Forex Analysis: EUR/USD Wavers after 1.3000 Breakdown

July 03, 2013 – EUR/USD (daily chart) has tentatively stalled and fluctuated after having just made a significant breakdown below the major prior support level at 1.3000. This breakdown has been the culmination of two weeks of substantial bearishness that brought price down from its intermediate highs just above 1.3400 down to today’s low well below 1.3000. Having just broken down below this major support barrier, the currency pair has made a strong bearish stance. If price is able to stay below 1.3000, further downside should target the 1.2800 support objective in the short-term. A further breakdown below 1.2800 would confirm the strong bearish trend bias for the pair, and could prompt a move towards downside targets around 1.2650 and then 1.2300.

James Chen, CMT
Chief Technical Strategist
City Index Group

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Asian stocks mixed as traders await ECB; Nikkei down 0.46%

Asian stocks traded mixed Thursday in cautious trade, ahead of a holiday in the U.S., as traders eyed the European Central Bank meeting later Thursday. 

In Asian trading Thursday, Japan’s Nikkei 225 fell 0.46% while the Topix was off 0.3% on below average volume. USD/JPY traded slightly lower as traders turned to the yen as a safe-haven play amid ongoing unrest in Egypt. 

Hong Kong’s Hang Seng climbed 1.5% while the Shanghai Composite fell 0.9%. Energy shares in Hong Kong got a lift after oil continued to rally on the Egypt headlines. Cnooc, China’s third-largest oil company, was among the sector’s standouts. 

On Wednesday, Citigroup said emerging markets equities are as cheap as they have been in a year and those attractive valuations could lure buyers to the downtrodden asset class. 

Australia's S&P/ASX 200 added 1% as energy and mining shares contributed to the upside. AUD/USD bounced back from three-year lows seen Wednesday. New Zealand’s NZSE 50 inched up 0.15%. 

The European Central Bank meets later Thursday and while ECB President Mario Draghi was expected to reiterate that an exit from loose monetary policy remains distant, traders will also be listening for what Draghi has to say about the situation in Portugal. 

Yields on Portuguese sovereign debt spiked this week after two of the nation’s financial ministers resigned. Yields on Portuguese 10-years hit 8% for the first time since November. Most economists expect the ECB to keep its benchmark interest rate at 0.5%. 

South Korea’s Kopsi added 0.16%. Earlier this week, Goldman Sachs issued an overweight view on South Korean stocks. Singapore’s Straits Times Index advanced 0.6%. 

S&P 500 futures rose 0.17%. U.S. markets are closed Thursday in observance of the Independence Day holiday. 

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Forex Trading Signal for 4th July 2013

                                                                                


Japan (Tokyo)                               United Kingdon (London)                        USA (New York)

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Yesterday Sell signal for Eur/Usd (E/T: 1.30025) must conclude its movement before we jump in to BUY on today signals

EUR/USD

 Up Trend :

 (1) BUY

E/P: 1.29911

T/P: 1.30300

S/L: 1.29600

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GBP/USD

Up Trend:

(1) Buy

E/P: 1.52416

T/P: 1.52800

S/L: 1.52000

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USD/JPY

Down Trend:

(1) SELL

E/P: 99.996

T/P: 99.600

S/L: 100.300

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USD/CHF

Down Trend:

(1) SELL

E/P: 0.94734

T/P: 0.94300

S/L: 0.95100

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Forex - EUR/USD slightly lower ahead of ECB meeting

The euro traded modestly lower against the U.S. dollar during Thursday’s Asian session ahead of the European Central Bank meeting later Thursday. 

In Asian trading Thursday, EUR/USD fell 0.12% to 1.2996. The pair was likely to find support at 1.2900 and resistance at 1.3056, the high of June 27. 

During Wednesday’s Asian session, EUR/USD hit 1.2961 during late Asian trade, the pair’s lowest since June 3; the pair subsequently consolidated at 1.2974, dipping 0.03%. 

On Wed, official data showed that euro zone retail sales rose 1% in May, outstripping expectations for a 0.2% gain.

In addition, revised data showed that the euro zone services PMI ticked up to 48.3 in June from a final reading of 47.2 in May. 

