Monday June 26, 2006 - 10:41:46 GMT
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Mellon Bank Foreign Exchange - https://fx.mellon.com/
Forex: Mellon FX Daily - U.S. EditionKey Points
â€¢ EUR-USD breaks back above 1.2530 in early European trading, but upside looks limited ahead of FOMC.
â€¢ JPY remains focused on Fukui, who is struggling to muster popular support.
â€¢ US new home sales todayâ€™s data feature.
bounced back early in European trading (above the 1.2530 level that broke on Friday) and this move back into the old â€˜rangeâ€™ should trigger some further improvement today. However, upside is likely to remain limited ahead of Thursdayâ€™s FOMC announcement and if anything there could ultimately be a fresh push lower before then.
IMM positioning data released on Friday showed that as of last Tuesday net longs on EUR-USD for spec accounts narrowed to 52,940 from 61,846 the previous week. This is still fairly sizeable and was probably cut down a little further after last weekâ€™s price action. However, this level of positioning still suggests some liquidation risk in the next few days.
On the FOMC
meeting itself, there is a full discussion in the
Week Ahead Preview,
although overall they are likely to offer a presentation that does little to change market sentiment about the possibility of even more rate rises. The basic message is likely to be that they will continue to watch the data to evaluate policy.
has remained fairly soft through the night, but USDJPY has not ventured above the next resistance level at 116.70. The fate of BoJ governor Fukui continues to occupy market attention and while government ministers have been coming out in support of him over the weekend, he has yet to convince the public. The latest opinion poll showed over 70% of respondents favouring his immediate resignation and this needs to improve quickly if he is to survive.
balance of payments numbers for April failed to reveal anything too dramatic. Within portfolio investment, net outflows in equity (EUR 14 billion) were partly counterbalanced by net inflows in debt instruments (EUR 8 billion). The net outflows in equity were due to both net sales of euro area securities by non-residents (EUR 10 billion) and net purchases of foreign securities by euro area residents (EUR 4 billion). However, it is the May data that will be more interesting given recent market developments, to see how general liquidation pressures have relatively affected Eurozone investor holdings of foreign equities as opposed to foreign investor holdings of Eurozone equities.
new home sales data is out today and while this has shown much volatility in recent months (sharply lower in Jan and Feb, moderate rebound in Mar and Apr), the trend clearly remains down, as the chart shows. It will take another very strong rise today to counter that conclusion and this seems unlikely.
Data/event EDT Consensus*
DE CPI (Jun, prel) m/m today +0.1%
US New home sales (May) 10.00 1150k
Latest data Actual Consensus*
JP CSPI (May) y/y -0.2% -0.1%
FR Own company ind outlook (Jun) +9 +12 last
FR Business climate indicator (Jun) 107 108
SE Trade balance (May) SEK15.4bn SEK13.8bn
EU Current account (Apr) â‚¬0.0bn -â‚¬3.5bn
* Consensus unless stated
ï›™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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