Overnight Gains By Greenback Undone In NY Trading

 

 

 

EUR/USD - Euro Falls to 1.38 Overnight, Finds Support

The Euro-Dollar pair fell below 1.39 overnight, reaching the 1.38 level, which was support from May 28th. The Dollar remained supported overnight following its positive momentum generated by its better-than-expected May non-farm payroll report along with weaker equity markets in Asia and Europe. The jobs data pushed the theme that the Fed may move at a more rapid pace to tighter monetary policy which favor's the Dollar. The Euro meanwhile was also pressured as Standard & Poor's cut Ireland's sovereign rating to AA from AA+. After hitting a low around 7 am, the pair saw a rally in the Euro's favor despite weak stocks in the US for most of the US session. The price action from the last tw weeks also resembles a head and shoulders pattern.

GBP/USD - Pound Rallies After Hitting 2-Week Low

The Pound which has been pressured recently due to political turmoil in the Brown government slid further overnight as well. The pair hit a two-week low at 1.58 as UK's ruling Labor Party fared very poorly in European Parliament elections, following a very poor showing in local elections last week. The Pound, did recover after it found support, rallying 300 pips to set an intra-day high near 1.61 in NY trading.

EUR/GBP - Euro Gives bak Last Week's Gains vs Pound

The Euro-Pound saw another sharp move in today's trading following Friday's late slide. After climbing near the 0.88 level prior to the European open the Pound gained 130 pips, erasing most of the gains seen by the Euro last week. The decrease in the pair has more to do with the downgrade of Ireland's rating which exposes some of the problems the Euro-zone is currently going through.

GER Factory Orders Flat in April, Plunge in Annual Basis 

In data from the Euro-zone, German factory orders were flat on the month in April, though on the year orders are down 37.1%, worse than expectations. Domestic orders were up 0.6%, but export sales were down 0.5%. Therefore the figure is a bit of a mixed bag, but one that can point to improvement in the medium-term.

USD/JPY - Despite Weaker US Stocks, Dollar Trades in Narrow Range vs Yen

The Dollar-Yen meanwhile, traded in a very small range after Friday's sharp increase in the wake of the US jobs report. Today the main US indexes were off about 1% prior to the last hour of trading, as rising Treasury rates are increasing interest rates, which will have a negative impact on the recovery. First it means higher mortgage rates, complicating Bernanke's plans to lift the housing market out of its slump. Secondly, investing in bonds becomes more attractive, at the expense of equities. Still, the greenback is holding its ground against the Yen.

AUD/JPY - Aussie Slides vs Yen as Eruropean Stocks Weak

The Yen did gain against the Aussie reflecting weakness in global equities. The Aussie-Yen pair slid about 150 pips during the European session, setting a low near the 77 level, as the pair came up against an upward sloping line of support. From there the pair traded sideways in a tight range.

JPN Current Account Narrows in April 

The Japanese current account narrowed for a third straight month in April, as exports in Japan remain very weak. The surplus shrank 54.5% to 630.5 billion yen or $6.4 billion from a year earlier. Though the pace of decline in the export sector is easing, the fact that they are still down is eating into Japan's trade and current account figures.

CAN Housing Starts Improve in May 

Turning to Canada, housing starts increased to a seasonally adjusted annual rate of 128K in May, matching expectations. It was an improvement from April's 117K, and the increase was broad based according to the Canada Mortgage and Housing Corporation, which put out the report. The report also stated that starts are expected to improve throughout 2009.

USD/CAD - Canadian Dollar Regains Earlier Losses vs Greenback


The US Dollar-Canadian Dollar advanced to 1.1290 overnight, but fell back down to pare all of the greenback's gains. That matched a pattern of greenback weakness during NY trading. A late rally in US stocks helped the main US indexes to turn positive, a factor that had a strong boost on higher yielders towards the end of today's trading session as demonstrated in this pair.

Upcoming Releases

Tonight, the UK will post data on retail sales and housing prices, Australia posts its business confidence, and Japan will release its leading index. Overnight, Germany will unveil data on trade and industrial production.
The fundamental docket is light tomorrow, with the main release being wholesale inventories. Treasury Secretary Tim Geithner will also be testifying about his department's budget before the Senate Appropriations Committee.

Hans Nilsson
Capital Market Services, L.L.C.
www.cmsfx.com