Forex Outlook For June 2013

Forex traders experienced an exciting month of May, with the Bank of Japan’s actions driving the Japanese yen volatility. While June’s excitement may prove to be a bit more muted than May, there are many events unfolding that forex traders should watch closely, including the drop-off in the Japanese yen, Mark Carney’s upcoming Bank of England appointment, and ongoing economic data from the U.S. and E.U.

In this article, we’ll take a look at where the four major currency pairs might be headed in June 2013 and some key reports that forex traders should watch for during the month.

USD/JPY Appears a Bit Top-Heavy
The USD/JPY has experienced a tremendous rise from around 80.00 in November 2012 to more than 100.00 in May 2013. Driven by anticipated easing from the Bank of Japan, forex traders have sold the Japanese yen to remarkable lows and dramatically boosted the country’s exports. But, these trends may be ready to reverse, judging by some top-heavy technical price action and a reversal in confidence seen in the country’s equity markets.

Robert Sinche, global strategist at Pierpont Securities, told Bloomberg in a May 28th interview that there are signs that the country’s government wants to stabilize the Japanese yen between 100.00 and 105.00 to the U.S. Dollar. Exporters that have enjoyed the trade-related success also want the currency stabilized in order to contain their costs and make their businesses more predictable to investors who have been left to guess their futures.

Looking into June 2013, forex traders should watch for the Japanese yen to stabilize at around 100.00 or perhaps strengthen a bit against the U.S. Dollar with some profit taking. Key reports to watch include GDP data on June 9th, MPB minutes on June 13th, merchandise trade on June 18th, and CPI and industrial production data on June 27th.

SEE: 4 Types Of Indicators FX Traders Must Know

EUR/USD Strength Remains Uncertain
The EUR/USD strengthened during the latter part of May, moving from a low of around 1.2800 to above 1.300 by May 30th. Economic morale in the 17-state union increased by 0.8 to 89.4, according to the European Commission, as countries in crisis have stabilized. Southern Europe saw some of the strongest improvements in the region, while the OECD projects that the regional economy will rebound by some 1.1% in 2014.

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In the meantime, the U.S. recovery continues to be sluggish following the expiration of the payroll tax cuts and ongoing cuts in government spending. GDP figures were revised downward from 2.5% to 2.4% for the first quarter of 2013, but could be approximately 3.4% without government spending cuts, according to a CNN Money report. The consumer story was also mixed with a 0.2% drop in April spending, but confidence that reached a 6-month high in May.

Looking into June 2013, forex traders should watch for the currency pair to remain within recent trading bands, but should also keep an eye out for policy changes or new data. Key reports to watch include ECB announcements on June 6th, industrial production data on June 12th, and EC economic sentiment on June 27th, in addition to individual country indicators.

GBP/USD Remains Under Pressure
Britain’s pound sterling will likely remain under pressure moving into June amid uncertainty regarding future monetary easing by the Bank of England. Incoming governor Mark Carney has been an open proponent of monetary easing, which has many traders nervous that he may implement some big changes when he takes office in July. While positive data has resulted in short-term movement, the currency will likely remain under pressure for now.

In the U.S., there’s a bit more certainty with no doubts that the U.S. Federal Reserve will end its own $85 billion per month bond-buying scheme. Some analysts believe the move could come as early as this summer, which led to a drop in the U.S. dollar versus many of its peers. But, others suggest that recent inflation data has caused some concerns that growth isn’t quite up to where it needs to be in order to end the programs so soon. [6]
Looking into June 2013, forex traders should watch for signs of Mark Carney’s position, while being cognizant of the fact that the U.S. may end its bond buying in the near-term. Key reports to watch include BOE data on June 6th, employment reports on June 12th, CPI and PPI data on June 18th, retail sales data on June 20th and GDP data on June 27th.

USD/CAD Rally Could Extend in June
Canada’s economy rebounded from its slow growth rates during the past two quarter, with an above-consensus 2.5% increase in GDP during the first three months of the year. Statistics Canada also revised its estimates from 0.6% to 0.9% during the fourth quarter and from 0.7% to 0.8% during the third quarter of last year. Ahead of these revisions, the Canadian dollar already jumped from about 1.000 to 1.040 during the month of May.

However, the external threats to Canada’s economy, including uncertainty in the U.S. caused some hesitation in its currency in late-May and early-June. Ironically, the U.S. slowdown has led to some traders taking up safe-haven in the U.S. dollar, while profit taking has also contributed to the recent sideways movement. Many economists don’t see the situation improving all that much until later this year and in 2014, when the U.S. economy starts picking up.

Looking into June, forex traders should watch for upside surprises in Canada’s economic indicators or improvements in the U.S. economy to drive valuation. Key reports to watch include employment reports out June 7th, housing starts data out June 10th, CPI and retail sales data out on June 21st, and monthly GDP figures on June 28th.

Summary of Key Events to Watch
· The Bank of Japan is expected to keep the Japanese yen at around 100.00, as export-driven profits must be balanced with rising costs.
· Mark Carney’s upcoming appointment to the Bank of England has led to speculation of additional monetary stimulus that could lower the Sterling’s valuation.
· The U.S. economy remains sluggish and the eurozone economy’s unemployment remains high, putting a damper on overall global growth.