Japanese Yen Rallies After Bevy of Disappointing US Data

Japanese Yen Rallies After Bevy of Disappointing US Data
THE food: USD existing home sales (JUN) > 4,37 M (5.4%) compared to 4.62 M (+ 1.5%) expected from 4.62 M (0.0%) > USD leading indicators (JUN) > 0.3% vs. 0.1% expected by + 0.4% > USD Philadelphia Fed index (JUL) > 12.9 to 8.0 expected from 16.6 > EURUSD BEARISH
The news always worse for the U.S. economy, since a few months ago was world economy the favourite and is now only a further decay in the photo, the global growth. Three 'medium' importance (after the DailyFX economic calendar) data releases for the US economy have been released, disappointed by 10: 00 am EDT / 14: 00 GMT, and all three. Namely:
Existing home sales for June fell to an annual rate of 4,37 m from 4.62M, well-below 4.62 M pace expected. Sales fell by 5.4% over month while a gain of 1.5% was planned. Leading indicators for June shrank by 0.3%, faster than the 0.1% forecast fall in. The July Philadelphia Fed index improved, but remained the stretched compared to 8.0 expected negative to 12.9. The data come measures to improve the growth prospects at a crucial time, as the Federal weighs reserve more stimuli, but remain questions about what exactly is going to happen. Each Chairman Ben Bernanke was as made clear over the last two days half-yearly report on monetary policy to Congress, while the Federal can do more reserve, if necessary, the necessary structural improvements in the economy will come only through a prudent fiscal policy. To the United States ' said that fiscal policy is corrected, the US economy will continue to fight, no matter what does the Federal Reserve. USD/JPY 1 minute chart: 19 July 2012
Charts created using MarketScope prepared by Christopher Vecchio
Following the bevy of disappointing versions of the US dollar initially strengthened, the AUDUSD send lower from 1.0422 to as low as 1.0401, before recovering to 1.0417, which was written at the time of this report. The EURUSD behaved as well as diving from 1.2244 to 1.2230.
The big winner was the Japanese yen, as investors shed the US dollar as the play favorite safe haven: the AUDJPY fell from 81.97 to as low as 81.73; the EURJPY dropped from 96,27 to as low as 96.13; and the USDJPY fell to 78.52 of 78,64, before recovering to 78.57, at the time of this report was written.