The European Central Bank meets later Thursday and while ECB President Mario Draghi was expected to reiterate that an exit from loose monetary policy remains distant, traders will also be listening for what Draghi has to say about the situation in Portugal. 

Yields on Portuguese sovereign debt spiked this week after two of the nation’s financial ministers resigned. Yields on Portuguese 10-years hit 8% for the first time since November. Most economists expect the ECB to keep its benchmark interest rate at 0.5%. 

Solid U.S. economic news also weighed on the common currency. In U.S. economic news out Wednesday, weekly jobless claims fell 5,000 to a seasonally adjusted 343,000 last week. The less volatile four-week moving average dropped by 750 to 345,500, according to the U.S. Labor Department. 

Payroll provider ADP said private employers added 188,000 new jobs last month. Heavy gains were seen in construction and small-business. The Labor Department delivers the June jobs report Friday before the open of U.S. markets. 

The Institute for Supply Management said its services index fell to 52.2 last month from 53.7 in May. Economists expected a June reading of 54. 

Elsewhere, EUR/JPY fell 0.15% to 1.2980 while EUR/AUD inched down 0.01% to 1.4314.

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Gold holds gains after flurry of U.S. jobs data

Gold futures were higher on Wednesday, holding on to gains following the release of a flurry of U.S. employment data.

On the Comex division of the New York Mercantile Exchange, gold futures for August delivery traded at USD1,249.45 a troy ounce during U.S. morning hours, up 0.5% on the day.

Comex gold rose by as much as 1.1% earlier in the day to hit a session high of USD1,258.25 a troy ounce.

Gold futures were likely to find support at USD1,180.35 a troy ounce, Friday’s low and a 34-month low and near-term resistance at USD1,276.05, the high from June 26.

Payroll processor ADP said the U.S. private sector added 188,000 jobs in June, more than expectations for an increase of 160,000.

Separately, the U.S. Department of Labor said of people who filed for unemployment assistance last week fell by 5,000 to a seasonally adjusted 343,000, compared to expectations for a drop of 3,000 to 345,000.

Investors were looking ahead to Friday’s U.S. nonfarm payrolls data, for further clues on when the Federal Reserve may decide to unwind its USD85 billion-a-month stimulus program.

Any improvement in the U.S. economy was likely to reinforce the view that the Federal Reserve will begin to taper its bond purchase program in the coming months.

Moves in the gold price this year have largely tracked shifting expectations as to whether the U.S. central bank would end its bond-buying program sooner-than-expected.

Meanwhile, the precious metal also drew some safe haven bids as renewed concerns over the handling of financial troubles in peripheral euro zone countries weighed on market sentiment.

The yield on Portugal’s 10-year government bond surged to 8.01%, from 6.539% on Tuesday after the country’s Finance Minister Vitor Gaspar resigned on Monday.

Elsewhere on the Comex, silver for September delivery rose 1.6% to trade at USD19.62 a troy ounce, while copper for September delivery added 0.7% to trade at USD3.166 a pound.

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Dollar off lows vs. yen after U.S. data, Portugal in focus

The dollar pulled back from session lows against the yen on Wednesday following the release of strong U.S. employment data but demand for the safe haven yen continued to be underpinned amid concerns over an escalating political crisis in Portugal.

During European afternoon trade, the dollar trimmed losses against the yen, with USD/JPY dropping 0.91% to 99.69, up from lows of 99.26.

Payroll processor ADP said the U.S. private sector added 188,000 jobs in June, more than expectations for an increase of 160,000.

Separately, the U.S. Department of Labor said of people who filed for unemployment assistance last week fell by 5,000 to a seasonally adjusted 343,000, compared to expectations for a drop of 3,000 to 345,000.

Investors were looking ahead to Friday’s U.S. nonfarm payrolls data, for further clues on when the Federal Reserve may decide to unwind its USD85 billion-a-month stimulus program.

The yen remained stronger against the dollar and the euro on Wednesday as market sentiment was hit by concerns over political instability in Portugal, following the resignation of country’s foreign minister on Tuesday and the finance minister on Monday in protest over government austerity policies.

The political crisis raised doubts over the future of the country's coalition government and its ability to honor bailout commitments.

