Forex Market Updates & Commentary

• US New House Price Index Rises 1.1%
• Eurozone Consumer Confidence comes in at -10 vs -10.4 expectations
• EURUSD remains in range as the FOMC is awaited.
• Webinar Today: Ask the Chartist with James Chen
• No leaks at French nuclear plants
• GBPUSD bangs on the 1.6094 floor
• Market talk of a nuclear leak in France
• The NY Opening Forex Commentary is available for viewing
• New House Price Index Data Due at 10AM
• Euro lower on Merkel comments
• Merkel says pressure on Greece and other highly indebted Euroarea countries to cut their debt and deficit won’t let up.
• Swiss ZEW -24.3 vs. -11.5 prior reading.
• MPC Meeting Minutes
• German government source says finance ministry will hold talks today on working group level with banks, insurers over private creditor contributions for Greece.
• IMF says Spain must step up efforts to overhaul its economy as Europe’s sovereign debt crisis threatens to damp growth.

US New House Price Index Rises 1.1% Posted: 22 Jun 2011 07:08 AM PDT House Price Index (MoM)- Survey: -0.3%   Actual: 0.8   Prior: -0.3%   Revision:  -0.4% U.S, April vs March 2011Pacific: 1.0% vs  -0.2 Mountain: -1.3% vs  0.4% West N. Central: -0.6% vs  0.7 West S. Central: 2.1%  vs  1.2% East N. Central: 1.4%  vs  -1.6% East S. Central: 1.8%  vs  -0.7% New England: 2.2%  vs  -0.1% Middle Atlantic: 1.3%  vs  -0.3% South Atlantic: -0.2%  vs  -1.1%

Eurozone Consumer Confidence comes in at -10 vs -10.4 expectations Posted: 22 Jun 2011 07:01 AM PDT Last month the index came in at -9.8.  The slightly better than expected data ahs pushed the EURUSD above the resistance on the 5 minute chart.

EURUSD remains in range as the FOMC is awaited. Posted: 22 Jun 2011 06:33 AM PDT The Greek vote of confidence vote last night was met with increased volatility.  However, apart from a  quick move above trendline resistance (see chart above), the price has remained in a confined range between channel support and channel resistance.  I am looking for the 1. 4443 level as the topside resistance today, while the 1.4356 is the current downside support.   Looking at the 5 minute chart, clues to possible direction could be tightened to 1.4410 on the topside and 1.4369 on the downside (see 5 minute chart below).  Fundamentally, the market struggles with bearish fundamentals in the US and in the Eurozone.   With the Fed today and comments from Bernanke at 2:15 PM, there exists the potential for more dollar bearishness.  The Fed chair is likely to comment how the end of QE3 will not have a material impact – at least initially – as the move has been telegraphed by the Fed.  The bond markets will have to survive without the Fed’s consistent buying.   Rates may back up as a result. However,  lending by banks have switched more to a focus on credit risk. One could argue that lower rates (as a result of QE buying) may lead to banks pulling back from lending as the implied rate is too low for the credit risk.   Buying treasuries become a better use of funds.   In an ironic twist, higher rates make banks more comfortable with loans. They simply earn a higher spread. Bernanke is likely to be disappointed with the sluggishness of the economy/employment and will implore Congress  to pass a debt ceiling extension.  Employment at 9% is well above what is normal (6-6.5%) . Until the rate heads to this level the Fed Chair will not be satisfied.  Inflation has dipped with the decline oil back below the $100 a barrel level.  This should help stimulate some growth in the 2H of the year as the Fed sees the almost immediate impact from higher oil on the consumer and businesses.  Because of lower prices for energy, Bernanke will likely give a more positive assessment for 2H growth. In Europe, the vote of confidence went along party lines and passed. Austerity measures being implemented will be eyed next.  The EU/IMF will continue to want to see progress on budgets in order to provide aid.  The fear is of a domestic breakdown in Greece that spreads.  Reports in the press showed that the tentacles of a default in Greece extend to the Credit Derivative Swap market which kick in on any default.

