EUR
Risk took its lead from equities for the latter part of the session yesterday , a swathe of weaker data across Europe and then a woeful ADP print piled the agony’s on the market and the final nail in the coffin was the Moody’s downgrade to CAA1 which took euro$ to the lows of 1.4307 .
The bounce back up feels like reserve manager flow and a short Asian market , at the moment we are meeting offers around the 1.4380 level from eastern European names , but the NYK stops start again above 1.4400 before the real money selling starts again around the retracement level at 1.4450.
Technicals
Resistance: 1.6038- ( July 2008 highs); 1.5142/45- (NOV/DEC multi high 2009 ); 1.4940-monthly high; 1.4455- 50 pct retracement level from 1.4940/1.3970; 1.4377- overnight highs
Support: 1.4307-overnight lows; 1.4350-55 day sma; 1.4276-7 day sma; 1.4256- 21 day sma; 1.4228-14 day sma; 1.4062-100 day sma; 1.3733- 200 day sma
GBP
Yesterday’s UK PMI manufacturing outcome was the lowest for 20 months, with the mortgage approvals measure falling to a four month low. This trend was replicated in other data around the globe causing stocks, yields and commodities to reverse the recent risk positive moves. We had bought gbpusd at 1.6410 (see Jun 1 Notes), and it (fortunately) rallied enough for the trailing stop loss to take us out of the trade for no loss (it felt like we had caught a falling knife without being injured).
For today, given that most economists have substantially lowered their forecasts for tomorrow’s NFP, and that today is a partial European holiday, we expect some gbpusd consolidation following yesterday’s sharp fall. Assuming that this morning’s PMI construction data is close to consensus we will trade 1.6300-1.6400, using a 30 pip stop loss on either side.
EURGBP technicals
Resistances; 0.88465, daily high (May 19); 0.88085, daily high (Jun 1); 0.8799, daily high (Jun 2)
Supports; 0.87735, daily low (Jun 2); 0.8745, daily low (Jun 1); 0.8675, daily low (May 31)
GBPUSD technical levels
Resistances; 1.6480, daily high (Jun 1); 1.6442, hourly high (Jun 1); 1.6354, daily high (Jun 2)
Supports; 1.6319, 55 dma & daily low (Jun 2); 1.6273, daily low (May 26); 1.6132, daily low (May 25)
JPY
A demand from Japanese investors lifted USDJPY up and caused a short squeeze, a daily high was printed at 81.33 before it retraced back to 81.00 at the London opening. Japan’s non-confidence vote was rejected and PM Kan survived, but the reaction was very limited.
For us, it looks like a typical risk aversion day with lower equities and higher bonds, lower oil and higher gold. Hence we retain a short bias for USDJPY on the back of the short risk trade, US10y yields has come off below 3%, which also keeps putting a pressure onto USDJPY. On the topside, the Asian high is the first resistance at 81.33 and 2 months downtrend is the next at 81.60. On the downside, 4 daily lows of 80.65/70 is the first support and a low on 13 May is the next at 80.34.
SELL USDJPY at 81.10 with SL at 81.60, target at 80.30
Key Level to watch: 86.00; 2 years downtrend line; 85.94; 6 months high ( 16,17 Sept); 85.53; fresh year’s high ( 6 Apr); 82.59; 200 DMA; 82.23; weekly high ( 19 May); 81.60; 2 months trendline – resistance; 80.66/70; 4 daily low ( 27,30,31 May and 1 June) – support; 80.34; daily low ( 13 May); 79.57; recent low ( 05 May); 78.90; pre-intervention level
79.75; old historical low in 1995; 76.25; fresh historical low ( 17 Mar)
AUD
Today’s Australian retail sales data was much stronger than expected, including an upward revision to last month’s figure, confirming what yesterday’s GDP data showed, that domestic demand remains robust. This makes trading audusd difficult as weak global data puts pressure on aud, but local strength keeps it underpinned. We will therefore look to trade a range, working 1.0580-1.0680, using a 30 pip stop loss on either side.
Technicals
Resistances; 1.0889, daily high (May 11); 1.0753/57, 2 daily highs (May 31, Jun 1); 1.0665, daily high (Jun 2)
Supports; 1.0587, daily low (Jun 2); 1.0567, hourly low (May 26); 1.0510, daily low (May 26)
NZD
Asia fell to a low of 0.8110 mainly on the back of audnzd demand after stronger than expected retail sales number in Aus. Negative asian stock market weighing on risk, think this trend may run into European markets and prefer to sell rallies to 0.8200.
CHF
Stronger chf retail sales and better PMI made the chf even more attractive yesterday, add on the weaker US numbers and usdchf traded to a new low of 0.8379. General Usd demand saw a rebound back to 0.8450 overnight but with the safe haven status firmly in place rallies will continue to be sold in usdchf and eurchf.
Nomura Holdings, Inc. group