Wednesday June 29, 2005 - 11:16:07 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
• USD-JPY short-term upside risk extends.
USD firm in general, although data barriers need to be overcome to allow further EUR-USD weakness.
• Weak UK retail survey clobbers GBP.
The USD has remained generally firm overnight, with the development of most significance still being the firmer tone recorded against the JPY. USD-JPY
dipped to test the prior resistance level at 109.70 early in the Asian session, in part perhaps because of the sharp pullback in oil prices and also in fear of a stronger industrial output report. However, industrial output merely confirmed market expectations of a sharp m/m fall after the strong rise seen in the previous month. Stronger than expected Japanese data is now required to offset the positive technical bias that has emerged on USD-JPY since moving above 109.70 yesterday. USD-JPY promptly tested the topside, moving as high as 110.15, before proceeding above the October 13 2004 high of 110.21 in Europe. Technically there is now scope up towards the 111.50-112.00 area and further advances are likely today as others are tempted by the positive short-term technical scenario. However, this is not without risk as a deeper pullback in oil prices (below 57.85 on NYMEX crude would signal trouble) and/or some Japanese data strength later this week could offer support for the JPY.
Indeed, it is a similar situation for the USD
in general. The way things currently stand the USD is favoured cyclically, although there are possible pitfalls over the next week or so in the form of the FOMC meeting, the ISM surveys and the employment report. The onus is on one or other of these reports to offer some negative news to upset the status quo that is still favouring the USD in general. The FOMC meeting is likely to be USD supportive – the data releases are the biggest unknowns. Uncertainty about these events should continue to offer support for EUR-USD, although 1.2080 needs to be cleared to take the pressure off today. EUR-USD was lifted higher late in the European morning and it seemed to be following the move in
EUR-GBP after the release of weak UK data (see below).
It was a choppy morning for GBP.
EUR-GBP tested lower initially, moving close to support at 0.6625, before nudging higher ahead of the economic data. The first two releases (consumer credit and mortgage approvals) both came out ahead of expectations, but the CBI retail survey released later on was extremely weak, with the -18 balance the weakest since records began in 1983. The CBI did say that this may overstate the weakness to a certain degree as June 2004 was particularly buoyant (the balance is a y/y comparison). However, as the chart shows, the 3-m average is also at an all-time low so perceptions about the UK consumer will remain negative. EURGBP traded higher and this appeared to prompt an improvement in other EUR crosses. The move above 0.6660 on EUR-GBP is significant from a short-term perspective and further gains to at least 0.6687 should be seen today. 0.6735 needs to be overcome to really turn things around, but this will be difficult.
final GDP for Q1 is unlikely to include any major revisions and is also a little outdated.
manufacturing PMI is due tonight and since dipping to 50.6 in December it has risen in each month since then to 53.5 in May.
Data/event EDT Consensus*
US GDP (Q1, final) saar 08.30 +3.7%
US Core PCE prices (Q1, final) saar 08.30 +2.2%
JP PMI manu (Jun) 18.30 53.5 last
AU Private sector credit (May) y/y 21.30 +0.8%
*Consensus unless stated
Latest data Actual Consensus*
US ABC consumer conf (w/e Jun 19) -11 -10 last
JP Ind prod (May, prel) m/m -2.3% -2.3%
NO Retail sales (May) m/m -2.5% -2.6%
GB Consumer credit (May) +£1.8bn +£1.6bn
GB Mortgage approvals (May, sa) 96k 94k
CH KOF indicator (Jun) 0.46 0.52
ZA CPI (May) y/y +3.3% +3.3%
ZA CPIX (May) y/y +3.9% +4.1%
GB CBI retail trades survey (Jun) -18 -7 last
* Consensus unless stated
% reporting higher/low er y/y volume grow th
2005, Mellon Financial Corporation Note: Although obtained from sources believed by us to be reliable, Mellon Financial Corporation and its affiliates cannot guarantee the accuracy or completeness of the information upon which this report is based. This report does not purport to disclose the risks or benefits of entering into particular transactions and should not be construed as advice in any specific instance. The views in this report constitute our judgement as of this date and are subject to change without notice.
Ian Gunner 44 20 7163 5996 06.40 EDT Monday May 31 2005
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