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FOREX: US Dollar, Japanese Yen Set to Extend Gains Through Week-End

By , Currency Strategist
10 June 2011 05:52 GMT

Overnight Headlines

  • Dollar, Yen Outperform as Stocks Sink Again in Asian Trade
  • Chinese Exports Grow at Slowest Rate in Three Months in May

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4387

1.4558

GBPUSD

1.6111

1.6403

The Euro and the British Pound dropped as much as 0.5 and 0.6 percent against the US Dollar in overnight trade as the greenback enjoyed a broad-based advance on the back of safe-haven demand (see below). We continue to look for EURUSD selling opportunities and have entered long USDCAD as a risk aversion play.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

22:45

NZD

NZ Card Spending - Retail (MoM) (MAY)

-0.8%

-

1.5%

22:45

NZD

NZ Card Spending (MoM) (MAY)

-0.1%

-

1.4% (R-)

23:50

JPY

Tertiary Industry Index (MoM) (MAY)

2.6%

2.7%

-5.9% (R+)

23:50

JPY

Domestic Corp Goods Price Index (MoM) (MAY)

-2.1%

0.2%

0.9%

23:50

JPY

Domestic Corp Goods Price Index (YoY) (MAY)

2.2%

2.5%

2.5%

2:00

CNY

Trade Balance (USD) (MAY)

$13.05B

$19.80B

$11.42B

2:00

CNY

Exports YoY% (MAY)

19.4%

20.4%

29.9%

2:00

CNY

Imports YoY% (MAY)

28.4%

22.0%

21.8%

The US Dollar and the Japanese Yen outperformed in overnight trade, rising as much as 0.4 and 0.7 percent on average against their leading counterparts as stocks slumped in Asia, boosting safe-haven demand for the former currency and encouraging an unwinding of carry traders funded in the latter (implying a mass exodus out of short-Yen positions).

The MSCI Asia Pacific regional stock index fell 0.3 percent as South Korea’s central bank unexpectedly hiked interest rates, underscoring a trend favoring monetary tightening across the region that threatens growth and underscores already ominous signs of global slowdown through the second half of the year. A report showing Chinese Exports grew at the slowest pace in three months reinforced downward pressure, alluding to withering demand for the wares of the world’s second-largest economy.

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

-

GBP

NIESR GDP Estimate (MAY)

-

0.3%

Low

6:00

EUR

German CPI (MoM) (MAY F)

0.0%

0.0%

Medium

6:00

EUR

German CPI (YoY) (MAY F)

2.3%

2.3%

Medium

6:00

EUR

German CPI - EU Harmonised (MoM) (MAY F)

-0.2%

-0.2%

Medium

6:00

EUR

German CPI - EU Harmonised (YoY) (MAY F)

2.4%

2.4%

Medium

6:00

EUR

German Wholesale Price Index (MoM) (MAY)

-

0.2%

Low

6:00

EUR

German Wholesale Price Index (YoY) (MAY)

-

9.2%

Low

6:45

EUR

French Industrial Production (MoM) (APR)

0.4%

-0.9%

Low

6:45

EUR

French Industrial Production (YoY) (APR)

3.9%

3.3%

Low

6:45

EUR

French Manufacturing Production (MoM) (APR)

0.3%

-1.0%

Low

6:45

EUR

French Manufacturing Production (YoY) (APR)

4.1%

4.6%

Low

8:00

EUR

Italian GDP s.a. and w.d.a. (QoQ) (1Q F)

0.1%

0.1%

Low

8:00

EUR

Italian GDP s.a. and w.d.a. (YoY) (1Q F)

1.0%

1.0%

Low

8:30

GBP

Industrial Production (MoM) (APR)

0.0%

0.3%

Medium

8:30

GBP

Industrial Production (YoY)(APR)

1.3%

0.7%

Medium

8:30

GBP

Manufacturing Production (MoM) (APR)

-0.1%

0.2%

Medium

8:30

GBP

Manufacturing Production (YoY) (APR)

3.4%

2.7%

Medium

8:30

GBP

Producer Price Index Input n.s.a. (MoM) (MAY)

-1.0%

2.6%

Low

8:30

GBP

Producer Price Index Input n.s.a. (YoY) (MAY)

16.2%

17.6%

Low

8:30

GBP

Producer Price Index Output n.s.a. (MoM) (MAY)

0.3%

0.8%

Medium

8:30

GBP

Producer Price Index Output n.s.a. (YoY) (MAY)

5.3%

5.3%

Medium

8:30

GBP

PPI Output Core n.s.a. (MoM) (MAY)

0.3%

0.6%

Low

8:30

GBP

PPI Output Core n.s.a. (YoY) (MAY)

3.4%

3.4%

Low

The economic calendar appears uneventful despite a plethora of items set to cross the wires, with only second- and third-tier releases on tap and unlikely to challenge risk sentiment for dominance over currency market price action. With that in mind, S&P 500 index futures are pushing increasingly lower, hinting fears of broad-based global economic slowdown that had weighed on risk appetite throughout the week are back after yesterday’s brief respite. This gives the US Dollar and Japanese Yen room to extend the overnight advance against sentiment-linked currencies. A slowdown in UK Industrial Production growth and softer Canadian Employment figures reinforces the likelihood that the dour mood will prevail through the week-end.

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10 June 2011 05:52 GMT