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US Dollar Finds Support in Haven Demand as Stock Markets Slump

By , Currency Strategist
04 June 2012 07:35 GMT

Talking Points

  • US Dollar Rides Haven Demand Higher as Stocks Slump in Asian Trade
  • Soft Eurozone PPI Print May Pressure Euro on ECB Policy Easing Bets
  • Markets Highly Sensitive to QE3 Cues with US Factory Orders on Tap

The US Dollar (ticker: USDollar) advanced overnight as Asian stocks declined, boosting demand for the go-to haven currency. The MSCI Asia Pacific regional benchmark equity index fell 2.2 percent, with markets reacting to Friday’s deeply disappointing US employment report. The US is a crucial market for Asian exporters and the sub-par jobs growth reading weighed on future demand and earnings expectations. China’s Non-Manufacturing PMI reading released over the weekend compounded selling pressure, showing service-sector activity slowed to the weakest in at least 14 months. The stocks-linked Australian and New Zealand Dollars bore the brunt of the selloff in the FX space.

Looking ahead, S&P 500 stock index futures are pointing sharply lower, hinting at continued risk aversion that stands to keep the greenback well-supported against most of its leading counterparts. Eurozone PPI figures headline the economic calendar, with expectations calling for wholesale inflation to print at 25-month low of 2.7 percent. The outcome may compound downward pressure on the Euro ahead of Wednesday’s ECB policy meeting amid speculation that slumping growth and easing price pressure in the pipeline may allow Mario Draghi and company to boost stimulus efforts.

Later in the day, the spotlight shifts to US Factory Orders figures. Economists’ forecasts point to an increase of 0.2 percent in April following a sharp 1.9 percent decline in March. A print in line with expectations is unlikely to prove particularly market-moving in that it would do little to disrupt the overall down trend carved out over the past two years. A disappointing outcome may spark some fireworks however considering markets’ likely sensitivity to soft US data releases in the context of QE3 speculation. This means a particularly soft print may see the greenback pressured, particularly against the Japanese Yen and gold.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

1:00

CNY

China Non-manufacturing PMI (MAY)

55.2

-

56.1

23:50

JPY

Monetary Base (YoY) (MAY)

2.4%

-

-0.3%

0:30

AUD

TD Securities Inflation (MoM) (MAY)

0.0%

-

0.3%

0:30

AUD

TD Securities Inflation (YoY) (MAY)

1.8%

-

1.9%

1:30

AUD

Company Operating Profit (QoQ) (1Q)

-4.0%

-2.5%

-6.4% (R+)

1:30

AUD

Inventories (1Q)

0.9%

0.7%

1.4%

1:30

AUD

ANZ Job Advertisements (MoM) (MAY)

-2.4%

-

-0.8% (R+)

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

8:30

EUR

Euro-Zone Sentix Investor Confidence (JUN)

-30

-24.5

Low

9:00

EUR

Euro-Zone Producer Price Index (MoM) (APR)

0.2%

0.5%

Medium

9:00

EUR

Euro-Zone Producer Price Index (YoY) (APR)

2.7%

3.3%

Medium

13:00

EUR

France to Sell 84-357 Day Bills

-

-

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2329

1.2497

GBPUSD

1.5275

1.5445

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow me on Twitter at @IlyaSpivak

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04 June 2012 07:35 GMT