Overnight data weighed heavily on the Australian Dollar, taking AUDUSD lower to breach the 0.95 level. Japanese data surprised to the upside but failed to stir the markets as USDJPY oscillated in a tight 16-pip range throughout the session. Today’s session promises volatility as the docket is filled to the brim with market-moving data.
[B][U]Key Overnight Developments[/U]
• Australian Dollar Buckles As Data Deteriorates Further
• Dollar Retreats Late into Asian Trading Ahead of European Data Overload[/B]
[U][B]Critical Levels[/B][/U]
The Euro popped higher late into the Asian session having spent most of the night in a 20-pip range. The US session saw the pair break past 1.57 once again and price action now seems poised to retest the figure as resistance going into a busy European trading day. Technical analyst Jamie Saettele reported the dollar rally as corrective, with immediate support at 1.5612 followed by a more substantial floor at 1.5534. In a similar fashion, the sterling sees short term support at 1.9648. Resistance remains at 2.0175.
[U][B]Asia Session Highlights[/B][/U]
Overnight data weighed heavily on the Australian Dollar. [B]Westpac Consumer Confidence[/B] tumbled in July, reaching lows unseen since 1992 with a print at -6.7% versus -5.6% in the preceding month. May’s [B]Home Loans[/B] and [B]Investment Lending[/B] statistics also took a beating, with the former registering a fall of -7.9% versus expectations of -2.0% while the latter dropped -6.8% versus 1.4% in the preceding month. The metric now stands at the lowest since 2000 with Australians unlikely to take on debt with borrowing costs at record levels. The combined negativity took AUDUSD 71 pips lower to breach the 0.95 level.
Meanwhile, Japanese data surprised to the upside as May’s [B]Machine Orders[/B] jumped ten-fold higher than expected to grow 10.4% since the preceding month. Demand from emerging markets has remained firm, supporting Japanese industry as the island’s premier customers in the US pare back spending. The markets paid little attention to the release as USDJPY oscillated in a tight 16-pip range throughout the session.
Nationwide’s survey of [B]UK Consumer Confidence[/B] underperformed in June, registering at 63 versus the expected 65 result. The release supports the idea that May’s uptick in Retail Sales was a one-off seasonal development likely to be reversed going forward.
[U][B]Euro Session: What to Expect[/B][/U]
Today’s session promises volatility as the docket is filled to the brim with market-moving data. Things will start off with [B]Germany’s May Trade Balance[/B] release. April saw exports remain resilient despite rising oil prices and a stronger euro on the back of strong demand from emerging markets. Traders will look for more of the same from the Euro Zone’s largest economy to offset deteriorating growth prospects for the 15-nation bloc. That said, yesterday’s greater-than-expected decline in May’s industrial production will put downward pressure on the metric. [B]France’s Trade Balance[/B] may also surprise to the upside in May as sharp erosion in consumer and business confidence will likely translate into declining demand for imported goods.
Analogous data from across the English Channel follows with the [B]UK’s May Trade Balance[/B] report. April saw an upside surprise as exports got a boost from rising oil prices and a falling Pound. Expectations favoring more of the same may be upset this time around: May’s Retail Sales figure spiked higher (3.5% vs. -0.1% expected) as atypically warm weather saw consumers load up on seasonal foods and clothing. This will put upward pressure on import levels. Further, sterling depreciation slowed in May, which will cut some of the stimulus for export growth.
The session closes with the final revision of [B]Euro Zone Gross Domestic Product[/B] figures for the first quarter. The annualized metric is expected at 2.2%, a slight improvement from the 2.1% in the fourth quarter of last year. This data will likely prove too backward looking to affect price action. Speaking in no uncertain terms, ECB’s own Jean-Claude Trichet warned that “the second quarter will be very different from the first quarter…we clearly had a very flattering first quarter, which will certainly not be mirrored in the second quarter.”
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To contact Ilya regarding this or other articles he has authored, please email him at <[email protected]>.[/I]