U.S. stocks dropped on Wednesday, as Wall Street scaled back its economic growth outlook following another round of dour data. The Dow Jones Industrial Average fell 279.65 points to 12,290.14. The Standard & Poor’s 500 Index declined 30.65 points while to 1,314.55, while the Nasdaq Composite Index shed 66.11 points to 2,769.19. ADP reported private employers added only 38,000 jobs when 170k was expected, and it happens to be the lowest number since September. In addition, the ISM index and auto sales were also sub-par. We have unemployment claims out today, and our monthly unemployment data due on Friday.
The major indices are likely to continue see red screens as selling in May has not gone away and investor sentiment is beginning to pull back to a more bearish stance. Jobs are key to our recovery, so if we’ve definitely hit a soft patch, one will have to question how the Federal Reserve will react with the ending of QE2. Inflation has in fact had an impact on the economy; high fuel prices, a declining housing market, weaker than expected GDP, and problems in Europe all contribute to the negative sentiment.
When trading the EUR/USD, one must understand that Greece is insolvent and it’s a question of who is going to pick up the bill. Their debt restructuring has been pushed to the end of June, right when the American bailout expires. The Euro was at a 4 week high anticipating a positive result from the restructuring, but Moody’s cut Greece’s rating today, which compounded with the ADP data. Crude dropped $3 on the day, with API reporting a build of 3.5 million barrels. Given the Monday holiday, inventory data is pushed back one day, so we await EIA data this morning, and in all likeliness it will support the bears.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP Construction PMI
9:15 AM EUR ECB President Trichet Speaks
12:30 PM USD Unemployment Claims
2:00 PM USD Factory orders m/m
2:30 PM Natural Gas Natural Gas storage
3:00 PM USD Crude Oil Inventories
10:45 PM NZD Building Consents m/m
11:30 PM AUD AIG Services Index
Forex & Commodities Technical Analysis
EUR/USD
On Wednesday the EUR/USD adjusted downwards with 150 pips. The European currency depreciated from 1.4459 to 1.4306 yesterday, closing the day at 1.4325. This morning the pair is trading quietly, and within yesterday’s range for now. On the 1 hour chart quotes are testing the lower limit of the upward channel. Break above the nearest resistance and yesterday’s top at 1.4459 may trigger further strengthening of the Euro. Going bellow yesterday’s bottom and first support at 1.4306, however, would confirm continuation of the bearish trend, towards next important objective downwards 1.4200. There are no major economic events for EU today, but US releases include jobless claims, durable goods (revised) and factory orders. Pay close attention to the fundamentals and sell only at opportune times.
Stop Loss: 1.4418
Take Profit: 1.4279
GBP/USD
A string of weaker than expected economic data weighed on the pound in overnight trade, with the sterling suffering the largest losses against the dollar. May PMI manufacture and April Mortgage approvals missed consensus estimates and saw the pound quickly pull away from interim resistance at the 1.65-handle. The pair continued to fall in the pre-market hours, breaking through support at 1.6420 before halting at crests level of 1.6385. Yesterday’s ADP employment figures out of the US weighed on the dollar at the New York open, giving a reprieve to the sterling which fell 0.33% against the greenback. Despite the recent downtrend, one more rise towards 1.6438 previous high is expected later today.
Stop Loss: 1.6314
Take Profit: 1.6438
USD/CHF
The Swiss franc topped the performance charts against the dollar overnight, advancing to fresh all-time highs versus the greenback. As sovereign debt concerns continue to take root in Europe, the Swissie remains well supported on haven flows as domestic investors seek to hedge against the possibility of a debt restructuring from Greece. The currency strengthened across the board against the greenback and euro after the release of stronger-than-expected Swiss PMI data in May. USD/CHF and EUR/CHF tumbled sharply from 0.8544 and 1.2319 to fresh record lows of 0.8383 and 1.2058 respectively. Further fall is still possible in a couple of days, and next target would be at 0.8720.
Stop Loss: 0.8763
Take Profit: 0.8720
Published by www.SolidityBrokers.com
