Daily Report: Euro Stabilizes from Yesterday's Sell off
The forex markets stabilized a bit from yesterday's volatile movements. One the one hand, the sell off in Euro is still believed to be a "buy on rumors, sell on news" profit taking exercise. Even though the Eurozone economy has started showing signs of slowdown, the continuously high inflationary pressure is still believed to keep ECB lean towards a tightening bias even though Trichet has toned down the hawkishness and said the ECB has "no bias" now.
On the other hand, the US economic data released this week were still generally disappointing, with ISM manufacturing just merely above 50, ISM Services back below 50. More importantly, all employment data were negative, with NFP contracting for the sixth consecutive months, employment component in both ISM indices deep in contraction, and jobless claims above 400k. Markets are continuing to pare bets on a near term hike from Fed. Interest rates futures are showing around 81 % change of a 25bps hike by year end, down from near to 90% a week ago. The implied chance will continue to go down if the upcoming growth data continue to show weakness in the economy. Also, take into considering the persistent strength oil prices which breached $145 a barrel already, risks for the dollar is still on the downside.
With US market on holiday, today's trading will be rather light. Released earlier, Japanese leading indicators dropped -0.2% in May. In the European session, Germany factory order will be features and is expected to rebound by rising 0.7% mom in May, with yoy rate at 2.0%. IN US session, Ivey PMI in Canada is expected to drop slightly to 62 in June.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 210.85; (P) 211.37; (R1) 212.18; More
No change in GBP/JPY's outlook as choppy sideway trading continues and the cross is still bounded in tight range between 209.39 and 212.32. The corrective nature of price actions from 209.39 argues that it's merely consolidation to the fall from 213.91 only. Also, as mentioned before, failure to sustain above 213.48 key medium term resistance, and bearish divergence conditions in 4 hours MACD and RSI argues that at least a short term top is possibly in place. Below 209.39 will indicate that such decline from 213.91 has resumed for 203.96 support first. On the upside, above 212. 32 will encourage a retest of 231.91 high. Nevertheless, firm break above 213.91 is needed to revive short term bullishness. Otherwise, risk remains mildly on the downside.
In the bigger picture, a medium term bottom is in place at 192.60. At this moment, there is no confirmation of completion of the rebound from there yet. Though, break of the mentioned short term trend line support will be the first signal that rally from 192. 60 has finished. Further break of 199.78 support confirm such case, and focus will be back to 192.60 low. On the upside, above 213.91 will confirm the such rebound is still in progress towards 221.25 medium term support turned resistance.
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Economic Indicators Update
| GMT |
Ccy |
Events |
Actual |
Consensus |
Previous |
Revised |
| 5:00 |
JPY |
Japan Leading indicators May |
-0.20% |
0.20% |
2.00% |
|
| 10:00 |
EUR |
Germany Factory orders M/M May |
|
0.80% |
-1.80% |
|
| 10:00 |
EUR |
Germany Factory orders Y/Y May |
|
2.00% |
15.00% |
|
| 14:00 |
CAD |
Canada Ivey PMI Jun |
|
62.3 |
62.5 |
|
|
|
U.S. Market holiday |
|
|
|
|
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