Market review for 28.05 – 1.06, 2012
Euro: The Euro currency opened this week with the gap up against all its competitors on news which came from Greece. The pre-election positions of the parties that support the European Union conditions had shown a good improvement as it was recorded by the results of opinion polls conducted in Greece. This positive news weakened the concerns about the situation with possible exit of Greece from the euro zone. The EUR / USD pair rose to $ 1.2622 during the Asian session. However the concerns still remain due to the fact that the yield of the Italian and Spanish debt securities gone higher than the critical mark of 6.0%, while the spread on 10- year bonds of Spain and Germany surpassed the record high mark of 500 b.p. Also, the Spanish Bank “Bankia”, which is the largest mortgage lender in the country, warned the government that it will need an additional 19 billion Euros aid to fight the crisis. As it was posted before, the international agency Standard & Poor’s downgraded the credit rating of “Bankia”, from BBB -to BB +. On early Tuesday’s European session, the previous downtrend had changed its direction for a little while amid the information that the four Greek banks received a total of 18 billion Euros as the second program of assistance to Greece from the EU and the IMF. The funds were received in the form of bonds of the European Financial Stability Fund. However, the currency could not go higher due to the strong selling pressure which was accelerated after the agency Egan-Jones lowered the credit rating of Spain from BB- to B. The EUR / USD pair continued to suffer losses, reaching the area of $ 1.2407, despite the statements of the representatives of European Commission who said that “it is possible to consider the possibility of direct recapitalization of banks by the European Stabilization Mechanism (ESM)…”The negative news of early retirement of the Governor of the Bank of Spain, Mr. Miguel Ordones gave to investors more concerns about stability of Spanish banking sector. The published on Thursday macroeconomic data from Europe did not provide any significant impact on the Euro currency trading dynamics. The reports came out with mixed results except the one on the labor market in Germany which showed a decline in unemployment in this country in April to 6.7% against the forecasted value of 6.8%. On Friday,the EUR / USD rocketed sharply by 145 basis points, reaching a resistance of 1.2455 amid the negative statistics on U.S. economy, but quickly began to lose its positions.
U.S. Dollar: The rumors that the Xinhua government intended to launch a new program for stimulating economic growth have been officially denied by the news agency of the People’s Republic of China (PRC). Against this background the market participants’ sentiment shifted towards the safe heaven assets, therefore the demand for the U.S. dollar has been increased. The currency strengthened against major traded currencies. The dollar rose against its competitors also on the background of worsening of the situation with debt crisis. On Friday, a negative surprise on the number of Non-farm payrolls in May as well as the rising the Unemployment Rate by 0.1% provoked a fast correction in the dollar. As the result, the index of the dollar fell within an hour to 82.769 level which is 1.1% change, but quickly moved back with the new active buyers who waited this buy opportunity.
British Pound: The Pound traded lower against all its competitors this week showing again the correlation with the Euro currency. The report provided by the Confederation of British Industry which showed that the Reported Sales grew in May to 21% did not support the Pound trading dynamics. The Confederation of British Industry also stated that Retail Sales were still below average this year and would remain under pressure due to the weakness in other sectors of the UK economy. The GBP / USD pair continued trading down and trend was accelerated when the couple dropped to $1.5554 area on heavy trading volume. The GBP / USD pair tried to recover by rising up to $ 1.5530 level, however after the new sellers came in the couple fell sharply and updated new lows by breaking many support levels on its way down to the $1.5200 area which was reached on Friday.
Japanese Yen: The yen rose against of the most traded currencies against the backdrop of increased demand for safe-haven assets due to the growing negative sentiment in the market. After the European Commission confirmed that there are many struggles with the debt crisis in the euro zone this asset strengthened against all traded currencies. Indeed, there were more and more investors who began to buy the Japanese currency against the flow of negative news from the euro zone. All in all, the Japanese yen continued to be main defensive asset in the market as it was usually in the bad time for World economy.
Australian dollar: The Australian dollar dropped after publication of the report on Retail Sales which unexpectedly fell in the last month in the Australia showing -0.2% change with the forecasted prediction of growth to the 0.2%.
Weekly technical analysis for 4 – 8.06
The pair may decline to 1.21390. This is a strong level which supports Fibonacci 50%.
Resistance: 1.25667, 1.28800, 1.33427
Support: 1.20280, 1.17063, 1.14010
The pair has declined to Fibonacci 23% 1.53270. Lower is a strong level of trend line at 1.51697.
Resistance: 1.59962, 1.64274, 1.68504
Support: 1.52523, 1.48532, 1.43344
The pair has reached resistance 0.96597.
Resistance: 0.96597, 0.99031, 1.01369
Support: 0.93264, 0.91074, 0.88022
The pair has broken 80.244 and aiming to 76.535.
Resistance: 80.244, 83.330, 86.836
Support: 76.535, 73.126, 69.117
The pair may find support at Moving Average (200) 0.94417.
Resistance: 0.97889, 1.00592, 1.01873
Support: 0.94417, 0.89581, 0.85561