The UK construction Purchasing Managers’ Index slipped from 56.7 in March to 55.8 in April. Analysts predicted a drop to 54.1. The index is still close to the March 21-month high and well above the neutral level of 50.0, indicating robust growth. At the same time, reports from Europe left little room to optimism, driving investors away from the euro to the relative safety of the pound.

The Bank of England will hold a monetary policy meeting next week and will announce its policy decision on May 10. Most experts say that the central bank may expand its asset purchase program. That does not bode well for the sterling.

EUR/GBP was down from 0.8159 to 0.8118 as of 21:47 GMT today, while the intraday low was the lowest since June 30 2010. GBP/USD slid from 1.6216 to 1.6197. GBP/JPY was near 129.76 after jumping from 129.88 to 130.75.

source from: topforexnews

It is not surprising that the Canadian currency gained against the euro, considering the shrinking eurozone manufacturingand the unexpected growth of German unemployment. Yet it is surprising to see the growth-related loonie to hold ground versus the safe currencies of the United States and Japan, considering the negative sentiment of Forex traders. The slower-than-expected growth of US employment worsened already sour mood of investors, but somehow the Canadian dollar was able to withstand the impact of the bad news.

Bank of Canada Governor Mark Carney was speaking yesterday about a possible interest rate hike. It is unusual nowadays to hear from a leader of a central bank such hawkish statement and many economists question appropriateness of such attitude. The global economy demonstrates downturn and it is unlikely that Canada’s economy would emerge unaffected. Anyway, tomorrow’s monetary policy meeting of the European Central Bankand Friday’s US non-farm payrolls should have a stronger effect in the near term than speculations about the BoC stance.

EUR/CAD fell from 1.3046 to 1.2972 as of 23:46 GMT today, touching 1.2953 intraday — the lowest rate since April 18. USD/CAD was at about 0.9866 after it climbed from 0.9856 to 0.9902. CAD/JPY was flat near 81.21.

source from: topforexnews

The greenback is firmer at the close of North American trade with the Dow Jones FXCM Dollar Index(Ticker: USDOLLAR) advancing 0.19% on the session after moving nearly 87% of its daily average true range. The gains come amid a mixed performance in US equity markets with a weaker-than-expected ADP employment report weighing on broader market sentiment early in the session. Although the ADP report triggered the initial sell-off in the US session, broader market sentiment was already dampened by a slew of dismal developments coming out of the European region. Rising finance costs in the periphery countries along with fears of a prolonged recession and record high unemployment sapped risk appetite ahead of the open. In turn, the flight to safety trade may gather pace over the next 24-hours should Spain’s three and five year debt auction stoke contagion fears. By the close of trade in New York, the Dow and the S&P were off by 0.08% and 0.25% respectively with the NASDAQ to closing higher by 0.31%.

The dollar continues to trade within the confines of a descending channel formation dating back to the March highs with the index testing key daily resistance at the 9900-level. This level has continued to be a critical pivot for the dollar and is backed closely by the 100-day moving average at 9907. A breach above this mark eyes daily targets at the 61.8% Fibonacci extension taken from the August 1st and October 27th troughs at 9946 and channel resistance. Daily support now rests with the 50% extension at 9850 backed by the 200-day moving average at 9815. Note that while RSI has now broken back above former trendline support, we look for a breach above trendline resistance dating back to the March highs with such a scenario offering further conviction on our directional bias.

An hourly chart shows the index continuing to trade within the confines of a descending channel formation with the greenback closing just below the confluence of channel resistance and the 9900-mark. Note that a breach above this channel formation remains paramount for further dollar advances with subsequent topside intra-day targets are eyed at the 61.8% extension at 9945, 9975 and the psychological 10,000 threshold. Soft interim support rests at 9875 backed by the 50% extension at 9850 and 9825. Look for the correction seen at the tail end of the US session to soften with an RSI rebound off the 50-mark supporting further advances over the next 24-hours.

