Tuesday, May 31, 2011

FOREXYARD: Forex News Blog

FOREXYARD: Forex News Blog

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Dollar Declining as FX Markets Look Past Greek Debt Crisis

Posted: 30 May 2011 04:54 AM PDT

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Greece remains the key question going forward though towards the end of last week the debt crisis was beginning to weaken its impact on the FX markets and the euro.

Talks between the EU and the IMF were continuing as scheduled and should end within the next few days. The German newspaper Der Spiegel reported the EU may withhold a 50B euro package for Greece should the indebted nation fail to reach its proposed austerity measures.

While the question over Greece remains unanswered, markets may have come to the conclusion that new funds will be provided to the indebted nation and Greece will eventually undertake a restructuring of its sovereign debt. Should the Greek situation be put on the back burner, this may allow for the euro to rally in the near term as the underlying fundamentals between the euro and the dollar have not changed over the month of May when the EUR/USD declined 3.5%. EU interest rates are still expected to rise while the Fed continues its QEII program into June. A close above the 50-day moving average at 1.4350 would put the bulls back in the driver's seat with a target at the May high of 1.4940.

The dollar is on its back foot again versus the G10 currencies following a week of disappointing data releases. Lower than forecasted durable goods orders, disappointing GDP, and a steep decline in pending home sales on Friday all point to a US economy that is not firing on all cylinders. Given the downturn in US data releases, the dollar could continue to be sold versus the G10 currencies in the near term.

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Kiwi Hits 3-Year High Versus US Dollar

Posted: 30 May 2011 02:36 AM PDT

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Overnight the New Zealand dollar reached its highest level versus the US dollar since February 2008 on the strength of significantly better than forecasted trade balance data as the Kiwi builds on gains from last week.

Comments by New Zealand Prime Minister John Key touched on the strength of the Kiwi which knocked the NZD/USD off of a 3-year high. Earlier in the Asian trading session the pair reached as high as 0.8214 before trading back to 0.8170.

Helping to boost the Kiwi was significantly stronger than expected trade balance which showed a surplus of 1,113M NZD for the month of April. The data handedly beat expectations for 603M NZD. The tone of the report was further boosted by the March numbers which were revised higher to 578M NZD from a previously reported 464M.

The trade balance numbers are quite the feat following the Christchurch earthquake in February and show the improvement in New Zealand exports and terms of trade. Today's trade balance data should further support a bullish case for the Kiwi. Last week the New Zealand dollar rose sharply following reports of Chinese interest in diversifying the nation's FX reserves and setting aside up to 1.5% to invest in New Zealand assets and government bonds.

While the NZD/USD hit a 3-year high overnight the AUD/NZD also reached a significant technical level, falling to the trend line off of the November and January lows at 1.3010. A breach here and the AUD/NZD would target a range between the January pivot at 1.2775 and 1.2470, the latter being the 61.8% retracement level from the 2010 low to the May 2011 high. The November low at 1.2640 would be a last stand for the Aussie dollar.

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Canadian GDP Due Out Today

Posted: 30 May 2011 12:32 AM PDT

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With UK and US markets closed today liquidity may be on the light side. However, the economic calendar will not be taking a break as monthly Canadian GDP numbers will be released later today.

CAD – GDP m/m – 12:30 GMT
Expectations: 0.2%. Previous -0.2%.
Canadian GDP for the month of April is forecasted to grow following a disappointing month of February which had economic growth slipping into the red. Expectations are low and any decent growth numbers would be a positive for the Loonie. Initial support for the USD/CAD is found at 0.9740 followed by the low on March 20th at 0.9640. To the upside the recent rally has been capped at 0.9815. A breach here opens the door for gains towards 0.9970, a level where the mid-March high coincides with the 200-day moving average.

JPY – Preliminary Industrial Production m/m – 23:50 GMT
Expectations: 2.5%. Previous: -15.5%.
A fall in industrial output was expected after the earthquake and tsunami and is reflected in April numbers which declined by 15.5%. A 2.5% gain may be expecting too much from a feeble Japanese economy and could induce further declines in the USD/JPY. Initial support comes in at 80.35 followed by the May low at 79.50. A breach here would expose the pre-intervention low at 76.10.

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