GBPCHF LONG TERM SELL

 I have been

BEEN WATCHING THE GBPCHF FOR A WHILE AND IT HAS BOUNCED AROUND FOR A FEW DAYZ WITH LOWER HIGHS . CURRENTLY NOW PRESENTING A SELL OPPORTUNITY AT THE POSEIDON UPPER RESISITANTCE LINE.
MY COUNT IS A WAVE 3 DOWN WAVE 2 FINISHING AT 1.4967
SELLING @ 1.4916 TARGET 1 1.46300 THE N t2 1.442 STOP AT  1.49940
THERE IS A 57% CHANCE OF PRICE REACHING ITS TARGET

HARMONIC TRIGGER

EURAUD Short OPP

 EURAUD daily Above
4hrs below

USDJPY MY FAVORITE

USDJPY MY FAVORITE

By Joseph Plocek

WASHINGTON (MNI) – U.S. April trade data were almost as expected,
consistent with slightly slower GDP growth and showing some effects from
the oil market.

The April trade balance was -$50.1 billion, close to the median
forecast, after a revised -$52.6 billion in March.

Imports fell $4.1 billion as oil-related and other imports fell,
and exports declined $1.5 billion.

Imports had broad declines with computers -$1 billion, aircraft
-$368 million, pharmaceuticals -$1.4 billion, autos -$363 million, and
television-telecommunications -$0.6 billion. In many cases the changes
were offsets to March surges that in turn had responded to a slow
February when the Lunar New Year stoppered imports from Asia.

Oil-related imports fell $0.6 billion because fuel and ‘other’
products declined. But crude prices rose nearly $2 and the number of
barrels of crude advanced as well. World oil price declines in May
should lower these imports anew; apparently the timing of the
Commerce Department’s data collection did not allow an impact in April.

The exports dip reflected -$1 billion in industrial supplies, where
chemicals, steel and plastics fell. There was also a $0.8 billion
decline in aircraft & engines after a March surge.

Changes in services categories were small in April.

Unadjusted, the trade gap by country included: China at -$24.6
billion after -$21.7 billion in March, Japan -$6.3 billion after -$7.15
billion, and OPEC -$11.5 billion after -$9.1 billion.

April imports from South Korea surged to a record $5.5 billion, and
the trade gap with that country was -$1.8 billion after -$0.6 billion in
March. This probably reflects the increased popularity of Korean autos.

China and Japan are planning to trade directly without the USD as the common currency to determine the “cross-rate”.

Instead, the transactions from trading activities will determine the exchange rate. This is a step to promote trading between the two countries.

This could also be an initial sign of the greenback losing its dominance as a reserve currency. As Zerohedge puts it “when one bypasses the dollar, one commits blasphemy to a reserve currency.”

Here is the full report from Agence-France Presse (AFP):

TOKYO — Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, according to reports.

With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current “cross rate” system that involves the dollar in setting yen-yuan rates, Kyodo News said on Saturday.

The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.

The yen-yuan exchange system would help businesses in the world’s second- and third-largest economies reduce risks associated with exchange rate fluctuations in the dollar and cut transaction costs, Kyodo said.

It will be the first time that China has allowed a major currency except the dollar to directly trade with the yuan, Kyodo said.

AUDUSD

AUDUSD

RBA lowered the cash rate by -25 bps, following a -50 bps cut in May, to 3.5% in June. Deterioration in the sovereign debt crisis in the Eurozone and moderation in the Chinese economic growth were reasons triggering the reduction. Moreover, cautiousness of business and household spending which might continue in the near-term also contributed to the need for further easing. After the rate cut, policymakers believed that borrowing costs have dropped to be a 'little below their medium-term averages'. More in RBA Eases For A Second Consecutive Month. Aussie GDP showed an impressive 1.3% qoq growth in Q1, more than double of expectation of 0.5% qoq and was triple of Q4's 0.4% qoq. Year-over-year rate also jumped to 4.3% versus consensus of 3.2%. Australian treasurer Swan said hailed the data as a "remarkable outcome" and "reaffirms Australia's position as one of the strongest economies in the world". Also, Swan noted that "in through the year terms, this result is the fastest growth in over four years, which have been the most turbulent in the global economy since the GreatDepression of the 1930s."


