UK Mortgage Approvals are expected to fall for the second consecutive month in June while Net Consumer Credit growth slows from the previous month over the same period.
UK Mortgage Approvals are expected to fall for the second consecutive month in June while Net Consumer Credit growth slows from the previous month over the same period. The figures will reinforce dovish comments from BOE policymakers delivered in testimony to the Parliament’s Treasury Committee, where governor Mervyn King downplayed the stronger-than-expected second quarter GDP result to stress lingering uncertainty about the recovery in general and inflation in particular, signaling monetary policy is firmly stuck in accommodative territory for the time being.
Trading Tactics
A clear uptrend could be an opportunity to Buy GBP/USD.
The buying point is at 1.5627; Pivot point highest level is the take profit at 1.5695; Pivot point is the stop loss at 1.5590
The selling point is at 1.5570; Fibonacci 38.2% is the take profit at 1.5450; Pivot point is the stop loss at 1.5650
Technical: Sterling forms a new high and may continue the minor uptrend. A move back higher could set up a test of 1.5695
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD crosses the signal line upwards; Momentum and RSI (Relative Strength Index) are in an uptrend; stochastic oscillator gives a neutral signal.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
The recent upside failure at 1.3044 has seen a narrow consolidation, ahead of today’s renewed attempt higher. Break above the later is required to resume gains, with 1.3073/93 seen next, ahead of 1.3125 Fibonacci level. Immediate support stands at 1.2965/51 zone.
The latest strength retraced 50% of 1.7041/1.4230 descend at 1.5637 yesterday, with consolidation just below here followed. Fresh push higher is now underway, with clear break above 1.5637 to focus 1.5688, 18 Feb high, next. Below, 1.5544 offers initial support, while 1.5440 remains key support and possible break under here to weaken the structure and allow deeper corrective pullback.
The latest upleg off 86.82 higher low stalled at 88.10 yesterday, ahead of reversal. This has so far reached 87.09, retracing over 50% of the entire upleg off 86.25, increasing risk of lower top and possible fresh weakness towards 86.33/25, key support zone. Otherwise, regain of 88.10 would revive bulls and resume recovery.
Upside rejection at 1.0638, 200 days M.A on 27 July has triggered a reversal to 1.0515 so far. To maintain immediate bulls, higher low above 1.0480 is now required. Above 1.0638/45 will open 1.0675/95 barriers, with break here required to resume recovery. Loss of 1.0480/58, however, would attract key 1.0406/1.0393 support zone.
(Reuters) - The euro struck a two-month high against the yen and stayed within reach of an 11-week high against the dollar on Wednesday, as markets stayed in risk-on mode on robust European bank earnings and solid economic data.
The Australian dollar bucked the trend, after weaker-than-forecast Australian inflation dented rate hike expectations.
Risk sentiment had been boosted on Tuesday as European shares hit a five-week closing high. Two of Europe's top banks, UBS AG (UBSN.VX)(UBS.N) and Deutsche Bank AG (DBKGn.DE)(DB.N), posted results that reassured investors following last week's regulatory stress tests.
A rise in Germany's GfK consumer sentiment indicator on Wednesday to its highest level since November has also boosted hopes that the economic outlook in Europe is improving.
Asian equity markets tracked the positive tone, as Japan's Nikkei 225 Index .N225 and China's Shanghai Stock Exchange .SSEC both jumped more than 2 percent on Wednesday.
"Clearly there's a risk-on situation as the market is starting to believe there's a European recovery in place, but there is thin liquidity behind it," said Neil Mellor, currency strategist at Bank of New York Mellon.
At 3:24 a.m. ET, the euro was trading up around 0.3 percent versus the yen at 114.50, close to a two-month high hit in early European dealing at 114.74 on trading platform EBS.
Technical analysts said the picture was becoming bullish, as euro/yen continued to make gains within its Ichimoku cloud. The top of the cloud was seen as key resistance at 117.86.
The euro stayed within touching distance of an 11-week high against the dollar at $1.3045 hit the previous day. Traders said an option barrier at $1.3050 would need to be taken out for a move toward Fibonacci resistance at $1.3125, which is a 38.2 percent retracement of the December-June move.
