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FOREX: US Dollar unable to Hold Gains Amid Swings in Sentiment

FOREX: US Dollar unable to Hold Gains Amid Swings in Sentiment

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  • US Dollar unable to Hold Gains Amid Swings in Sentiment
  • Euro Threatened by Talk of Greek Debt Restructuring at EU/IMF Summit
  • British Pound: Sterling Firms Ahead of BoE Minutes
  • Australian Dollar Sees Support from Hawkish RBA Minutes
  • Japanese Yen could See Sharp Moves on GDP Surprises
  • Loonie Snaps 4-Day Losing Streak as Dollar Relinquishes Early Gains

US Dollar: Unable to Hold Gains Amid Swings in Sentiment

The dollar was modestly higher early in North American trade as steep losses in equities and commodities saw traders seeking haven in the safety of the greenback. The gains come on the heels of dismal housing data out of the US, with April housing starts plummeting 10.6% m/m, down from a previously upward revised gain of 12.9% m/m. Building permits, industrial production, and capacity utilization data also disappointed to the downside sparking risk aversion flows on concerns that the global growth may be stalling.

However a mid-day reversal saw the greenback surrendering all of the day’s gains to close marginally lower on the session. Risk appetite picked up late in the day as equities and commodities advanced off session lows, putting pressure on the greenback. With higher-yielding, risk currencies stabilizing, the dollar will be subject to shifts in sentiment with the FOMC minutes tomorrow and existing home sales on tap.

Related:Discuss the Dollar in the DailyFX Forum,

Euro Threatened by Talk of Greek Debt Restructuring at EU/IMF Summit

The Euro saw sharp intraday price swings only to finish very modestly higher through the New York close. Official speculation over the possibility of Greek debt restructuring kept the euro on the back foot, but a late-day reversal in ‘risk’ meant that the safe-haven Greenback finished lower against all major currencies except the Japanese Yen.

Greek bond yields hit further extremes as officials acknowledged the term “debt restructuring” for the first time at the EU/IMF summit. The benchmark 2-year Greek bond yield hit an incredible 25 percent despite assurances the European Commission’s Olli Rehn that restructuring was “off the table”. There was a sense of irony in the fact that Rehn said a “voluntary Greek debt re-profiling could be examined”—essentially restructuring/default by another name. This was consistent with Eurogroup President Juncker’s statement that a “soft restructuring” was necessary. Disappointing German ZEW business survey results further weighed on the euro. Yet the sharpest moves came on volatility out of the S&P 500 and broader financial market risk sentiment. A relatively empty economic calendar in the day ahead leaves the Euro at the whims of broader financial market trends.

British Pound: Sterling Firms Ahead of BoE Minutes

The pound seesawed throughout the session after CPI data released overnight showed inflation surging 1% m/m in April, while the year on year figure topped 4.5%. The data surpassed even the most modest estimates and had traders speculating that the BoE will move on interest rates. Comments made by the MPC’s newest member Ben Broadbent saw the pound pare early gains after he cited that he would have followed in the BoE’s footsteps to keep rates on hold at 0.5%. Broadbent will be replacing the Monetary Policy Committee’s most vocal hawk Andrew Sentence who steps down this month. Tomorrow’s release of the BoE’s May 5th meeting will be closely eyed by traders as the vote tally will be very telling. With Mr. Sentence’s departure, the hawkish camp may find it increasingly difficult to gain enough traction to move on interest rates. The minutes will be accompanied with an update on the jobs sector, with the claimant count rate expected to hold at 4.5%. A weaker than anticipated read on the employment sector will put more pressure on the BoE as the central bank weighs sluggish domestic growth against rising inflationary pressures.

Australian Dollar Sees Support from Hawkish RBA Minutes

The Australian Dollar saw modest support on a surprisingly hawkish Reserve Bank of Australia Meeting Minutes release, suggesting that rates could rise faster than markets had previously priced in. Overnight Index Swaps show that 12-month interest rate forecasts remained only slightly higher, but the real mover was a shift in timing of those interest rate moves. Traders now price in a 50 percent chance of an RBA move within three months—a notable pickup from yesterday. Attention now turns to upcoming Westpac Consumer Confidence data and later Wage Cost Index results. We suspect that any particularly noteworthy moves could further shift forecasts on the future of RBA policy.

Japanese Yen could See Sharp Moves on GDP Surprises

The Japanese Yen was the worst-performing G10 currency as equities and broader financial market risk sentiment recovered into late trade. A virtually empty economic calendar left the Yen at the whims of broader market moves, but tomorrow night’s Gross Domestic Product growth figures could move markets on any noteworthy surprises. The range of analyst forecasts is unusually wide due to the destruction following the massive earthquake and tsunami in March. As such, watch for Japanese Yen reactions to any particularly above or below-forecast prints.

Loonie Snaps 4-Day Losing Streak as Dollar Relinquishes Early Gains

The Canadian dollar was firmer at the close of trading in New York, advancing 0.23% against the greenback. The Loonie pared early losses as a mid-day reversal saw equities and commodities move off session lows. Event risk for the CAD mounts tomorrow with the April leading indicators and March wholesale sales. Leading indicators are expected to print at 0.6% m/m, down from a previous read of 0.8%, while sales are expected to rise to 1.2% from a decline of 0.6% a month earlier.