$Dollar Suffers its Biggest Hit in Five Months as Risk Rallies

Parameter name: request
Dollar Suffers its Biggest Hit in Five Months as Risk Rallies Euro: ECB Rate Hold Keeps Yield, But Where is the Stability? British Pound Up Next for Stimulus Speculation Australian Dollar Makes it Three-for-Three on Impressive Data Japanese Yen Sees the Balance of Power Between Risk and Intervention Swiss Franc Faces Inflation and Employment Data Gold: A True Reflection on Stimulus Chances? Dollar Suffers its Biggest Hit in Five Months as Risk Rallies
The Dow Jones FXCM Dollar Indexsuffered its biggest single-day loss since January 3 (the first liquid trading day of the year) on a tremendous swell in stimulus expectations. We know the cumulative effects that financial support from the Fed and other policy authorities has on the dollar. One of the most effective stimulators in the world, the US central bank may be even more effective at devaluing its currency than it is at providing financial stability. And, as a safe haven currency, the capital market boost that large stimulus programs provide specifically undermines the dollar’s most prominent catalyst over the past month. The only problem is that there seemed to be little actual support for stimulus.
With the aggressive decline in growth-sensitive markets since the beginning of May, we have seen expectations for a stimulus response from the ‘financial stability guard’ (Fed, ECB, PBoC, etc) rise sharply. And so, heading into this week, the assumption of official support from the world’s largest policymakers was clearly reflected in the financial media. Yet, what we have seen so far this week seems to contradict the expected path to another injection. Tuesday, the impromptu G7 meeting ended with no guidance or definitive policy to take action or react to future periods of trouble. This past session, the best opportunity to find an actual boost (the ECB policy decision) passed with a distinct hands-off outcome. Given the pulse for global risk seems to yield from the Euro Zone’s financial troubles, a direct effort to smother the fire before it spread could have carried a lot of weight for risk trends. Instead, further support was only described as an action in the aftermath (more on this below).
Where the European authorities had the best chance to leverage global confidence on the last trading day specifically, the greatest overall influence still resides with the Federal Reserve and speculation surrounding QE3. Even though most of the financial trouble for the global markets to this point has been largely isolated to the Euro-region, the chance for losses and future spread of instability has charged the expectation for another round of Fed support. After this past Friday’s big NFP miss, it seemed a certainty to the stimulus believers; but the Beige Book from this past session seemed to hold a distinctly optimistic bias – on growth, labor and real estate. Given we’ll see rate and growth forecasts at the June 20 Fed meeting and it’s the last meeting before Operation Twist expires, the timing seems right. But is it truly needed?
Euro: ECB Rate Hold Keeps Yield, But Where is the Stability?
Has the Euro intrinsically strengthened over the past 24 hours and this week or is its recovery against the US dollar merely a reflection of underlying risk trends. Just in the past trading session alone, EURUSD climbed 1.0 percent – the biggest single-day rally since November 11. However, when we look at the currency’s relative performance against the other majors we see a distinct outperformance against safe havens and underperformance versus higher yielding currencies. From the ECB rate meeting, there was a high degree of speculation that the policy group could provide much-needed stability for the region’s financial strain. The decision to hold rates maintains the yield advantage the euro holds over the dollar and other counterparts; but cut or not, it would do little to stabilize sovereign debt, credit health or bank liquidity. That would come through a revival of the SMP program or anotherLTRO program – both were conspicuously absent. Fear surrounding the Euro-region’s troubles could further abate through no effort of European authorities if QE3 expectations gain traction.
British Pound Up Next for Stimulus Speculation
The fourth and final central bank decision this week is due in the upcoming London session. The Bank of England could be a difficult policy decision to analyze as the group notoriously remains silent when they do not make changes. That is the most likely outcome. On the other hand, the call for stimulus has spread to the UK as surely as it has to the Euro Zone and US. As fear that the Euro crisis is spreading beyond its own boarders, the reality is that the UK is most likely to be the first domino to fall. Will Member Adam Posen and crew yield to the cooling inflation, weak 1Q GDP reading and spill over crisis concerns with more bond purchases? The market may not care immediately if risk trends are firm…
Australian Dollar Makes it Three-for-Three on Impressive Data
Just as surely as the Australian dollar found its fundamentals perfectly aligned through May to secure an aggressive selloff, we have found the backdrop fully support a bullish recovery this week. Not only have risk appetite trends recovered, but the Aussie fundamentals themselves have significantly raised the currency’s profile. Following a smaller-than-expected rate cut and big jump in 1Q GDP, we saw this morning that the nation added 38,900 jobs against a forecast of no change. Where the 12-month rate cut forecast was 156bp Monday, it’s now 101bp.
Japanese Yen Sees the Balance of Power Between Risk and Intervention
It is important to recognize the difference. After multiple stimulus efforts (subtle and explicit) these past few months, the yen crosses continued their decline unfazed. Yet, with the rebound in risk appetite through the first half of this week, the same group is up between 1.5 and 3.9 percent. Intervention cannot compete with standard risk flows. A report from Bloomberg harkened back to the success of the 1995 intervention – which was found traction through US and EU coordination. Policy officials don’t have that luxury this go around. And so, they hope like speculators.
Swiss Franc Faces Inflation and Employment Data
With all the volatility behind risk-sensitive pairs this week and the retrenchment of volatility on EURCHF, the Swiss franc has understandably moved off the radar. However, we should not lose sight of this currency or pair. The next move is likely to be violent and unnatural rather than slow and steady. As such, we will watch the employment and inflation figures on deck to see if they provide justification for further SNB action.
Gold: A True Reflection on Stimulus Chances?
There is a lot of speculation surrounding potential stimulus programs moving forward, which risk trends tend to run away with. However, what is the actual probability that further support from these supranatural players will be realized? Perhaps gold gives us a better reflection of the chances as it pits fiat against alternative store of wealth. Gold did jump against the dollar early Wednesday but lost those gains before the close.
For Real Time Forex News, visit:http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go towww.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
AiG Performance of Construction Index
Halifax Plc House Prices s.a. (MoM)
Despite deterioration in housing prices, investors still treat London real estate as a safe haven.
RBA rate cut on June 5th 25bs to 3.5% suggest low inflationary pressure. Change in unemployment will be an indicator of future rate cuts.
Tokyo Avg Office Vacancies (%)
6th month in a row printing higher unemployment.
Deteriorating growth is an important component to justifying further action from the SNB to balance growth
Foreign Reserves (Australian dollar)
Deflation pressures add to the SNB’s claims that more can and needs to be done on monetary policy front.
Purchasing Manager Index Services
Service sector report needed to support manufacturing and construction figures.
Stimulus expectations have fallen through on the ECB and Fed so far, what will the BoE provide?
After the disappointing outcome of May NFPs, this timely data will carry greater weight
Ivey Purchasing Managers Index s.a.
Factory activity has cooled across the world, can Canada buck the trend?
Follows the biggest increase in credit in 10 years.
Fed's Bernanke Testifies to Joint Economic Committee
Fed's Lockhart Speaks on U.S. Economy in Georgia
Fed's Kocherlakota Speaks in Minneapolis
Fed's Fisher Speaks on Renminbi in California
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE
INTRA-DAY PROBABILITY BANDS 18:00 GMT

