Forex: Daily outlook

on May 23, 2013


Yesterday at 14:00 GMT, after Ben Bernanke talked about possible reducing of asset purchases in the next few meetings the dollar surged against most of its counterparts. Fed Chairman said the monetary stimulus was helping the U.S economy recover and the QE program would slow gradually if the labour market improved in a proper way.
However, the EUR/USD pair couldn’t touch the 1.3000 level. It was trading as high as 1.2998 before sharply sinking to a daily low of 1.2832, and closed 53 pips lower at 1.2852. The short term perspective is slightly bearish.

Are you looking for signals & alerts from pro-traders? Sign-up to Invezz Signals™ for FREE. Takes 2 mins.

Today it’s ECB President Draghi’s turn to speak during the European session in which we will receive a number of important EU PMI figures. Release started just before 7:00GMT.
Later, at 14:00 GMT data is expected on EU consumer confidence in May.
Data published yesterday showed UK retail spending was weak in April, falling -1.3%. After that, sterling finished at new lows for a second day running, closing down 108 pips to finish at 1.5042, which is the lowest close for the pair since March. The bearish bias was confirmed after BoE’s minutes pointed to a possible extension of the assets purchase programme up to £400 billion.

The long term perspective is also bearish, as future advances seem limited until the end of the week.
Before the start of the London session data on the UK Gross Domestic Product Q1, Index of Services and Total Business Investment will be released.
The session in Tokyo overnight was a busy one, with the USD/JPY pair first hitting new highs at 103.74 and then falling to 102.47 after the release of HSBC’s flash manufacturing PMI index update – the worst since last October. It is an early indicator of economic health in the Chinese manufacturing sector. The index came in at 49.6 vs. 50.5 expected and 50.4 in the previous month, disappointing traders. USD/JPY continued to fall to a new low of 101.47, before making a short upward move to 101.70. The pair is still trading above 102, slowly recovering.

At the same time when the pair was sinking, Nikkei slid from fresh 5.5-year highs above 15900 points to the 15500 level.
In the U.S, the day will be full of data releases.
At 10:00 GMT, the President of the Federal Reserve Bank of St. Louis, James Bullard, is expected to speak.
At 12:30 GMT traders are waiting for new initial and continuing jobless claims data.

At 13:00 GMT – Preliminary Markit Manufacturing PMI for May and Housing Price Index (MoM) for April.
At 14:00 GMT – The American Petroleum Institute Monthly Report and New Home Sales update (MoM) for last month. About an hour later the Energy Information Administration and the American Gas Association will unveil a weekly survey of changes in natural gas storage.
The Aussie is making a big plunge into bearishness close to the key support at 0.9600, trading at 0.9603, after U.S. auto giant Ford announced a jobs reduction plan in Australia.
The pair was also affected by earlier disappointing data from China’s manufacturing sector.
An update for Consumer Inflation Expectation was released by the Melbourne Institute at 1:00 am GMT today, showing 2.3 percent for this month. The April reading was 2.2%.
Looking at the USD/CAD, it is trading around 1.0386, with signs of bullish uptrend.
Yesterday, the Canadian dollar fell to its lowest level in more than two months against its U.S. counterpart amid speculation that growth in the world’s largest economy would spur the Federal Reserve to reduce stimulus. Crude oil, Canada’s biggest export, continued a four-day rally.
Doug Porter, chief economist at the Bank of Montreal, said the Canadian dollar is overvalued by 5% to 10% given the levels of commodity prices.
David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, said the Canadian economy is still struggling. Inflation numbers have suggested that there is no reason for the Bank of Canada to consider hiking rates.
The USD declined against the CHF yesterday after the chief of the Swiss national bank, Thomas Jordan, confirmed that a price limit of 1.2000 Swiss francs per euro would be defended amid low inflation and growth. He said that the SNB was ready, if necessary, to set the franc cap higher, as well as to apply negative rates, also to adapt the monetary policy in case of a change in Libor. The USD/CHF jumped from 0.9692 to 0.9757 yesterday within an hour following the release of the news.
In the Asian session today the USD rose 0.46% against the CHF and closed at 0.9387.
Currently the pair is trading at 0.9743 and the trading range for today should be between 0.9810 – 0.9740 with neutral trend.
Last week, the International Monetary Fund reported that the Swiss National Bank needed to maintain its policy of defending its exchange-rate floor as it looks to avoid fresh inflows into the nation and battles deflationary trends. According to IMF officials, introducing negative interest rates on banks’ excess deposits could help cool Switzerland’s real-estate market.


Want easy-to-follow crypto, forex & stock trading signals? Make trading simple by copying our team of pro-traders. Consistent results. Sign-up today at Invezz Signals.

Learn more