Comments and forex-analytics from FBS

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USD/CAD: a pause in advance

Yesterday the greenback added almost 100 pips trading versus its Canadian counterpart. However, the bulls didn’t manage to push USD/CAD above resistance in the 1.0300 zone and the pair posted the day’s minimum at 1.0261.

Note that both technical and fundamental picture for the pair still looks positive, so US dollar may resume its advance after some consolidation.

The pair has gained 4.2% this month. Canada’s 10-year bond yield dropped to the lowest level since at least 1989 at 1.770%.

US currency strengthened due to several factors: global risk aversion, declining commodity prices and the speculation that the odds of the Bank of Canada interest-rate increase decreased.

Analysts at TD Securities think that USD/CAD may strengthen to 1.04/06 before USD-bears finally reemerge. Strategists at National Bank of Canada recommend buying the pair above 1.0320.

As always with the pair USD/CAS, much depends on US and Canada’s data. Watch US unemployment claims and US GDP data today and Canada’s GBP and US NFP release tomorrow.

Analysts expect the U.S. non-farm payrolls to increase by 152K. However, in April the labor market didn’t fulfill expectations rising only by 115K, far below the 172K consensus forecast. The March unemployment rate is predicted to remain unchanged at 8.1%. The unemployment declined to 8.1% in April from 8.2% in March, despite lower NFP job gains.

Chart. Daily USD/CAD

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Danske Bank: trading GBP/USD

Analysts at Danske Bank recommend going short on GBP/USD, entering the trade at $1.5540, targeting at $1.5410 and with a stop at $1.5615.

On Thursday British pound strengthens against the greenback after yesterday’s sharp fall. The sterling is supported by M&A talks (Britain’s Logica could be bought for 1.7 billion pounds by Canada’s CGI) and by positive UK economic data (GfK consumer confidence index and housing prices went up).

However, the cross still trades in a downward channel and is close to a 4-month minimum at $1.5233. According to specialists, the sterling will continue a downward movement after a short-term correction. The bank points out that British economy is affected by the euro zone’s debt crisis. Moreover, the pair’s looking oversold with RSI index below 30.

Support for the pair lies at $1.5440, $1.5400 and $1.5365, while resistance – at $1.5510, $1.5550 and $1.5600.

Chart. H4 GBP/USD

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Bearish outlook for EUR/CAD

The single currency hit yesterday 2-year minimum versus Canadian dollar in the 1.2730 area. Today the pair USD/CAD has managed to recover a bit, though it got constrained by the resistance of this week’s downtrend.

According to analysts at Rabobank, the loonie will suffer from euro zone’s debt turmoil and slow rebound of the US economy. Strategists are bearish on the cross in the long term. If the pair makes a sustainable break below the 1.2761 (2011 minimum), it will get vulnerable for a decline to 1.2500.

Specialists at Danske Bank also remain bearish on EUR/CAD, but forecast a short-term correction. They recommend selling the pair at 1.2850, targeting at 1.2640 and stopping at 1.2940.

According to analysts at TD Securities, there is no strong support for the cross until 1.2455 (2010 minimum).

Chart. Daily EUR/CAD

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Spain’s in danger, markets are worrying

While there are slight signals of optimism in Greece (according to new surveys, Greek parties are likely to form a pro-bailout coalition in June), market attention has switched to Spain and its troublesome banking sector.

On Wednesday Span’s 10-year bond yields reached 6.7% approaching the critical 7% mark at which Greece and Ireland were forced to ask for financial help. Main Spanish stock index IBEX lost 28%, while the nation’s unemployment is almost at 25%,

Spanish authorities confirm that the situation is critical. According to them, financial needs for the next few weeks are satisfied after the nation’s government has issued more than half bonds planned for 2012. The comment doesn’t sound inspiring at all.

The European Commission offered direct aid from a euro-zone rescue fund to recapitalize distressed banks and proposed giving Spain additional time to meet a 3% budget deficit target.

The EC officials also underlined that they would like to know Spain’s restructuring plans for recently nationalized Bankia as soon as possible: beyond all question, the domestic solution of the country’s bank crisis without a bailout is preferable. Spanish government promised to provide Bankia with 23.5 billion euro, but still hasn’t provided any information on where the funds will come from.