++++Aussie rallies after RBA cuts key rate by 25 Points as expected

Cut the takeaway: Reserve Bank of Australia June decision > 25 - bps rate, as expected > AUDUSD distributed on the rise
After cutting 50 basis points last month, the deterioration of Asian and European growth images prompted other rate by the Bank of Australia reserve. The RBA only reduced the rate of 25 - bps from 3.75% to 3.50%, according to the median forecast provided by Bloomberg News. However, with credit Switzerland Overnight Index swap price to 50-50 chance for a cut of 50 - bps, a surprise was in the cards and price action has certainly not disappointed.
Chart 1-minute AUDUSD: 5 June 2012

Graphing with Marketscope - prepared by Christopher Vecchio
Early release price action suggested that only a 25 - bps cut was due, the Dollar Australian rallying in all areas but particularly against the Yen and the U.S. Dollar. However, a few minutes before the release, it appeared that a cut of 50 - bps has filtered, with trade AUDUSD 0.9755 for only 0.9718 a minute before the decision was announced. However, with only 25 - bps down the chimney, the AUDUSD quickly regained ground and traded to 0.9791 shortly after. During the that drafting this report, the AUDUSD had plunged to its preliminary level before rising back to 0.9784.
Governor Glenn Stevens noted concerns in release covers of the RBA, with lots of time spent discussing the financial situation and global growth before touching on the evolution of the Australian economy. Presented below, without comment, are the key points of the policy statement:
Growth of the world economy, picked up in the first months of 2012, according to slow in the second half of 2011. Other moderation of growth in China. Conditions in other parts of Asia have largely recovered from the effects of natural disasters of the last year, but the trend is not clear and can be mitigated by the slowdown of Chinese growth. The United States continue to grow at a moderate pace. Raw material prices decreased lately, even if they are still mainly high. Terms of Australia of trade, reached about six months ago but they remain high. Financial markets:
The Council previously noted that Europe remains a potential source of adverse shocks. Economic and financial Europe's prospects have again been overshadowed by a weakening of growth, political uncertainty increased and concerns about the financial viability and strength of some banks. Capital markets remain open to spoil banks and corporations, but increased spreads. Long-term interest rates facing highly rated sovereign, including the Australia, have fallen to exceptionally low levels. The markets declined. In Australia:
In Australia, the available indicators suggest a modest growth continued in the first part of 2012, with significant variation between sectors. In all conditions of the labour market strengthened slightly, despite the excretion in certain industries, and the unemployment rate is low. Households and businesses continue to show a degree of behaviour of precaution, which may continue in the short term. Given this surprise (at least according to base swaps), in combination with the poor, we labour market reading Friday which has inevitably fueled speculation there, the AUDUSD might be initiated for a race towards the support of the former trendline from 0.9845/60. Gatherings should be covered by the 0.9880/0.9900, and a near daily over this area exposes 0.9930 and parity, 1.0000. Beyond these levels, we see little room for the AUDUSD to acquire new, because we believe that the ongoing stress in Asia and Europe will generate more-risk aversion, and gatherings should be seen as opportunities to sell.

