Currency Analyst since 2010

Forex trading plan for June 2

It is an intense week for the currency market. At the start of the week everybody was talking about comments of the Federal Reserve Chairwoman Janet Yellen, who said that the rate hike would be appropriate “probably in the coming months”, if the economy and labor market continue to strengthen. The comments themselves were not very bullish for the US dollar, as the market players awaited US economic figures to form their expectations about the future actions of the Fed. For now, the possibility of an increase in the US interest rate in June is 24.4%, according to the futures market.

American data were mixed. On Tuesday personal spending and house prices exceeded forecast, but consumer confidence disappointed. On Wednesday ISM manufacturing PMI rose to 51.3 vs. 50.5 expected. Yet, it’s the US labor market traders are most worries about. The figures will come out at 12:30 GMT on Friday. According to consensus, US economy gained 163K jobs in May after adding 160K in April. The unemployment rate is expected to decline from 5.0% to 4.9%. However, there are reasons to think that the actual data would be worse than these projections: unemployment claims count wasn’t very inspiring last month plus the strike at Verizon could have made a negative impact. ADP employment report will precede NFP as it released on Thursday and may offer hints for the Friday data.

Thursday is also going to be a tough day. We have several important events on the agenda, such as the OPEC meetings and ECB meeting & press conference.

EUR/USD is holding above support line since November 2015. So far, the pair has been trading sideways between the 100-day MA at 1.1178 and 200-day MA at 1.1100. Watch for the break of this range.

GBP/USD was hit hard after two Guardian/ICM polls gave the Leave campaign a 52-48 lead. The pair fell to 55-day MA at 1.4395, but the support doesn’t look strong, so the pound will be vulnerable for a slide to 1.4340 (100-day MA). Another reason for weaker pound is lower oil prices.

USD/JPY broke down several support levels: daily Ichimoku cloud bottom, 55-day MA and May support line. The pair fell on the news that Japanese Prime Minister Abe delayed sales tax hike to October 2019 in order to ease pressure on Japanese economy. This also means that the pressure on the Bank of Japan to ease policy more will ease. Although the rumors about this decision were circulating for a while, the market reacted. Another yen-positive factor was the deterioration in traders’ risk sentiment: Chinese data weren’t very good and investors remain tense. As long as the pair is staying below 110.25/00, we may see more downside. The sell targets below 109.40 will lie at 108.60.

AUD/USD almost reached 0.7300, but failed to hold at the maximums and returned below the 200-day MA (0.7250). Australian GDP for Q1 came out stronger than expected (+1.1%), but the overall risk aversion didn’t let the rally to continue. We may get a bearish technical setup if the pair closes below 0.7250 on Wednesday. On Thursday morning watch Australian retail sales and trade balance figures. Modest bearish targets will lie in the 0.7200 area.



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