FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The dollar weakened sharply across the board during the Asia session. There was no clear driver behind the move, but the market does appear to be forming the opinion that Greece will eventually receive its next quarterly instalment of rescue funding from the EU/IMF, even if no decision on this is imminent. EURCHF and USDCHF hit new record lows. EURUSD traded 1.4111-1.4279, USDJPY 80.89-81.42. US Q1 GDP was unchanged despite expectations for an upward revision. The unchanged print, coupled with an unexpected rise in jobless claims, added to the recent soft patch in data and introduced further uncertainty on the timing of Fed policy tightening. US equities closed marginally positive and Treasury yields were lower across the curve. Upcoming data includes personal income and consumption for April and the final University of Michigan reading for May. The G8 concludes its two-day summit but press reports so far have indicated the communiqu? will not offer any new insights on the Eurozone crisis or currencies.
EUR
The euro continues to trade in a wide range as headlines drive price action. Greece announced further measures to privatize certain assets but the focus was on Eurogroup Chairman Juncker’s comments on the potential withholding of the next IMF tranche to Greece. The possibility had been raised earlier and Juncker clarified that the tranche could still be delivered if the EU and IMF are satisfied with the new Greek measures.
ECB President Trichet repeated the line that the ECB’s primary mandate is price stability. Trichet also again stressed the ECB’s view that monetary policy is decoupled from liquidity provision – in other words, that rates can be hiked even if the periphery and its banks remain under pressure.
GBP
In an article in today’s Financial Times, Bank of England MPC Member Posen reiterated his now familiar call for further quantitative easing. He also said the majority on the MPC was “right to have held its nerve against calls for rate hikes”.
BoE Deputy Governor Tucker said policymakers remain worried on inflation but that global imbalances are more worrying. He said his own policy decisions have been “finely balanced” since 2010. Tucker has voted for an unchanged policy rate at previous meetings..
CHF
In it’s latest report on the Swiss economy, the IMF recommended that “monetary accommodation should be withdrawn in the near-term”, and that FX intervention should only be conducted to counteract excessive FX volatility. EURCHF and USDCHF made new record lows during the Asia session, at 1.2168 and 0.8534 respectively.
TECHNICAL OUTLOOK
EURCHF and USDCHF define new lows.
EURUSD BEARISH As long as resistance at 1.4346 holds, expect the pair to lose. Initial support is at 1.4068 ahead of 1.3970.
USDJPY BEARISH Decline through 80.94 has exposed 80.64. Resistance at 82.23 caps the upside.
GBPUSD NEUTRAL Model has turned neutral with 1.6517 and 1.6268 marking the near term directional triggers.
USDCHF BEARISH The pair cleared 0.8554, key support, to expose 0.8500. Resistance lies at 0.8663.
AUDUSD BEARISH Recovery through 1.0657 has exposed 1.0794. Initial support is at 1.0510 ahead of 1.0441.
USDCAD BULLISH Stalled at 0.9816 ahead of 0.9849. Near-term support lies at 0.9744.
EURCHF BEARISH The cross continues to fall; break below the trend channel lower boundary has left little support till 1.2000. Resistance is at 1.2360.
EURGBP BEARISH Break below 0.8590 would expose 0.8534. Initial resistance is at 0.8717.
EURJPY BEARISH Move below 113.88 would lead to 113.42/00 area. Resistance lies at 116.38.
SCHEDULE
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