Meanwhile, the euro pulled back from five-week lows against the dollar, with EUR/USD down 0.08% to 1.2967, after falling as low as 1.2924.

The single currency found support after official data showed that euro zone retail sales rose 1% in May, outstripping expectations for a 0.2% gain.

In addition, revised data showed that the euro zone services purchasing managers’ index ticked up to 48.3 in June from a final reading of 47.2 in May.

Investors remained cautious ahead of Thursday’s European Central Bank policy meeting. ECB President Mario Draghi was expected to reiterate that an exit from loose monetary policy remains distant.

Elsewhere, the dollar fell to session lows against the pound, withGBP/USD up 0.76% to 1.5268 after data showed that service sector activity in the U.K. expanded at the fastest pace since March 2011 in June.

Markit said the U.K. services PMI rose to a 27-month high of 56.9 in June from 54.9 in May, compared to expectations for a decline to 54.5.

The data boosted the outlook for second quarter growth and lowered the chances for additional easing measures by the Bank of England at its monthly policy meeting on Thursday.

The dollar remained lower against the traditional safe haven Swiss franc, with USD/CHF down 0.26% to 0.9480. 

The greenback was mixed to higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 0.73% to hit three-year lows of 0.9080, NZD/USD inching up 0.05% to 0.7754 and USD/CADslipping 0.16% to 1.0529.

The Aussie weakened after Reserve Bank Governor Glenn Stevens said the board "deliberated for a very long time" on Tuesday before deciding to keep its key interest rate unchanged at a record low 2.75%, signaling the possibility of further rate cuts in the coming months.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.32% to 83.54. 

The ISM was to produce a report on U.S. service sector activity later in the trading day.

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U.S. initial jobless claims fall by 5,000 to 343,000 last week

The number of people who filed for unemployment assistance in the U.S. fell broadly in line with market expectations last week, official data showed on Wednesday. 

In a report, the U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending June 29 fell by 5,000 to a seasonally adjusted 343,000, compared to expectations for a drop of 3,000 to 345,000.

Jobless claims for the preceding week were revised up to a gain of 348,000, from a previously reported 346,000.

Continuing jobless claims in the week ended June 22 fell to 2.933 million. Analysts had expected continuing claims to decline to 2.953 million from last week’s revised figure of 2.987 million.

The four-week moving average was 345,500. The monthly average is seen as a more accurate gauge of labor trends because it reduces volatility in the week-to-week data.

Following the release of the data, the U.S. dollar held on to gains against the euro, with EUR/USD shedding 0.07% to trade at 1.2969.

Meanwhile, U.S. stock index futures remained lower. The Dow Jones Industrial Average futures indicated a loss of 0.2% at the open, S&P 500 futures pointed to a drop of 0.2%, while the Nasdaq 100 futures indicated a decline of 0.2% at the open.

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Forex - EUR/USD trims losses, Portugal uncertainty weighs

The euro pulled back from five-week lows against the dollar on Wednesday but the single currency remained under pressure as an escalating political crisis in Portugal weighed.

EUR/USD pulled away from 1.2924, the pair’s lowest since May 29, to hit 1.2958 during European afternoon trade, still down 0.15% for the day.

The pair was likely to find support at 1.2903, the low of May 24 and resistance at 1.3000.

Market sentiment was hit by concerns over political instability in Portugal, following the resignation of country’s foreign minister on Tuesday and the finance minister on Monday in protest over government austerity policies.

The political crisis raised doubts over the future of the country's coalition government and its ability to honor bailout commitments.

The single currency found some support after official data showed that euro zone retail sales rose 1% in May, outstripping expectations for a 0.2% gain.

Meanwhile, revised data showed that the euro zone services purchasing managers’ index ticked up to 48.3 in June from a final reading of 47.2 in May.

Investors also remained wary ahead of Thursday’s European Central Bank policy meeting. ECB President Mario Draghi was expected to reiterate that an exit from loose monetary policy remains distant.

Demand for the dollar continued to be underpinned after economic data releases earlier in the week underlined the view that the stronger U.S. economy will see the Federal Reserve start to taper asset purchases later this year.

