Euro Rebounds From 4-Year Lows
| Daily Forex Fundamentals | Written by MG Financial Group | May 18 10 06:02 GM |
Traders will look ahead to Tuesday's reports, consisting of the April producer price index, housing starts and building permits. Consensus estimates are calling for housing starts to improve to 650k units in April from 626k units from March and for building permits to remain unchanged at 680k units. The headline producer price index is forecast to creep up by 0.1% on a monthly basis versus 0.7% and higher by 5.6% on an annualized basis compared with 6.0% previously. The core PPI figures are seen unchanged at 0.1% m/m and 0.9% y/y.
EURUSD managed to claw its way back after hitting a fresh 4-year low at 1.2232 to climb back toward the 1.24-region. Uncertainties over the Eurozone sovereign-debt crisis continues to weigh on the single currency, triggering heightened bouts of risk aversion and increased volatility. Traders have largely shrugged off recent Eurozone economic reports. Nonetheless, in the session ahead several key releases are scheduled, including the Eurozone HICP, core inflation and Germany’s ZEW sentiment survey.
The euro will find support at 1.23, followed by 1.2260 and 1.2230. Additional floors will emerge at 1.22, backed by 1.2170 and 1.2140. On the topside, resistance is seen at 1.2370, followed by 1.24 and 1.2450. Subsequent ceilings are eyed at 1.2480, backed by 1.25 and 1.2550.
| Daily Forex Fundamentals | Written by Westpac Institutional Bank | May 18 10 05:39 GMT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Forex Exchange Morning ReportAnother day of risk-averse behaviour, albeit in a milder form, with commodities the main sufferer on concerns European debt crisis contagion could slow the global economy. The CRB index is down 2.2% to a post October low, with copper futures down 6.0%, and oil -1.9% to below US$70/bbl. US manufacturing was weaker than expected, and added marginally to the mood. US equities (S&P500) are down -0.3%, having recovered on a bounce in the EUR and better late-session house building data. Global funding concerns remain, US 3mth Libor rising 1.5bp to 0.46% (compared to 0.25% in early March). US 10yr treasuries gained 2bp in yield late in the session. US data showed foreigners purchased $109bn of US treasuries in March, much higher than in February.The US dollar index stalled around its 12 month high. Outperformer EUR rebounded from its Apr-06 low of 1.2235 (made during yesterday's Sydney session) to 1.2414, but still looks oversold according to momentum indicators. The ECB has bought €16.5bn bonds so far and true to their word will sterilise the operation by issuing term deposits for the same amount. Safe-haven JPY also performed well, holding around 92.50 apart from a brief foray to 91.85. AUD followed EUR's moves but underperformed, from 0.8750 up to 0.8830 initially, and then down to 0.8686 (Feb low) before recovering back to 0.8750. NZD was yesterday's laggard, hugging 0.7000 during Europe but falling to 0.6917 in NY before regathering to 0.6970. AUD/NZD rose to 1.2600. US NY Fed factory index falls from 32 to 19 in May. This survey contrasts with the cycle high for the April national factory ISM, with which there is some survey period overlap, so one possible inference is that later responses in the NY survey were weaker than earlier responses. The lower business confi dence headline could be a function of recent equities volatility and concern about economic growth due to sovereign debt issues and investment banking reputations. The detail showed sharply slower orders (April 29>May 14) and shipments (32>11) growth but jobs picked up slightly (20>22). The inherent volatility of this particular index means we need to be cautious in interpretation, but if the other regional factory indices over the next two weeks show a similar pull-back, that would be a solid signal that the US industrial recovery might be losing some momentum in mid Q2. US TIC data for March. Net long term capital fl ows soared to $141bn in March, refl ecting strengthening global demand for US fi nancial stocks including stocks and Treasuries, with the Chinese big players. Concerns about European sovereigns and favourable US economic data would have been attractive factors for investors although the USD did not begin its latest round of appreciation (on safe have status) until April. US NAHB homebuilders index rose from 19 to 22 in May, indicating less pessimism on the part of builders, as they continued to benefi t from increased sales following the fl urry of activity in the market as buyers scrambled to beat the end April expiry of the $8k tax credit. Japanese machinery orders close to expectations in March. Core orders rose 5.4% in March, which taken together with an upward revision to Feb, comes in pretty close to the +6.3% consensus. Japanese corporate goods prices move closer to positive territory. The headline improved to -0.2%yr from -1.3%, as prices rose in the month and favourable base effects flowed through. The UK CBI industrial trends survey for May saw a sharp improvement with orders jumping from -36 to -18, driven by a sharp rise in export orders (from -16 to 3, the fi rst positive reading since 2008). Sterling depreciation is starting to show up in a whole range of data now, including exports and industrial production, as well as this survey. Output volumes rose but selling prices moderated. OutlookAUD/USD and NZD/USD outlook next 24 hours: Much today depends whether the EUR's bounce is sustained. AUD looks supported at 0.8690 but should struggle beyond 0.8850. NZD should hold above 0.6920 but go no further than 0.7000Events Today
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