Market Summary,Dollar remained firm despite mixed economic results, which on closer look are not likely...

... to neither alter Fed’s existing outlook nor put a dent on U.S. better growth prospects compared to other regions. Leading Indicators suggested expansion but at a slower pace while the drop in Philly Fed coupled with the Empire State drop definitely point towards a slower manufacturing sector but this is likely to be a temporary cyclical downturn. While the sharp drop in jobless claims kept the current buoyancy for the labour market intact.

· The Euro continues to meander directionless within the 1.26 region and is waiting for some concrete weak data sets from the U.S. to push higher. Data from its side remains from average to weak as inflation figures came in line with expectations while Industrial Production continues to be on the soft side with domestic demand and export orders failing to pick up. For now decent support continues on dips below 1.26 while 1.2690-1.2710 continues to hold resistance.

· The Yen like other majors remained directionless within the107 region and slipped a bit as South Korea stated that their Gov’s statement was misinterpreted and does not imply that they would no longer intervene in the FX markets. Meanwhile the government in economic report for May kept its assessment of the economy the same as it has done since start of this year and stated that the economy is struggling to regain the kind of growth momentum seen couple of years ago. Nonetheless, Hong Kong’s action of widening its currency trading band is lending support to the Yen.

· The Pound slipped back into the 1.83 region in spite of a higher than expected Retail Sales outcome. A close look at the report suggests the higher sales as a result of heavy discounts offered by retailers trying to lure customers out of their recent slow spending. It also faces strong technical resistance in the 1.8430-50 zone which led to a strong sell off as the Pound approached this mark. Today’s lending data is eyed for further clues.

· The Aussie slipped back below 0.76 taking cue form the general softness in other majors. Commodity prices slipped a bit as well with the Aussie locked between strong resistance above 0.7625 and decent support in the 0.7510-35 zone. It should continue to move in narrow range bound movements.

Economic Data Released

GMT Release Region Previous Actual Comment
08:30 April Retail Sales U.K. -0.1% 0.5% Higher than expected but still at low levels with spending remaining stiffened
09:00 March Industrial Production Euro-Zone -0.5% -0.2% Poor domestic and export demand continue to stiffen production.
14:00 April Leading Indicators USA -0.4% -0.2% As expected recent spike in oil prices denting sentiment
16:00 May Philadelphia Fed USA 25.3 7.3 Lower than expectations with all sub components falling.


Upcoming Economic Releases

GMT Release Region Previous Forecast Comment
06:45 Q1 GDP q/q France 0.9% 0.5% Poor consumption should drag GDP lower.
08:30 April Public Sector Net Borrowing U.K. 3.8Bn 2.3Bn In keeping with recent trend borrowing should decline.

*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 1.2604 and high was 1.2689.
The pair closed at 1.2630.
Bottom pickers and mild profit taking has for now, helped the Euro stay above 1.26 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 1.2755-70 zone. It should continue to meander within its recent range.
Key resistance is seen at 1.2715 followed by 1.2775 while support starts at 1.2610 followed by 1.2555.

USD/JPY – Yesterday’s low was 106.94 and high was 107.67.
The pair closed at 107.51
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 106.40-55. On the upside resistance is strong in the 107.75-90 zone with a break above 108 likely to meet solid offers. The pair is likely to remain range bound for today

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 1.8320 and high was 1.8433.
The pair closed at 1.8345.
The Pound’s fundamentals remain on the weak side thus it continues to be offered on any break above 1.84 with strong resistance around 1.8455. On the downside bottom pickers are likely to help it stay above 1.83 with strong support around 1.8265. U.K. lending data is eyed.
Key Resistance is seen at 1.8455 followed by 1.8505 while support starts at 1.8305 followed by 1.8265.

AUD/USD – Yesterday’s low was 0.7564 and high was 0.7603.
The pair closed at 0.7569.

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 0.7615 followed by 0.7655 while support starts at 0.7535. followed by 0.7495.




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