Large option expiries were reported by traders at $1.3000 and $1.2850, potentially slowing the euro's gains on the day.
Focus for the morning was the ECB's three-month liquidity operation, with the result due around 5:20 a.m. ET.
"The tenders have shown there are a still a large number of European banks which are clearly hooked on ECB funding, which isn't a good situation," said BNYM's Mellor.
Results of a Portuguese bond auction were also keenly awaited, set for release around 0930 GMT.
AUSSIE SLIDES ON CPI DATA
The Australian dollar slid 0.7 percent to $0.8949, having dropped from a 11-week high of $0.9069 reached the previous day.
Australian consumer prices rose much less than expected last quarter and core inflation slowed to its lowest in more than three years, ruling out the need for a rate rise next week and possibly the rest of the year.
"The Aussie has given back some of its recent gains as CPI data prompted investors to push back expectations for higher rates," said Ayako Sera, a market strategist at Sumitomo Trust & Banking.
"But the Aussie is likely to keep drawing support from Australian interest rates, which are still the highest among industrialized countries."
The dollar index .DXY was down 0.2 percent at 82.011, staying close to a 12-week low hit on Tuesday at 81.824.
(Additional reporting by Rika Otsuka; Editing by Susan Fenton)
MORNING BRIEFING: Australian CPI rises less than expected, ease likeliness of RBA intervention
What’s new: Australia: CPI rises much less than expected United States: Consumer Confidence falls in July Japan: Nikkei strongest close in 2 weeks on strong corporate earnings and weaker Yen China: IMF staff estimate the Yuan is undervalued between 5 to 27 percent, say sources
Today:
Rates in Asia and Indices: EURUSD: 1.3033 - 1.2966. USDCHF: 1.0624 - 1.0590. GBPUSD: 1.5627- 1.5562. EURJPY: 113.48 – 112.57. USDJPY: 88.07 – 87.66. DowJones: 10'537.69 +0.12% NASDAQ: 2'288.25 -0.36% S & P 500: 1'113.84 -0.10% Nikkei: 9'753.27 +2.70% Shanghai: 2'634.77 +2.31% Gold: $ 1'162.10 Crude Oil: $ 77.54
Comments: The Nikkei climbed 2.7% on Wednesday for its highest close and biggest one-day gain in two weeks, breaking through several resistance levels on strong corporate as well as a weaker Yen.
Australian consumer prices rose much less than expected last quarter while core inflation slowed to its lowest in over three years, greatly lessening the possibility of the Reserve Bank of Australia raising interest rates, now at 4.5%, at its monthly meeting on August 3rd.
US consumer confidence for July fell to its lowest level since February, and eyes are on consumer durable goods numbers for June due today to further gauge the health of the world's largest economy.
The International Monetary Fund has chosen not to call the Yuan "substantially" undervalued, a move that recognizes China's efforts to free up its exchange rate and avoids friction with an increasingly influential shareholder. Since its de-pegging from the US Dollar, the Yuan has appreciated by 0.7% against the buck. Sources said IMF economists reckoned the Yuan was still between 5%and 27% undervalued depending on the methodologies used. A diplomat in Beijing confirmed the range.
The Euro is hovering above 1.3000 versus the Dollar today, however has failed to close above this technically crucial level, the 61.8% Fibonacci retracement from its fall since mid-April. Against the Yen, the single currency reached a 2-month high yesterday, while continued to record new highs today. EUR/JPY is now seen as bullish by an increasing number of traders, confirmed also by our RTFX Trend which turned bullish for the pair yesterday, with a start rate of 114.23.
The Aussie slipped to 0.8922 earlier following the release of inflation figures from an 11-week high reached yesterday at 0.9069.
The Euro hit a one-week high against the US Dollar as risk appetite held up overnight.
The Euro hit a one-week high against the US Dollar as risk appetite held up overnight. A tame European calendar puts the onus on US consumer confidence data and another round of second-quarter earnings reports. The Euro inched higher in overnight trade, adding nearly 0.2 percent and reaching a high of 1.3017 to the US Dollar, the strongest in a week. The British Pound was little changed, tracking sideways in a narrow range below the 1.55 figure.