Webinar Today: Ask the Chartist with James Chen Posted: 22 Jun 2011 06:18 AM PDT Please join us today (June 22) at 10:00 AM ET for FXDD’s Ask the Chartist with James Chen. This free webinar will feature answers to questions from the audience regarding forex trading, technical analysis, and trading strategies. Please click here to register:https://www1.gotomeeting.com/register/732278729 .

No leaks at French nuclear plants Posted: 22 Jun 2011 06:17 AM PDT The report discredits the earlier newswire reports.

GBPUSD bangs on the 1.6094 floor Posted: 22 Jun 2011 05:46 AM PDT Last week the price in the GBPSUD banged against the 1.6094 level and used the level as a floor for trading (a level to define risk). There was one lone hourly bar that moved below triggering stops, but that move quickly failed and the floor was reestablished. Now the price is back down testing this floor today. A break should solicit additional selling in the pair with the next target being the 1.6023 level where the 200 day MA is currently located. The GBPUSD has traded above the 200 day MA for all of 2011 (last time below was on Dec 30th 2010).  Adding to the bearishness, is the breaking of the parellel trendline on the daily chart that connects lows going back to January 26th.  This level was broken at the 1.6141 level today (see chart below). The line has been broken on three separate occassions over the last week, but each time the price rebounded and closed back above the line by the end of the trading day – keeping the sellers in check. Staying below – and closing below this level today, will keep the pressure on the GBPUSD and should lead to additional selling. Additional resistance today comes in at 1.6135. This is the high correction off the original low today and just below the trendline at the 1.6142,  Staying below these levels will keep the bears firmly in charge today.

Market talk of a nuclear leak in France Posted: 22 Jun 2011 05:36 AM PDT This may be leading the rotation back down in the EURUSD in the last 10 or so minutes.

The NY Opening Forex Commentary is available for viewing Posted: 22 Jun 2011 05:20 AM PDT

New House Price Index Data Due at 10AM Posted: 22 Jun 2011 04:38 AM PDT

Euro lower on Merkel comments Posted: 22 Jun 2011 02:58 AM PDT EU summit to work on post 2012 ESM mechanism. One possibility is to extend investment in Greek bonds upon expiry of current bonds. Confidence vote in Greece is important step, but Athens must not push through austerity package. EU summit will not make final decisions on Greece. Wants voluntary, substantial, quantifiable contribution from private sector to Greek aid deal. Not possible to demand private sector contribution if ECB is not in agreement on method. Can only warn against disorderly default.

Merkel says pressure on Greece and other highly indebted Euroarea countries to cut their debt and deficit won’t let up. Posted: 22 Jun 2011 02:32 AM PDT Countries such as Greece and Portugal have long way to go before they return to economic growth and become competitive.

Swiss ZEW -24.3 vs. -11.5 prior reading. Posted: 22 Jun 2011 02:01 AM PDT

MPC Meeting Minutes Posted: 22 Jun 2011 01:36 AM PDT Voted 7-2 to hold benchmark interest rate at 0.5% in June. Voted 8-1 to keep QE at 200 bln Some members saw risk more bond purchases may be needed. CPI expectation hadn’t moved materially. Wage growth remains subdued. Some members thought APF expansion might become warranted. CPI risks “substantial” thought little changed on month. Posen maintained vote for additional bond purchases. Medium-term outlook “extremely difficult to judge”. The GBP sold off following the release.

German government source says finance ministry will hold talks today on working group level with banks, insurers over private creditor contributions for Greece. Posted: 22 Jun 2011 01:10 AM PDT

IMF says Spain must step up efforts to overhaul its economy as Europe’s sovereign debt crisis threatens to damp growth. Posted: 22 Jun 2011 01:09 AM PDT