For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT

Currency

Release

Survey

Previous

Comments

0:30

AUD

Westpac Consumer Confidence (MAY)

1.2%

Currently near post-recession lows

0:30

AUD

Westpac Consumer Conf Index (MAY)

105.3

1:00

AUD

DEWR Skilled Vacancies (MoM) (MAY)

1.7%

Lower vacancies suggests recovery

1:30

AUD

Wage Cost Index (YoY) (1Q)

4.0%

3.9%

Higher wage growth may point to rate hike in near future

1:30

AUD

Wage Cost Index (QoQ) (1Q)

1.1%

1.0%

4:00

JPY

Tokyo Condominium Sales (YoY) (APR)

0.0%

Expected to stay unchanged

8:30

GBP

Jobless Claims Change (APR)

0.0K

0.7K

Lower number of jobless claims suggests economy may grow faster than previously thought

8:30

GBP

Claimant Count Rate (APR)

4.5%

4.5%

8:30

GBP

ILO Unemployment Rate (3M) (MAR)

7.8%

7.8%

8:30

GBP

Avr Week Earning inc Bonus (3MoY)(MAR)

2.0%

2.0%

Wages expected to stay flat as UK economy still faces headwinds

8:30

GBP

Avr Week Earning ex Bonus (3MoY)(MAR)

2.2%

2.2%

9:00

EUR

EU Construction Output w.d.a. (YoY)(MAR)

3.5%

Previous MoM decline suggests EU economy slowing down

9:00

EUR

EU Construction Output s.a. (MoM)(MAR)

-0.7%

11:00

USD

MBA Mortgage Applications (MAY 13)

8.2%

More applications indicate better market

12:30

CAD

Leading Indicators (MoM) (APR)

0.6%

0.8%

Canadian manufacturing expected to pull wholesale higher

12:30

CAD

Wholesale Sales (MoM) (MAR)

1.2%

-0.6%

14:30

USD

DOE U.S. Refinery Utilization (MAY 13)

0.43%

-1.1%

Inventories gasoline and crude inventories expected to fall as prices rise

14:30

USD

DOE U.S. Crude Oil Inventories (MAY 13)

1500K

3781K

14:30

USD

DOE U.S. Gasoline Inventories (MAY 13)

1000K

1275K

14:30

USD

DOE U.S. Distillate Inventory (MAY 13)

500K

-843K

23:50

JPY

Gross Domestic Product (QoQ) (1Q)

-0.5%

-0.3%

First quarter GDP seen to be heavily hit by earthquake, falling sharply despite recovery signals in early January and February

23:50

JPY

Gross Domestic Product Annualized (1Q)

-1.9%

-1.3%

23:50

JPY

GDP Deflator (YoY) (1Q)

-1.8%

-1.6%

23:50

JPY

Nominal GDP (QoQ) (1Q)

-0.7%

-0.7%

23:50

JPY

Housing Loans (YoY) (1Q)

3.2%

Real estate loans may stop as prices fall

GMT

Currency

Upcoming Events & Speeches

7:00

EUR

ECB's Juergen Stark Speaks on Global Economy

7:00

EUR

ECB's Lorenzo Bini Smaghi Speaks on Global Imbalances

8:30

GBP

Bank of England Meeting Minutes

9:30

EUR

ECB's Vitor Constancio Speaks on European Economy

18:00

USD

Federal Open Market Committee Meeting Minutes

23:00

USD

Fed's James Bullard Speaks on U.S. Economy

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.5160

1.6750

89.00

0.9345

1.0275

1.1800

0.8400

116.80

146.05

Resist 1

1.5000

1.6600

86.00

0.8900

1.0000

1.1000

0.8215

116.00

140.00

Spot

1.4236

1.6252

81.35

0.8803

0.9723

1.0627

0.7841

115.82

132.21

Support 1

1.4000

1.6160

80.00

0.8600

0.9500

1.0400

0.7745

113.80

125.00

Support 2

1.3700

1.5750

75.00

0.8500

0.9055

1.0200

0.6850

105.50

119.00

CLASSIC SUPPORT AND RESISTANCE EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

13.8500

1.6575

7.4025

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

12.5000

1.6300

7.3500

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

11.7224

1.5851

6.9587

7.7752

1.2457

Spot

6.3260

5.2378

5.5668

Support 1

11.5200

1.5040

6.5575

7.7490

1.2145

Support 1

6.0800

5.1050

5.3040

Support 2

11.4400

1.4725

6.4295

7.7450

1.2000

Support 2

5.8085

4.9115

4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.4314

1.6373

82.32

0.8910

0.9821

1.0709

0.7900

117.39

134.49

Resist 1

1.4275

1.6312

81.83

0.8857

0.9772

1.0668

0.7870

116.60

133.35

Pivot

1.4198

1.6244

81.29

0.8829

0.9745

1.0587

0.7818

115.45

132.05

Support 1

1.4159

1.6183

80.80

0.8776

0.9696

1.0546

0.7788

114.66

130.91

Support 2

1.4082

1.6115

80.26

0.8748

0.9669

1.0465

0.7736

113.51

129.61

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.4427

1.6417

82.27

0.8914

0.9823

1.0777

0.7953

117.71

134.25

Resist. 2

1.4379

1.6375

82.04

0.8886

0.9798

1.0740

0.7925

117.24

133.74

Resist. 1

1.4331

1.6334

81.81

0.8859

0.9773

1.0702

0.7897

116.77

133.23

Spot

1.4236

1.6252

81.35

0.8803

0.9723

1.0627

0.7841

115.82

132.21

Support 1

1.4141

1.6170

80.89

0.8747

0.9673

1.0552

0.7785

114.87

131.18

Support 2

1.4093

1.6129

80.66

0.8720

0.9648

1.0514

0.7757

114.40

130.67

Support 3

1.4045

1.6087

80.43

0.8692

0.9623

1.0477

0.7729

113.93

130.16

v

Written by: David Rodriguez, Quantitative Strategist and Michael Boutros, Currency Analyst for DailyFX.com

To receive this report via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com

The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.

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