Trading Tactics
A clear uptrend could be an opportunity to buy EUR/USD.
A buying point is at 1.2988; Pivot point is the take profit at 1.3075; Fibonacci 23.6% is the stop loss at 1.2900
A selling point is at 1.2880; Fibonacci 50% is the take profit at 1.2775; Pivot point is the stop loss at 1.2960
Technical: Euro breaks standard error channel middle line upwards and may continue the major uptrend. A move back higher could set up a test of 1.3075
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD is in a bullish direction; RSI (Relative Strength Index) and Momentum are pointing upwards; stochastic oscillator crosses %D line downwards.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
The EUR once again reached above $1.30 on Monday after better than expected economic data from the US, and an advance in global equities, boosted demand for riskier assets. Gold continues to decline as market concerns ease and people turn away from safe-haven assets.
Economic News
USD - Dollar Declines on Renewed Risk Appetite The US dollar declined against all of its major counterparts Monday following the release of better than expected US New Home Sales data. Combined with a boost in FedEx Corp.'s earnings, these two reports together have helped to raise demand for riskier assets. New US home purchases increased 24% from May to an annual pace of 330,000.
The Dollar depreciated 0.7% to $1.008 per EUR during today's early Asian trading, from $1.2909 at the end of last week. The dollar fell to 86.86 Yen, from 87.46.
Looking ahead to today, traders are advised to follow the release of the CB Consumer Confidence at 14:00 GMT. Better than expected results on this report may intensify the greenback's recent downtrend, especially since risk appetite will rise with a positive reading.
EUR - EUR and GBP Advance after Banks Pass Stress Tests The EUR remained within its trading range as results from the stress tests continued to reassure investors. The common currency traded within a cent of the 10-week high of $1.3029 reached July 20; however, it has since returned to trade around $1.3015.
The EUR rose to ¥112.97, up from ¥112.11, after reaching ¥113.48, the highest level since June 3rd. The British pound also rose to $1.5490 from $1.5425 after briefly reaching above $1.55, the highest levels since late April.
The Pound advanced after a July 23rd announcement that HSBC Holdings Plc, Barclays Plc, Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc passed the European bank stress tests.
JPY - Yen Drops as Demand for Safe-Haven Currencies Diminishes The Japanese yen fell versus all 16 major counterparts after the release of better than expected US New Home Sales data. The yen's safe-haven appeal also diminished as global equities gained and boosted demand for riskier currencies.
The JPY is currently trading at 113.07 per EUR as of today's early Asian trading, from 112.89 in New York yesterday, when it touched 113.48, the lowest since June 3. The yen is at 86.95 per USD, up slightly from 86.88.
Traders should follow the release of today's economic data from the US and Europe as positive news will likely dampen demand for the yen further.
Crude Oil - Crude Remains around $79 a Barrel Better than expected economic data from the US and advancing global equities helped support oil prices around $79 a barrel. Crude oil for September delivery traded at $78.85 a barrel, down 13 cents in electronic trading on the New York Mercantile Exchange
Oil seems to remain between $70 and $80 as future demand remains unknown and above average stockpiles are keeping Crude from breaching higher. For the time being, oil futures continue to trade on economic data as well as movements in equities. Traders should follow the release of today's US CB Consumer Confidence report at 14:00 GMT as better than expected results might help push oil prices closer to the $80 resistance level. Technical News
EUR/USD The price has broken out from the rising channel pattern on the daily chart for the second time; making a solid close above the upper line of the channel. A pullback into the channel pattern would signal a false breakout, as was the case last in last week's trading. A rise to the 38.2% Fibonacci retracement level at 1.3110 would signal a confirmation of the breakout pattern.
GBP/USD The pair rose as high as the resistance line of 1.5520, found the May high before falling back to close up at 1.5494. Momentum appears to be behind the price move as the 14-day Momentum indicator is sloping higher at 103, indicating further appreciation may be in store for the pair. The next significant resistance level comes in at 1.5820.