Image from http://dom-spain.com

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June 1: currencies & economic background

The summer has begun in the risk-off mode. Chinese manufacturing PMI disappointed: official figures were down from 53.3 in April to 50.4 in May (that still means expansion, but the critical 50 level is getting closer), while HSBC index dipped from 49.3 to 48.4 vs. 48.7 expected.

US dollar gained versus the majority of its peers as a safe haven with the Dollar Index (DXY) reaching 21-month maximum. Even USD/JPY is trading on the upside as investors went long due to potential intervention, but got only the usual verbal commitments from the Japanese Ministry of Finance, so the pair has already erased some of its advance.

Euro’s attempt to interrupt the long decline against the greenback ended in red yesterday. EUR/USD has been steadily renewing 2-year minimum this week: today is set at $1.2323. Australian and New Zealand currencies are set to complete 5-week declines against the dollar as Asian stocks fell. The MSCI Asia Pacific Index of shares lost 0.9%.

In Europe it’s all about politics. The markets are waiting for the results of Irish referendum on the fiscal pact – Ireland is the only country to put the EU plan to a public vote. Although the polls indicate that the legislation will be ratified, one can’t eliminate the possibility of unpleasant surprises taking into account the fact that Irish voters rejected 2 previous referendums. The results will be announced tonight. In addition, the ECB is pushing Germany to give up its opposition to direct euro-area aid for struggling banks.

Important data to watch today:

Great Britain: According to forecasts, manufacturing PMI will decrease to 49.7 in May from 50.5 in April, indicating industry contraction and augmenting concerns on the UK economic conditions. Great Britain holds a 10-year bond auction.

Canada: GDP in March may have added 0.3% in March after an unexpected contraction by 0.2% in February.

US: Analysts expect the US non-farm payrolls to increase by 150K. In April the labor market didn’t fulfill expectations rising only by 115K, far below the 172K consensus forecast. The March unemployment rate is predicted to remain unchanged at 8.1%. The ISM manufacturing PMI in May is expected to drop slightly to 54.1 compared with 54.8 in April.

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Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2350, $1.2450, $1.2480, $1.2485, $1.2500;

USD/JPY: 78.50 and 79.00;

GBP/USD: $1.5525;

EUR/GBP: 0.8000, 0.8050, 0.8100;

USD/CHF: 0.9725;

EUR/CHF: 1.2050;

AUD/USD: $0.9700, $0.9800.

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NFP is unlikely to bring joy

Today is one of the most exiting regular releases of the month – US Non-farm payrolls.

Previous (April): +115K.

Forecast (May): +151K.

Analysts at Standard Chartered think that the actual reading will come between previous and forecast level, at 130K. In their view, the lack of progress at US labor market reflects more the cautious attitude of business to future than indicates fears about a return to recession.

Analysts at BNP Paribas also think that NFP will show increase of only 110-140K that is below 150-200K level regarded by the Fed as acceptable. The specialists note that such figures will surely increase the odds of monetary easing in the US. However, BNP Paribas notes that this may happen only later in summer: it’s likely that the Fed’s Jackson Hole gathering in August will once again prove a defining moment in the US monetary policy.

Initial jobless claims have recovered after their seasonally adjusted spike higher in April, but they have failed to move below the levels seen in February-March. In addition, ADP employment report released yesterday was lower than expected showing that the number of employed people excluding the farming industry and government rose by 133K in May after increasing by 113K in April (below the forecast of +145K).

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USD/JPY slides lower, interventions fears loom

The greenback began today’s trading by rising versus Japanese yen as traders went long in order to get ready to potential intervention of Japanese monetary authorities, but got only the usual verbal commitments from the Japanese Ministry of Finance. As a result, the USD/JPY erased ts advance sliding to 78.10, the minimal level since the middle of February.

On the fundamental part, risk aversion strengthened due to disappointing UK PMI data of 45.9 (vs. 49.8 expected and previous 50.2). US 10-year Treasury yield fell from 1.5713% to 1.5374% – negative factor for USD.

The talk about potential intervention intensifies as US dollar slid yesterday below the 200-day MA. Analysts at Societe Generale think that Japan may act if USD/JPY goes under the 78 yen mark. Experts say there’s an option barrier and buy orders there.

Analysts at Standard Chartered closed USD/JPY longs citing several reasons: the ability of the BOJ to provide support for the pair’s recovery seems less and less feasible, while the markets will stay risk-off amid euro zone’s problems. “The Japanese authorities may well seek to offset this renewed JPY strength through aggressive FX intervention. However, with the BOJ demonstrating continued reluctance to act, it is challenging to suggest when this might occur”.

