Papademos sends market into a selling frenzy
The Euro (EUR) saw any hope of revival dismissed as former Greek Prime Minister Papademos admitted to the fact that "risk of Greece leaving Euro is real", "Preparations for Greece Euro exit are being considered" indicating that it could cost anywhere between 500 Billion to 1 Trillion, ensured the Euro plummeted from day highs above 1.2800 to trade just above 1.2650
The Japanese Yen (JPY) suffered on the back of Fitch move to downgrade its economy to A+ with a negative outlook. Such a move, added to recent trends, ensured the currency pair once again failed to break below 79.00.Further, markets flight to USD safety, in light of Greece conjecture, ensured the USDJPY pair managed to break back above the 80.00 mark. Markets will now look to the outcome of the 2 day BoJ meeting, although bias is doubtful that there will be any added measures to ease further.
The Sterling Pound (GBP) slid despite CPI numbers coming in on expectations. Although the EURGBP cross managed to trade above the 0.8100 figure, the Sterling Pound was largely reflective of a weaker Euro, and a rampant greenback, pushing the GBPUSD lower from levels near 1.5850 to lows of 1.5740
The Australian Dollar (AUD) managed to hold on to much of its previous day gains throughout the Asian session, as regional stock markets showed positive life. Yet sharp reversals on Papademos comments saw the AUD trade back to monthly lows of 0.9800 before breaking further in Asian trade Wednesday setting a new 5 month low of 0.9753
Gold (XAU) was subjective to selling interest in early Europe, as market looked to its previous night failure to break 1600 as a technically negative, taking out a key Fibonacci number of 1582 on the downside, setting a new weekly low of 1562. XAU continued its decline into Asian Wednesday trading toward 1556.00
Greece helps drive markets lower
Last week’s currency trading review
The Dollar was bid for most of the week as markets around the world extended losses on the back of uncertainty from Greek elections. Adding to the dollar buying were downgrades of European banks by ratings agencies. April Industrial production rose 1.1% from -0.6% previously. The Euro plunged to 4 month lows below 1.2700 as negativity surrounding possible second elections for Greece weighed on the currency. News of deposits being withdrawn from European banks did not help sentiment. The EUR/USD lost 1.15% closing at 1.2779, after opening the week at 1.2928.
The Japanese Yen continued to strengthen as safe haven flows prompted USD/JPY to fall in light of Eurozone issues. In the absence of any direct intervention in the markets, the pair has moved below 80 yen without major resistance. The USD/JPY fell 1.16% closing at 79.00 vs. 79.93 opening for the week. The GBP was a noted underperformer with the Bank of England inflation report suggesting more QE was very possible going forward. GBP/USD was notably weaker for the week. The GBP/USD lost 1.56% closing at 1.5828 after opening at 1.6078. The AUD was hit particularly hard as the risk sensitive currency suffered from issues abroad and softening sentiment locally. The RBA meeting minutes echoed this sentiment paving the way for possible further rate cuts. The AUD/USD gave up 2.06% closing at 0.9845 after opening at 1.0052.
The Forex Trading Week Preview
In the States; On Tuesday, Existing Home sales forecast at 2.9% vs. -2.6% previously m/m. On Thursday, April Durable Goods forecast at 0.70% vs. -4.00% previously. Also, Initial Jobless claims with previous at 370k new claims. On Friday, University of Michigan Confidence survey forecast at 77.8 vs. 77.8 previously. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; On Tuesday, EZ Consumer confidence forecast at -20.1 vs. -19.9 previously. On Thursday, Q1 GDP for Germany is forecast unchanged at 0.50% q/q. Also on Thursday, PMI Manufacturing and Services forecast of 47.0 and 52.0 respectively compared to previous readings of 46.2 and 52.2 respectively. German IFO is released later in the European morning with expectations component forecast at 102.0 vs. 102.7 previously. In the UK, On Tuesday, April CPI is forecast at 3.10% vs. 3.50% previously. On Wednesday, BoE minutes are due. On Thursday, Q1 GDP forecast at -0.20% vs. -0.20% previously q/q. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; On Wednesday, BOJ Meeting Forecast to hold at 0.1% but with a chance of extra measures to support the economy and weaken the Yen. On Thursday, National CPI forecast at 0.40% vs. 0.50% previously. In Australia; In what is a light data week, no releases are due. We will provide our previews and reviews of these data releases in the daily summary.
Euro – 1.2812
Initial support at 1.2759 (May 16 high) followed by 1.2624 (Jan 13 low). Initial resistance is now located at 1.2569 (May 15 High) followed by 1.2958 (May 11 High)
Yen – 79.29
Initial support is located at 79.14 (62% retrace of 76.03-84.18) followed by 78.8 (Feb 17 low). Initial resistance is now at 79.85 (mid-point of 80.55-79.14) followed by 80.4 (May 17 high).
Pound – 1.5827
Initial support at 1.5733 (May 18 low) followed by 1.5643 (62% retrace of 1.5235-1.6302). Initial resistance is now at 1.5933 (May 17 high) followed by 1.6 (May 16 high).
Australian Dollar – 0.9914
Initial support at 0.9795 (May 18 low) followed by the 0.9742 (Nov 28 low). Initial resistance is now at 0.9968 (May 16 high) followed by 1.0035 (May 14 high).
Gold – 1594
Initial support at 1538.7 (May 17 low) followed by 1526.9 (May 16 low). Initial resistance is now at 1599.2 (50% retrace of 1671.57-1526.97) followed by 1606.6 (May 9 high).
Oil – 93.18
Initial support at 92 (Previous low) followed by 90.9 (Intraday Support). Initial resistance is now at 93.75 (Intraday Resistance) followed by 94.25 (Intraday Resistance).
Written by Anthony Darvall
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