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Forex Market Update
Published: Jun. 19 2006, 05:48 GMT
USDJPY higher in Asia on worries that North Korea may go ahead with a missile test!
Chief Cabinet Sec Abe said Japan will respond severely if North Korea goes ahead with a ballistic missile test and that the UN Security Council may impose economic sanctions on the country.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€¢ Euroland Industrial Production (Apr) MoM down -0.6% vs. 0.4% exp.
â€¢ Euroland Industrial Production (Apr) YoY down 1.9% vs. 3.2% exp.
â€¢ US Current Account Balance (1Q) up -$208.78b vs -$222.0b exp.
â€¢ US U. of Michigan Confidence (Jun) up 82.4 vs. 79.0 exp.
â€¢ USD sees temporary strength on Guynn Speech. JPY under pressure from every direction.
â€¢ Japan's Tokyo Dept. Store Sales May (YoY), out at -0.3% with a prior reading of -0.5%.
â€¢ Japan's Nationwide Dept. Sales May (YoY) out at -1.1% with a prior reading of -0.6%.
THEMES TO WATCH â€“ UPCOMING SESSION
Friday's US economic release and comment from St. Louis Fed Reserve president Poole on US accelerating inflation did little to strengthen the USD. With both Current Account Balance and U. Michigan Confidence Survey slightly outperforming the market expectations and expectation of increased tightening, we would have expected to see a stronger USD bounce. However, worries of an economic slowdown either cause by the FEDS over tightening or general global sluggishness cause traders to shy away for USD.
As Monday began to take shape speculation on FED Bank President Jack Guynn speech today will focus on the USâ€™s positive economic outlook. This reassured helped traders that a slowdown might be avoided and caused temporary USD strength across the board.
USDJPY â€“A combination of factors weighed heavily on the JPY in Asia session. First was Chinaâ€™s decision to increase banks reserve requirements by .5%., then renewed aggression with North Korea and finally speculation on Atlantaâ€™s FED Guynneâ€™s speech and finally This week JPY will be at a cross roads caught between USD selling and geopolitical threats from North Korea.
EURUSD - Industrial Production fell - 0.6% vs. a gain of 0.4% expected in April. This negative result sends slightly mixed view of the current growth outlook for the Eurozone. We will look for clarity in this weekâ€™s economic calendar, starting with todayâ€™s Trade Balance to add some clarity.
GBPUSD - With a very light economic calendar, the markets will be looking to the release of the BoE Minutes on the 21st. This should provide clarity to the Central Banks mind set on current interest rate and inflation environment. We believe these minutes will show and increase in members voting for a hike adding significant strength to GBP bullishness.
AUDUSD â€“ AUD continue to get hurt because high correlation to commodity prices. Commodities such as zinc and copper make up roughly 60% of Australiaâ€™s exports. In Asia session, AUD saw strong selling on speculations that falling metal prices and decline in Australian equity markets signals a global slowdown and speculators renewed risk aversion. With persistence fear of weakness in the global economy AUD will continue to suffer.
Note: the support/resistance levels used in the matrixâ€™s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
EURUSD (1.2588 @ 05:47 GMT)
Weekly update 18-06-2006:
EURUSD continues to find renewed upside after the corrective recovery from a test of 1.2537 38% retracement from (1.1823-1.2979) from the February bull wave. We favor the upside with short term bullish confirmation if the pair is able to break 1.2692 resistance which would give scope for a retest of the inverse head and shoulder target at 1.2980 where a close above would suggest longer term upside acceleration for a 1.3200+ target. For the downside key support is now at 1.2537 and again at 1.2400 50% retracement support.
Monday: EURUSD loosing ground through Asia on with stops going through below 1.2600. We still favor the upside in early Europe as long as 1.2530 remains intact, but looking for a stop reversal below for a test of 1.2400. Our upside target for today is challenge of Friday's highs at 1.2670.
19 Jun 06
British Pound/US Dollar
GBPUSD (1.8445 @ 05:47 GMT)
Weekly update 18-06-2006: GBPUSD has made swift recovery after the downside correction from 1.9023 highs from May 2006 was rejected at 1.8338 38% retracement (from 1.7123-1.9023). Daily stochastics are turning higher and we look for a close above 1.8530 this week which would give scope for a test of 1.8900 in weeks to come. Key support for the upcoming week is now at 1.8340 and again at 1.8130.
Monday: GBPUSD loosing some of its gains from Friday on Asian dollar buying, but only look to follow this trend if 1.8340 breaks which would give scope for a deeper correction to a test of 1.8130. For the upside we remain a buyer on dips above 1.8340.
19 Jun 06
US Dollar/Japanese Yen
USDJPY (115.61 @ 05:46 GMT)
Weekly Update 18-06-2006: USDJPYâ€™s upside corrective rally fell short of breaking 115.50 wave resistance and we remain with a slight bearish view as long as 115.50 remains intact. A close above would suggest a test of 116.00. But our preferred scenario is the downside and we look for a break of 114.50 to accelerate the downside for a short term target of 113.00.
Monday: USDJPY higher in Asia on worries that North Korea may go ahead with a missile test. The pair took out 115.50 and a test of 116.00 looks likely unless 115.20 support is taken out in the upcoming European session.
19 Jun 06
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