Currency Analyst since 2010

Forex trading plan for June 8

US dollar index is consolidating with the bearish bias in the 94.00 area. The Fed’s Chairwoman Janet Yellen said on Monday that the central bank may still raise rates even after the disappointing jobs report, which was released on Friday. According to Yellen, American economy is still in a good shape, although this time she didn’t say that the rate hike will take place “in the coming months”. Yellen’s comments were positive for stocks, both American and emerging.

EUR/USD stalled below resistance at 1.1376 (February high). The euro area’s GDP growth for Q1 was revised up from +0.5% to +0.6%, back to the level from which it was revised down on May 13. Investment and higher consumer spending were the main drivers of growth. However, the European Central Bank expects the region’s economic growth to slow down in Q2. The ECB will start buying corporate bonds on Wednesday, and the borrowing costs in the euro area are already extremely low. These expectations together with the risk of Brexit – the UK leaving the European Union – is making it hard for the euro to continue its advance.  

GBP/USD made a spike to 1.4657 during the Asian session. The potential reason of such move is mis-typed orders from some bank trader. The pair will likely remain in range between 1.4600 and 1.4350 in the coming days. Trading will be very volatile, as the pound will be affected by the news flow on Brexit (new opinion polls, comments of officials). It’s not reasonable to take long-term positions ahead of the British referendum on June 23. The UK will release manufacturing production figures at 08:30 GMT.

USD/JPY corrected up from the recent lows at 106.37 to 107.90. It’s rather difficult for the pair to move up. Resistance is at 108.15 and 108.90. Below 106.80 (78.6% Fibo of May advance) the pair will fall to 106.00 (200-week MA). Japan is to release final GDP for Q1 early on Wednesday: a slight revision of growth to the upside from +0.4% to +0.5% is expected. Japan’s current account surplus is also seen higher. If the forecasts come true, the yen will gain. Also keep an eye on the statistics from China: trade balance figures will be important for the market’s risk sentiment. Better readings will improve the sentiment and increase demand for USD/JPY, worse reading will spoil the market’s mood and contribute to the pair’s selloff.

Another currency pair, which is sensitive to the market’s risk sentiment is AUD/USD. The pair shot up to 0.7450 as the Reserve Bank of Australia left its benchmark interest rate unchanged at 1.75%. Still many economists think that the RBA will reduce the rate at its August meeting. Aussie still has some bullish potential in it, though be careful of Chinese data release. Next targets lie at 0.7480 and 0.7510. Support is at 0.7380 and 0.7300. 

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