USD Strengthens But Remains In Check

The greenback retraced some of its earlier fall, despite the weaker than expected ADP employment figure yesterday. Analysts tend to also attribute the correction to an initial overreaction during yesterday’s morning as the USD had continued to weaken. Analysts also fear that the market may be pricing too aggressively the possibility of a rate cut by the Fed and sooner than later. The US labor department is to release its Employment report for May tomorrow and the markets are expected to scrutinize the employment data to estimate whether there is a slack in the US employment market or not. We could see the USD stabilizing somewhat today, yet should market worries persist we could see the USD start weakening again. USD/JPY maintained a sideways movement yesterday between the 108.50 (R1) resistance line and the 107.90 (S) support line. We expect the pair to maintain its sideways movement for today, yet the market may start positioning itself ahead of the US employment report. Should the pair’s long positions be favoured by the market’s we could see it breaking the 108.50 (R1) resistance line. Should the pair come under the selling interest of the market, we could see it breaking the 107.90 (S2) support level.

ECB interest rate decision

The ECB is to release its interest-rate decision today (11:45, GMT) and is widely expected to remain on hold at 0.0%. EUR OIS imply a probability of 95% for the bank to remain on hold at the current stage. Given the probably unchanged interest level, the markets are expected to be influenced by the accompanying statement and the following press conference of ECB President Mario Draghi (12:30, GMT). The bank may sound dovish given the recent soft inflation rate and despite some hopes still existing regarding growth. Points of special interest would include the announcing of possible terms for the new TLTRO program, any further rate guidance and any changes in the bank’s forecasts. Should the bank sound more on the dovish side, we could see the common currency weakening. EUR/USD tumbled yesterday after testing the 1.1300 (R2) resistance level, breaking the 1.1260 (R1) support line (now turned to resistance), the upward trendline incepted since May 31st and continued its drop only to bounce on the 1.1220 (S1) support line. As the pair broke its upward trendline, we switch our bullish view in favor of a sideways scenario. Should the bulls take over the pair’s direction, we could see it breaking the 1.1260 (R1) resistance line once again and aim for higher grounds. Should the bears dictate the pair’s direction, we could see it breaking the 1.1220 (S1) support line and aim for the 1.1175 (S2) support barrier.

Other economic highlights, today and early tomorrow

Today during the European session, we get Germany’s factory order’s growth rate for April and Eurozone’s 2nd estimate of the GDP growth rate for Q1. In the American session, we get the US international trade balance for April and Canada’s trade balance figure also for April as well as the Ivey PMI for May. In tomorrow’s Asian session, we get Japan’s household spending for April. As for speakers, please note that BoJ Governor Kuroda, BoE Governor Carney, IMF’s Christine Lagarde, Dallas Fed President Kaplan, NY Fed President Williams (NYSE:WMB), BoJ Governor Kuroda and San Francisco Fed President Daly are scheduled to speak.

4-Hour USD/JPY

•Support: 107.90 (S1), 107.20 (S2), 106.60 (S3)

•Resistance: 108.50 (R1), 109.15 (R2), 109.75 (R3)

4-Hour EUR/USD

•Support: 1.1220 (S1), 1.1175 (S2), 1.1125 (S3)

•Resistance: 1.1260 (R1), 1.1300 (R2), 1.1340 (R3)

FX Rates

Global FX

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