USD/JPY The bullish correction the pair experienced in the later half of last week came to an end yesterday. The price rose as high as the 20-day simple moving average before heading sharply lower. The inability for the pair to breach this resistance level indicates a sharp downtrend in the pair. Traders should be short with a first target at the support level of 86.25.
USD/CHF Shorter-time frame charts on this pair don't seem to be hinting too strongly at an impending direction. The hourly and 4-hour Stochastic (slow) and RSIs show upward mobility, but have not yet entered signal territory. We can see, however, that the weekly chart's Stochastic (slow) is giving off what appears to be a recent bullish cross. It seems upward pressure is mounting on this pair and we may see traders taking long positions as a result.
The Wild Card USD/SEK After a few days of trading sideways, this pair now seems to be giving off some clear buy signals. The 4-hour Stochastic (slow) appears to be approaching the beginning of a bullish cross, indicating future upward movement. The daily and weekly Stochastic (slow) also seem to indicate an impending bullish cross. The daily RSI also appears to be floating in the over-sold territory, indicating further upward pressure. Forex traders may want to take advantage of this information and enter a short-term long position on this pair for quick daily profits.
The Pound remains trading higher, supported by improved market confidence, and moving at 3-month highs above 1.5470, with room for further appreciation, according to technical analyst at Commerzbank.
The Pound remains trading higher, supported by improved market confidence, and moving at 3-month highs above 1.5470, with room for further appreciation, according to technical analyst at Commerzbank. The Sterling is biased to the upside, trading on an uptrend channel from May lows, targeting 1.5525/60 area, says Jones: "Short to medium term, the market has recently severed its 1.5310 down channel.
Trading Tactics
A clear uptrend could be an opportunity to Buy GBP/USD.
The buying point is at 1.5467; Pivot point is the take profit at 1.5565; Fibonacci 23.6% is the stop loss at 1.5400
The selling point is at 1.5380; Fibonacci 61.8% is the take profit at 1.5270; Pivot point is the stop loss at 1.5495
Technical: Sterling breaks the previous resistance level and forms a new support on moving averages line. A move back higher could set up a test of 1.5410
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD crosses the signal line with a higher histogram; Momentum and RSI (Relative Strength Index) are in an uptrend; stochastic oscillator crosses %D line in oversold area.
*Analysis is for information purposes only and does not constitute advice in any form. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
The combination of growing confidence in Europe’s economy and mounting evidence of a slowdown in the U.S. is driving euro bears into hiding.
Fundamental The combination of growing confidence in Europe’s economy and mounting evidence of a slowdown in the U.S. is driving euro bears into hiding. After tracking the euro’s slide from about $1.45 at the beginning of 2010, the median forecast of currency strategists has stayed within two cents of $1.20 since the start of June, according to data compiled by Bloomberg. Goldman Sachs Group Inc. and Wells Fargo & Co. raised their estimates in the past two weeks, joining HSBC Holdings Plc and Deutsche Bank AG in predicting a stronger euro. Technical Technical analysis shows the euro may continue the bullish movement as MACD crosses the signal line upwards and RSI bounces on 30% line. Bollinger gives us a bullish signal by closing the candle above the middle band.
EUR/USD (Daily Chart) The primary tendency breaks downtrend line upwards.
EUR/USD (4 Hour Chart) The pair is in a clear uptrend.
EUR/USD (Hourly Chart) The Minor trend trying to break Fibonacci fan.
After a long time waiting, the Euro-Zone's famous Bank Stress Tests results were finally published on Friday evening. The results failed to reassure investors regarding the stability of the European banking system as analysts claimed that the test weren't strict enough. As this week begins, the reliability of the tests will remain the main topic. Will it eventually boost the Euro?
Economic News
USD - The Dollar Ends A Volatile Trading Week Following Mixed Data from the U.S. The Dollar saw mixed results against the major currencies during last week's trading session. The Dollar had ups and downs vs. the Euro, and eventually the EUR/USD level closed at the 1.29 level. The Dollar also slightly strengthened against the Yen, while falling against the Pound.
The Dollar's volatile session came as a result of the mixed data from the U.S. economy. On one hand, the housing sector provided positive data last week. The U.S. Building Permits report showed that 0.59M new residential buildings permits were issued during June. The meaning of the data is that the quantity of future construction will rise; obtaining a permit is among the first steps in constructing a new building.
