$ Dollar, Major Currencies Look to US Economic Calendar for Direction

Talking Points
Quiet European Economic Calendar Puts Focus on US Richmond Fed Gauge Traders Watching Bond Yield Levels as Italy and Spain Hold Debt Auctions US Dollar Corrects Lower in Asian Trade, Commodity Bloc Outperforming The US Dollar corrected lower in overnight trade after advancing against most of its top counterparts as risk aversion stocked haven demand for the benchmark currency in the preceding 24 hours. The sentiment-linked Canadian, Australian and New Zealand Dollars outperformed. Although Asian stock exchanges sold off, the move appeared to be a catching-up to weakness seen in yesterday’s European and US sessions by regional investors that was already reflected in exchange rates.
A relatively quiet European economic calendar shifts the focus to US docket, where the Richmond Fed Manufacturing gauge takes top billing. The release is one of a series of surveys due this week that traders will use for a timely measure of where the world’s top economy stands in June. The final balance of outcomes is likely to be particularly significant given hopes that a recovery in North America can help offset malaise in Europe and Asia.
An analogous release from the Dallas Fed surprised higher yesterday. A similar result this time around may boost risk appetite but likewise reinforce the case against additional Fed stimulus. This may weigh on the US Dollar against its higher-yielding counterparts but drive the benchmark currency against the Japanese Yen, where prices remain sensitive to US Treasury yields. June’s Consumer Confidence reading is also on tap.
S&P 500 stock index futures are pointing higher in late Asian trade, suggesting risk appetite is relatively well-supported heading into the European trading day. Italy and Spain are due to hold bond auctions. Rome will sell 2014 zero-coupon paper as well as 2016 and 2026 inflation-linked bonds. Madrid will auction off 84- and 168-day bills. As usual, traders will look to average yields and bid-to-cover readings for signs of sovereign stress in the region.
Asia Session: What Happened
Corporate Service Price (YoY) (MAY)
Conference Board Leading Index (MAY)
Small Business Confidence (JUN)
Euro Session: What to Expect
German GfK Consumer Confidence Survey (JUL)
UBS Consumption Indicator (MAY)
French Consumer Confidence Indicator (JUN)
Italian Retail Sales (YoY) (APR)
Italian Retail Sales s.a. (MoM) (APR)
Public Finances (PSNCR) (£) (MAY)
Public Sector Net Borrowing (£) (MAY)
Spain to Sell 84-168 Day Bills
Italy to Sell 2014 0-Coupon and 2016-26 I/L Bonds
Italian Hourly Wages (YoY) (MAY)
Italian Hourly Wages (MoM) MAY)
Critical Levels

~ Crude Oil, Gold Look to US Earnings Calendar for Direction Cues ~

Crude Oil, Copper Look to US Earnings Calendar to Set Sentiment Trends Gold and Silver Look to US Dollar for Risk Appetite Trends Transmission Commodity prices are little changed in early European trade, reflecting directionless risk sentiment trends projected via flat S&P 500 stock index futures. A quiet US economic calendar keeps the focus on the earnings calendar, with cycle-sensitive names including Halliburton and Dover as well consumption-trend proxies like Yum! Brands and American Express on tap.

So far, the twenty-nine S&P 500 companies to report first-quarter outcomes have produced mixed results: earnings growth slumped 0.5 percent on average, but this marked a 4.6 percent outperformance relative to expectations. Broadly speaking, traders are looking to the reports for answers to a familiar question: can a stronger recovery in the US offset a recession in the Eurozone and a slowdown in China this year?

Crude oil and copper remain closely correlated with the S&P 500, hinting shares’ response to today’s earnings reports will see direct reflection in prices for the growth-driven commodities. Meanwhile, gold and silver continue to look to the US Dollar for direction cues. For its part, the greenback, continues to show a meaningful inverse relationship with share prices, hinting a sentiment-supportive set of reports is likely to weigh on the benchmark currency while bolstering precious metals (and vice-versa).

WTI Crude Oil (NY Close): $104.20 // +1.27 // +1.23%

Prices are testing resistance at 104.90 after putting in a Bullish Engulfing candlestick above rising trend line support set from mid-December. A break above this level exposes falling trend line barriers at 105.61 and 106.70. Support is now at 101.22.

 Daily Chart - Created Using FXCM Marketscope 2.0

Spot Gold (NY Close): $1649.57 // -2.30 // -0.14%

Prices put in a Bearish Engulfing candlestick pattern below falling trend line resistance set from early March. Initial support has been found at 1638.02, the 23.6% Fibonacci expansion. A break below this exposes the 38.2% level at 1612.02. Trend line resistance is now at 1670.97.

 Daily Chart - Created Using FXCM Marketscope 2.0

Spot Silver (NY Close): $31.68 // +0.18 // +0.57%

Prices continue to consolidate below resistance at 32.93, the former neckline of a Head and Shoulders (H&S) top carved out between late January and mid-March, and horizontal support at 31.04. A break blower exposes the first downside barrier at 29.79. The H&S setup broadly implies a measured downside target at 26.84.

 Daily Chart - Created Using FXCM Marketscope 2.0

COMEX E-Mini Copper (NY Close): $3.648 // +0.020 // +0.55%

Prices put in two back-to-back Hammer candlesticks above rising trend line support set from early October, hinting a move higher may be ahead. Initial resistance lines up at 3.716, the 38.2% Fibonacci retracement. A break above this barrier exposes the 50% level at 3.761. Trend line support is now at 3.621.

 Daily Chart - Created Using FXCM Marketscope 2.0