Market Summary,Dollar’s magnanimous rally finally halted courtesy of tame inflation figures with the reading excluding...

... food & energy coming in flat. Meanwhile the Yuan revaluation issue was back in the spotlight as U.S. imposed quotas on Chinese textile exports while heavy rhetoric urging China to revalue soon continued. While China replied by saying that they won’t bow to any pressure and would set its own timetable and also advised the U.S. to solve its own domestic problems first rather than blaming others. Thus rhetoric remains on the same lines but is getting heavier each passing day.

· The Euro could not break above 1.27 in spite of a few bearish factors for the Greenback. Bottom pickers have helped it form a nice base around 1.26 but mild resistance around 1.2710 is holding well for now. After yet another day devoid of key data outcomes the focus shifts to today’s heavy data calendar for the Euro-Zone. Meanwhile Europe joined the U.S. in urging the Chinese to revalue the Yuan, as they have an equally keen interest in the environment of their own exports falling and growth forecasts for Germany and France having reduced for this year.

· The Yen gained on the back of a report which mentioned that South Korea would no longer intervene in FX markets and would not be looking to increase their FX reserves as they have plenty already. Also perceived as a step towards revaluation was Hong Kong Monetary Authority’s decision to widen its trading band against the USD. Meanwhile the Yen remains above 107 as fundamentals continue to remain on the weak side.

· The Pound was helped by Dollar’s mild weakness as well as being deep in the oversold territory after its massive fall. But nothing has changed fundamentally with data remaining on the soft side as wage growth declined while the number of unemployed came in much higher than expected. While the minutes of BoE’s meeting revealed the on hold decision in favour at 8:1 compared to two members in favour of a hike in the last two meetings. Today’s Retail Sales are expected to confirm the trend of slow consumer spending with resistance around 1.8455 for the Pound.

· The Aussie broke back above 0.76 on tame U.S. inflation figures while the general strength in Asian currencies on the Yuan revaluation issue also helped it. Commodity prices after their sharp sell off also stabilized a bit with lack of any clear general direction in the market likely to keep the Aussie confined to narrow range bound movements.


Economic Data Released

GMT Release Region Previous Actual Comment
08:30 April Unemployment Change U.K. 11 K 8.1K Jobless higher than expected with wage growth on the soft side.
12:30 April CPI m/m USA 0.6% 0.5% Lower than expected with inflation excl food and energy very tame.


Upcoming Economic Releases

GMT Release Region Previous Forecast Comment
08:30 April Retail Sales U.K. -0.1% 0.0% Should improve slightly after last month’s sharp fall.
09:00 March Industrial Production Euro-Zone -0.5% -0.3% Should continue to remain at weak levels as domestic demand fails to improve
14:00 April Leading Indicators USA -0.4% -0.2% The easing in oil prices should help the improve index
16:00 May Philadelphia Fed USA 25.3 19.2 Expected to inch lower on cyclical demand factors.

*Only key potential market moving data is mentioned, for a detailed Economic Calendar please click on the ‘Financial Calendar’ link on the web-site.

Technical Analysis

EUR/USD – Yesterday’s low was 1.2585 and high was 1.2688.
The pair closed at 1.2670.
Bottom pickers and mild profit taking has for now, helped the Euro stay above1.26 with U.S. Inflation data coming in tame. A fair number of bids are lined down to the crucial psychological level of 1.25 with 1.2575-90 the first zone of support. On the upside no clear rally is expected from the Euro, with weak moves towards 1.2695-1.2710 likely to meet offers with strong resistance above it around 1.2775-90 zone.
Key resistance is seen at 1.2715 followed by 1.2795 while support starts at 1.2610 followed by 1.2555.

USD/JPY – Yesterday’s low was 106.74 and high was 107.77.
The pair closed at 107.05
South Korea’s statements and Hong Kong’s action has taken us a step closer to Yuan revaluation thus helping the Yen by default. However its fundamental weaknesses have kept it in the 107 region with decent support for the Dollar around 106.75, a break below targets the solid support zone at 106.20-35. On the upside resistance is strong in the 107.75-90 zone with a break above 108 likely to meet solid offers.

Key Resistance is seen at 107.75 followed by 108.25 while support starts at 106.75 followed by 106.25.

GBP/USD – Yesterday’s low was 1.8290 and high was 1.8410.
The pair closed at 1.8388.
The Pound’s losses stopped thanks to tame U.S. inflation but its own fundamentals remain on the weak side. Thus mild resistance exists around 1.8455 with any break above 1.85 likely to lead to strong offers. On the downside bottom pickers are likely to help it stay above 1.83 with strong support around 1.8275. U.K. Retail sales data is eyed for further direction.
Key Resistance is seen at 1.8455 followed by 1.8515 while support starts at 1.8325 followed by 1.8275.

AUD/USD – Yesterday’s low was 0.7530 and high was 0.7616.
The pair closed at 0.7592.

The pair targeted the strong support zone at 0.7540-55 but failed to break below as strong bids lie in that zone. A break below 0.75 pivot mark could accelerate losses. On the upside, 0.7615-25 now holds mild resistance followed by strong offers on any moves above 0.7675. The pair is likely to move in narrow range bound movements.
Key Resistance is seen at 0.7625 followed by 0.7675 while support starts at 0.7555. followed by 0.7505.




Kunal ‘Kris’ Sharma
Forex Analyst
E-mail: kris@easy-forex.com
www.easy-forex.com