$ USD rallies as may consumer confidence hits highest level since October 2007

The Takeaway: may u. of Michigan confidence Final Index 79.3 waves > Americans could extend their spending due to the higher financial confidence > USD/CAD loss to extend
US consumer confidence for may hit the highest level since October 2007, reflecting optimism persisted on the prospective resistance of the economy, inflation has eased and prospects of employment and wages have become more favourable.
The Thomson Reuters / final index of the University of Michigan mounted to 79.3 in May before 76.4 in April and well over 74.3 last May. The increase continued streak of consecutive earnings index, now at 10 months. Also topped test estimation of consensus as economists surveyed by Bloomberg News widely anticipated the gauge to hold in May of 77.8 preliminary reading.
The increase in confidence in the six months was substantial, with the Sentiment Index climbing well above the average of the recession of 69.3 but still less than the average of 88.1 for periods of non-récession. Consumers still had much hope on a growth of employment renewed in a short term despite the slowdown of jobs recently published by the Ministry of labour. Index of economic Conditions significantly increased to 87.2 in May of 82.9 in April. The Economic Outlook index advanced to 71.7 preliminary reading and 72.3 April 74.3. "The most likely prospect is that employment growth CV modest pace and confidence largely unchanged until after the November election and decisions relating to fiscal policy are taken", said Richard Curtin, Chief Economist of consumer surveys.
The final report revealed that expectations of inflation during one year before continue moderate to 3.0% preliminary reading of monthfrom may of 3.1% and 3.2% in April following a withdrawal of price of gasoline. During this time, the expectations for five years edged 2.7% to 3.0% of the preliminary report.
USDCAD1-minute chart: May 25, 2012

Graph created with strategy trader - prepared by Trang Nguyen
The US dollar has immediately edged more higher against most of its major trading partners in the minutes that followed the stronger than expected consumer confidence report. Seen 1 minute table USDCAD above, the greenback travelled 20 pips against the dollar of 1.0265 in of 1.0285 in thirty minutes. In the as of this report, the USDCAD trade to $1.02849.

