2013-05-28 03:25 GMT
After the storm
As last week’s volatility in Japanese markets demonstrates central banks do not have it all their own way. Unfortunately for Japan the risk remains that policy makers spur higher yields without accompanying growth, an outcome that would be highly undesirable, especially if it hits economic activity. Equity markets and risk assets in general came under pressure and safe havens found long lost bids, with core bond yields moving lower and JPY and CHF strengthening. The heightened volatility in markets was also partly triggered by concerns about the timing of the tapering off of Fed asset purchases, with Fed Chairman Bernanke setting the cat amongst the pigeons by with commenting about the possibility of reducing asset purchases over the next few meetings. Additionally weaker than forecast Chinese manufacturing confidence data came as another blow to markets. While the market reaction looked a tad overdone in it is notable that the dichotomy between growth and equity market performance has widened over recent weeks.
This week is likely to begin on a calmer note, with holidays in the US and UK today. Data releases in the US will remain encouraging , with May consumer confidence likely to move higher although US Q1 GDP is likely to be revised slightly lower to 2.4% due an inventories hit. In Europe, while the trajectory of recovery is starting from a much lower base there will be some improvement in business confidence in May while inflation will be well contained at 1.3% YoY in May, an outcome that will maintain room for more European Central Bank policy easing. In Japan a sixth straight negative CPI reading will highlight jus how difficult the job is for the Bank of Japan to meet its inflation target. The JPY was a major beneficiary of last week’s volatility helped by short covering as speculative positioning in the currency reached its lowest level since July 2007. A calmer tone to markets ought to ensure that JPY upside will be limited and USD buyers are likely to emerge just below the USD/JPY 100 level. In contrast the EUR has been surprisingly well behaved despite the fact that speculative EUR positioning has also dropped sharply over recent weeks. While the overall trend is lower EUR/USD will find some support on any dip to around 1.2795 this week. -FXstreet.com
FOREX ECONOMIC CALENDAR
2013-05-28 06:00 GMT
Switzerland. Trade Balance (Apr)
2013-05-28 07:15 GMT
Switzerland. Employment Level (QoQ)
2013-05-28 14:00 GMT
USA. Consumer Confidence (May)
2013-05-28 23:50 GMT
Japan. Retail Trade (YoY) (Apr)
FOREX NEWS
2013-05-28 05:22 GMT
USD/JPY offered at 102 figure
2013-05-28 04:23 GMT
Bearish chart pattern developments still favor further downside in EUR/USD
2013-05-28 04:17 GMT
AUD/USD erased all loses, back above 0.9630
2013-05-28 03:31 GMT
GBP/USD chopping around 1.5100 in Asia trade
MARKET ANALYSIS – Intraday Analysis
Upwards scenario: Recently pair gained momentum on the downside however appreciation above the next resistance at 1.2937 (R1) might be a good catalyst for a recovery action towards to next expected targets at 1.2951 (R2) and 1.2965 (R3). Downwards scenario: Any downside penetration is limited now to the initial support level at 1.2883 (S1). A breach of which would open a route towards to next target at 1.2870 (S2) and potentially could expose our final support at 1.2856 (S3) later on today.
Resistance Levels: 1.2937, 1.2951, 1.2965
Support Levels: 1.2883, 1.2870, 1.2856
Upwards scenario: New portion of macroeconomic data releases might increase volatility later on today. Our resistances at 1.5139 (R2) and 1.5162 (R3) could be exposed in case of possible upwards penetration. But first, price is required to overcome our key resistive barrier at 1.5117 (R1). Downwards scenario: Downside development remains for now limited to the next technical mark at 1.5085 (S1), clearance here would create a signal of possible market weakening towards to next expected targets at 1.5063 (S2) and 1.5040 (S3).
Resistance Levels: 1.5117, 1.5139, 1.5162
Support Levels: 1.5085, 1.5063, 1.5040
Upwards scenario: USDJPY upwards penetration is approaching our next resistive barrier at 102.14 (R1). Surpassing of this level may initiate bullish pressure towards to next visible targets at 102.41 (R2) and 102.68 (R3). Downwards scenario: Risk of possible corrective action is seen below the support at 101.65 (S1). With penetration here opens a route towards to our immediate support level at 101.39 (S2) and any further price cut would then be limited to final target at 101.10 (S3).
Resistance Levels: 102.14, 102.41, 102.68
Support Levels: 101.65, 101.39, 101.10