Market Brief
The good economic data failed to boost enthusiasm in New York yesterday, yet the fading risk sentiment due to geopolitical tensions in Iraq lifted the safe-haven demand in US dollars. The US sent troops back to Iraq, 275 armed forces for protection of diplomatic posts. Traders should be ready to face a carry unwind and get positioned accordingly.
Data-wise, the US empire manufacturing survey in June unexpectedly improved to 19.28 (vs. 15.00 exp. & 19.01 last). The US industrial production expanded by 0.6% in May (vs. 0.5% exp. & -0.6% last), the capacity utilization improved above expectations from 78.6% to 79.1% over the same month. The US 10-year government yields shortly advanced to 2.61%, while the DXY index rebounded from 80.400 overnight. The focus is on Fed verdict on June 18th. The consensus leans towards a deceleration in monthly QE tapering from 45bn to 35bn dollars. In Canada, the increase in existing home sales in May (from 2.8% to 5.9%) limited the USD/CAD upside attempt at the 21-dma (1.0883). The MACD (12, 26) stepped in the bearish zone, yet the rising USD demand should keep the downside safe above the key 1.0804 Fibonacci support (38.2% on 2009-2011 drop).
In China, the foreign direct investment turned unexpectedly negative in May (-6.7% in May, vs. 3.2% exp. & 3.4% last). The Yuan upside attempt has been limited sub-6.2000; USD/CNY returned to its 50-dma (6.2358). While technicals stay in the Yuan-supportive zone, decent option bids are placed at 6.2000/50 for today expiry.
JPY-crosses were slightly better bid in Tokyo. USD/JPY holds ground above the critical 200-dma support (101.60), resistance is eyed at the daily Ichimoku cloud cover (102.23/66). EUR/JPY trades with steady negative bias below the 200-dma (138.86), subject to broad based EUR bias.
EUR/USD continues testing 1.3580/1.3600 offers, while technicals are mixed. The 50-dma (1.3729) crossed below the 100-dma (1.3734) favoring technical shorts, while the MACD turns neutral. A daily close above 1.3552 should send the MACD in the positive territories.
In UK, the Cable consolidates strength right below 1.7000/11 area before the CPI release (due at 08:30 GMT). The inflation reading has surprised on the upside last month, a similar surprise should reinforce the upside attempt in GBP-complex. The critical resistance stands at 1.7043 (5-yr high). As suspected, the oversold conditions in EUR/GBP sent the pair towards 0.80000, yet offers (& option related expiries) keep the upside capped at 0.80000/0.80500 region. The RSI now stands at 22%, the 30-day lower BB at 0.79996. We believe that deeper correction is needed at the current levels, while keeping our mid-term call on the bearish side.
Today’s economic calendar consists of Swedish May Unemployment Rate, EU27 May New Car Registrations, Spanish and Euro-zone 1Q Labor Costs, Swiss May Producer & Import Prices m/m & y/y, Italian April Trade Balance, UK May CPI, PPI and RPI m/m & y/y, ZEW June Survey on German Current Situation and Expectations in June for Germany and Euro-zone, US May CPI m/m & y/y, US May Housing Starts and Building Permits m/m.
Currency Tech
EUR/USD
R 2: 1.3677
R 1: 1.3600
CURRENT: 1.3566
S 1: 1.3503
S 2: 1.3477
GBP/USD
R 2: 1.7043
R 1: 1.7011
CURRENT: 1.6980
S 1: 1.6940
S 2: 1.6882
USD/JPY
R 2: 102.66
R 1: 102.23
CURRENT: 101.93
S 1: 101.60
S 2: 100.76
USD/CHF
R 2: 0.9156
R 1: 0.9037
CURRENT: 0.8982
S 1: 0.8961
S 2: 0.8908