ASIA session review: Iraq and Ukraine are in focus

Data released: 

09:00 GMT EMU Consumer Price Index - Core (YoY) (May) 0.7% 0.7% 1.0% 

09:00 GMT EMU Consumer Price Index (MoM) (May) -0.1% -0.1% 0.2% 

09:00 GMT EMU Consumer Price Index (YoY) (May) 0.5% 0.5% 0.7%

Iraq and Ukraine are in focus today.

Russia’s Gazprom said that no payment received from Ukraine and the deadline has now passed. It said Ukraine will now have to pre-pay for its gas supplies. Gazprom filed a lawsuit to recover Ukraine’s debt for gas supplies and filed in Swedish arbitration court for $4.5 bln. It said gas supplies had been restricted to Ukraine, while Ukraine’s pipeline operator Transgaz says they are operating in “normal mode” after deadline expiry. Meanwhile, Ukraine’s Naftogaz demands a “fair price” from Gazprom and wants a return of the $6 bln in overpayments that it made.

A Federal Reserve report today will show industrial production climbed in May after falling the previous month. The Fed Bank of New York’s general economic index dropped to 15.7 this month from 19.01 in May, a separate survey shows. 

The Fed next meets on June 17-18. Policy makers reduced monthly bond-purchases by $10 billion for four consecutive meetings to $45 billion and indicated that further cuts in “measured steps” are likely.

EURO

The euro declined for the sixth time in seven days against the yen amid concern slowing inflation will prompt the European Central Bank to introduce additional stimulus that tends to weaken a currency.

ECB policy makers cut the deposit rate to -0.1% when they met on June 5, lowered the main refinancing rate to a record 0.15% and announced measures including targeted longer-term loans.

EUR/USD has eased off the Friday’s high $1.3575/80. Initial resistance comes at $1.3600 (daily highs). Above last week’s highs on $1.3680 resistance comes at $1.3730, with a stronger one - on $1.3770/80. Below $1.3520 support extends to $1.3500 (Thursday’s lows).

POUND

The pound pulled back from a fresh 5-year high and slipped back below $1.7000. The pound reached a high of $1.7011 at the beginning of the European session, last seen Aug 5 2009, with the pound still underpinned by BoE’s Carney comments last week. Last Thursday, Carney said interest rates in the UK could rise sooner than investors expect, a clear signal the BoE is gearing up for its first hike after 5 years of record low rates.

GBP/USD tested $1.7010 before retreated to $1.6980. Above resistance is around $1.7040 (Aug 23’2009 high). Initial support comes at $1.6920 (May 21 lows) and $1.6840 (Jun 6 high).

YEN

The yen advanced, reaching the strongest level in four months against the euro, as violence in Iraq boosted speculation oil supplies will be disrupted and bolstered the appeal of haven assets.

The yen has gained 3.1% this year.

USD/JPY holds at session high at Y102.00. Above resistance comes at Y102.80 (Jun 4 high), extending to Y103.00 and Y103.40. Stronger one remains at Y104.30/80. Support comes at Y101.60 (Jun 12 lows) and Y100.80/70 Y100.80/70 (Feb 7 lows). Below losses may widen to Y99.50 (Nov 19’2013 lows).

DATA AHEAD

US data include Jun NY Empire State Manufacturing Index at 12:30 GMT with 15.70 expected after 19.01 month earlier.

Later, at 13:00 GMT Apr Total Net TIC Flows come, followed by May Industrial Production at 13:15 GMT. Analysts predict 0.4% gain after -0.6%.

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