ASIA session review (04.07.2013): Dollar up vs. euro as Draghi set for center stage

Data released (actual, consensus, previous):           

01:30 GMT Australia Building Permits (YoY) (May)  -3.2%   _     28.8%    

01:30 GMT Australia Building Permits (MoM) (May)  -1.1%    -1.5%    9.5%    

07:00 GMT UK Halifax House Prices (3m/YoY) (Jun) 3.7%    3.6%    2.6%        

07:00 GMT UK Halifax House Prices (MoM) (Jun)  0.6%    0.4%    0.4%        

The U.S. dollar edged higher against the euro Thursday as the European Central Bank prepared to announce its decision on monetary policy.

The European Central Bank is widely expected later Thursday to keep its main refinancing rate at 0.5%, with the spotlight set to fall on ECB President Mario Draghi’s press conference following the meeting.

The market will also monitor developments in Egypt following the military ouster of President Mohammed Morsi Wednesday.

EURO:

Draghi may field questions about Portugal. The bid yield on Portugal’s 10-year government bond Wednesday jumped to more than 8% for the first time since last November.

EUR/USD backs to $1.3000. Initial support comes at recent lows at $1.2960 (Apr 24 and Jun 3 lows) and $1.2840 (May 29 lows). Key support remains at $1.2800 (May 17 low). Resistance comes at $1.3100 (Friday’s high). Above gains may extend to $1.3160 (Jun 20 lows), then - at $1.3255/60 (Friday’s high) and $1.3300 (Jun 6 high).

POUND:

A very good performance by the services PMI during June in the UK economy lifted the rate more than a big-figure on Wednesday to test multi-day highs around $1.5300, although all that euphoria will be put to the test today with the BoE MPC meeting.

“We expect the Bank of England to opt for status quo in connection with today’s announcement… However, this will be the first MPC meeting with Mark Carney as governor and a deviation from usual practice is possible, even if policy is unchanged”, commented Sverre Holbek, Senior Analyst at Danske Bank.

Today’s data showed UK Halifax house price index rose 0.6% in June vs +0.4% expected, while rising 3.7% y/y vs +3.6%  expected.

The Bank of England is also expected on Thursday to leave its lending rate unchanged, at a record low 0.5%.

GBP/USD commenced a pullback to the current area around $1.5250 after a brief adventure above $1.5300. The immediate support at $1.5131 (low Jul.3) ahead of $1.5000 (psychological level). On the flip side, a breakout of $1.5321 (high May 16) would bring $1.5371 (MA55d).

YEN:

The yen rose versus the dollar. Bank of Japan Gov. Haruhiko Kuroda said earlier in the day the local economy was improving and that consumer prices were expected to gradually rise as the effect of the central bank’s quantitative easing took hold.

BOJ also raised economic assessment for 8 out of 9 regions in quarterly report.

USD/JPY holds a bit lower Y100 with resistance remains at Y100.45/50. Break above will target Y101.20.  Initial support is around daily lows on Y99.20. Below Y98.80 support comes at Y97.20, with a break under targets last Friday’s lows near Y96.90.

DATA AHEAD:

At 11:00 GMT the  BoE announces its Interest Rate Decision with 0.5% expected and Asset Purchase Facility likely will remain at £375B.

At 11:45 GMT attention will be on ECB Interest Rate Decision with no changes expected.

At 12:30 GMT ECB Monetary policy statement and press conference  are due to come.

At 23:30 GMT Australian Jun AiG Performance of Construction Index comes.

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