The greenback advanced against three of the four component currencies highlighted by a 0.60% advance against the euro. The single currency remains at risk ahead of tomorrow’s ECB interest rate decision. While the central bank is not expected to move on rates, investors will be looking to ECB President Mario Draghi for insight as to whether officials will look to carry its easing cycle into the second half of the year. For a complete outlook on tomorrow’s rate decision refer to the trade the news report. The Australian dollar was the top performer of the lot with the AUDUSD closing virtually flat on the session. The aussie has struggled to pare losses sustained on the back of the RBA interest rate decision amid speculation that the central bank is embarking on a series of rate cuts to support the fragile recovery. As such, we remain bearish on the pair with only a breach above the 1.0475 threshold negating our directional bias.

Tomorrow’s US economic docket is highlighted by the April ISM non-manufacturing composite with consensus estimates calling for a print of 55.3, down from a previous read of 56.0. Despite the implications of the print, reaction to the ECB rate decision is certain to steal the spotlight as the governments operating under the single currency continues to look for additional monetary support. Beyond the ECB, market volatility may thin ahead of the highly anticipated non-farm payrolls report as today’s dismal ADP print dampens expectations for stronger job growth. However, should NFPs top expectations, we may see the dollar rally across the board going into the end of the week as calls for further Fed easing subside.

Upcoming Events

source from: dailyfx

NZD/USD hit >3-month lows of 0.8040 after the jobless rate rise- below the 0.8088 lows seen yesterday. Good sovereign, real money, local exporters, Asian, US houses bids were placed at 0.8080-90, which supported Kiwi in recent sessions. With stoploss hit below 0.8050 – focus turns to key 0.8000 – psychological level where huge option barriers rumoured. Interest to sell on rallies for break of 0.8000. Sentiment toward Kiwi turning bearish after break of 0.8080/50 and break of Parity in NZD/SGD – more next. Markets now pricing in -13bps of RBNZ rate cut, up from -8bps – after the rise in jobless rate. NZD/JPY back up at 64.70-75, after dive to 2-half month lows 64.40-45 from 64.80-90. Eye break of 64.00 as Cross/JPY under pressure on risk aversion, rise in Europe jobless rates and fall in PMIs to sub 50s – triggering concerns over more economic contraction and Euro woes. NZD/JPY offers 65.00. WL

source from: fxstreet

The Japanese yen is the strongest performing currency against a markedly firmer greenback in early US trade with USD/JPY off by a mere 0.03% on the session. Weaker than expected GDP data out of China in overnight trade continues to weigh on broader market sentimen with European equity markets plummeting by 1.2%-2.4% across the baord. Whisper numbers for a print of 9% were grossly over-estimates with Chineses GDP coming in at just 8.1%, missing consensus esitmates for a print of 8.4%. Economic data out of the US today added further downside pressure to risk assets with the March core CPI coming in at 2.3% missing calls for a read of 2.2%. Continued stickiness in core prices will limit the Fed’s scope to embark on further easing measures as price growth remains above the 2% target set forth by the central bank in January. The April University of Michigan confidence survey also missed estimates with a print of 75.7, down from a previous print of 76.2. US equities are on the defensive at the close of European trade with the major stock indices down by 0.7-1.15%.

The USD/JPY has continud to trade sideways over the past few sessions with the exchange rate holding within the confines of a descending channel formation dating back to late March. Interim support rests with the 123.6% Fibonacci extension taken from the March 21st and April 1st crests at 80.65 backed by the confluence of the 138.2% extension and channel suport at 80.35. Topside resistance stands with the 100% extension at 81.18 with subsequent resistance targets eyed at 81.40, the 78.6% extension at 81.60, and 81.80. A breach abvoe the 61.8% extension at the 82-figure alleviates some of the pressure on the dollar with such a scenario eyeing targets at 82.25 and the 38.2% extension at 82.50. Look for the pair to remain rangebound into th close as risk-off flows continue to support both the greenback and the yen, with our long-term outlook still weighted to the topside.

Key Levels/Indicators

The Swiss franc is the weakest performer with the a loss of 0.95% on the session. The franc has come under substantial pressure as declines in the euro have continued to weigh on the swissie. The daily chart shows the pair breaking above the 23.6% Fibonacci extension taken from the October 27th and February 24th troughs at 9175 before making a run at trendline resistance dating back to the January 17th high. Note that RSI continues to consolidate into the apex of a wedge formation with a topside break likely to fuel the pair with enough momentum to breach the 100-day moving average which sits just higher at 9224.

