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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.

The Sterling (GBP) the GBP/USD fell below 1.5600 as its own risk event weighed with the BOE rate announcement today and expected to result in some form of easing for the UK economy. The EUR/GBP has been very stable in a 0.8000-0.8050 range. Also ahead, ECB Rate Announcement forecast to cut to 0.75% vs. 1% previously. BOE Rate announcement forecast to hold at 0.5%. The BOE Asset Purchase program is forecast to expand to 375bn vs. 325bn previously.

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.

Oil & Gold (XAU) Gold remained strong supported on dips to $1612 finishing roughly unchanged near $1620. OIL/USD eased a little bit as profit taking emerged after the $10 a barrel rally in previous few days. Support was found at $86.50.

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.2460

1.2500

1.2530

1.2580

1.2625

USD/JPY

78.90

79.45

79.90

80.00

80.25

GBP/USD

1.5540

1.5570

1.5585

1.5660

1.5705

AUD/USD

1.0200

1.0240

1.0275

1.0320

1.0350

XAU/USD

1602.00

1611

1616

1625

1632

OIL/USD

85.00

86.50

86.75

88.00

90.00

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