However on the other hand, the unemployment reports delivered negative signals. The weekly Unemployment Claims report showed that jobless claims in the U.S. increased more than forecasted to 464,000. The number of individuals who filed for unemployment insurance for the first time during the past week rose from 427,000, and failed to reach expectations for 449,000.
As for the week ahead, many interesting economic reports are expected from the U.S. The most significant publications look to be the New Home Sales, the Consumer Confidence, Durable Goods Orders indices, the Unemployment Claims, and the Gross Domestic Product (GDP). All these reports have potential to impact global trading and the Dollar in particular, and traders are suggested to follow the end results.
EUR - Stress Tests Fail to Ease Investors' Concerns from a Possible Debt Crisis The Euro saw a volatile session during last week's trading. The Euro began last week's trading with a bullish trend vs. the Dollar and the Yen. However the Euro then saw sharp drops and by the end of the week, resumed to its previous levels.
The Euro had a rising trend with the beginning of the week as positive data from the Euro-Zone supported the 16-nations currency. The German Producer Price Index (PPI) rose by 0.6% in June, beating expectations for a 0.2% rise. The report suggested that inflation in Germany rose for the 4th consecutive time, reassuring investors that the German economy is recovering. The European Industrial New Orders report also provided an unexpected positive data. The report showed that industrial orders in the Euro-Zone rose by 2.8% in May, well above expectations for a 0.1% drop.
However, by the end of the trading week, the Euro erased its profits, as the European Bank Stress Tests failed to reassure investors concerns from a possible sovereign crisis. The tests showed that merely 7 banks have flunked the stress test, out of 91 major banks that were tested. The supposedly positive data failed to create an impact in the market as investors felt that the tests may not have been strict enough. However, traders should take under consideration that European governments are putting a lot of efforts in the attempt to convince investors regarding the reliability of the tests results.
As for the week ahead, a batch of data is expected from the Euro-Zone. Traders are advised to focus on the German Preliminary Consumer Price Index (CPI), which will prove if the German inflation is indeed rising as last week's PPI data showed. Traders should also keep in mind the affects of the bank stress tests, as these results will continue to impact the market this week.
JPY - Yen Weakens Against the Majors The Yen fell against most of the major currencies during last week's trading session. The Yen dropped about 100 pips vs. the Dollar and about 300 pips against the Pound, and the GBP/JPY pair is now trading near the 135.50 level.
The Yen dropped last week due to speculations that Asia's economic recovery is advancing. These speculations have increased risk-appetite in the market, and have turned investors to look for riskier assets. The Yen is considered to be a safe-haven currency, and tends to fall as risk aversion weakens. The speculations came following several reports which showed that South Korea's economy grew faster than analysts forecasted, and Japanese exports rose more than expected.
As for this week, many interesting publications are expected from the Japanese economy. The main news events that traders are advised to follow are the Retail Sales on Monday and the Tokyo Core Consumer Price Index (CPI) on Thursday. If the reports will continue to provide positive signals, the Yen might weaken further as investors will continue to look for higher-yielding assets.
OIL - Crude Oil Prices Consolidates Around $79 a Barrel Crude oil prices continued to climb during last week's trading session. A barrel of crude oil was traded around $76 a barrel at the beginning of last week and as the week progressed, crude oil prices soared, and a barrel of crude oil is now trading around $79 a barrel.
Crude oil strengthened last week due to several positive economic reports from the U.S. and the Euro-Zone. The positive reports have created speculations that global energy demand will increase, and as a result, crude oil prices consistently rose. The bullish trend halted close to the weekend as concerns regarding tropical storm Bonnie have eased due to reports claiming that the storm has weakened.
As for this week, traders are advised to follow the main publications from the U.S. and the Euro-Zone, as they have significant affect on oil prices. Trades should also follow the U.S. Crude Oil Inventories report on Wednesday as this tends to have an instant impact on spot crude oil prices.
