London Session

EUR/USD has pushed higher late in the London morning, taking out the 1.4200 level. While price action has picked up in the approach to the US open, earlier in the day consolidation and profit-taking had been a more dominant theme in many cross rates and assets classes. European stocks traded lower through most of the morning, cable had continued to shy away from the GBP/USD1.6400 level and the EUR, AUD and NZD had spent most of the morning lower vs the USD. The approach of key central bank meetings and the US payrolls data later in the week had injected a cautious tone into the market.

The rise in the Eurozone unemployment rate to 9.2% in April from 8.9% in March has focused attention on the ongoing economic difficulties facing the region. Overnight, the RBA surprised the market by stating that scope remains for some further easing of monetary policy. Risk is that the ECB could also maintain a dovish tone this week particularly given last week's soft inflation data and this had kept EUR buyers sidelined through most of the London morning.

The EUR's gains vs the USD have now dragged cable through the USD1.6400, a level which had offered resistance through most of the session. Good news for the UK came this morning in the form of a rise in mortgage approvals to 43K in April from 39K in March and a moderate rise in lending on dwellings to GBP1.0 bln. These data signal a tentative improvement in housing demand suggesting the massive softening in monetary policy is beginning to impact. However, it is likely that the BoE will retain its dovish stance at this week's MPC meeting and this may inject a cautious tone into the pound later this week.

USD/JPY has been the biggest mover of the session so far with the USD falling back towards the middle of its range vs the JPY after yesterday's rise. This afternoon, US pending home sales and ABC consumer confidence data will be watched.

New York Session

The commodity complex came off the boil in the NY session and this led to a revival in the US dollar. The weekly oil inventory data showed a massive 2.9 million barrel build in the latest week (market was looking for a -1.5 million draw) and this helped push the oil imbalance back in the favor of supply for the first time in three weeks. Oil briefly tried below $65/bbl before recovering, but the damage was done.

The correlations witnessed over the last month or so were in full force and the commodity currencies bore the brunt of the weakness in crude. USD/CAD confirmed the hourly double-bottom by 1.0790 and squeezed through the 1.0970 neckline. Look for potential to 1.1150 before this is over. AUD/USD saw a similarly impressive decline of about -150 pips in the session. The pair found support at the 200-hour SMA by 0.7940 and was trying to sneak back above 0.8000 ahead of the close.

US dollar strength extended well beyond the commodity currencies. Cable saw an impressive -200 pip drop towards 1.6310/20 and was down about -400 pips on the day at one point. Below 1.6240 opens up potential for further weakness. EUR/USD shed a more modest -50 pips into the 1.4150/60 area. The 1.4100 level remains like a rock and contained the weakness once again. The immediate risk is for a squeeze higher towards 1.4200/50 ahead of tomorrow's ECB meeting. This, however, would set up a potential head-and-shoulders hourly consolidation. If this comes to fruition, then the ensuing 1.41 break could be ''lights out''.

The big story in stocks was that the S&P managed to stay above the 200-day SMA (923.30) today after an earnest attempt on the market's part to take the level out. The index squeezed higher at the end of the day but closed -1.4% in negative terrain nonetheless. The weakness here left the yen crosses heavy with EUR/JPY, for example, dipping -60 pips towards the 135.80/90 zone.

Upcoming Economic Data Releases (Asia Session) prior expected

6/3 23:50 GMT JN Capital Spending 1Q -17.30% -27.10%

6/3 23:50 GMT JN Capital Spending excl Sftwre 1Q -18.10% - -

6/4 1:30 GMT AU Trade Balance APR 2498M 1700M

6/4 2:30 GMT AU RBA Governor Stevens Speech in Townsville

6/4 3:00 GMT NZ ANZ Commodity Price MAY 2.50% - -

6/4 3:00 GMT NZ Commodity Price Index for May

Asia Session

The US Dollar struggled to hold onto earlier overnight gains that were made after some poor data and lower equities poured cold water on the risk trade. The oversold Greenback was given a boost in New York trading as optimism waned with ADP employment data showing over 500,000 jobs lost for May. The EUR/USD dropped from its lofty heights of 1.4338 to hit bottom just under 1.4110 prior to the Asia morning open. The pair entered Asia close to 1.4160 and after a high of 1.4192 and a subsequent low of 1.4136, the pair graciously exited the session right where it began. The trading this session was relatively calm ahead of the slew of central bank decisions on deck for tomorrow from the European Central Bank, Bank of England and the Bank of Canada. Although all central banks are expected the keep rates unchanged, with ECB at 1.00%, BOE at 0.50% and finally the BOC at 0.25%, traders will nonetheless be on the lookout for any signals for future moves from the banks.

The Yen lost favor in Asia, dropping against both the Dollar as well as the Euro. USD/JPY began the Asian trade day near 96.00 and broke above 96.35 before settling near 96.15 prior to the London open. EUR/JPY opened near 135.90 and after a 135.57 low and a high of 136.63 closed the session 40 pips of that aforementioned high. South of Japan, both the Aussie and Kiwi dollars tried to bounce back from yesterday's massive losses, the AUD/USD to the tune of almost 2%, but looked to stay unchanged for the trade day. RBA Governor Glenn Stevens set the stage in a speech where he stated that the possibility for further easing was a strong possibility.

Upcoming Economic Data Releases (London Session) prior expected

6/4/2009	6:45	FR	ILO Unemployment Rate	1Q	8.20%	8.60%
6/4/2009	6:45	FR	ILO Mainland Unemployment Rate	1Q	7.80%	8.00%
6/4/2009	6:45	FR	Mainland Unemp. Change (000s)	1Q	187K	- -
6/4/2009	9:00	EC	Euro-Zone Retail Sales (MoM)	APR	-0.60%	0.20%
6/4/2009	9:00	EC	Euro-Zone Retail Sales (YoY)	APR	-4.20%	-2.80%
6/4/2009		UK	New Car Registrations (YoY)	MAY	-24.00%	- -
6/4/2009	11:00	UK	BOE ANNOUNCES RATES	4-Jun	0.50%	0.50%
6/4/2009	11:45	EC	ECB Announces Interest Rates	4-Jun	1.00%	1.00%

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