Investors were looking ahead to Friday’s U.S. nonfarm payrolls data, for further clues on when the Fed may decide to unwind its USD85 billion-a-month stimulus program.

The euro was sharply lower against the yen and the pound, withEUR/JPY tumbling 1.32% to 128.85 and EUR/GBP falling 0.93% to 0.8483.

The U.S. was to release the ADP report on nonfarm payrolls later Wednesday, as well as the weekly government report on initial jobless claims and data on the trade balance. In addition, the ISM was to produce a report on U.S. service sector activity.

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Crude oil surges to 14-month high on Egypt turmoil

Crude oil futures rallied sharply on Wednesday to hit the highest level since May 2012, as concerns that political unrest in Egypt would spread to major oil-producing countries in the Middle East boosted prices.

Investors also looked ahead to closely-watched weekly supply data on stockpiles of crude and refined products from the U.S. Energy Information Administration later in the day.

On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD101.20 a barrel during European morning trade, up 1.6% on the day.

New York-traded oil prices rose by as much as 2.5% earlier in the session to hit a daily high of USD102.16 a barrel, the strongest level since May 4, 2012

Oil prices rose sharply on Tuesday after Egyptian President Mohammed Morsi rebuffed the military’s ultimatum to comprise with protesters or relinquish power.

Market players were concerned that the escalating tensions would lead to the closure of the Suez Canal, which transports approximately 2 million barrels of crude oil a day from northern Africa to the U.S. 

The U.S. Energy Information Administration identified the Suez Canal as one of seven “world oil transit chokepoints” and an “important transit corridor for world oil markets” in its 2012 Energy Outlook report.

Oil traders were also awaiting data from the U.S. government on oil and fuel supplies later in the day to gauge the strength of demand from the world’s largest oil consumer.

The report was expected to show that U.S. crude oil stockpiles declined by 2.3 million barrels last week, while gasoline inventories were forecast to rise by 0.6 million barrels.

After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories fell by 9.4 million barrels last week, blowing past expectations for a decline of 2.7 million barrels.

Gasoline stocks declined 0.2 million barrels, compared to expectations for a 0.4 million barrel increase.

Oil traders also looked forward to this week’s highly-anticipated U.S. nonfarm payrolls data for indications of how the recovery in the U.S. labor market is progressing.

Any improvement in the U.S. economy was likely to reinforce the view that the Federal Reserve will begin to taper its bond purchase program in the coming months.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The U.S. is the world’s biggest oil consuming country, responsible for almost 22% of global oil demand. 

Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery rose 0.75% to trade at USD104.77 a barrel, with the spread between the Brent and crude contracts standing at USD3.57 a barrel, the narrowest level since December 2010.

The gap between the contracts has been on the decline in recent weeks, amid an improving production outlook in the North Sea and indications of declining stockpiles at Cushing, Oklahoma, the delivery point for Nymex oil futures.

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Forex - Dollar rises to 5-week highs vs. yen

The dollar rose to five-week highs against the yen on Wednesday, boosted by expectations that the Federal Reserve will start to unwind its bond buying program by the end of the year.

USD/JPY hit 100.86 during late Asian trade, the pair’s highest since May 31; the pair subsequently consolidated at 100.74, easing up 0.13%.

The pair was likely to find support at 99.50, Tuesday’s low and resistance at 101.27, the high of May 31.

Demand for the dollar continued to be underpinned after economic data releases earlier in the week underlined the view that the stronger U.S. economy will see the Fed start to taper asset purchases later this year.

Data on Tuesday showed that U.S. factory orders rose slightly more than expected in May. On Monday, a report showed that the Institute of Supply Management’s manufacturing index was higher in June, recovering from an unexpected contraction in May.

Investors were looking ahead to Friday’s U.S. nonfarm payrolls data, for further clues on when the Fed may decide to unwind its USD85 billion-a-month stimulus program.

The yen was fractionally lower against the euro, with EUR/JPY inching up 0.06% to 130.65.

The U.S. was to release the ADP report on nonfarm payrolls later Wednesday, as well as the weekly government report on initial jobless claims and data on the trade balance. In addition, the ISM was to produce a report on U.S. service sector activity.

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