Market Overview | Written by ActionForex.com | Jul 01 08 07:03 GMT |
Aussie extends the pull back from new 25 year high made yesterday after RBA left rates unchanged at 7.25% as widely expected. More importantly, the accompanying statement sounds confident that "demand growth will be moderate this year," balancing the "concerning" inflation outlook. While inflation is likely to remain "relatively high" in short term on rises in global oil prices, it's believed to decline over time. The statement suggests that interest rates will remain at a 12 year high of 7.25% for considerable period of time.
On the other hand, then Japanese yen is trying to regain some momentum on risk aversion after Q2 Tankan survey showed confidence among businesses dropped to the lowest in almost five years. Big manufacturer confidence tumbled sharply from 11 to 5 in Q2 but was above consensus of 3. Non-Manufacturing confidence dropped from 12 to 10, also above consensus of 8. Q2 capex rose more than expected by 2.4%.
Elsewhere, Euro remains steady after stronger than expected May retail sales in Germany, with 1.3% mom, 0.7 % yoy growth. Sterling is also steady against dollar after nationwide house price dropped by -0.9% mom, dragging yoy rate down to -6.3% yoy in Jun.
Markets will cautiously await a number of economic data later today. Particular focus will be on UK PMI manufacturing which is expected to dip into contraction reading of 49.8 in Jun. Eurozone unemployment rate is expected to be unchanged at 7.1%. Eurozone PMI manufacturing is expected to be unchanged at 49.1 in June. Swiss SVME PMI is expected to drop further to 55 in Jun.
Most importantly, market will looking into today's US ISM manufacturing report which is expected to remain below 50 for the fifth consecutive months. On the other hand, price paid component is expected to climb further from 87 to 81. Another focus will be on whether the employment component will stay contractionary for the eight consecutive months.
AUD/USD Daily Outlook
Daily Pivots: (S1) 0.9535; (P) 0.9601; (R1) 0.9650; More
AUD/USD fails to sustain at new 25 year high of 0.9667 and retreats sharply since then. With an intraday top in place, intraday bias is flipped back to the down side for 0.9492 support. though, downside should be contained there and bring another rally. Above 0.9595 minor resistance will bring retest of 0.9667. As discussed before, sustained trading above 0.9653 key resistance will confirm resumption of medium term up trend, targeting 1.0000 psychological resistance.
In the bigger picture, with 0.9291 support intact, followed by break of 0.9653 key medium term resistance, the whole up trend from 0.8512 could have resumed. Regardless of the structure, such rally is treated as part of the long term up trend from 0.4773 (01 low) and is still expected to extend further to next medium term target of 100% projection of 0.4773 to 0.8008 from 0.6773 at 1.0008 which overlaps with parity.
However, the upside momentum since making a low at 0.7675 is still far from being convincing. A break below 0.9327 support will be the first alert that rise from 0.9512, as well as that from 0.7675 has completed. This will set the stage for deeper decline back into 0.7675, 0.8870 support zone, with key long term support of 0.8008 lying in between.
Forex News Digest
- No change to Reserve Bank of Australia's cash target rate of 7.25%
- The Day Ahead Canada & U.S.: ISM Mfg, U. S. Construction Spending, Canada Day
- U.S. Preview: June ISM Manufacturing to Continue in Moderate Decline
- Closing Market Update: Sovereign Spreads Blown Out as U.S. Sits Out Selloff
- Monday's News Recap: Chicago Business Barometer Upbeat, Canadian GDP Rebounds
- Yen Strengthens as Economic Growth Concerns Damp Demand for Higher Yields
- Australian Dollar Declines as Central Bank Says It Expects Moderate Growth
- Manufacturing in U.S. Probably Shrank for Fifth Month as Fuel Costs Jumped
- Dollar May Reach 104.43 Yen Should It Weaken Past 105 Yen, Forecast Says
Economic Indicators Update
| GMT | Ccy | Events | Actual | Consensus | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Japan Tankan big manufacturing Q2 | 5 | 3 | 11 | |
| 23:50 | JPY | Japan Tankan non-manufacturing Q2 | 10 | 8 | 12 | |
| 23:50 | JPY | Japan Tankan capex Q2 | 2.40% | 2.00% | -1.60% | |
| 04:30 | AUD | RBA rate decision Jul | 7.25% | 7.25% | 7.25% | |
| 06:00 | EUR | Germany Retail sales M/M May | 1.30% | 0.80% | -0.60% | |
| 06:00 | EUR | Germany Retail sales Y/Y May | 0.70% | -1.10% | -1.00% | |
| 06:00 | GBP | U.K. Nationwide hse price M/M Jun | -0.90% | -1.00% | -2.50% | |
| 06:00 | GBP | U.K. Nationwide hse price Y/Y Jun | -6.30% | -6.40% | -4.40% | |
| 07:30 | CHF | Swiss SVME PMI Jun | 55 | 55.7 | ||
| 07:55 | EUR | Germany Unemployment rate Jun | 7.90% | 7.90% | ||
| 07:55 | EUR | Germany Unemployment change Jun | -15K | 4K | ||
| 08:00 | EUR | Germany PMI manufacturing Jun | 53.3 | 52.3 | ||
| 08:00 | EUR | Eurozone PMI manufacturing Jun | 49.1 | 49.1 | ||
| 08:30 | GBP | U.K. PMI manufacturing Jun | 49.8 | 50 | ||
| 09:00 | EUR | Eurozone Unemployment rate May | 7.10% | 7.10% | ||
| 14:00 | USD | U.S. ISM manufacturing Jun | 49 | 49.6 | ||
| 14:00 | USD | U.S. Construction spending Jun | 49 | 49.6 | ||
| Canada Market holiday |
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