Currency Markets – Morning Trading Session

The US dollar was sharply higher against the Japanese yen Thursday morning on investment flows out of Japan, but currency markets overall are lacking in direction as traders wait for another U.S. Treasury auction later in the session. Japanese buying of foreign bonds appears to be the key driver of the dollar’s strength against the Japanese currency, with month end positioning and stop loss selling also cited as reasons for the yen’s retreat. News that the S&P had actually lifted the outlook for New Zealand debt to stable from negative, after the country released the budget plans, also buoyed the currency. The New Zealand dollar is around 62.44 cents U.S. from 61.59 late Wednesday.

News that U.S. durable goods unexpectedly surged by 1.9% in April, much stronger than the flat performance expected by economists, and that initial U.S. jobless claims dropped by 13,000 to a seasonally adjusted 623,000 in the week ended May 23, had relatively little impact on currency markets. The euro gained some ground against the dollar after the news, but afterward surrendered it.

Thursday morning, the euro was at USD1.3869 from USD1.3888 late Wednesday, while the dollar was at JPY97.14 from JPY95.21. The euro was at JPY134.75 from JPY132.24. The pound was at USD1.5922 from USD1.6005, while the dollar was at CHF1.0906 from CHF1.0883.

Currency Markets – Afternoon/Evening Trading Session

Currency markets are somewhat directionless early Thursday ahead of the auction of USD26 billion in new seven year U.S. Treasury notes later in the session. The UK Pound snaps back above USD1.5900, with rate recovering to USD1.5948 after being pressured to pullback lows of USD1.5875 and looking at the time as if it was targeting stops below USD1.5850. Above USD1.5950 may allow for a retest on earlier highs at USD1.5978, with offers noted to USD1.5980. Break here targets USD1.6000 once again, but with a shooting star candle on the daily chart, this is increasingly looking unlikely. Equity markets are bouncing around with the dollar yen rally failing to make a clear break above its key resistance level at JPY97.20/25 (200 day m/a) seen prompting the snap.

The euro pound remains in consolidation mode, following yesterday’s extended easing to 0.86535, with the rate currently held within an outside range of 0.8685/80-0.8720/25. Rate currently favors’ the upper end of the range though holding off a retest of earlier highs around stg0.8721. Stops noted on a break of stg0.8725/30. The euro yen takes out the May highs on the break above JPY134.80 as the yen crosses all trade with a strong bid tone. Some light interest reported into JPY135.00 now, more around JPY135.50/55, though little of significance ahead of the April spikes high at JPY137.39.

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