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Daily outlook – 5th July 2012 (00:30GMT)

July 5, 2012

Currency Updates:

U.S. Dollar Trading (USD) July 4th celebrations kept the US session quiet with commodities and stock markets closed. The EUR/USD is continued to be weighed by the expectations of a rate cut today at the ECB meeting. The reaction to a rate cut will depend on the stock market reaction with a positive move to the policy action potentially resulting in gains for the EUR/USD. The more traditional response is a drop in the currency if you cut the interest rate investors receive. Looking ahead, Weekly Jobless Claims forecast at 385k vs. 386k previously. Also June ISM Services forecast at 53 vs. 53.7 previously. Also June ADP National Employment forecast at 105k vs. 133k previously.


The Euro (EUR) the EUR/USD eased back towards 1.2500 as yields began to creep higher in Spanish and Italian debt. Germany’s Merkel once again stated here opposition to the Eurobond idea whilst the Italian PM voiced his support for the idea.


The Japanese Yen (JPY) the USD/JPY is holding under Y80 finding support on dips and pressuring the key topside level. BOJ officials have continued to comment to the market that they will keep monetary policy aggressively loose. EUR/JPY is pressuring Y100 as the EUR/USD falls into the ECB meeting.

Looking Ahead:

Australian Dollar (AUD) the AUD/USD is holding to a tight range just under 1.0300 as the market consolidates. The AUD/USD did push above 1.0300 briefly in Asia yesterday on the stronger than expected May Retail Sales but traders are hesitant to be too long into the ECB and Nonfarm Payrolls. Looking ahead, AUD May Trade Balance forecast at -500mn vs. -203mn previously.

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