EUROPEAN session review: dollar compensates morning’s losses

Data released (actual, consensus, previous):                 

06:00    DE    EUR    Consumer Price Index (YoY) (May)    1.5%    1.5%    1.1%         

06:00    DE    EUR    Consumer Price Index (MoM) (May)    0.4%    0.4%    -0.5%         

06:00    DE    EUR    Harmonised Index of Consumer Prices (MoM) (May)    0.3%    0.3%    -0.5% 

06:00    DE    EUR    Harmonised Index of Consumer Prices (YoY) (May)    1.6%    1.7%    1.1% 

08:30    UK    GBP    Claimant Count Change (May)    -8.6K    -5.0K    -11.8K 

08:30    UK    GBP    Average Earnings excluding Bonus (3Mo/Yr) (Apr)    0.9%    0.7%    0.8%     

08:30    UK    GBP    Average Earnings including Bonus (3Mo/Yr) (Apr)    1.3%    0.3%    0.6% 

08:30    UK    GBP    Claimant Count Rate (May)    4.5%        4.5%         

08:30    UK    GBP    ILO Unemployment Rate (3M) (Apr)    7.8%    7.8%    7.8%         

09:00    EMU    EUR    Industrial Production w.d.a. (YoY) (Apr)    -0.6%    -1.2%    -1.4% 

09:00    EMU    EUR    Industrial Production s.a. (MoM) (Apr)    0.4%    -0.2%    0.9%

The dollar recovered some lost ground against the yen and the euro after a sharp selloff the previous day, although market participants remained cautious amid speculations of stimulus withdrawal from the Fed. 

Germany’s top court continues its two-day hearing to address the European Central Bank’s Outright Monetary Transactions program and the European Stability Mechanism. ECB’s Asmussen: said the OMT aims only to curb unjustified peaks in interest rates; 

There are no dangers of inflation as a result of OMT, purchases will be sterilized; 

Positive effects are already visible; 

OMT is not government financing; 

Bond buys on secondary market. 

Also he noted that ECB is more conservative than U.S. Fed.

EURO:

Industrial Production in Eurozone in  April  -0.6% vs  -1.2% expected and -1.4% in the previous period.  

  

EUR/USD fell to $1.3270.  Initial support is around $1.3230, with a break under $1.3190 may widen losses  to $1.3108 (MA100d) ahead of $1.3075 (low Jun 6) and then $1.3053 (low Jun.5). A breakout of $1.3319 (high Feb.25) would open the door to $1.3343 (61.8% of Feb-Apr slide).

POUND: 

The jobless rate in the UK was expected to stay put at 7.8% and it did so, while the more focused bit of data, the claimant change fell from the previous numbers of -11.8k to -8.6k against a consensus of -5.0k, which is over all bullish for the pound given expectation could be for a higher consumer spending count in the long run benefiting economic growth. 

GBP/USD came back to the opening price. Initial resistance comes at $1.5680, extending to $1.5710. Break under overnight lows on $1.5520 targets support at $1.5500 and then - $1.5420 (38.2% Fibo of the $1.5000 - $1.5680 rise) and $1.5370 (Jun 3 high).

YEN: 

The yen dropped against all of its major peers as traders speculated yesterday’s advance versus the dollar, the biggest in three years, was too rapid given expectations for further stimulus from the Bank of Japan. 

USD/JPY is stabilizing in Y96.50 area. Initial resistance comes at Y99.00 (channel line from May 29), extending to Y99.30 (yesterday’s high, also 50% Fibo of the Y103.80 - Y95.00 decline). Break above targets Y100.40 (61.8% and Jun 4 highs).  Initial support is near Y95.00.

DATA AHEAD: 

Germany Constitutional court ruling on ECB bond buying is expected at this very time. 

At 21:00 GMT RBNZ Interest Rate Decision and Monetary Policy Statement  will finish the day.

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