Free Forex Signals for 06.04.2015

EURUSD, Daily

ADP reported that private payrolls in the US rose 201k in May versus a revised 165k April increase (was 169k). The goods producing sector added 9k, while the service sector jobs rose 192. Construction jobs were up 27k, but manufacturing fell 5k. Financial sector payrolls increased 12k. Professional and business services payrolls were up 28k. Trade and transports added 56k. Headline data are a little better than expected and support forecasts for about a 220k nonfarm payroll gain as our Survey Median projects. Payrolls face upside risk from tight claims and heightened consumer confidence in the face of lower gasoline prices, though downside risk from factory sentiment weakness. U.S. ISM non-manufacturing index fell to 55.7 in May, weaker than expected, from April’s 57.8. And it is the lowest since April 2014. Declines were broad-based, although index levels still remain relatively high. Fed’s Beige Book reiterated the economy continued to expand, with most Districts characterizing the pace as moderate to modest pace. Maybe not surprisingly given its exposure to the energy sector recession, the Dallas Fed reported slightly slower growth. Most Districts also noted an uptick in consumer spending with outlooks on the future rather positive. Manufacturing activity held steady or increased in most districts while oil and gas activity continued to decline in most areas. Employment was up slightly, as were wages. Prices were stable or ticked up, though some manufacturers reported lower input prices. There isn’t robust support in the report for policymakers to be on the verge of hiking rates.

The ECB left interest rates unchanged at and re-affirmed its commitment to the full implementation of QE despite the fact that inflation projections for this year were revised up. Any tapering of the ECB’s bond purchase schedule still is a way off and any help from the ECB for Greece is tied to a deal with its creditors. The ECB president Mario Draghi said that with low levels of interest rates we should get used to periods of higher market volatility. Draghi also agreed that a long period of low interest rates can cause problems, but added that that shouldn’t necessarily prompt the ECB to change policy. He said the central bank is unanimous in its view to see through short term market trends and keep policy steady and added that recovery is on track, but there has been some loss of momentum. According to Draghi the recovery is developing in line with the ECB’s projections, but the slight loss of momentum is mainly due to countries outside of the Eurozone and trade developments.

The Greek PM Tsipras rejected creditor offer after talks with Juncker and Dijsselbloem. He said “the realistic proposals on the table are the proposals of the Greek government”, adding that “ideas like cutting benefits for low-income pensioners, or raising the VAT rate for electricity by 10% points, can’t be a basis for discussion”. At the same time, he suggested the Commission was more favourable to Greece’s proposals than other creditors. The Commission meanwhile said in a statement that “intense work” will continue and that “progress was made in the understanding of each other’s positions on the basis of various proposals”. So we are not really any closer to an agreement, although Tsipras told reporters not to worry when asked about IMF repayment tomorrow.

EURUSD strength continued yesterday after a pullback to 38.2% Fibonacci level. The 1.1120 intraday support was penetrated so momentarily that it held on closing basis even in 15 min chart. The stops below that support were taken out but then price closed above the support before shooting higher. At the time of writing the pair is trading above 1.1238 intraday support but the upside is getting limited and the risk of downside volatility has grown significantly. As the pair is trading close to a major resistance level market participants are likely to take money off the table and decrease the bids. This makes EURUSD vulnerable. Stochastics is signalling the pair is overbought and the nearest significant daily resistance is at 1.1324 while the next important daily support is as far as 1.1006

 

Currency Pairs, Grouped Performance (% Change)

What goes up, must come down. This certainly applies to AUDUSD this morning. After surge higher and hitting a resistance yesterday AUDUSD created a shooting star candle and is now moving lower. AUD is weak against all the major currencies with AUDJPY being the weakest. At the same time JPY, following BoJ governor Kuroda’s speech, has seen some strength. USD and GBP show some strength while EUR performance is mixed. GBPAUD created a daily hammer candle yesterday and has moved above the yesterday’s high 1.9765. AUDJPY is bearish after breaking below yesterday’s low at 96.25.

 

Main Macro Events Today

• Bank of Japan Governor’s Speech: GovernorKuroda said in a speech that some emerging economies worry that the Fed’s proposed rate hikes, which are seen kicking off later this year, may complicate the their policy management by triggering a massive outflow of capital from their markets back to the United States. The BOJ expanded its massive stimulus last October to prevent the oil rout, and a subsequent slowdown in inflation, from delaying a sustained halt on deflation. Inflation expectations are “obviously” one of the most important channels in which unconventional monetary policy, such as quantitative easing, reflates growth.
• Band of England’s Interest Rate Decision is due to today but analyst consensus expects the rate will stay at 0.5%. According to the BoE minutes to the April MPC meeting showed unanimous votes to maintain the repo rate at 0.5% and the QE total at GBP 375 bln, as expected.
• US initial jobless claims are expected to be 285k (median 280k) in the week-ended May 30. Continuing claims are expected to fall to 2,200k for the week-ended May 23. Forecast risk: downward, as there is risk of rebound after recent large declines. Market risk: downward, as weaker than expected data could further delay rate hike expectations.

 

Janne Muta

Chief Market Analyst

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