Chart. Daily USD/JPY

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Analysts set targets for EUR decline

The single currency has been trading within downtrend versus its US currency since the beginning of May. The markets are bearish, analysts are bearish… What interests everybody is how deep EUR/USD may fall?

SocGen: sell EUR/USD at $1.2350, stopping at $1.2550 and targeting $1.1800. There’s a risk of short-covering rally, but the risk aversion is so high that euro seems to be the best way to play the short European trade.

ANZ: any acceleration of the decline may bring the pair to $1.1875 (2010 minimum) and even to $1.1760 (2004 spike minimum), $1.1640 (2005 spike minimum) and $1.1215 (61.8% Fibonacci retracement). Euro has to rise above $1.2640 to ensure that a decent consolidation period.

Commerzbank: EUR/USD will find support today in the $1.2336/06 (2008 minimum, 2001-12 uptrend line). If this area is breached, the pair will head down towards $1.2058 (200-month MA) and $1.2000 (psychological level). Resistance for euro lies at $1.2457 (March 2009 minimum), $1.2495, $1.2500 and $1.2625 (January minimum and weekly maximum).

Chart. Monthly EUR/USD

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Pound plunged on negative data

Sterling slumped this week versus the greenback losing 400 pips in a decline from $1.5700 to $1.5300. Only a month ago GBP/USD set high at $1.6300. The pair breached $1.3555 (support line connecting 2008 and 2010 minimums).

Today pound was hit by disappointing UK PMI data of 45.9, the lowest level since the depths of the financial crisis in 2009 (vs. 49.8 expected and previous 50.2).

Support lies at $1.5268 (today’s minimum, October 2011 minimum) and $1.5233 (January minimum). 14-day RSI slid to 15 showing that the pair’s decline may have been too rapid and some consolidation may take place. At the same time, downtrend may be expected to continue while pair is trading below resistance at $1.5355.

Chart. Daily GBP/USD

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NFP comes worse than expected

The market's risk sentiment has taken another blow.

According to US Non-Farm Payrolls data released today, US economy added only 69K in May vs. 151K expected. April figures were revised down from 115K to 77K. Moreover, the unemployment rate unexpectedly rose from 8.1% to 8.2%.

USD/CAD jumped sharply on the news. USD/JPY’s daily candle is a doji-like formation.

ctemploymentlawblog.com

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RBC: buy AUD/NZD

Analysts at RBC Capital Markets recommend buying Australian dollar versus its New Zealand’s counterpart. In their view, AUD/NZD will overcome resistance at 1.30 and rise to 1.33/1.35 in the next 1-3 months.

The specialists think that the Reserve Bank of New Zealand won’t lower interest rates again this cycle. In their view, the normalization in the RBNZ rate expectations may not manifest in kiwi’s outperformance against Aussie as AUD forward curve is more mispriced than the NZD one. In addition, the bank regards AUD/NZD longs as a good way to trade independently of general risk appetite.

Chart. Daily AUD/NZD

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BOJ: judging the intervention risk

Bloomberg data shows that Japanese currency lost 10.4% versus its main counterparts in the first 3 months of the year, but then added 12.5% since March. Last week yen, a popular safe haven, has made the biggest weekly advance versus the greenback in 2012. During the resent months USD/JPY has been steadily trading below 1995 minimums in the 80 yen area.

However, analysts at Morgan Stanley note that yen still isn’t overvalued compared with 1995: on a trade-weighted basis yen is “roughly” in line with its average over the past 2 decades and would need to appreciate to about 55 yen per dollar to equal its strength in the mid 1990s.

Japanese authorities keep saying that they are ready to act in order to weaken the national currency. The nation’s Ministry of Finance sold 14.3 trillion yen ($183 billion) in 2011. The last time it sold the currency was on November 4 – the sales were unannounced and came to the market’s attention after the data appeared in February. There’s talk about the BOJ’s stealth intervention on June 1.

Investors don’t believe that Bank of Japan’s intervention will be able to prevent further yen’s appreciation taking into account the current situation in Europe and its negative impact on the markets all over the world. According to PIMCO, the probability of Japan intervening at yen’s current level and pace of change is low as last year yen’s sales were unsuccessful. RBC expects yen to keep strengthening 73 per dollar and 93 per euro by year-end. In their view, “the goal of Japanese officials is to manage the pace of appreciation in the yen and not try to engineer its outright weakness.”

