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Last week’s currency trading review

The Dollar was under pressure across the board with reports of China diversifying more reserves into Europe and New Zealand. Economic data missed with GDP remaining at 1.8% vs. 2.2% previously. Also concerning was the -3.6% m/m drop in durable goods orders in April. The Euro was able to rebound and overcome the concern about Greece Debt with tough talk from the IMF and EU seen rhetoric to speed up fresh austerity measures. German Business confidence remained strong at 114.2 in May. The EUR/USD is up +1.11% currently at 1.4315, after opening the week at 1.4156.

The Japanese Yen was stronger against the USD but relatively mixed against most crosses with strong majors supporting. Core CPI at 0.1% y/y remained close to deflation territory. Focus on Japanese credit rating downgrades is a source of potential Yen weakness going forward. The USD/JPY is down -1.09% currently at 80.80, after opening at 81.68. The GBP was very strong surging towards 1.6500 on the back of strong commodities and stocks. Resistance has been broken and if the correction is over then a retest of 1.6700 is likely. EUR/GBP broke below 0.8700 and is being sold on rallies with the Euro concerns helping GBP to outperform. The GBP/USD is down +1.67% currently at 1.6508 after opening at 1.6232. The AUD tested 1.0500 a few more times before surging back to life on strong Gold and AUD/JPY buying late in the week. The outlook for the Aussie is still strong given the likely rate hikes coming in the second half of this year. The AUD/USD is up +.039 % currently at 1.0705 after opening at 1.0663.

The Forex Trading Economic Data Ahead Preview

In the States; On Wednesday, May ADP Employment is forecast at 178k vs. 179k. Also, ISM Manufacturing is forecast at 58.8 vs. 60.4 previously. On Thursday, Weekly Jobless Claims are forecast at 427k vs. 423k previously. On Friday, May NonFarm Payrolls forecast at 244k vs. 195k previously. May Unemployment forecast at 8.9% vs. 9.0% previously. Finally on Friday we have May ISM Services forecast at 54.3 vs. 52.9 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Wednesday, May PMI Manufacturing forecast at 54.8 vs. 54.8. Also ECB president Trichet Speaks. On Friday, May PMI Services forecast at 55.4. In the UK, May PMI Manufacturing forecast at 54 vs. 54.6 previously. On Friday, May PMI Services forecast at 54.2 vs. 54.3 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Friday, BOJ Nakamura Speaks. In Australia; On Wednesday, Q1 GDP forecast at 1.8% vs. 2.7% previously.

We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.4068

1.4125

1.4410

1.4423

1.4455

USD/JPY

80.34

80.64

81.40

82.00

82.23

GBP/USD

1.6132

1.6268

1.6465

1.6584

1.6661

AUD/USD

1.0510

1.0609

1.0680

1.0794

1.0877

XAU/USD

1504.00

1513

1531

1543

1550

OIL/USD

98.00

100.00

102.90

103.00

105.00

Euro – 1.4410

Initial support at 1.4125 (May 27 low) followed by 1.4068 (May 26 low). Initial resistance is now located at 1.4423 (May 11 High) followed by 1.4455 (50% retrace of 1.4940-1.3970)

Yen – 81.40

Initial support is located at 80.64 (May 16 low) followed by 80.34 (May 13 low). Initial resistance is now at 82.00 (Big Figure resistance) followed by 82.23 (May 19 high).

Pound – 1.6465

Initial support at 1.6268 (May 26 low) followed by 1.6132 (May 25 low). Initial resistance is now at 1.6584 (76.4% retrace of 1.6747-1.6058) followed by 1.6661 (May 3 high).

Australian Dollar – 1.0680

Initial support at 1.0609 (May 27 low) followed by the 1.0510 (May 26 low). Initial resistance is now at 1.0794 (61.8% retrace of 1.1012-1.0441) followed by 1.0877 (76.4% retrace of 1.1012-1.0441).

Gold – 1531

Initial support at 1513 (May 24 low) followed by 1504 (May 23 low). Initial resistance is now at 1543 (May 4 high) followed by 1550 (76.4% retrace of 1577.57-1462.45).

Oil – 102.90

Initial support at 100.00 (Intraday Support) followed by 98.00 (Intraday Support). Initial resistance is now at 103.00 (Intraday resistance) followed by 105.00 (Intraday Resistance).

Written by Anthony Darvall