Forex Fundamental Analysis: Weak Data Weighs on EUR and AUD – June 3, 2014

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Forex Fundamental Analysis: Weak Data Weighs on EUR and AUD - June 3, 2014

The US dollar had a very strong start to the forex trading week, as it raked in gains against the euro, Loonie, and yen. The US ISM manufacturing PMI showed a decent improvement from 54.9 to 55.4, slightly lower than the consensus at 55.7 but still a positive reading. There are no top-tier reports due from the US today, as only medium-tier ones like the factory orders data and total vehicle sales report are up for release. With that, the Greenback might move to the tune of risk sentiment for the rest of the trading day.

The euro sank lower against its forex counterparts when the German preliminary CPI reading fell short of expectations and hinted of weaker than expected euro zone CPI forecasts. The reading showed a 0.1% downtick versus the estimated 0.1% gain, following the previous 0.2% decline. Other euro zone reports, such as the Italian manufacturing PMI, also disappointed while the Spanish and region-wide PMI simply came in line with expectations. Euro zone CPI forecasts are due today and a downgrade from 0.7% could seal the deal for further ECB easing later on this week.

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Forex Fundamental Analysis

The pound put up a strong fight to the dollar in recent forex trading when the UK manufacturing PMI was able to come in line with expectations. The figure slipped from 57.3 to 57.0, indicating that the expansion in the industry slowed down. For today, construction PMI is due and might show a climb from 60.8 to 61.2. In this case, the pound might be able to go for more gains.

The franc gave up its recent forex gains to the dollar when the SVME PMI turned out to be a disappointment. The figure was expected to dip from 55.8 to 55.7 but it fell to 52.5 instead, reflecting a sudden drop in industry activity. There are no major reports lined up from Switzerland today but traders might keep selling the franc on the heels of the slowdown in manufacturing.

The yen lost a lot of ground to its forex counterparts in recent trading as risk appetite picked up. The Nikkei recorded a 2.07% gain for the day, reflecting optimism that capital spending might make up for the slack in retail sales and household spending. There are no reports due from Japan today so the yen might continue to give way to risk appetite.

The Aussie was a big loser in the recent trading sessions as building approvals showed a weaker than expected reading and led traders to believe that the RBA might sound dovish in today’s rate statement. Earlier today, retail sales came in worse than expected at only 0.2% versus the estimated 0.3% gain. Chinese non-manufacturing PMI showed an improvement though, helping limit the Aussie’s losses. As for the Loonie and Kiwi, there are no major reports due from Canada and New Zealand, leaving these currencies at the mercy of market sentiment.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.