Technical News
EUR/USD Last week's trading has led to a doji candlestick formation on the weekly chart indicating a potential reversal lower for the pair. Traders will want to combine this signal with other technical indicators for confirmation before entering short. The next significant resistance level rests at the 38.2% Fibonacci retracement level at 1.3110. The next support level is found at last Wednesday's low of 1.2730.
GBP/USD The 2-month bullish correction has pushed the price above significant technical resistance levels, signaling a shift in the long term trend of the pair. The weekly chart shows the price broke the long term downward sloping trend line that began in July of 2008. The price has also moved above the 200-day simple moving average line. Traders will want to be long on the pair with the next resistance level coming in at 1.5520, April's high. USD/JPY Last week the pair failed to break below the support level of 86.25. Momentum for the pair has reversed as the Momentum (10) is trending higher. The price is looking to break above the resistance at the 20-day simple moving average line. A breach above this line could take the pair to the resistance level at 89.15, close to the long term downward sloping trend line. The potential correction could lead to a good setup to enter short in the direction of the trend.
USD/CHF The Relative Strength Index on the 4-hour chart shows the pair in overbought territory, indicating a downward correction could take place. That being said, according to most other technical indicators, the pair is trading in neutral territory with no clear direction. Traders may want to take a take a wait and see approach today, as a clearer picture may present itself later.
The Wild Card AUD/USD The Stochastic Slow on the 8-hour chart indicates that a bullish cross has formed, meaning a downward correction may occur today. This theory is supported by the Relative Strength Index on the 4-hour chart. Forex traders may want to go short in their positions for this pair today, as bearish movement will likely occur.
The Euro and the British Pound consolidated NY-session losses in overnight trade, with the single currency tracking sideways in a narrow range above 1.2750 while the UK unit oscillated within 30 pips above 1.5160.
The Euro and the British Pound consolidated NY-session losses in overnight trade, with the single currency tracking sideways in a narrow range above 1.2750 while the UK unit oscillated within 30 pips above 1.5160. Preliminary German Purchasing Manager Index figures are set to show that growth in the manufacturing and service sectors deteriorated to the slowest in four months. A composite Euro Zone Purchasing Manager Index reading is expected to decline for the third consecutive month to print at the lowest since February.
Trading Tactics
A clear downtrend could be an opportunity to sell EUR/USD.
A buying point is at 1.2860; Pivot point is the take profit at 1.2970; Fibonacci 50% is the stop loss at 1.2770
A selling point is at 1.2778; Pivot point is the take profit at 1.2635; Fibonacci 38.2% is the stop loss at 1.2830
Technical: Euro breaks previous support level and continues the minor downtrend. A move back lower could set up a test of 1.2635
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice histogram MACD is in a bearish direction; RSI (Relative Strength Index) and Momentum are in an uptrend; stochastic oscillator gives a bullish correction signal.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
Both the euro and British pound fell against the safe haven currencies yesterday, following a speech from FED Chairman Bernanke which caste doubt over the pace of the global economic recovery. While the euro has traded steadily against the U.S. dollar in overnight trading, it continues to fall against the yen.
Economic News
USD - USD Sees Moderate Gains Following Return to Risk Aversion The U.S. dollar broke the bearish trend it had been experiencing since early last month yesterday, following a speech by the Fed Chairman which led to gains for safe haven assets. The speech from Chairman Bernanke was unlike his more recent statements, in that it did not paint a solid picture of the global economic recovery. Following the speech, investors dumped riskier currencies in favor of the greenback.
Both the euro and British pound tumbled versus the dollar. EUR/USD has dropped over 100 pips over the last 24 hours, and currently stands at the 1.2768 mark. GBP/USD dropped close to 200 pips over the course of yesterday's trading session, before staging a slight comeback. At the moment, the pair is trading around the 1.5180 level.
While risk aversion appears to be the predominant market sentiment at the moment, investors will be cautiously awaiting several U.S. economic indicators set to be released today. At 12:30 GMT, the weekly U.S. unemployment figures are set to be released. With analysts predicting a slight increase in unemployment over last week, investors may continue to buy up safe haven assets in the afternoon, thereby boosting the dollar.