COMMENTS BY ACTION FOREX

EURUSD DAILY

Much volatility was seen in the markets last week as talk of additional easing from Fed, as well as rate cuts from China and RBA, boosted risk markets and pressured dollar. The hope for QE3 was then dashed as Bernanke failed to deliver in his testimony with lack of hints on QE3. Then towards the end, risk markets was then lifted again by talk of imminent agreement of bailout for Spain's banking sector. At the time of writing, there was no announcement made regarding the bailout yet. But there should be some news after the EU finance minister conference call at 4pm Brussels time. Risk rebound could extend further initial this week. But we'd like to point out that such rebound might not be sustainable since traders would remain cautious just ahead of Greece election next Sunday on June 17.

Spain did had a decent bond auction last week even though yields jumped in the auction. It's believed that Fitch's downgrade of Spain by three notches was the trigger for the rush for talk on bailout on Spain's troubled banks. EFSF, the temporary bailout fund, is expected to be involved. A solution is for EFSF to inject bonds into Spanish banks which could then be used as collateral to access ECB liquidity. Such a program would be fundamentally different from bailout of Greece, Ireland and Portugal as it's directly addressing the banking sector, not the government. Thus, additional austerity measures for the Spanish government would not be a pre-condition for the aid. In any case, we'll keep an eye on the development over the weekend.

Last week, Fitch downgraded the credit rating of Spain by 3 notches to BBB. The rating agency cited that "the negative outlook primarily reflects the risks associated with a further worsening of the Eurozone crisis, notably contagion from the ongoing Greek crisis". Fitch warned that the costs of restructuring and recapitalizing Spanish banking sector is at around EUR 60b and could be as high as EUR 100b in a more "severe stress scenario". That's more than double of it's original forecast of EUR 30b. However, the "reduced financing flexibility" of Madrid will constrain its ability to intervene in the restructuring and raise the odds of "external financing support". And, Fitch noted that Spain's gross public debt could peak at around 95% of GDP in 2015. Regarding the economy, Fitch expected Spain to say in recession throughout this year and 2013, and that's a downgraded outlook from expectation of mild recovery in 2013.

COMMENTS BY FX360

GBP/USD

GBP/USD

In US, at the testimony to congress, Fed Chairman Bernanke stated that "the situation in Europe poses significant risks to the US financial system and economy and must be monitored closely". He also indicated that "the Federal Reserve remains prepared to take action as needed to protect the US financial system and economy" due to the risks posed by "the situation in Europe". Regarding further easing by the Fed to boost the US growth, the Chairman stressed the Committee has a number of options to consider and if it's decided that "further action is required", the Committee would also "decide what action is appropriate or what communications are appropriate". Yet, he did not indicate what options are being considered. That's somewhat in sharp contrast to Vice Chairman Yellen's urge for additional accommodation the day before, as she said it's "appropriate to insure against adverse shocks that could push the economy into territory where a self-reinforcing downward spiral of economic weakness would be difficult to arrest".

The latest Fed Beige Book described that the overall economic activity expanded at a "moderate", "modest" or "steady" pace in 11 of the 12 Districts (the pace of expansion in Philadelphia slowed slightly during the period). The report also stated that "lenders in most. Districts noted an improvement in loan demand and credit conditions". The economic outlook remained positive but those surveyed "were slightly more guarded in their optimism". Yet, the language used in the report does not seem that the market conditions would lead to QE3.

BoE kept bank rate unchanged at 0.5% and maintained the size of the asset purchase program at GBP 325b. Only a brief statement was released and focus will turn to meeting minutes to be published on June 20 instead. Sterling was lifted by stronger than expected PMI services, which stayed unchanged at 53.3 in May.
COMMENTS BY ACTION FOREX

wkly Fundermentals

USD: WILL FED EASE BEFORE ECB?

