Currency Trading – Morning Report
The Japanese yen rose against the US dollar and the euro in Asia trading on Friday, helped by strong factory output data released by Japan, but many currency traders were uncertain as to whether the Japanese currency could climb further in the next few days. Data from Japan’s trade ministry showed that industrial production rose 5.2% in April, the biggest gain since March 1953, and as a result led Asian hedge funds and other short term investors to buy the Japanese yen. The data added to hopes that Japan’s export reliant economy has left behind the worst of its recession, although other data issued in the day indicated that its domestic demand is deteriorating, so a slightly confusing picture for fundamental news. The US dollar fell briefly to 96.25 against the yen, down more than two thirds of a yen from late New York Thursday, before recovering to around 96.50.
In Europe, the Euro fell to USD 1.3793 against the dollar in Asian session before rebounding from there, partly due to cross buying versus the yen and the release of better than expected German employment data (unemployment rate at 8.2% vs a forecast of 8.4% ), whilst the unemployment change also rose by a much lower than expected number at 1,000 in May against a forecast of an 67,000 increase.
The UK pound traded briefly above the USD1.6000 level but ran into a wall of offers and pulled back later in the trading session, as this price level now proves to be a major stumbling block to any move higher. CBI distributive trades fell to -17 against a forecast 0f -10 . The pound yen was incredibly well supported, and traded at fresh year highs of 155 Yen. Finally the aussie dollar tried to make a new weekly high after Sydney’s close, but only managed to reach 0.7870.
Currency Trading – London Session Outlook
The outlook for the yen looks unclear as many of the currency markets still lack any clear sense of direction, according to many analysts and currency speculators. Currency traders’ focus is changing around so often, so quickly, from stock markets to U.S. yields to economic data, that it’s too risky to make long-term directional bets,and many traders are now simply focusing on intra day trading using shorter time frame charts.
The currency markets are now waiting for revised U.S. gross domestic product data for the first quarter due later in the global day to gauge the state of the world’s largest economy. The euro is higher against the dollar, closing in on USD1.40, and both are lower against the yen, as the market renews its focus on dollar weakness, primarily from a technical perspective, and view supported by the US dollar index, which is looking increasingly bearish.
The euro vs dollar is currently holding back around USD1.4000. The focus during the day will turn to end month MSCI fixing flows with trader’s suggesting medium demand for dollars versus the euro. Despite this some technical traders already see potential for a further rally in the euro dollar possibly as high as USD1.4200 (there are many barriers positioned here). Support is seen placed at USD1.3960, with interest trailing all the way down to USD1.3945. Stronger interest is placed at USD1.3925/20 with offers placed at USD1.4015/25, USD1.4045/50. Some currency traders were citing news that Korea’s National Pension Service planned to lower its exposure to U.S. bonds. This may have prompted some selling of the U.S. dollar, though the Korean government didn’t say how much the fund might reduce its U.S. bond exposure, or whether this would mean buying fewer bonds or divesting existing holdings.
The UK pound has received a boost this morning posting highs at USD1.6021 on release of stronger than expected nationwide house price data, the rate extending highs to USD1.6025 and retaining a firm tone. Offers seen placed to USD1.6030, with more toward USD1.6050. This is despite the technical weakness now in evidence on the daily candle chart for the dollars to pounds pair.
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