:Currency Rallies Viewed As Corrective; Fresh US Dollar Upside Ahead

08 May 2012 10: 55 GMT Risk rallies viewed as technical corrections; look to sell Euro consolidating above 1.3000 ahead of next drop Investors digesting implications of latest French and Greek elections Spain back in focus as the country attempts to rescue local bank German industrial production comes in well above consensus Australian government announces return to budget surplus Although we have seen a bit of a bounce in risk correlated assets, we contend that the rally is nothing more than some minor consolidation ahead of the next wave of risk liquidation. The Euro managed to close back above 1.3000 on Monday, but from here, we expect any additional rallies to be very well capped ahead of 1.3200 in favor of an eventual retest of the 2012 lows from January at 1.2620. Market participants are still digesting the weekend election results out of France and Greece, and there is a good deal of concern as to whether the newly elected governments will acceded to the austerity measures imposed to ease the debt crisis. In Greece, the situation is highly uncertain, with the lack of a clear majority potentially creating a situation where austerity measures might be significantly reduced in order to appease the opposition. Elsewhere, Spain is back in the headlines, as the country attempts to rescue its third largest bank.
Relative performance versus the USD Tuesday (as of 10: 45GMT)
JPY - 0.21 %
CHF + 0.17 %
EUR + 0.21 %
GBP + 0.30 %
CAD + 0.43 %
NZD - 0.54 %
AUD - 0.59 %
Moving on, economic data continues to show signs of weakness, and the softer results once again highlight the fragile state of affairs in which the global economy lies. Nevertheless, the Euro did manage to hold above 1.3000 in European trade, aided by some solid auction results and a very impressive German industrial production print. Meanwhile, our Euro / Sterling long position (long @ 0.8050) found some bids on softer overnight RICS house price data, while in Australia, the government announced the country would return to a budget surplus of $A1.5B in 2012/2013. Still, overall, we expect risk correlated currencies and global equities to be very well offered on any rallies in favor of more bearish price action.
ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The market has finally cleared some key support by 1.3000 and the break opens the door for deeper setbacks over the coming days towards the 2012 lows from January at 1.2620. However, short-term technical studies will need to unwind from oversold readings before we are to see any extended declines below 1.3000, and we recommend looking to sell into rallies into the 1 3150 - 1 3200 where a fresh lower top is now sought. Ultimately, only back above 1.3300 would delay.

USD/JPY: The latest pullback from the 2012, UST highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.


GBP/USD: Finally starting to see signs of a medium-term top and potential 2012 high after the market has stalled and retreated from the area 1.6300. Key support now comes in by 1.6075 and a break and closed below this level will confirm bearish bias and accelerate declines towards 1.5800 further down. Ultimately, only a break back above 1.6300 would negate and give reason for reconsideration.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now looks as though the market could be looking to carve a fresh higher low, and we will be looking for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

€ Euro Rallies After Draghi Presser Despite No New Policy Actions

Fundamental Headlines
- Canadians Dominate World’s 10 Strongest Banks – Bloomberg
- Jobless Claims in U.S. Decline More than Forecast – Bloomberg
- Mario Draghi’s Introductory Statement – ECB
- ECB Holds Rates, Resisting Calls for Crisis Actions – Reuters
- Solid Demand for Spain Bonds – WSJ
European Session Summary
Higher yielding currencies and risk-correlated assets traded mostly lower in the overnight, but volatility and price ranges were contained overall as market participants eagerly awaited the outcome of the European Central Bank’s policy meeting midway through the European trading session on Thursday. As Euro-zone stresses have risen in the past few weeks, not in the form of liquidity issues for banks but rather a crisis of confidence, there have been calls for the ECB to introduce more measures to bide time for governments struggling to implement austerity measures. After today’s meeting, it is clear that the Mario Draghi ECB is going to hold out for as long as possible when considering new policy measures, as President Draghi noted that the ECB “didn’t discuss” a rate cut at this month’s meeting.
In terms of President Draghi’s statement, the outlook provided by the ECB was certainly downbeat. According to President Draghi, the ECB sees “downside risks” to the Euro-zone economic outlook, saying that the outlook has become more “uncertain.” On the topic of inflation, the ECB sees price pressures in line with prices broadly balanced over the medium-term horizon. Similarly, the ECB notes that liquidity is abundant in the Euro-zone and that short-term real rates are negative in all Euro-zone nations, further supporting President Draghi’s outlook that inflation will be tethered to the medium-term target at 2 percent.
The big development, or lack thereof, was the ECB’s commentary on what their intentions are with their securities market program (SMP), the facility the central bank uses to intervene in the secondary bond markets to purchase sovereign debt (mainly PIIGS). President Draghi said that the SMP is neither “eternal nor infinite,” and while the program is “still there,” the ECB never “pre-commits.”
Overall, while the Euro rallied across the board following the statement, this could be in part due to the expectations that the ECB might cut rates at this meeting – I find that the “weak” hands were shaken out of the market during the press conference. Instead, with the ECB offering little more substantive support, the increasing tensions between politicians and policymakers is expected to continue, with more governments coming out to offer lip service to the notion that the Euro-zone just needs to grow – as if it were that simple given current market conditions. There’s little contained within the ECB’s statement and the President Draghi presser that would suggest the Euro’s intraday rally is sustainable.
EURUSD 5-min Chart: May 3, 2012