Chart. Daily USD/JPY

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Trading EUR/USD

Britain is celebrating the Diamond Jubilee, 60 years of the Queen's reign – UK has a 2-day bank holiday. Trading seems quite, the pairs EUR/USD, GBP/USD and EUR/GBP have little changed.

There aren’t many important data releases either.

08:30 a.m. GMT: Euro zone Sentix investor confidence for June expected -30 from previous of 24.5.

09:00 a.m. GMT: Euro zone PPI for April expected +0.3% m/m.

02:00 p.m. GMT: US factory orders for April expected +0.3% m/m.

The market’s sentiment continues to be risk-off. Investors are still under the impression of Friday’s disappointing US labor market data (US economy added only 69K in May vs. 151K expected, while the unemployment rate unexpectedly rose from 8.1% to 8.2%).

TD Securities notes that though there may be some pauses in EUR/USD decline, the strong downtrend is still in place, so one should sell the pair on its advances to $1.25.

Commerzbank claims that EUR/USD may recover a bit this week, but only as longs as it holds above $1.2288 (Friday’s minimum). Resistance levels for the pair lie at $1.2495 (May 25 minimum), $1.2500 and $1.2625 (January minimum). Below $1.2288 euro will be vulnerable for a slide to 1.2058 (200-month MA) and $1.2000 (psychological level).

Chart. Daily EUR/USD

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Westpac: trade in case of the “doomsday”

Analysts at Westpac recommend a type of “doomsday trade”. The specialists felt the necessity of such proposal after US jobs data released on Friday (US economy added only 69K in May vs. 151K expected, while the unemployment rate unexpectedly rose from 8.1% to 8.2%) as the situation may keep deteriorating.

According to Westpac, it’s time to buy US dollar as a safe haven. The currency to be bearish on versus the greenback should be: 1. correlated with global equity markets; 2. relatively illiquid; and 3. from a country with high levels of external financing that would dry up in the event of a global economic problem. The analysts think that New Zealand’s dollar fits all 3 of these conditions.

So, the trade is: go short on NZD/USD at 0.7530 stopping at 0.8350 and targeting 0.5000.

Chart. Weekly NZD/USD

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Analysts expect RBA to cut rates tomorrow

Expectations for a rate cut changed dramatically in the past month from just two economists forecasting a cut until a few days back.

The latest Reuters poll shows that the majority of experts (60%) expect the Reserve Bank of Australia to cut interest rates tomorrow. Wall Street Journal survey shows that 10 of 20 economists expect 25 bps cut, 6 expect a 50 bps cut, and 4 expect no change.

Many economists have adjusted their forecast after the weak US Non-Farm Payrolls figures were released on Friday.

Here are some of the forecasts for the RBA rate:

Outcome Looking Ahead

ANZ -25bps Another 50bps by year-end

NAB -25bps Another 25bps cut

JP Morgan -25bps Another 50bps by year-end

HSBC -25bps

TD Securities Hold

UBS -25bps

StanChart Hold

Westpac -25bps Another 75bps cut

Citigroup Hold

CommSec -25bps

Deutsche Bank -50bps

AMP Capital -50bps Several cuts ahead

Moody's -25bps

Barclays -25bps

St George Hold

Macquarie Hold

RBC Capital -25bps Another 50bps by year-end

Goldman Sachs -25bps Another 25bps cut

BankAm-ML Hold

RaboBank -25bps

RBS Hold

AUD/USD lost 5% in May as the demand for riskier assets fell due to the European debt problems, concerns about China’s economic slowdown and US jobless rate. Australian dollar went up to the levels around $0.9700 versus its US counterpart today after $0.9627 in Asia.

Resistance: 0.9770 (May 31 maximum), 0.9800 (May 29 minimum) and 0.9900 (May 29 maximum).

Support: 0.9579 (June 1 minimum), 0.9488 (October 5 minimum), 0.9388 (October 4 minimum) and 0.9313 (September 14 minimum).

Chart. Daily AUD/USD

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UBS: short- & longer-term comments

EUR/USD: neutral in the short-term. Recovery is likely. Resistance lies at $1.2650 (38% retracement of the May decline). Support is at $1.2288.

GBP/USD: neutral in the short-term. Upward correction may continue in the summing days. Resistance is at $1.5410. Support lies at $1.5235.