The promise of more stimulus from central banks boosted currencies and equities around the world. While the European Central Bank left interest rates unchanged, they paved the way for more easing in July. Comments from Federal Reserve officials also suggest that the Fed is warming to the idea of introducing another round of Quantitative Easing. Despite the recent stability in the financial markets, the outlook for global growth deteriorated significantly and the only reason why currencies and equities stabilized is because investors hope that European leaders will make a major announcement quickly. Many challenges need to be overcome before this can happen and negotiations can break down at anytime because at the end of the day, European nations are being asked to bear more pain in the near term. More importantly however, the fact that the ECB stood pat today means there is a realistic possibility that the Fed could ease before the ECB.
According to Fed President Lockhart, who is a voting member of the FOMC this year, "extending operation twist is on the table" and according to Fed President Williams, who is also a voter, the Fed must “stand ready to do more” if needed. The most important event risk tomorrow will be Fed Chairman Ben Bernanke’s testimony on the outlook for the U.S. economy. He has been laying low for the past few weeks but when the Fed last met in April, he said they were prepared to take more balance sheet actions if the economic outlook worsened. This was a major surprise at the time because the central bank raised their inflation forecast and lowered their unemployment rate projections, creating a great deal of confusion in the markets. Since then, his pessimistic view has been validated and so at bare minimum, he will eloquently say “I told you so.” The sharp deterioration in the labor market will only increase his concerns for the U.S. economy and this sentiment will most likely be shared in his speech on Thursday. If Bernanke verifies this possibility, we could see further weakness in the U.S. dollar as traders continue to adjust their near term rate hike expectations. However it will be a close call.  Like in Europe, if it was up to economic data alone, the Fed would boost asset purchases immediately but timing is critical right now and the Fed meeting comes on the heels of the G20.
Meanwhile the results of the Beige Book were mixed. The report concluded that the economy expanded at a moderate pace last month which is at odds with recent economic reports. The reviews from the individual districts range from a slow pace to steady growth of economic expansion.  The manufacturing sector saw signs of improvements in most Districts with energy production and exploration improved except for coal which reported a slight decline in activity. Demand appeared to be the strongest in auto and steel manufacturing although hiring was a different case because some Districts reported difficulty in finding qualified workers. Retail spending ranged from flat to modestly positive as there were a few reports that high fuel prices distressed consumer spending and sentiment. New vehicle sales and travel and tourism remained strong. Real estate improved since the previous report as new home construction, commercial real estate conditions increased although it is to note that home prices remained unchanged but sellers were lowering asking prices.  At the end of the day, Bernanke’s stance is the most important and we will get fresh details on that tomorrow. 

EUR: DRAGHI PREPARING FOR JULY MOVE

The euro ended the day higher against the U.S. dollar after selling off initially following ECB President Mario Draghi’s press conference. The promise of more stimulus and a way out of the crisis overshadowed the possibility of an interest rate cut next month. According to Draghi, the central bank is watching data closely and stands ready to act if necessary.  As expected, the European Central Bank left monetary policy unchanged and laid the groundwork for a move in July.  Based upon Draghi's concerns about economic growth and the increased risks to the downside for the Eurozone economy, they have every intention to ease.  In fact, Draghi even admitted that "a few council members would have preferred a rate cut today."  The only reason why they passed was because Draghi believes that monetary policy "can't fill lack of action" by European governments. Even though he said it is not the ECB's job to push governments into action, there is no question that its their strategy.  By holding back stimulus, the ECB is effectively pressuring European governments to be proactive so the ECB can be reactive.  There are plenty of advantages to waiting until July.  By then, they would know the outcome of the Greek elections, see the IMF's assessment of Spain and the market's response to the G20 meeting.  If things awry, they can always increase liquidity between meetings.  The ECB has quite a bit of tools at their disposal.  They can expand their long term refinancing operation, cut interest rates and / or leave asset purchases unsterilized. Draghi believes that the LTROs have prevented serious disruptions in the financial markets but he is skeptical about the effectiveness of more LTROs which suggests that a rate cut could be the ECB's next move.  While the ECB unveiled their latest GDP and inflation forecasts, investors should take their revisions with a grain of salt because they were finalized before the soft economic reports.  If the ECB incorporated the decline in manufacturing and service sector activity, they would have cut their GDP and inflation forecasts more significantly.  For 2012, they expect growth of -0.5 to 0.3%, which was the same as prior forecasts but 2013 growth was downgraded slightly to 0 - 2.0% from 0 - 2.2%.  Although the central bank believes that inflation will fall below their 2 percent target at the start of next year, they only tightened their inflation forecasts slightly.  In 2012, they see inflation at 2.3-2.5% versus a prior forecast of 2.1 to 2.7%.  Next year, they expect inflation to drop to 1.2-2.2% vs. 0.9-2.3%. Their anticipation of softer inflationary pressures confirms that monetary policy will remain easy through the better part of 2013.

