Daily FX Market Outlook by AceTrader-5-5-2011

Market Review – 04/05/2011 20:16 GMT

Euro falls from a 17-month high as metal prices tumble

Euro retreated strongly from a fresh 17-month high in New York morning as the selloff in U.S. stocks, precious metals and commodity prices dented risk appetite.

   
  
Earlier in the session, despite euro’s brief but sharp fall to an intra-day low of 1.4775 in Asian morning, the single currency managed to ratchet higher in European morning. Although price rallied above Monday’s top of 1.4903 easily in New York morning after release of lower-than-expected U.S. ADP Employment data and climbed to a fresh 17-month high of 1.4940 following the much weaker-than-expected U.S. ISM non-manufacturing PMI data, profit-taking offers there capped the single currency’s upside and price later fell swiftly to 1.4806/10 in New York afternoon session.  
  
U.S. April ADP Employment came in at 179,000 versus economists’ forecast of 198,000 with upwardly revised reading of 207,000 from 201,000 in March. U.S. April ISM non-manufacturing PMI came in at 52.8 versus economists’ forecast of 57.4 and previous reading of 57.3.  
  
Spot silver price tumbled sharply from 42.25/oz to 39.01/oz, suffering the worst one-day drop in three decades after Wall Street Journal (WSJ) reported that George Soros’s big hedge fund and some other leading firms have been selling gold and silver according to people close to the matter. Spot gold price also tumbled from 1541.30/oz to as low as 1506.10/oz.   
  
The British pound tracked euro’s intra-day movement closely. Despite cable’s brief breach of previous session’s low of 1.6464 after meeting renewed selling at 1.6494 in Australian trading session, buying interest at 1.6453 limited downside and intra-day firmness in euro lifted price to as high as 1.6575 in New York session before falling sharply back to 1.6480/82.   
  
The Japanese yen and the Swiss franc strengthened across the board on safe-haven demands. Despite the dollar’s recovery against the Japanese yen from Asian low of 80.82 to 81.19 in European midday, price then tanked to 80.51 after the release of a slew of worse-than-expected U.S. economic data, usd/jpy eventually fell to 80.44, the lowest level since the Group of Seven jointly intervened in the foreign exchange markets to weaken the Japanese yen on March 18. Eur/jpy, aud/jpy, gbp/jpy also fell sharply from 120.83 to 119.27, from 88.15 to 86.44 and from 134.24 to 132.79 respectively. The usd/chf pair posted another fresh all-time low of 0.8554 before staging a recovery on short-covering. Eur/chf tumbled from 1.2830 to as low as 1.2730.  
  
Federal Reserve Bank of Boston President Eric Rosengren said that current accommodative policy stance was appropriate given the state of economy and impact of current oil, food supply shocks on inflation should be transitory.  
  
European Commission stated that press conference on Portugal bailout was scheduled for Thursday at 10:00 GMT.  
  
Data to be released on Thursday include:   
  
New Zealand unemployment rate and employment change; Australian retail sales and building approvals; U.K. services PMI, BOE rate decision and BOE asset purchase target; German factory orders ; ECB rate decision and press conference; Canadian building permits and Ivey PMI; U.S. jobless claims, productivity and labour cost.

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