FX News – June 4: USD Continues to Falter

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The USD continued to falter yesterday after the release of the US ISM Manufacturing PMI data. It fell to 49.0 after the previous 50.7, and well below analysts' expectation of 50.5. This further aggravated the weakness of the greenback after a series of setbacks last week, particularly the GDP, unemployment data and low consumer spending.

Several majors rose as a consequence of the weakened USD. The AUD/USD pair, for example, has risen over the 0.97 mark yesterday, and is currently trading at around 0.9712. It even traded near 0.98 yesterday, which is the highest it has been over the past two weeks.

Traders must also take note that there is an upcoming interest rate decision from the Reserve Bank of Australia (RBA) an hour or so from now. Last month, the RBA made a 25 bps cut to its cash rates, which dropped it to a record-low of 2.75%. While analysts expect another round of cut within the year, they do not expect it to happen today.

Initial resistance for the AUD/USD is at 0.9884, followed by 0.9909. Meanwhile, initial support is at 0.9681, followed by 0.9656.

The EUR/USD also gained from the greenback's weakness, hovering just around the 1.306 mark. Over the past two weeks, the pair has sunk below 1.30, even trading at around 1.283.

The pair is currently trading at 1.3061, with initial resistance seen at 1.3169, followed by 1.3202. Meanwhile, initial support is at 1.3015, followed by 1.2982.

After going as high as 103.5 several weeks ago, the USD/JPY pair has seen a massive drop during this week's trading. The pair fell to almost the 99.00 mark in yesterday's trading and is currently at 99.61. Initial resistance for the pair is seen at 100.15, followed by 100.40. Meanwhile, initial support is at 98.24, followed by 98.00.

More Volatility Ahead

Traders should expect a lot of volatility around the time of the RBA's interest rate decision. But that won't be the only cause of volatility for the week as the ECB will announce its interest rate decision on Thursday, June 6 (11:45am GMT), while the US will announce its Nonfarm Payrolls data for May on Friday, June 7 (12:30pm GMT).

By FX Strategy Team, Published on 4th of June 2013
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