The scalp chart shows the pair encountering resistance at the confluence of the 50% Fibonacci extension a taken from the February 29th and April 2nd troughs and channel resistance at the 92-handle. While we expect this level to hold for now, a topside breach risks further losses for the franc with subsequent resistance targets seen at 9920 and the 61.8% extension at 9250. Soft interim support rests at 9175 backed by the 38.2% extension at 9150 and the 23.6% extension just below the 91-figure. While we continued favor the topside in the pair it’s important to note that the move will remain contingent on losses in the euro as the SNB maintains its pledge to defend the 1.20 EUR/CHF peg.

Key Levels/Indicators

source from: dailyfx

The yield on 10-year Spanish sovereign bond climbed 18 basis points, or 0.18 percentage point, to 6 percent. The cost of insuring against a default in Spain jumped to a record. Klaas Knot, a member of the ECBgoverning council, said that he doesn’t see a reason to buy Spanish government securities.

Overseas, the economic environment also wasn’t particularly good.University of Michigan said in a preliminary report that US consumer confidence unexpectedly fell this month. China’s economic growth slowed, reigniting fears of so-called hard landing. The dollar strengthened on resulting risk aversion, driving the euro further down.

EUR/USD was down from 1.3185 to 1.3077 today. EUR/JPY dropped from 106.66 to 105.81, following the rise to 107.09. EUR/GBP ticked down from 0.8261 to 0.8249 and touched the intraday low of 0.8227.

source from: topforexnews

EURUSD – The correction may be complete as the rally from 13035 reversed following a 50% retracement of the decline from 13380. The turn also occurred at the 4/3 low and 20 day average. In other words, the recent top is well defended. A top that forms at a confluence of technical levels (rather than an arbitrary level) is more likely to remain in place.

Prepared by Jamie Saettele, CMT

GBPUSD – No change from yesterday – “The rally from the low has extended but treating strength as corrective is appropriate given the 5 wave decline from 16062. Currently testing the 61.8% retracement of the decline price should turn lower now if the larger trend did indeed reverse last week (don’t forget that a WEEKLY key reversal formed last week).”

Prepared by Jamie Saettele, CMT

AUDUSD – The April high at 10464 is the line in the sand for AUDUSD bears. Exceeding that level would shift focus to 10510 and 10595 (former supports). As long as price is below 10464, the trend is considered down and focus remains on the year to date low at 10145. Resistance is bolstered at the yesterday’s high by the underside of former trendline support, channel resistance, 20 day average, and 200 day average.

Prepared by Jamie Saettele, CMT

NZDUSD – Volatility has contracted to the point that price closed above its 2nd standard deviation band (20 day) yesterday. This is worth noting because the initial break of a tight range is often a false break (this was noted with the USDJPY back in December and January). The pop above 8287 may have completed the advance from 8060.

Prepared by Jamie Saettele, CMT

source from: dailyfx

Overall, it has been an uninspired start to the week, with Monday’s price action failing to offer any hints into direction and Tuesday showing more of the same. The key event on the day thus far has been the RBA rate decision, with the Australian central bank leaving rates on hold at 4.25% as was widely anticipated. The higher yielding Australian Dollar has however come under some relative pressure in recent days, and could continue to underperform as markets start to price in a more accommodative Aussie central bank. The realities of a slower China and potential spread of the Eurozone crisis are being more widely adopted by market participants and we see this is the primary driver of Aussie weakness going forward.

The Australian Dollar has been a major beneficiary of risk on flows in recent years, with the currency tracking to fresh post float record highs in 2011 just over 1.1000. But from here there is evidence of the formation of a major technical top which exposes deeper setbacks below parity over the medium-term. Cross rates like EUR/AUD also stand to gain a great deal from the structural reversal in the Australian Dollar, with this market looking to carve a major base by 1.2000 after falling off a cliff in 2008 from levels above 2.1000. The general takeaway from the latest RBA policy decision is a central bank that is tilting more to the dovish side after hinting at the possibility of an imminent rate cut in May should inflation figures continue to show signs of softening. The Board has highlighted that the pace of output growth is somewhat lower than earlier estimated and that adjustments may therefore need to be made.

