US session review 01.07.2013: yen remain under pressure

Data released (actual, consensus, previous):           

12:58    US   Markit Manufacturing PMI (Jun) 51.9    50.6    52.3        

14:00    US   Construction Spending (MoM) (May)  0.5%    0.6%    0.1%

14:00    US   ISM Manufacturing PMI (Jun)   50.9    50.5    49.0        

14:00    US   ISM Prices Paid (Jun)     52.5    51.5    49.5

The yen fell to a three-week low against the dollar as the central bank’s Tankan survey showed large manufacturers were the most optimistic in two years, damping demand for safety.

Japan’s currency slid versus all of its 16 most-traded peers as the nation’s stocks rose and the central bank forecast the economy will keep expanding until second-quarter 2014. The dollar briefly extended gains versus the yen after a gauge of U.S. manufacturing rose more than forecast. The euro appreciated after manufacturing in the currency bloc shrank less than forecast. Australia’s dollar rallied from the lowest since 2010.

EURO:

Euro rose a bit after Eurozone PMI Manufacturing grew to 48.8 points in June, from 48.3 points in May, according to data released. Market consensus pointed to slightly less increase to 48.7.

Other data released showed the Eurozone Unemployment Rate increased to 12.1% in May, from 12% in April. This result is more positive than forecasts of a rise to 12.3%.

UBS maintains year-end forecast  EUR/USD  of $1.2000

Foreign demand for US stocks cooled a little last week, but remains intact despite the FOMC signaling that QE3 tapering could begin later this year. More significantly though, US investors are also now putting their money to work much closer to home. Capital continues to flow westward across the Atlantic, now driven mainly by US investors switching out of Eurozone stocks.

“If this pattern continues on the back of this growth dividend, the EUR/USD is likely to fall gradually towards our end-2013 forecast of $1.2000.”

EUR/USD trades around $1.3060 with initial support comes at recent lows on $1.2980. Below support comes at $1.2960 (Apr 24 and Jun 3 lows) и $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:

The pound reversed when UK activity surprised to the upside.

PMI came in as 52.5 beating expectations of 51.5. Mortgage Approvals for May 58.242k vrs expectations of 55.05k. Net Lending to Individuals was lower at £1b vrs £1.4b consensus. 

GBP/USD remains under pressure, despite the recovery from Friday’s lows on $1.5160 (initial support). Below losses may widen to $1.5140 (May 24 high and May 31 lows), then - to $1.5000 (May 29 lows). Initial resistance comes at Friday’s high on $1.5280, then - at $1.5340 (Thursday’s high), then - at $1.5400 (Wednesday’s high), then - at $1.5450/60 and $1.5530 (Jun 21 high).

YEN:

The yen continues to slide despite the Bank of Japan’s quarterly tankan survey showed a sharp improvement in sentiment at large businesses.

USD/JPY trades around Y99.70. Above resistance comes at Y99.90/00 (61.8%). Below Y98.80 support comes at Y97.20, with a break under targets last Friday’s lows near Y96.90.

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