USD rally ends on poor inflationary numbers

Last week’s currency trading review
The Dollar experienced six consecutive sessions of rallying in beginning of the week following the edging higher of Treasury bonds. The dollar was further supported by strong economic data in the middle part of the week in the form of PPI, and Retail Sales coming in almost double expectations on Wednesday. However gains in the USD were soon capped with poor inflationary data on Friday. The Euro eased through out the week against the USD before rebounding in the later part of the week. Although data out of the EZ added to the cause that the booming economy may be starting to slow in the form of poor industrial production and a widening of the Trade Balance surplus on Friday, yet did well to regain its earlier week losses on the back of a broadly weaker dollar. The Euro closed last week at 1.3378 having opened at 1.3356. The Japanese Yen ended the week battered, reaching 4.5 year highs against the USD in three consecutive sessions. The BoJ’s decision to keep rates on hold and give an indication that there was no urgency for monetary tightening saw the Japanese Yen continue to fund high yielding currencies, as the carry trade remained in full swing. Highlighted by the EURJPY cross, reached an all time high on Friday, of 165.27. The USDJPY closed last week at 123.44 having opened at 121.79 at the start of the week. The GBP started the week soft against the dollar, before hawkish comments by Governor King mid week gave some rebound to the pound, despite CPI data coming in a little worse than expected. The GBP closed last week at 1.9751 higher than the open of 1.9694. The AUD was quiet at the beginning of the week due to a market holidays. Much of the weeks focus surrounded the RBA Governor Stevens talk on Thursday, where short term dovish outlook was sounded as the Central Bank bought time in order to monitor economic data before resorting to monetary tightening. Initially, the long AUD positions were squared off, post comments causing an ii slight sell of before the AUD rallied to end the week on the back of a broadly weaker dollar. The AUD closed last week at 0.8415 having opened at 0.8435 in the New York session. In other news, the RBNZ intervened on Monday for the first time since the currency floated in 1985. as a result the NZD was sold off from 0.7640 to 0.7500 in short period of time dropping by 1.8% in a single session.

The forex trading week preview
In the States; an extremely quiet week is expected for US markets in light of last week’s heavy slate of data. Housing Starts seems to be the key data release this week on Tuesday whilst the Philly Fed survey will round of the week on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; will be the busiest economy of all markets in terms of data releases, ECB President Trichet is scheduled to speak on Monday, and the release of the German ZEW survey out on Tuesday. The German IFO index is scheduled to be made public on Friday before President Trichet ends the week with another speech. In the UK; will be subject to an absence of data with the only tier one data in the form BoE Minutes of the June 7 meeting published on Wednesday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; the BoJ minutes for the May meeting will be published on Wednesday. Whilst the Trade Balance for the month of May will be made public on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; a very quiet week for Australian markets is expected with assumption that the AUD will be trading technically for much of the week. We will provide our previews and reviews of these data releases in the daily summary.

Key weekly pivot levels

Euro 1.3385

Initial support at 1.3305 (June 15 low) followed by 1.3262 (Jun 13 low). Initial resistance is now located at 1.3392 (June 1 high) followed by 1.3436 (June 8 high)

Yen 123.50

Initial support is located at 122.86 (June 15 low) followed by 122.54 (Jun 14 low). Initial resistance is now at 123.68 (June 15 high) followed by 124.06 (Mid Dec 2002 high)

Pound – 1.9765

Initial support at 1.9687 (June 15 low) followed by 1.9622 (Jun 8 low). Initial resistance is now at 1.9793 (June 8 high) followed by 1.9969 (June 5 reaction high)

Australian Dollar – 0.8425

Initial support a 0.8348 (June 15 low) followed by 0.8333 (June 14 low). Initial resistance is now at 0.8479 (Jun 7 trend high) followed by 0.8500 (Jun 7 trend high)

Gold – 658.30

Initial support at 643.50 (June 13 low) followed by 637.36 (Mar 14 low). Initial resistance is now at 655.00 (June 11 high) followed by 661.65 (June 8 high)