Elsewhere, we are keeping a close watch on the moves in EUR/USD, with the market still very much locked in a tight consolidation. While our core bias in this market is bearish, for now, it seems as though the shorter-term risks are tilted to the upside as the correction in 2012 continues to play out. The technical picture is showing a bullish triangle formation on the hourly/daily chart which now opens the door for a sustained break above 1.3400 and towards the 2012 highs by 1.3490 further up. At this point, only a break and close back below 1.3250 would negate outlook and alleviate immediate topside pressures. Any gains beyond 1.3500 are expected to be met with solid offers by the 200-Day SMA just shy of 1.3600. Finally, as a side note, one other cross rate worth watching this week is EUR/CHF, with the market dangerously close to testing the highly touted SNB 1.2000 floor. A break below this barrier could spark some fresh volatility in the cross.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: The recent break and close back above 1.3300 now likely opens the door for additional upside over the coming days towards, and eventually through, the current 2012 highs just shy of 1.3500. While our core outlook still favors substantial weakness ahead, current strength could very well extend into the 1.3600’s by the 200-Day SMA before consideration is to be given for underlying bear trend resumption off of the record highs from 2008.

USD/JPY:Has been locked in some consolidation since the market broken to fresh 2012 highs beyond 84.00 with technical studies unwinding from overbought levels before consideration is to be given for the next major upside extension. The key levels to watch above and below come in at 84.20 and 81.80 and a break on either end will be required for clearer short term directional bias. However, given the bullish breakout in 2012, all signs point to a major structural shift which favors additional upside beyond 84.20 and into the 85.00-90.00 area further up. Ultimately, only back under 80.00 would give reason for concern.

GBP/USD: The market has recently broken to fresh 2012 highs beyond 1.6000 and this now likely opens additional upside back towards the October 2011 peak by 1.6170 further up. While our core bias remains bearish, we will stand aside and look for opportunities to sell into rallies towards 1.6200 in anticipation of an eventual bearish resumption. A break and close back below 1.5945 now required to alleviate immediate topside pressures.

USD/CHF: While our core bias remains constructive with eventual gains seen back above parity over the coming months, the market remains under pressure over the shorter-term. From here, there are risks for additional declines back below recent lows at 0.8930, but ultimately we see the 200-Day SMA by 0.8850 supporting. Ultimately, only a daily close below 0.8850 would give reason for concern.

source from: dailyfx

Data published by the China Federation of Logistics and Purchasing shows that the country’s non-manufacturing purchasing managers index rose to 58.0 in March from 48.8 in February. The positive figure contrasted a series of indicators over the past few months that suggested a drop off in Chinese growth.

A growing Chinese economy is a boon to local nations that rely on the country for trade. As fears of a global slowdown of economic growth were subdued, traders bought currencies native to exporting countries reliant on Chinese consumption, like the Aussie.

The Australian dollar follows positive Chinese PMI since a strong Aussie export sector would suggest that the likelihood of a central bank rate cut is less likely. The AUDUSD rose as high as 1.04464.

Overall, price action on the Aussie was minimal as traders focus on the RBA cash rate decision due out later this morning.

source from: dailyfx

The positive outlook for the global economy, which has appeared on the Forex market last week, continued to prevail at the beginning of this week. The expansion of China’s manufacturing alleviated fears of global economic slowdown to some degree. Additionally, the report of Institute for Supply Management confirmed that US manufacturing continues to expand.

Mark Carney, the Governor of the Bank of Canada, said yesterday:

Conditions in the Canadian economy have also been somewhat stronger and the degree of slack somewhat smaller than the Bank had expected. Growth has been a bit quicker in recent quarters, reflecting a combination of temporary factors as well as improved confidence and better financial conditions.

USD/CAD was down from 0.9956 to 0.9905 yesterday and traded at 0.9893 as of 3:41 GMT today. EUR/CAD was at 1.3199 today, following the drop from 1.3299 to 1.3192 yesterday. CAD/JPY traded at about 82.73 after it fell from 83.30 to 82.81 on the previous trading session.

source from: topforexnews