Analysts at UBS claim that the recent weaker than expected data in the US could make the market expect the Federal Reserve to launch the third round of quantitative easing. At the same time, the specialists still favor the safe-haven dollar amongst the major currencies as the Fed’s actions are surrounded with uncertainty, while the rest of the main central banks could resume their stimulus as the crisis in the euro area remains unsolved.

Chart. Daily EUR/USD

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CFTC traders positioning data

The latest Commitments of Traders (COT) report for the week to May 29, released on Friday by the Commodity Futures Trading Commission (CFTC), showed the following changes in traders’ positioning in comparison with what was at the week to May 22:

• The net long US dollar positions against other major currencies rose by 7.4% to $37.97 billion, the maximal level since at least 2007.

• The net short euro positions rose from 195K to the new record maximum of 203K contracts.

• The net long pound positions declined last week from 11K to 1.5K contracts. This is the third consecutive week of declines from the maximal level in over a year on May 8.

• The net short yen positions decreased from 18K to 11K contracts improving for the seventh week in a row due to the market’s risk aversion.

• The net short Swiss franc positions declined from 35K to 31K contracts.

• The net long Canadian dollar positions declined from 39K to 34K contracts.

• The net short Australian dollar rose from 17K to 35K contracts, the most bearish level since 2009. Aussie bears are increasing positions for the fourth week in a row.

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

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[ryuroden]

Expectations ahead of the ECB meeting

This week is packed with the major central bank meetings. We’ve already pointed out that the expectations for the RBS rate cut have significantly strengthened in the recent days, what about the ECB?

Policymakers of the European Central Bank are meeting on Wednesday, June 6. In May the central bank left kept the interest rates unchanged at the record minimum of 1% for the fourth month in a row.

Analysts at IHS Global Insight think that the ECB will take a wait-and-see approach. In their view, European monetary authorities would like to wait for the results of Greek elections on June 17 as well as some economic growth figures. The specialists think that the ECB will slash the borrowing costs in Q3, probably in July.

Deutsche Bank points out that the ECB may decide to accelerate a possible policy response before the next Bank Lending Survey in July due to the weaker European economic data, especially the last flash PMIs indicating a significant slowdown in Q2 output after Q1’s flat print. At the same time, the ECB reiterated that the final responsibility for crisis resolution rests on Europe’s politicians. Economists see a cut in the refinancing rate or, less likely, another 3-year LTRO as possible outcomes.

Strategists at BNY Mellon expect no change in the ECB’s rates or stance. However, the specialists think that the central bank may signal that it’s ready to do more. In their view, Draghi is a tricky character to judge so it impossible to know whether he is susceptible to political pressure to cut rates. The bank says the market hasn’t positioned itself towards any solid expectations for the decision, “otherwise the euro would be trading higher.” But there are bets at the margins so the bank expects the euro to strengthen on any remedial action by ECB such as a liquidity injection.

Photo from http://crackerjackfinance.com

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June 5: economy, policy and currencies

Today is quite eventful.

Finance ministers and central bankers from the G7 nations will hold an emergency conference call today to discuss the euro zone’s debt crisis.

Traders covered euro shorts in case the policymakers arrive to some new measures. However, investors will keep selling the single currency on its advance. For now EUR/USD dipped below today’s opening price sliding to $1.2490 after testing resistance at $1.2540 earlier today.

Demand for higher-yielding assets improved, Asian equities went up making US dollar and Japanese yen lose versus the majority of their peers. The MSCI Asia Pacific Index of shares added 1% after declining for 4 days in a row.

As it was expected, the Reserve Bank of Australia cut its benchmark interest rate by 25 bps to 3.50%, the lowest level since 2009. Australian Q1 current account deficit came in line with expectations (AUD$14.9 billion). AUD/USD gained after the RBA’s announcement as the markets were ready for bigger cut.

Data to watch today:

9:00 a.m. GMT – euro zone’s retail sales, forecast: -0.1% m/m in April after +0.3% in March.

1:00 p.m. GMT – Bank of Canada’s rate decision: the borrowing costs are seen unchanged at 1%.

2:00 p.m. GMT – ISM Non-Manufacturing PMI: May readings are seen almost unchanged from April level (53.5).

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[ryuroden]

USD/JPY remains under pressure

There's a talk that Japan conducted stealth intervention on June 1 to weaken the national currency and support the pair USD/JPY which spiked below 78 yen hitting fresh 4-month low at 77.64 yen. Analysts at Totan Research, however, don’t think that the nation has sold yen last week citing their analysis of the Bank of Japan’s current-account balances.

