97.04 move) but crucial level at 96.14 will allow for retracement to continue towards 95.92.
UsdChf 1.0954 – 1.0894 moves retraced and faltered at 50.00% before continuing its move down, the break past 1.0894 will focus 1.0873 (soft support) with a floor in at 1.0812. On the upside moves should be capped at 1.0953 with a level at 1.0923.
Resistance and Support:
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot