Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from Hamburg and welcome to our latest Daily FX Report. Asian stocks sagged and the dollar stood tall on Wednesday on growing prospects the Federal Reserve was on track to raise interest rates later this year and concerns that financial woes could engulf Spain in addition to Greece. Taking a lead from Wall Street's slide, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.3 percent with Australian and South Korean shares suffering losses. Tokyo's Nikkei shed 0.3 percent. The Dow and S&P both lost 1 percent on Tuesday on Greek debt concerns and after upbeat U.S. economic data added fuel to expectations that the Fed will raise rates sooner rather than later. Higher interest rates for the world's largest economy could lessen the allure of equities, not only in the United States but also in other countries.
However, we wish you a successful trading day!
Market Review – Fundamental Perspective
The dollar was on a bullish footing, hoisted higher as U.S. debt yields rose on the strong economic indicators. The USD received a further boost as the euro slid not only on persisting Greek woes but signs that the Spanish public was also tiring of austerity. With Athens already facing the possibility of missing its June 5 debt repayment deadline to the International Monetary Fund, the mood in Europe became even more edgy as voters in Spain punished the ruling Popular Party in local elections after years of austerity policies. The euro was steady at $1.0879, staying close to a one-month low of $1.0864 struck overnight. The dollar was little changed at 123.05 yen after surging to an eight-year peak of 123.33. Traders said stop-loss buying was triggered after the dollar cracked key resistance around 122.04, a high set back in March. The USD also rose against the euro, which slid to its lowest since April 28 at $1.0864. The common currency last stood at $1.0872. All that helped the dollar index rally 1.3 percent, its biggest one-day gain in nearly two years. Commodity currencies also lost ground against the resurgent dollar, with the Australian dollar falling to a one-month low of $0.7727. Its New Zealand peer skidded to its lowest in over two months at $0.7222. The Canadian dollar dipped to its weakest level against the USD in six weeks on Tuesday. Commodities felt the impact of a stronger dollar, with crude oil prices tumbling nearly 3 percent overnight. U.S. crude managed to edge up 0.5 percent to $58.35 a barrel on bargain hunting after the slide while Brent gained 0.4 percent to $63.97 a barrel.
Daily Technical Analysis
EUR/GBP (Daily)
Since 2013 the GBP was able to appreciate until the pair reached the resistance line at 0.8034 where a sideward movement begun. During the last months we saw a sharp decline of the EUR versus the GBP. Especially over the course of the last couple months the EUR expericend a sharp decline and it remains to be seen whether the EUR will be able to rebound. According to the indicators this downward movement may last for a while since there are no clear signs for a significant trend reversal and the fundamentals of the EUR are not very promising at the moment.
Support & Resistance (Daily)
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