Market Summary,Dollar remained well bid and its gains stabilized after the rally across the board...

... in the Asian session. The only chink in the Dollar’s armour at the moment is the recent softness seen in the manufacturing sector. Chicago PMI came in much lower than expectations with weak manufacturing numbers the main catalyst for the decline this coupled with weak surveys in NY and Philly Fed should ensure a below par outcome in today’s ISM Manufacturing survey. Meanwhile the Consumer Confidence survey surprised to the upside thanks to a better labour market and easing in oil prices.



· Euro broke below 1.23 as well, ahead of today’s Dutch referendum on the EU constitution with fears it is likely to go the French way. Also data from the Zone remained below par with unemployment rates in Germany and France continuing to be around record high levels while Consumer Confidence across the zone worsened. Meanwhile French Prime Minister Raffarin resigned as an aftermath of the vote with French Consumer confidence indicator slumping.



· Yen continues to hover in the 108.25-50 resistance zone in spite of the broad based strength in the Greenback, it is hard to sell the Yen decisively at a time when the economy is slowly but surely picking up and the chances of a sudden Yuan revaluation announcement remains on the cards. This mornings’ Labour Earnings data has shown that the average basic pay has increased for the first time in a year.
.

· Pound after slumping towards 1.81 managed to break back above 1.82 as it was in deep intra day oversold territory. CBI Retail Sales survey improved but remains around very weak levels while Consumer confidence declined. It is also mildly supported by default on the immense negative sentiment around the Euro as the Pound is the preferred choice for investors who are cynical of the Dollar as well.



· Aussie managed to remain above its recent strong support zone at 0.7525-40 with this mornings GDP data coming in line with expectations. However Q2 figures are likely to show a decline as concerns on the economy’s growth outlook are increasing. Tomorrow’s Aussie Trade balance figures as well as U.S. data is eyed for further direction.

Economic Data Released

GMT Release Region Previous Actual Comment
06:45 May Consumer Confidence Indicator France -24 -29 Recent uncertainty due to EU vote has decreased confidence
07:55 May Unemployment Rate Germany 11.8% 11.8% Unemployment rate continues to remain around record high levels
09:00 May CPI y/y Euro-Zone 2.1% 2.0% In line with expectations
10:00 May GFK Consumer Confidence survey U.K. 0 -1 Recent softness in the economy has reduced confidence.
14:00 May Chicago PMI USA 65.6 54.1 Much lower than expected with manufacturing sector slowing.

Upcoming Economic Releases
GMT Release Region Previous Forecast Comment
06:00 April Retail Sales Germany 0.0% -0.4% Spending remains stiffened and sales should slide.
08:00 May PMI Manufacturing Euro-Zone 49.2 49.0 Orders have failed to pick up.
08:30 CIPS Manufacturing PMI U.K. 49.5 49.9 Should remain around recent levels but orders have declined.
09:00 Q1 GDP Euro-Zone 0.2% 0.5% Should come in better than last quarter but overall outlook looks weak.
14:00 May ISM Manufacturing USA 53.3 52.4 Regional data suggests decline in the index

*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 1.2295 and high was 1.2480.
The pair closed at 1.2300.
The French have rejected the EU constitution and the likelihood of the Dutch following suit today has subsequently crashed the Euro below 1.23. It remains vulnerable for further losses with mild support around 1.2285-1.2310. A break below targets the strong support zone at 1.2175-90. On the upside, short term oversold conditions might help it inch higher towards 1.2385 where mild resistance exists and strong offers on any break above 1.2475.
Key resistance is seen at 1.2385 followed by 1.2475 while support starts at 1.2285 followed by 1.2195.

USD/JPY – Yesterday’s low was 107.69 and high was 108.56.
The pair closed at 108.32.
The Yen remains within its recent range as strong Japanese data in the last few days has kept it supported. Resistance continues in the 108.25-50 zone followed by strong offers on any move above 108.75. On the downside, mild Dollar bids lie around 107.75 followed by strong buying interest on any break below 107.

Key Resistance is seen at 108.55 followed by 108.75 while support starts at 107.75 followed by 107.25.

GBP/USD – Yesterday’s low was 1.8103 and high was 1.8256.
The pair closed at 1.8173.
The Pound’s fundamentals remain on the weak side and the pair is driven by Dollar’s strong momentum. It has managed to creep back above 1.82 but faces strong resistance around 1.8255 with very strong selling orders on any move above 1.83. A break below 1.8125 mild support mark targets the strong support mark at 1.8055.
Key Resistance is seen at 1.8255 followed by 1.8325 while support starts at 1.8125 followed by 1.8055.

AUD/USD – Yesterday’s low was 0.7539 and high was 0.7602.
The pair closed at 0.7559.

The pair has followed other majors and has slipped back as well but for now has remained above the 0.7525-40 support zone. A break below 0.75 will lead to the acceleration of losses while on the upside mild resistance lies around 0.76 followed by very strong resistance in the 0.7640-55 zone.

Key Resistance is seen at 0.7605 followed by 0.7655 while support starts at 0.7525. followed by 0.7475.




Kunal Sharma
Forex Analyst
E-mail: kunal@easy-forex.com
www.easy-forex.com