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No QE3 on the horizon triggers US dollar strength

Daily Outlook - 22nd June 2012

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 22/06/2012

Sterling / U.S Dollar (GBP / USD):

Sterling- dollar came under selling pressure in yesterday’s trading session, falling from 1.5730 down to 1.5580. The US dollar strengthened across the board as many currency traders were expecting the Fed to push on with QE3 on Wednesday night. This news was not delivered hence shorting of the USD, which had been elevated in the days leading up to the FOMC announcement, was unwound and currency rates have been corrected in the light of no new quantitative easing (QE) in the near future. Following a 150 pip drop the pair turned at 1.5580 in the late NY session and has been able to hold trading in the low 1.56s this morning. Looking ahead there are no financial data announcements out of the UK and US. From a technical stance the RSI is pointing up and if the pair gathers enough momentum to challenge the 1.5690/1.5700 resistance zone there is a preference to sell here with the first floor seen at 1.5560. In support of a short opportunity, on the 30 min bar chart the RSI is capped by a negative trend line.    

Euro / U.S Dollar (EUR / USD):

Euro-dollar fell from 1.2700 down to 1.2530 on the US dollar strength. Overnight challenges to trade in the lower 1.25’s failed and this morning the pair has been lifted to 1.2555. Germany’s business climate and current assessment data have come out sturdy which has supported the euro as well corrections on yesterdays large US dollar moves. The pair is now holding above 1.2540 and moves up will expose the overnight Asian high at 1.2565. Technical analysis signals indicate a preference to sell from 1.2570, as long as it is the resistance, and eyes 1.2475 as the initial profit target. The euro may come under selling pressure next week as the Spanish banks stress test revealed that the sector needs approximately EUR 60 billion of capital and EU finance ministers remain in their usual state of disagreement on the major issues such as how to manage the European Stability Mechanism (ESM), this has been postponed until the next EU summit on June 28-29. Bringing some fun to the eurozone crisis Greece is to face Germany in tonight’s Euro 2012 quarter finals. Will Germany knock Greece out of the Euro?!

U.S. Dollar / Japanese Yen (USD / JPY):

Dollar-yen continues to climb and overnight tested 80.50 a significant resistance level (highs from May 2nd, 3rd and 16th 2012). This resistance has acted as a barrier to the uptrend so far but technical analysis indicates the upside will prevail and there is a preference to buy from 80.00 (yesterdays pull-back) on the retrace. The break above 80.0 is a positive signal that has opened the path to 80.55. This pair has risen on Feds policy stance which has strengthened the US dollar and created a more risk-on environment. This move up, above 80.0, may have taken the pressure off a BoJ intervention to weaken their currency.

Australian Dollar / U.S. Dollar (AUD / USD):

Aussie-dollar along with the other majors moved on US dollar strength, the pair moved from 1.0190 down to 1.0030. It clawed back some of its gains overnight however met selling pressure in the late Asia/ early London session which pulled the price down to 1.0008, near parity. Since parity is such a psychologically significant level the market crowd have not taken the pair below 1.0 and it currently trades at 1.0020. From a technical stance the preference is to sell from 1.0100 with 0.9994 (15th June low) as the initial profit target. If the pair breaks lower more strong bids (to buy) are expected at 0.9970/65.

Gold (XAU):

XAU/USD continued its move lower that was initially sparked by the U.S. Fed’s FOMC statement, eluding to an extension of Operation Twist, but stopping short of implementing a third round of quantitative easing.  It opened the Asian session at 1566 and was able to break significant support at 1564 and briefly moved to the next level down (1560) before staging a slight rally to finally close the session at 1569.  News is thin on the ground today, so technicals will play a larger part in trading decisions.  Looking ahead, technical analysis is pointing to a lower day for gold, with a pivot of 1583 and support at 1554 and 1543.

Oil:

OIL/USD has followed gold on the way down over the last few days, possibly due to weak U.S. data and a report stating a slowdown in the global economy.  It opened last night at 78.03 and slowly moved higher to hit a session high of 78.99 before falling once again to achieve a session low of 77.54 and finally closed the session at 78.44.  Technical analysis has a preference to sell oil at a pivot of 80.15 with supports at 77.60 and 76.20.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5515  1.5560  1.5625  1.5690  1.5735
EUR/USD  1.2440  1.2475  1.2552  1.2570  1.2610
USD/JPY  79.65  80.00  80.28  80.55  80.80
AUD/USD  0.9965  0.9994  1.0029  1.0100  1.0140
XAU/USD  1543.0  1554.0  1570.1  1583.0  1590.0
OIL/USD  76.20  77.60  78.70  80.15  81.00

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