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Forex Market Update
Published: Jun. 30 2006, 05:53 GMT
FOMC Raises Rates 25bp with dovish comments causing broad based USD Weakness. Japan shows strong data.
With the FED out of the way and future hikes in question the USD goes weak providing the market with direction.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€˘ Canada GDP lower then expected at 0.1% vs. 0.2% expected.
â€˘ US GDP Annualized 5.6% in lines with expectations.
â€˘ US FOMC Rate Decision Expected exp. 5.25%, and removes forward bias.
â€˘ NZ Building Permits (May) MoM 12.7% vs. prior -6.0% - very strong figure for NZ economy.
â€˘ JN Jobless Rate (May) 4.0 % vs. 4.1% exp. â€“ continued strong employment data.
â€˘ JN Overall House Hold Spending (May) YoY -1.8% vs. exp. -2.2%.
â€˘ JN Toyko CPI Ex Fresh Food (Jun) YoY 0.3% vs 0.4%.
â€˘ JN National CPI (May) YoY 0.6% vs. exp. 0.6%.
â€˘ JN National CPI Ex Fresh Food (May) YoY 0.3% vs. exp. 0.4% - Overall Slight uptick in inflation and core as expected.
â€˘ Japan Housing Starts (May) YoY 6.7% vs. exp. 5.6% - Better then expected.
â€˘ JN Construction Orders (May) YoY-.2 vs. exp. 3.5% - concern regarding future Japanese interest rates.
â€˘ AU private Sector Credit (May) MoM% 1.1% vs. exp. 1.1%.
THEMES TO WATCH â€“ UPCOMING SESSION
Strong data from Japan continues to support a strong Tankan on Monday and therefore pressure on the BoJ to abandon it long standing ZIRP. Overall the CPI shows a slight up tick and core remains stable, while employment and construction remain strong. The one downside to todayâ€™s reads was the Household spending which printed lower then expected. The Tankan report should add some clarity to where the BoJs mind is and therefore point the markets in the right direction. We see a stronger JPY in the near time as traders expect a change in monetary policy in the near future and long standing â€ścarry tradesâ€ť unwind.
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 (1.2728 @ 05:53 GMT)
25-06-2006 Weekly Update: EURUSD broke the sideways consolidation zone last week with the break of 1.2537 38% retracement (from 1.1825-1.2979) supported by weekly stochastic pointing lower. But the pair remains in the bull wave from February with support now at 1.2415 and again at 1.2400 50% retracement which we favor to remain intact in the upcoming trading week. For the renewed upside acceleration a break of 1.2695 would give scope for a test of 1.2980 the inverse head and shoulders target.
Friday: We saw EURUD taking out key resistance levels after the FOMC at 1.2620 and again at 1.2695. The pair is now a buy on any dip and we expect a retest of 1.2979 in the upcoming weeks.
30 Jun 06
British Pound/US Dollar
GBPUSD (1.8361 @ 05:53 GMT)
25-06-2006 Weekly Update: GBPUSD resumed the downtrend this week with the break of 1.8340 38% (from 1.7229-1.9023), but remained well bid below 1.8126 50% from the current bull wave from February. For now the longer upside trend remains intact above 1.7915, but need to see 1.8530 resistance broken to confirm a continuation of the bull wave which would target the old high from May at 1.9023.
Friday: Despite the break of 1.8100 the pair came back very strong on USD weakness. Look to buy the pair on dips for a test of 1.8460 and further out a test of the high from May at 1.9023.
30 Jun 06
US Dollar/Japanese Yen
USDJPY (114.64 @ 05:53 GMT)
25-06-2006 Weekly Update: USDJPY took out major resistance last week at 115.75 supported by daily stochastic pointing higher. The pair still remains in a longer term bear channel from 1998 which capped the upside in 2005 presently at 119.80 which technically looks to cap any further medium term corrective rally. Key resistance this week is the G7 gap from April at 116.50-70 a close below this week would challenge 119.00 short term. For the downside key support is now at 114.35 with a break here giving scope for the longer term bear trend to resume.
Friday: USDJPY was the big mover as the dovish FOMC and the strong Japanese data should send USDJPY significant lower in the weeks to come. Sell the rallies for a test of 114.35 and look add to shorts below this level for a test of 113.20.
30 Jun 06
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