Forex Signal & News

Market settling down after further Yen gains
Even if industrial numbers haven’t been quite so positive business confidence has remained steady in France with June registering a move higher to 110.0. This is higher than the forecast of 109.0 and May’s 108.0 reading. The production outlook saw a hefty rise of 9 points to 24 with past production just one point higher at 16. Foreign orders were down from 5 to 3. The level of confidence is towards its highs in this cycle and does reflect a still strong economy, even if it is off its highs. One point to look out for is any pullback following the climax of the presidential elections.

Indeed the recent softening in European data may well be filtering through the ECB board members minds with Wellink this morning possibly highlighting a mild change in perceptions. He retains the belief that the tightening cycle is still in force but said that future rate increases will be based on new economic data. He noted higher oil prices risk providing a drag on growth and that there is now also downside risk to expansion and thus it would appear that the out-and-out bullish views are beginning to recede.

The following economic releases are due today:

May
U.S. Durable Goods Orders - 1.0%
U.S. Durable Goods Orders (excl transport) +0.2%

June
Swiss KOF Swiss Leading Indicator 2.06
U.K. CBI Distributive Trade Survey: Expected 25.0
U.K. CBI Distributive Trade Survey: Realized 35.0
U.S. MBA Mortgage Applications (22nd)

The Yen continued to make gains in the Asian session falling below the 122.44-53 support area and should see losses extend to 122.05 and 121.35-48. This is pushing the 164.20 support in Euro-Yen as carry trades are being exited and there is a sense that the major high I have been looking for has been seen at 124.13. Indeed, this would tend to suggest that a major correction is now under way which will be confirmed by a break below 120.76 although there is probably likely to be a correction before that occurs.

Indeed, the strength of the Yen is spilling over into the European currencies which are also on the decline as cross trades get unwound. However, unlike the Yen these declines should be limited with the medium term direction still Dollar bearish.

With today’s releases not really looking as if they will wield any strong influence it could well be carry trades that dominate the day and could well be quite volatile.

Note important support and resistance areas:

USDJPY EURUSD USDCHF GBPUSD
Res: 123.50-90 1.3521-53 1.2364-88 2.0015-40
Res: 122.80-90 1.3454-78 1.2293-11 1.9960-65

Spt: 122.05-40 1.3405-14 1.2242-51 1.9910-23
Spt: 121.48-80 1.3345-70 1.2171-05 1.9818-52

See Also