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UK public finances are less healthy than a year ago

Daily Outlook - 26th June 2012

Written by Zoe Fiddes

CURRENCY TRADING SUMMARY 26/06/2012

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

Sterling- dollar has climbed from yesterday’s lows of 1.5540 and currently trades around 1.5600. The pair initially rallied up to 1.5625 from 1.5580 this morning as the US dollar weakened across the board. The rally was stunted above the big figure as data revealed that UK public finances are less healthy than a year ago with public sector net borrowing increasing faster than forecasted. This along with continued concerns on the Eurozone crisis has put USD back in the driving seat and we have seen GBP and EUR weaken against the greenback. Also, the 1.5625 level is a key resistance (June 22nd high) which has held off the uptrend again today and there is preference to sell from here with a profit target eyed at 1.5550. If the price comes lower the risk of a break below 1.5540 is high. In the news at 15:00 BST we have US consumer confidence which is expected to show a sturdy figure at 63.0.

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

Euro-dollar is showing continued signs of weakness this morning as the pair is sold off from 1.2530 on a reported funds supply. The pair currently trades at 1.2485 and we could see some buying interest at 1.2480/70 which is a support (June 25th low). If 1.2770 breaks the next support is close by at 1.2440 (lows between June 6th – 11th). Moody’s downgraded 28 Spanish banks because of the risk that the government cannot pay back its debt and increasing losses on real estate. This is taking its toll on the euro this morning which has also dropped against the GB pound this morning and has broken below 0.8000.

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

Dollar-yen remains pointing south with 79.35 as its initial challenge followed by 79.10. There is a high chance of the first support being broken as moves in the yen crosses add to the downward pressure. The preference is to sell from the 79.80 pivot point. Volatility could increase on the announcement of US consumer confidence later today.

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

Aussie-dollar made 0.9970 lows yesterday before reversing to 1.0059, which is lower than the previous peak at 1.0077. Despite this evidence of a downtrend the RSI is calling for a rebound and a support is noted at 1.0015, technical analyst have a preference to buy from here with 1.0080 as the initial profit target.

Gold (XAU):

XAU/USD was typically range bound overnight after a late European rally took gold to a session high of 1588.  Opening overnight at 1584, gold suffered a lacklustre performance and achieved a session high of 1587 before falling to a low of 1581 and finally closing at 1583.  Technical analysis is pointing to a higher day for gold with a pivot of 1580 and resistance at 1596 and 1604.

Oil:

OIL/USD started the overnight trading session at 79.11 and suffered a drop to hit a session low of 78.70 before achieving a high of 79.60 and finally closing the session at 79.01.  Looking ahead, technical analysis has a preference to buy oil at a pivot of 78 with resistance at 80.35 and 81.00.

Technical Commentary:

  Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD  1.5515  1.5535  1.5619  1.5625  1.5655
EUR/USD  1.2440  1.2470  1.2487  1.2540  1.2570
USD/JPY  79.10  79.35  79.26  79.80  80.00
AUD/USD  0.9965  1.0015  1.0031  1.0080  1.0140
XAU/USD  1554.0  1565.0  1583.5  1596.0  1604.0
OIL/USD  77.60  78.00  78.97  80.35  81.00

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