GBP: WHAT TO EXPECT FROM BOE

U.K. traders have finally returned to the markets after their 4 day weekend and the rally in risk at the start of the European trading session indicates that rest and relaxation have made them less pessimistic about the outlook for the U.K. economy. This sentiment is important because it provides the benchmark for which the market’s reaction to the Bank of England’s monetary policy announcement will be measured. The British pound traded higher against the U.S. dollar and euro ahead of the rate decision. The BoE is not expected to alter monetary policy this month but like the ECB and the Fed, they will move closer to pulling the trigger on additional stimulus. Consumer spending weakened materially last month while inflationary pressured eased. Manufacturing activity also slowed considerably with the sector contracting at its fastest pace since May 2009. Activity in the construction sector continues to grow but at a slower pace last month. We know that at least 2 members of the monetary policy committee will vote for an increase in asset purchases but there is a reasonable chance that a number of other members will follow. The only question is whether there will be enough of a majority for action this month. If there isn’t the GBP/USD will rally in relief but the devil is in the details of which we will know when the minutes are released a few weeks later. Of course, if they ease, which is not the consensus view the GBP/USD will fall. In addition to the BoE meeting, the U.K.’s service sector PMI report is also scheduled for release.

AUD: RATE CUT EXPECTATIONS PARED AFTER DATA

Thanks to the rally in U.S. equities, the Australian, New Zealand and Canadian dollars ended the day higher against the greenback. Australia was the only country with economic data and according to the latest report, the economy expanded by 1.3 percent in the first quarter, which was two times faster than expectations. Solid consumer demand helped to cushion the economy from weaker growth in Europe and Asia. For the Reserve Bank, interest rate expectations have been pared as a result. Following the quarter point rate cut earlier this week, investors were looking for another half point move in July. With the stronger GDP number, those expectations have been pared. Australian construction sector PMI and employment reports will be released this evening. Based on the sharp decline in the employment component of the manufacturing and service PMI indices, job growth should have slowed. However the pullback may not be that significant considering RBA Governor Stevens’ comment yesterday that “overall labor market conditions firmed a little, notwithstanding job shedding in some industries, and the rate of unemployment remains low.” Canadian IVEY PMI is also on the calendar and a softer read is also anticipated with leading indicators growth holding flat and wholesale sales declining. The recent price action of the Australian, New Zealand and Canadian dollars suggests that they have bottomed but the sustainability of these gains will hinge completely on developments in Europe, leaving that the comm. dollars are the whim of global risk appetite. 

JPY: YEN CROSSES REBOUND

Today is third day in a row that the Japanese yen declined against the major currencies as the rally in equities eases flow into safe haven currencies. The weaker yen lends support to the export market which was lacking when the yen was appreciating at high levels for almost two months. No economic data has been released from the U.K. and after the G7 meeting yesterday, Japanese Finance Minister Jun Azumi told reporters that Japan is prepared to provide support if needed. At 19:50 ET / 23:50 GMT Japan will be releasing its data for Japan buying foreign bonds and stocks and foreigners buying Japanese bonds and stocks. At 22:00 ET / 2:00 GMT Japan will release its data for Tokyo Average Office Vacancies.

GBP/USD: Currency in Play for Next 24 Hours

Our currency pair in play for the next 24 hours will be the GBP/USD. We expect from service PMI from the U.K. at 4:30 ET / 8:30 GMT. At 7:00 ET / 11:00 GMT the Bank of England will meet to discuss its rate decision and asset purchase target. The US starts off with continuing claims and initial jobless claims at 8:30 ET / 12:30 GMT followed by Bernanke’s testimony to the US Congress at 10:00 ET / 14:00 GMT.
GBPUSD is currently trading at a range according to our Double Bollinger Bands. Nearest support is today’s low of 1.5375. Should the pair break below this support then our second support will be at 1.5233 which is the January 12^th low and where the lower second standard deviation Bollinger Band lies. On the up side the nearest resistance will be at today’s high of 1.5514 where it touches the 10 day SMA. Should this resistance break then a heavier resistance will be at 1.5725 where the 50% Fibonacci Retracement drawn from the year to date low to year to date high and 200 day SMA touch.

FX360.com