ASIA session review: Looking for drivers

Data released (actual, consensus, previous):                   

01:30 GMT Australia New Motor Vehicle Sales (MoM) (May) 0.0%   _     -1.7%    

01:30 GMT Australia New Motor Vehicle Sales (YoY) (May) 0.2%   _     3.2%    

08:00 GMT Italy Trade Balance EU (Apr) €0.441B   _     €0.611B       

08:00 GMT Italy Global Trade Balance (Apr) €1.907B    €2.480B    €3.240B

09:00 GMT EMU Labour cost (Q1)  1.6%  _      1.3%        

09:00 GMT EMU Trade Balance n.s.a. (Apr)  €14.9B    €18.5B    €22.5B        

09:00 GMT EMU Trade Balance s.a. (Apr)  €16.1B    €21.2B    €18.7B

The U.S. dollar index edged higher Monday, coming off a string a losses before the Federal Reserve’s policy decision later this week. The index had fallen in the previous five days, in part as the dollar dropped more than 3% against the yen last week. Investors unwound short bets made against the Japanese currency after the Bank of Japan last week opted not to expand its monetary-easing efforts.

Along with no action by the Bank of Japan, the dollar has been weighed by uncertainty about whether the Fed will curtail the pace of its bond purchases, set at $85 billion a month, directed at encouraging U.S. economic growth.

The Federal Open Market Committee, the Fed’s interest-rating setting body, is due to begin its meeting Tuesday and release its policy decision Wednesday.

The Wall Street Journal last week reported that the Fed, led by Chairman Ben Bernanke, will use this week’s meeting to try to calm fears that it’s moving closer to raising short-term interest rates and that its bond-buying program will end all at once.

EURO:

The euro on Monday slipped ahead of the summit of the Group of Eight major economies being held on Monday and Tuesday in Northern Ireland.

Euro-zone developments have been overshadowed by those in Japan and the U.S., but the currency market “may see some fireworks” this week with the release of Germany’s ZEW economic sentiment indicator and the preliminary reading of purchasing managers’ indexes, which will be the first June economic readings for the euro zone.

EUR/USD consolidates around $1.3330, a bit higher the channel support line from May 29, coming today at $1.3300 (strong support). Below support is around $1.3280 (Jun 13 lows), $1.3200 and $1.3170 (Jun 10 lows). Above $1.3400 (initial resistance, Jan 14 highs) resistance comes at $1.3480, then - near $1.3540 (channel resistance line from May 29).

POUND:

The pound was little changed versus the dollar and euro as an industry report showed U.K. home sellers raised asking prices for a sixth month in June.

Sterling climbed to a four-month high versus the U.S. currency last week. Prices sought rose 1.2% in June to an average 252,798 pounds ($396,800), property-website operator Rightmove said. Prices are up 2.7% from a year earlier, the report shows.

GBP/USD also holds above channel support line from May 29 at $1.5660. Rate currently holds at $1.5690. Break under $1.5660 widens losses to $1.5600 (psychological level). Resistance comes at last week’s highs on $1.5740 (also 4-months highs), next resistances could be found at $1.5765 (Feb 7 high) and $1.5800 (psychological level).

YEN:

The yen dropped versus all most-traded counterparts as stocks around the world gained, damping demand for haven assets.

The dollar advanced versus the Japanese currency before the Federal Reserve starts a two-day policy meeting tomorrow.

The yen has fallen 7.4% this year.

USD/JPY currently probes Y95.00. Minor support placed at Friday’s lows on Y94.00, extending to Y93.80 (Jun 13 lows). Below support comes at Y93.50 (Mar 25 lows) and then - at Y92.50 (Apr 2 lows). Resistance is around Y96.20 (Jun 12 hourly highs) and Y97.00 (Jun 12 highs).

DATA AHEAD:

At 12:30 GMT  NY Empire State Manufacturing Index (Jun)  will probably add to -0.50 from -1.43.

US NAHB Housing Market Index (Jun) will come out at 14:00 GMT.