The downside pressure on the US dollar remained palpable in the NY session as fiscal deficit worries remain front and center. Talk out of Russia for a new global reserve currency and Chinese students laughing at US Treasury Secretary Geithner speech when he said that China's investment in the US was ''very safe'' are ominous. Equity marts mattered little today with the big story being the failure of the S&P to take out 950 resistance (high was 949.38 for reference). Treasuries were better bid with the 10-year yield dipping to 3.61% after making another try above 3.70% earlier. This weakens the US interest rate differential and is dollar negative at the margin. Gold continued its stellar performance and added another $6 towards 981/982. The 1000 level looms as both psychological resistance and the neckline of a daily head and shoulders consolidation that looks to have started in March 2008. The measured move objective from a break to the upside would be near 1325/1350, which is not out of the question should inflation worries continue to grind higher.
In FX land the dollar thrashing was broad-based. EUR/USD jumped 50 pips into the 1.4300/10 area despite commentary that the recent surge in the common currency will undoubtedly hurt export activity and make an economic recovery in the region that more difficult. The yen crosses extended further with EUR/JPY adding 85 pips to 136.90/95 and USD/JPY up a more modest 30 points towards 95.70. Oil made a try for $69/bbl today before backing off into the close. This kept the pressure on USD/CAD which continues to bounce along the 1.0790ish lows. Look to target 1.0670 hourly channel bottom should we snap this level overnight. AUD/USD remained an unstoppable force and gained another 40 pips to sit just above 0.82 at the close. Australia GDP will be closely watched in Asia now and a weaker than expected result will bring the ''rate cut'' conversation back to the fore. Look for sharply weaker AUD should this come to fruition.
Upcoming Economic Data Releases (Asia Session) prior expected
- 6/2 23:01 UK Nationwide Consumer Confidence MAY 50 52
- 6/2 23:30 AU AiG Performance of Service Index MAY 39.8 - -
- 6/3 1:00 JN BOJ Board Member Kamezaki to Speak in Shizuoka City 3-Jun
- 6/3 1:30 AU Gross Domestic Product (QoQ) 1Q -0.50% -0.20%
