US session review: the market is consolidating

US session review: the market is consolidating

Data released (actual, consensus, previous):               

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

Main currencies are consolidating 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. 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.

A report showed that manufacturing in the New York, northern New Jersey and southern Connecticut region unexpectedly increased this month. The Fed Bank of New York’s general economic index rose to 7.84 in June, from minus 1.4 in May. Economists had predicted a reading of zero, the dividing line between expansion and contraction.

Group of Eight leaders gather for a two-day summit in Northern Ireland today with boosting trade between the U.S. and the European Union near the top of the agenda. EU governments last week gave the European Commission a mandate for the negotiations. A deal will increase global demand by 100-billion euros ($133 billion), the Brussels-based commission said.

EURO:

The euro compensated almost all losses. 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.

SocGen, meanwhile is warning the euro will decline to 1.20 by year-end as the ECB considers more easing. Analyst Vincent Chaigneau says pressure on the ECB to act will mount as the economy falters. But the the main driver is the other side of the coin as he expects the Fed to taper QE.

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 still trading near strong resistance as an industry report showed U.K. home sellers raised asking prices for a sixth month in June. 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.

USD/JPY currently probes Y94.80. 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).

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