US session review: Dollar weakens before economic data

Data released (actual, consensus, previous):                

11:00 GMT USA MBA Mortgage Applications (Jun 7) 5.0%   _     -11.5%        

14:30 GMT USA EIA Crude Oil Stocks change (Jun 7)  2.523M    -1.400M    -6.267M

The dollar fell against the yen and euro after erasing gains before U.S. economic data that may provide more direction about when the Federal Reserve will begin to taper its monetary stimulus.

The Dollar Index touched its lowest point in almost four months before a report tomorrow forecast to show retail sales grew 0.4% in May. Sentiment has grown that a strengthening economy will prompt the U.S. central bank to taper bond buying, which risks devaluing the currency.

EURO:

Investors also focused on euro-zone industrial-production data, which showed a 0.4% improvement in April, beating expectations.

But the rise was cappet by Greece worries after the two biggest labor unions called a 24-hour general strike starting on Thursday in protest over the government’s shutdown of its state broadcaster, the Hellenic Broadcasting Corporation.

EUR/USD has tested $1.3360 and took pause, but generally looks bullish.  Initial resistance comes at $1.3400 (Jan 14 highs) and $1.3460 (channel resistance line from May 29). Initial support is around $1.3320, below - at $1.3260 (Asian lows) and $1.3214 (channel support line).

POUND:

The British pound rose for a second day versus the euro, reaching the strongest level in more than three weeks, after a report showed U.K. jobless claims fell more than economists forecast in May.

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 keeps positive mood after testing resistance at $1.5680. Initial resistance comes at $1.5700 and then - near $1.5760 (61.8% Fibo of the $1.6340 - $1.4820 decline). Break under overnight lows on $1.5620 targets channel support line from May 29 at $1.5580 (also 50%). Below losses may widen to $1.5520 (Tuesday’s lows).

YEN:

The yen fell earlier on speculation the biggest gain in three years yesterday was too rapid amid forecasts for further stimulus from the Bank of Japan.

But later yen rallied versus the US dollar.

Japanese machine orders dropped 8.8% in April from March after rising for the previous two months, the Cabinet office said in Tokyo. Economists forecasted a decline of 8.1%.

The yen has slumped 7.4% this year.

USD/JPY challeneged Y95.14 (channel line from May 28) and currently tries to recover. Below daily lows support comes at Y93.50 (Mar 25 lows) and then - at Y92.50 (Apr 2 lows). Initial resistance is placed at Y97.00 (daily highs) with a break above targets Y98.30 (channel resistance line from May 29).

DATA AHEAD:

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

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