Market Brief
The US yields and USD are hit by dovish FOMC and cautious Yellen. The Fed kept the interest rates steady at 0.25%, the monthly bond purchases were reduced by another 10 billion dollars. Although the economic activity rebounded over the past months, the Fed fund rate is to remain below normal said the FOMC, even after the end of tapering. The Chairwoman Yellen said that the Fed is not behind the inflation curve. The US 10-year government yields fell below 2.5750% first time in almost two weeks.
EUR/USD cleared resistance at 1.3600 as Europe walked in. The short-term technicals turn positive; the MACD steps in the bullish zone. The 21-dma will be important to confirm the positive bias through the end of the week. GBP/USD advanced to fresh highs, ready to test the critical 1.7043 (5-year high). The EUR/GBP cross was better bid easing tensions on the oversold signals: the RSI stands at 29%, 30-day lower BB at 0.79832. Large option related offers trail below 0.80000, barriers seen at 0.80750/0.81000 pre-weekend.
Lower US yields and broadly offered USD sent USD/JPY back below 102.00. The key support stands at the 200-dma (101.62), offers should keep the upside challenging at the daily Ichimoku cloud 102.00/102.67 region. EUR/JPY tests the 200-dma (138.90) on the upside. We believe that post-Fed EUR rally should see little follow-up given the pressures on the ECB. The IMF urged the ECB to increase efforts on deflation. The ECB should consider bond purchasing stated the IMF.
In New Zealand, the GDP grew 1.0% q/q in Q1 (vs. 1.1% exp.) pulling the y/y growth to 3.8% (vs. 3.7% exp. & 3.3% last revised). NZD/USD rallied to 0.8736. A close below this level should confirm the formation of a tweezer top and signal minor bearish reversal. The key resistance stands at 0.8780 (May 6th high).
The Fed’s dovish stance helped AUD/USD paring losses post-RBA minutes. AUD/USD rallied to 0.9423 (at the time of writing). The bias remains positive with next supply zone eyed at 0.9461/0.9499 (April high / Fibonacci 76.4% on Oct’13 – Jan’14 drop). AUD/NZD tests the 100-dma (1.0794) on the upside, strongly bearish techs are to keep the rallies limited.
In Switzerland, the SECO revised down its growth forecast from 2.2% to 2.0% in 2014, from 2.7% to 2.6% in 2015. The forecasts on the consumer prices remained unchanged from March readings: 0.1% in 2014 and 0.4% in 2015. The SNB gives verdict today. The 3-month libor target is expected to remain 0.00-0.25%, the EUR/CHF floor to be kept steady at 1.2000.
The economic calendar consists of Norges bank rate decision, UK May Retail Sales m/m & y/y, Italian April Current Account Balance, UK June CBI Trends Total Orders & Selling Prices, US June 14th Initial Jobless Claims & June 7th Continuing Claims, Philadelphia Fed Business Outlook for June and US May Leading Index.
Currency Tech
EUR/USD
R 2: 1.3735
R 1: 1.3677
CURRENT: 1.3625
S 1: 1.3600
S 2: 1.3503
GBP/USD
R 2: 1.7332
R 1: 1.7043
CURRENT: 1.7011
S 1: 1.6923
S 2: 1.6860
USD/JPY
R 2: 102.80
R 1: 102.35
CURRENT: 101.77
S 1: 101.62
S 2: 100.76
USD/CHF
R 2: 0.9037
R 1: 0.9013
CURRENT: 0.8940
S 1: 0.8908
S 2: 0.8882