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UK data reveals lower inflationary pressure and a decline in retail sales

Daily Outlook - 19th June 2012

Written by Zoe Fiddes


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

GBP/USD took a tumbled in the early London session as UK CPI data came out at 2.8% vs. 3.0% y/y as expected and -0.1% vs. 0.1% m/m and simultaneously news revealed that the retail price index dropped by 0.4% to 3.1% y/y (May results). Sterling weakened across the board as the market reacted to the negative news which implies that the UK economy is slowing. However, in the bigger picture a short-term ease in inflation is not necessarily damaging for the economy as long as the y/y figure remains around 2.0% which is the target set by the Bank of England. Sterling-dollar fell to 1.5615 before reversing back to 1.5970. A bullish bias remains above 1.5600 with a preference to buy around that level and the initial ceiling lies at 1.5730. For the fundamental traders this afternoon we have US building permits and housing starts (MAY) at 13:30 BST, both are expected to come out slightly higher than the previous months results.

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

EUR/USD followed GBP/USD dropping to 1.2570 before reversing back to 1.2628. Following the disappointing UK data the German ZEW survey, which gives an indication of economic sentiment, came out negative at -16.9 but there was little reaction to this in the market at the euro managed to hold up. The pair still remains under pressure and in the short-term the next area of selling interest is 1.2620-30 which is the price zone that is currently being tested. The initial floor lies at 1.2555/68 which are lows from today and June 18th. If the pair does break above 1.2630 the rate could move to 1.2650/55. This pair may become more volatile around the US data announcements later today.

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

USD/JPY has traded sideways since the early move down from 79.00 to 78.85 in the Asia end / London open. Moves in this pair are fairly unexciting for now; we can see a support at 78.85 (June 18th and 19th lows) and past this the floor lies around 78.60. The pair was trading comfortably above 79.00 last week however moves on Friday saw it back to 78.60 as the pair broke-out through the 79.15/79.00 support. The market are nervous on the Bank of Japan’s (BoJ) next moves, if they intervene again the JPY will rapidly weaken.

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

AUD/USD has come up to test 1.0155 this morning as the pair remains in the uptrend we have seen throughout June. This uptrend, which began on June 1st, has taken the pair from 0.9580 to the 1.0155 high seen this morning. On an intraday analysis the pair is expected to continue up and there is a preference to buy from the pivot point 1.0090 with an initial ceiling at 1.0195. There are stops noted at 1.0160 and a break higher could see the price to 1.0195/1.0200. Overnight the reserve bank of Australia (RBA) says the case for June’s rate cut is finely balanced this has supported the Aussie dollar in today’s session.

Gold (XAU):

XAU/USD is trading sideways this morning with some moves to test trades above $1630.0. The initial resistance lies at $1630/33 and we can see the market is taken a rest just below this zone before deciding on its direction. We may see this liven up around the US open from 13:30 BST this afternoon. The pivot point lies at $1621/22 and there is a preference to buy from here following the uptrend that has taken hold this month.


OIL/USD is moving from around 82.00/82.25 to 83.20. Intraday analysis reveals a preference to sell in the zone 83.40/55 as long as this holds and the initial support lies at 82.05. According to the median of seven analysts in a Bloomberg survey ahead of the Energy Department report tomorrow, crude oil supplies probably dropped by 1.3 million barrels last week.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5535  1.5600  1.5663  1.5730  1.5775
EUR/USD  1.2515  1.2555  1.2614  1.2620  1.2650
USD/JPY  78.60  78.80  78.89  79.15  79.30
AUD/USD  1.0050  1.0090  1.0150  1.0195  1.0215
XAU/USD  1613.0  1621.0  1630.3  1633.0  1640.0
OIL/USD  81.55  82.05  83.34  83.40  84.00

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