Charts Created using Marketscope – Prepared by Christopher Vecchio
Following the press conference, the Euro took back much of its losses, and even rallied up 0.09 percent against the US Dollar overall. The Canadian Dollar remains the strongest currency, with the USDCAD depreciating by 0.13 percent. The Australian and New Zealand Dollars were among the weakest majors, shedding 0.45 percent and 0.97 percent, respectively.
24-Hour Price Action
Key Levels: 13:05 GMT

Thus far, on Thursday, the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is trading higher, at 9902.44 at the time this report was written, after opening at 9890.80. The index has traded mostly higher, with the high at 9923.23 and the low at 9887.13.

FOREX NEWS - Euro rallies on Fitch, IMF comments, but risks selling

* Euro up, Fitch tones down Italy talk, IMF plans more funds
* Solid demand for German, Portuguese debt also boost euro
* Analysts see more losses if Greek debt talks break down
By Naomi Tajitsu
LONDON, Jan 18 (Reuters) - The euro rallied broadly on Wednesday after a ratings agency appeared to soften its stance regarding its outlook on Italy, while a media report that the IMF would boost its funding capabilities also pushed the single currency higher.
The single currency kept its distance from a 17-month low versus the dollar, but many in the market believe its gains this week are fleeting, and that the single currency may be in for another beating if the euro zone debt crisis deteriorates.
Investors resumed cutting back bets to sell the euro after an analyst at Fitch said the ratings agency did not expect Italy to default. In earlier trade, the euro sold off after a senior director said a two-notch downgrade to Italy was an option.
Fitch's comments came just days after rival S&P on Friday cut its credit rating for Rome and eight other countries. S&P on Monday cut its AAA rating of the EFSF European bailout fund.
Traders said a media report that the IMF would propose increasing its lending pool drove the euro higher, while solid demand at German and Portuguese bond auctions bolstered the single currency to near session highs.
"The headline about the IMF wanting to expand its lending facility has helped risk to recover quite brutally across the board," said Sebastien Galy, currency strategist at Societe Generale.
"People were trying to fade risk (in earlier trade) by taking profits on the euro, and as usual, they got burned a bit."
The euro traded at $1.2820, up 0.7 percent on the day after jumping to a session high of $1.2845. Traders said the single currency was finding support from bids around $1.2810.
Its gains were broad-based, with the euro climbing more than 0.5 percent to 98.60 yen, backing off an 11-year low plumbed earlier in the week, while it recovered from a record trough hit against the Australian dollar.
The dollar took a hit as a result of the euro's gains. Against a currency basket, the U.S. currency fell 0.5 percent to 80.779, although it hovered in range of a 16-month high hit on Friday. It slipped a touch to 76.70 yen.
GREEK RISKS
Also supporting the euro was solid demand seen at a German auction of two-year notes, while Portugal managed to sell short-dated paper without a hitch despite being downgraded to "junk" status by S&P late last week.
Analysts believe euro zone debt auctions, even for weaker countries, have been going well due to demand from banks, which many suspect have ample funds to invest in domestic debt after taking up a massive amount of three-year ECB loans last month.
But despite its rally this week, investors believe the euro will remain vulnerable to more evidence of fiscal and economic weakness in the region, and see more selling if Greece is unable to reach a debt deal with its creditors.
This would raise the chance of default.
"Greek bond negotiations could trigger more euro weakness as they have to close a deal soon, before Greek debt repayments are due in March," said Richard Falkenhall, currency strategist at SEB in Stockholm, referring to talks beginning in Athens on Wednesday.
"If they don't come up with a solution soon, it could result in more euro weakness."
© Thomson Reuters 2011. All rights reserved.
Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."