The Dollar held below a three-month high against the Yen as investors await more US data including a monthly payrolls report today. The jobs data will provide more clues on whether the Federal Reserve will keep rates steady at the current 5.25%, after a strong report on regional US business activity on Thursday reinforced such views and gave a boost to the Dollar. The data offset a weaker-than-expected US economic growth number for the first quarter reported earlier and reduced the perceived chances of interest rate cuts by the Federal Reserve this year.
UsdJpy climbed as high as 121.99, the highest since mid-February. Traders said greater risk appetite, backed by a rise in global stock markets as Chinese shares rebounded after a sell-off, encouraged investors to resume carry-trades in which low-yielding currencies like the Yen are borrowed to fund investment in higher-yielding currencies and assets.
News and Events:
The Dollar held below a three-month high against the Yen as investors await more US data including a monthly payrolls report today. The jobs data will provide more clues on whether the Federal Reserve will keep rates steady at the current 5.25%, after a strong report on regional US business activity on Thursday reinforced such views and gave a boost to the Dollar. The data offset a weaker-than-expected US economic growth number for the first quarter reported earlier and reduced the perceived chances of interest rate cuts by the Federal Reserve this year. Markets still expect the Fed to hold rates steady at its next monetary policy meetings in June and August. The Chicago PMI rose in May to 61.7 from 52.9 in April and well above the forecast for a reading around 54. Traders said the Dollar has a chance to extend its gains above 122 Yen if the jobs data is healthy, but some analysts pointed out that the market may have already priced in a strong figure and dollar-buying may not last long.
EurUsd was little changed +0.17% at 1.3456, remaining within a sight of a seven-week low of 1.3407 hit this week. UsdJpy was nearly flat at 121.74 after climbing as high as 121.99, the highest since mid-February. EurJpy held at 163.79 +0.31%, staying near its record high of 164.30 hit on Tuesday. Traders said greater risk appetite, backed by a rise in global stock markets as Chinese shares rebounded after a sell-off, encouraged investors to resume carry-trades in which low-yielding currencies like the Yen are borrowed to fund investment in higher-yielding currencies and assets.
For the May US non-farm payrolls report, economists forecast an increase of 130k jots, compared with 88k jobs created in April. The unemployment rate is seen at 4.5%, unchanged from the previous month.
Today’s Key Issues (time in GMT):
08.00 EUR May Euro-zone Purchasing Manager Index 55.5 vs 55.4
08.30 GB May UK Purchasing Manager Index 53.7 vs 53.9
08.30 US Fed’s Kroszner speaks on US Economic Outlook in Greece
09.00 EUR 1Q Euro-zone Gross Domestic Product 0.6% vs 0.9% (QoQ)
09.00 EUR 1Q Euro-zone Gross Domestic Product 3.1% vs 3.3% (YoY)
09.00 EUR April Euro-zone Unemployment Rate 7.1% vs 7.2%
10.00 US ECB’s Bini Smaghi holds speech in Trento, Italy
12.30 US April Personal Income 0.3% vs 0.7% (MoM)
12.30 US April Personal Spending 0.4% vs 0.3% (MoM)
12.30 US April PCE* Core 0.2% vs 0.0% (MoM)
12.30 US April PCE* Core 2.0% vs 2.1% (YoY)
12.30 US May Non-farm payrolls 130k vs 88k
14.00 US April Pending Home Sales Index 105 vs 104.3
14.00 US May ISM manufacturing survey 54 vs 54.7
14.00 US May ISM Prices Paid 73 unchanged
14.00 US May University of Michigan Consumer Sentiment 88 vs 87.1
14.00 US May University of Michigan Condition 104 vs 104.6
14.00 US May University of Michigan Expectation 76.1 vs 75.9
- PCE = Personal Consumption Expenditure
The Risk Today:
EurUsd recent recovery from the 1.3407 short-term trend low followed a corrective path from 1.3521 resistance. This subsequent decline is likely to resume the bear trend where a break of 1.3407 Wednesday’s low would clear the way for a run at 1.3370 (38.2% retracement of 1.2865-1.3683).
GbpUsd recent sell-off from 1.9900 Tuesday’s high is likely marking a resumption of the bear trend. Market even reversed under 1.9770 support and Tuesday breakout. On the lower side, further pressure below 1.9734 Wednesday low would open the door toward the 1.9677 trend low and resume bear trend towards 1.9659 (50% retracement of the 1.9184 to 2.0134 advance).
UsdJpy bull trend remains intact with the focus on the January-February 122.10 to 122.22 highs. Yesterday 121.99 high would mark minor resistance before 122.05 (February high) next resistance. Support lies at 120.86, last Friday low.
UsdChf recent corrective pullback likely bottomed Tuesday at 1.2200. Only a break of the 1.2127 low from May 15 however would turn the short-run tone bearish. Until then, we’ll keep focus on the 1.2356 resistance (61.8% retracement of the 1.2575-1.1994 decline). Minor support is in the 1.2238 yesterday low.
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Resistance and Support:
By Jean-Claude Braha - ACM Advanced Currency Markets, Geneva, Switzerland