Wall Street closed in red territory yesterday. It ended at it’s lowest in more than a month Tuesday, after the latest round of data did little to dispel fears the economy was headed down a rockier path — just as a seasonal lull kicks in and the Federal Reserve prepares to unwind its special stimulus. By day’s end, the Dow Jones Industrial Average fell 25.05 points to 12,356.21. The Standard & Poor’s 500 Index shed 1.09 points to 1,316.28, The Nasdaq Composite Index fell 12.74 points to 2,746.16.
Some analysts are claiming we are headed into our normal summer lows, and throw in QE2 [quantitative easing] going away next month, and that’s another wrench in the program. That being said, market fundamentals as still strong, with corporate earnings robust and more acquisitions likely. Furthermore, Morgan Stanley and Goldman Sachs raised their outlooks on oil and offered a positive outlook for commodities.
Markets wobbled after the Commerce Department reported an unexpected 7.3% rise in new-home sales in April. The Federal Reserve Bank of Richmond reported a lull in regional manufacturing activity in May. The survey, typically not a market-moving one, comes after softer-than-anticipated New York and Philadelphia Fed manufacturing surveys last week and ahead of a national gauge from the Institute for Supply Management next week.
Today’s Important Economic Announcements (GMT)
7:30 AM
USD
FOMC Member Plosser Speaks
8:30 AM
GBP
Revised GDP q/q & Mortgage Approvals
12:30 PM
USD
Core Durable Goods Orders m/m
2:30 PM
Crude Oil
Crude Oil Inventories
5:30 PM
USD
FOMC Member Kocherlakota Speaks
11:15 PM
AUD
RBA Deputy Gov Battellino Speaks
Forex & Commodities Technical Analysis
USD/CHF Analysis
Just the other day, the SNB voiced its concern that the high level of the Swiss currency would hurt growth – and thereby, rate expectations could feed a deflation scenario that curbs rate expectations. Yet, the currency market seemed to pay little heed to the warning (as surely as they ignored active intervention). Rate expectations for the SNB are negative; but its role as a euro alternative still stands firm. USD/CHF stays in a trading range between 0.8747 and 0.8945. Another rise to test 0.8945 resistance would likely be seen later today. We advise our traders to expect the uptrend to resume into the weekend.
Stop Loss: 0.8766
Take Profit: 0.8838
GBP/USD Analysis
Interest rate expectations have deflated far enough for the sterling that normal fundamental developments have limited impact on the speculative side of the market. That’s an encouraging situation for the pound which saw public finance numbers report the worst April deficit on records (going back to 1996). Another discouraging outcome: the CBI report for May reflected a sharp drop in inflation expectations, another rate blow. GBP/USD stays below a downtrend line from 1.6516 to 1.6302. As long as the trend line resistance holds, downtrend could be expected to continue, and another fall towards 1.6000 is possible after consolidation.
Stop Loss: 1.6208
Take Profit: 1.6073
USD/JPY Analysis
The greenback extended Monday’s gain against the Japanese yen on Tuesday as the Japanese government maintained its overall economic assessment and modestly improving risk-appetites encouraged cross-buying of euro versus yen. The pair rose from Asian low of 81.62 to 82.21 near European closing before retreating on profit taking, trading around 81.90 near New York closing. USD/JPY remains in uptrend from 79.58. As long as the trend line support holds, uptrend could be expected to continue, and next target would be at 83.00 area. Long positions are encouraged for the next 24 hours.
Stop Loss: 81.78
Take Profit: 82.18
Published by www.SolidityBrokers.com