Analysts at Bank of America claim that US dollar may slide to 75.56 yen (October 31 minimum) as risk aversion will likely keep prevailing at the markets.

USD/JPY lost about 150 pips last week. The greenback managed to close last week above the lower border of the weekly Ichimoku Cloud. However, Tenkan-sen has crossed Kijun-sen upside-down - bearish signal. In addition, the prices have fallen below the 50-week MA, which is now playing the role of resistance. The daily Ichimoku chart oints at the downtrend.

At the same time, specialists at Westpac claim that “dips in the pair towards the low 78.00 region are likely to be well supported. Moreover, we are not too far away from previous intervention levels and if risk appetite does improve/stabilize we suspect the recent run of JPY strength can come to an end.” FBS thinks that the pair will have chance for recovery only above 78.72 (June 1 maximum) and 79.00.

Chart. Weekly USD/JPY

Chart. Daily USD/JPY

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SocGen: forex majors in the short-term

-EUR/USD: there are offers at 1.2540/50. Focus on G7 meeting and ISM non-manufacturing PMI ahead of the ECB meeting on Wednesday. Sell EUR/USD on rallies.

-GBP/USD: UK markets still closed for the Queen’s Diamond Jubilee holidays, so sterling will remain driven by external forces today ahead of Thursday's Bank of England’s meeting.

-USD/JPY and EUR/JPY may get lower after G7 meeting.

-AUD/USD: although Aussie didn’t suffer from the Reserve bank of Australia’s rate cut as some investors feared that the central bank may reduce the borrowing costs more, the dovish RBA statement may make the pair revisit its recent minimums in the 0.9600 area after the G7 meeting.

-USD/CAD: the Bank of Canada will likely leave the benchmark rate unchanged at 1.0%. This may provide support for loonie for some time.

Image from andlestickcourse.blogspot.com

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BOC may sound more dovish

The Bank of Canada interest rate decision is an important item on today’s agenda. The consensus forecast is that the central bank will leave the key rate unchanged at 1.0% without signaling higher borrowing costs in the near future as the European debt crisis is reducing global growth and demand for Canadian raw-material exports.

Analysts at RBS claim that there’s the risk that the BOC statement will be much more dovish. Note that at the end of April the BOC governor Mark Carney said that interest-rate rises may be necessary to contain inflation – today we’ll find out whether Carney’s position has changed.

According to Bloomberg calculations on overnight index swaps, there’s an 81% chance of at least one quarter-percentage point cut this year.

Such expectations made Canadian dollar weaken versus its US counterpart. The pair USD/CAD reached 6-month maximums in the 1.0450 area. Analysts at BMO think that the greenback may climb towards 1.5000 on the announcement. Technical outlook for the pair will remain bullish until it closes the day below the parity level. It would be sensible to buy USD/CAD on the bounces from support at 1.03 and 1.01.

Canadian economy in figures

GDP: +1.9% q/q in Q1.

CPI inflation: down from 3.7% in May 2011 to 2% y/y in April 2012.

Chart. Daily USD/CAD

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GBP/USD: technical & fundamental comments

The pair GBP/USD has survived 5 weeks of losses from April 30 maximum of $1.6300.

British pound is currently consolidating below $1.5400 versus the greenback after losing more than 300 pips last week in the decline from $1.5690 to $1.5360.

The key support lies at $1.5267 (June 1 minimum, support from 2009). Higher sterling will be supported at $1.5320 (today’s minimum). Resistance for pound lies at $1.5416 (yesterday’s maximum), $1.5526/30 (May 31 maximum, 10-day MA) and $1.5600 (March 12 minimum).

On the fundamental basis important day for the pair is Thursday: the Fed’s Chairman Bernanke will testify after discouraging May NFP data, while the Bank of England will hold its monthly meeting. In both nations the monetary authorities may incline towards more monetary stimulus. In addition, watch UK Services PMI release.

Chart. Daily GBP/USD

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Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2350, $1.2400, $1.2425, $1.2450 (large), $1.2500, $1.2650, $1.2670;

AUD/USD: $0.9600, $0.9750, $0.9800;

USD/JPY: 78.25, 78.50, 80.00, 80.80;

EUR/JPY: 98.00;

EUR/GBP: 0.8060, 0.8110.