Forex traders had a very interesting early June. The greenback closed its third consecutive weekly decline – and the progress on the pullback seems to carry the same level of momentum that the larger bear trend through the opening four months of the year. Friday’s performance was particularly painful for the dollar because its declines would set the majors further back from a recovery while the commodity-based pairs (USD/CAD, AUD/USD and NZD/USD) failed immediate breakout opportunities. The negative impact from the NFPs may have only been the first round effect of the data.
What does all this mean? The US is facing a rather weak recovery. This comes as a surprise to no one; but investors have tried to ignore this fact while they try to squeeze out capital gains. More for the dollar is that this disappointing release tempers the Fed’s hawkish policy ambitions – at least, what the market thinks could have been their drive. As many analysts have discussed before, the most fruitful prospect for a lasting-dollar recovery would be a swell in yields. Yet, one of the Fed’s primary mandates still slogging along, the potential withdrawal of stimulus and eventual rate hike looks much further down the road.
US Dollar risks remain to the downside across the board as it seems there are few factors to drive Greenback strength. Low yields continue to punish the USD against the highly interest-rate sensitive Japanese Yen, while corrections in the US Dow Jones and broader market ‘risk’ have not led to strength in the traditional safe haven US currency. A busy week of interest rate decisions from the Reserve Bank of Australia, Reserve Bank of New Zealand, Bank of England, and European Central Bank represent the interesting break-out trading opportunities in the coming week.
This Week’s Financial Main Events
Monday, June 6
US Economics
No major reports
Global Economics
Australian Securities Inflation
Euro-Zone PPI
Euro-Zone PPI
Canadian May PMI
Tuesday, June 7
US Economics
Consumer Credit
Global Economics
Reserve Bank of Australia Rate Decision
Swiss CPI
Swiss CPI
Euro-zone Retail Sales
Euro-zone Retail Sales
Euro-zone Factory Orders
Wednesday, June 8
US Economics
MBA Mortgage Index
Crude Inventories
Fed’s Beige Book
Global Economics
Japan Bankruptcies
German Trade Balance
Euro-Zone GDP
Euro-Zone GDP
Japan GDP Annualized
Thursday, June 9
US Economics
Initial Jobless Claims
Continuing Claims
Trade Balance
Wholesale Inventories
Global Economics
Australian Unemployment Change
Australian Employment Change
Japan Consumer Confidence
Bank of England Asset Purchase Target
Bank of England Rate Decision
Friday, June 10
US Economics
Export Prices ex- agriculture
Import Prices ex- oil
Treasury Budget Report
Global Economics
Great Britain GDP Estimate
Chinese Trade Balance USD
German CPI
German CPI
Canadian Net Employment Change
Canadian Unemployment Rate
Forex & Commodities Technical Analysis
EUR/USD
We were tempted to set the euro’s fundamental forecast to ‘Bullish’ for the coming week; but a critical fundamental concern kept me from doing so. This is an unusual outlook given our general bias for the health of the shared currency is very bearish over the span of weeks and months. Yet, the forecast for our purposes in this article is only for the coming week. On Thursday, President Trichet’s commentary will guide speculation as to when the next move will be. At the moment, there is a considerable discussion of a July hike; but current financial conditions don’t do much to support this timeframe. We advice our traders to be cautious when buying the EUR/USD.
Stop Loss: 1.4443
Take Profit: 1.4830
Gold
The month of May proved to be a tumultuous one for the gold prices. The first two weeks were marred by the Federal Reserve’s late-April pledge to allow the second round of quantitative easing to expire. This stoked fears of imminently rising borrowing costs and led investors to unwind positions financed cheaply through the program to buy a variety of assets, including gold, sending prices tumbling lower. By midweek, the prospect of a Greek default and the political wrangling around a second EU/IMF aid package, gold’s safe-haven credentials drove demand higher and prices recovered over three-quarters of their previous decline. Technically, gold’s inability to surpass the $1550/oz level over the past five trading sessions suggests we are at a strong resistance price. It would be wise to wait for a sudden spike in price, and then enter a short position with a relatively close take-profit.
Stop Loss: 1,550
Take Profit: 1,520
USD/CAD
The Canadian dollar struggled to hold its ground against its U.S. counterparts even as currency traders showed a bullish reaction to the Bank of Canada rate decision, but the sharp pullback from 0.9851 may gather pace as the economic docket is expected to reinforce an improved outlook for the region. A positive batch of fundamental developments should help the Loonie to regain its footing in the week ahead, and the near-term rally in the USD/CAD may come under pressure as growth in Canada outpaces the recovery in the world’s largest economy. We are predicting an end to the current uptrend, which should help the Loonie to recoup the losses from the previous month.
Stop Loss: 0.9852
Take Profit: 0.9669
Published by www.SolidityBrokers.com
