China lets Currency Strengthen into the G20 meeting

Last week’s currency trading review

The Dollar a global stock market rally on news that China will allow the Yuan to strengthen overtime was quickly discounted and stock markets spent the rest of the week falling heavily. The Safety of the USD saw it hold its own against most currencies but there was some notable exceptions (Pound and Yen). Housing data was extremely weak with New home sales slumping to 300k vs. 446k previously and Existing home Sales falling to 5.665m vs. 6.17mn previously. One Bright spot was the improvement in UoM Consumer Sentiment which jumped to 76 vs. 75.5 previously. The Fed also met during the week and held rates at 0.25% as widely expected. The Euro had a mixed week rallying in the beginning before falling sharply on Friday as stock market losses mounted and EUR/GBP broke lower. German IFO held up surprisingly well in June increasing to 101.8 vs. 101.5 previously. May EU Industrial Orders missed at 0.9% vs. 1.6% forecast.The EUR/USD fell -0.14% closing at 1.2369, after opening the week at 1.2386.

The Japanese Yen was the strongest major as Global stocks fell over 2% on the week and traders played the Yuan revaluation through its major Asian trading partner. May’s Trade Balance fell to 0.42T vs. 0.51T previously. CADJPY was the biggest mover down 3% on weak Canadian data.The USD/JPY fell -1.65% closing at 89.23, after opening at 90.70 previously. The GBP bucked the trend of other risk currencies gaining against all except the Yen as the UK budget satisfied investors that the UK Debt situation was manageable. Major Spending cuts and an increase in the VAT tax were the big announcements in the aggressive austerity budget. Also helping to underpin the Pound’s rally was the 7-1 decision to keep rates at 0.5% with one member voting for a rate hike.The GBP/USD gained +1.57% closing at 1.5058 after opening at 1.4821. The AUD gave back substantial China induced gains as AUD/JPY selling and risk aversion pushed the major lower. Support for the AUD on dips was seen from the rally in commodities with gold breaking to fresh year highs above $1260 an ounce. The AUD/USD gained +0.18% closing at 0.8735 after opening at 0.8719.

The forex trading week preview

In the States On Tuesday, June CB Consumer Confidence forecast at 62.9 vs. 63.3 previously. On Wednesday, June ADP Employment Change is forecast at 60k vs. 55k previously. On Thursday, June ISM Manufacturing is forecast at 59 vs. 59.7 previously. Weekly Jobless Claims are forecast at 455k vs. 457k previously. On Friday, June Unemployment Rate is forecast at 9.8% vs. 9.7% previously and NonFarm Payrolls are forecast at -105k vs. 431k previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Wednesday the German Unemployment Rate is forecast at 7.7% in June. Also released, June EU CPI forecast at 1.5% vs. 1.6% previously. On Thursday, ECB stark is expected to speak. On Friday the May EU Unemployment Rate is forecast at 10.1% vs. 10.1% previously. In the UK On Wednesday, Q1 GDP is forecast at 0.3% final reading. On Thursday, June Manufacturing PMI is forecast at 57.5 vs. 58 previously. On Friday, June PMI Construction is forecast at 58.3 vs. 58.5 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Friday, Q2 Tankan Survey released forecast at -3 vs. -14 previously. In Australia On Thursday, May Retail Sales are forecast at 0.3% vs. 0.6% previously m/m. May Building Approvals are forecast at 32.5% vs. 21.3% previously y/y. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.2280

Initial support at 1.2209 (June 23 low) followed by 1.2045 (June 11 low). Initial resistance is now located at 1.2487 (June 21 high) followed by 1.2672 (May 21 high)

Yen – 89.40

Initial support is located at 88.97 (May 20 low) followed by 87.95 (May 6 low). Initial resistance is now at90.59 (June 23 high) followed by 91.48 (June 21 high).

Pound – 1.5105

Initial support at 1.4803 (Jun 23 low) followed by 1.4646 (Jun 17 low). Initial resistance is now at 1.5122 (Jun 28 high) followed by 1.5219 (76.4% 0f 1.5524-1.4231).

Australian Dollar – 0.8710

Initial support at 0.8582 (June 16 low) followed by the 0.8506 (June 15 low). Initial resistance is now at 0. 8865 (May 17 high) followed by 0.9027 (May 17 high).

Gold – 1241

Initial support at 1224 (June 23 low) followed by 1215 (June 10 low). Initial resistance is now at 1265 (June 21 high) followed by 1300 (Round Number).

Oil – 78.30

Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 81.50 (Intraday Resistance).