In addition, traders will also want to pay attention to the existing home sales report set to be released at 14:00 GMT. A decrease in home sales from last month is predicted, which if true will likely lead to further risk aversion. That being said, any unexpected increase in the home sales figure may lead to gains for the euro against the greenback.
EUR - Euro Breaks its Bullish Streak. Falls Against Yen After a more than two month bullish streak, the euro saw serious losses against the safe haven currencies throughout the day yesterday. In addition to the 100 pip loss against the U.S. dollar, the euro also fell versus the yen. EUR/JPY has fallen over 200 pips in the last 24 hours. Analysts attribute the drop to a speech yesterday from the Fed Chairman, in which he made statements that created doubt in the pace of the global economic recovery.
Today, the euro may be able to recover some of its losses depending on the results of the French and German manufacturing data, set to be released at 07:00 GMT and 07:30 GMT, respectively. Analysts are forecasting both figures to show expansion in the manufacturing sectors of France and Germany. If the predictions turn out to be true, investors may be enticed to buy up some of the riskier currencies like the euro in morning trading. At the same time, U.S. data set to be released later in the day, are expected to show further declines in the American economy. If true, the euro may see some more losses against the dollar and yen.
JPY - Yen Soars Against Majors as Risk Aversion Returns Following yesterday's gains, the yen continued its bullish trend against the majors in overnight trading. Since 20:00 GMT last night, GBP/JPY has tumbled around 85 pips to its current level of 131.33. Meanwhile, it appears that the JPY has fully confirmed its status as the premier safe-haven currency by making substantial gains against the U.S. dollar. The dollar dropped some 60 pips during overnight trading against the yen. Currently USD/JPY is trading around the 86.50 level.
Today, a lack of Japanese news events means that yen values will likely be determined by U.S. economic indicators. Traders will want to pay attention to the U.S. Fed Chairman's testimony at 13:30 GMT and the Existing Home Sales Report at 14:00 GMT. Should either of these events lead to further uncertainty in the pace of the global economic recovery, the yen will likely continue its bullish trend as a result.
OIL - Oil Prices Tumble Following Surprise Increase in Reserves Investors were surprised to learn of an increase in U.S. crude oil supplies yesterday. The news indicated that oil demand in the world's largest energy consuming country was less than originally thought, causing oil prices to tumble. Since yesterday afternoon, the price of crude oil went from 78.60, to its current level of 76.40.
Analysts are predicting a further drop in prices today, assuming the U.S. unemployment data and existing home sales figure come in as forecasted. Both news events are expected to illustrate the slow pace of the U.S. economic recovery. Typically, during times of economic uncertainty, oil prices tend to fall. At the same time, should any of the American data come in better than expected, the price of crude may rise as a result.
Technical News
EUR/USD The pair slipped yesterday to the minor support level near 1.2770 following the bearish engulfing candlestick pattern on the daily chart. Despite the change of the trend to the upside, current momentum is lessening, shown by the falling Momentum (14) indictor and a Slow Stochastic that is also heading lower. The next support for the pair rests at the 1.2670 level.
GBP/USD Yesterday's price action presents two key points on the daily chart. The price of the cable rose as high as the lower channel line which was previously broken and is now being used as a resistance barrier. Despite the sharp drop in value of the pair, the price managed to close above the 20-day simple moving average (SMA). Traders can use the SMA as a support level and as a basis for an entry long on the pair with a target at the 1.5300 level. USD/JPY The Relative Strength Index on the 4-hour chart shows an acceleration of the downtrend for the pair and could lead to a further drop in the price. The pair is currently testing the support level at 86.25. A breach below this level could take the pair to the 84.80 level as the daily chart shows a lack of technical support between the two levels.
USD/CHF Tuesday's trading ended slightly lower for the day but formed a hanging man candlestick pattern, signaling an end to the upward movement in the pair. Yesterday's bearish move in the pair confirms the correction has run its course and the pair looks to head lower to its next support at 1.0400. The Wild Card Oil Yesterday's sharp drop in price may have made for a good entry opportunity to go long on spot crude oil. The price closed at $76.35, near the 38.2% Fibonacci retracement level from the previous bearish trend. A breach back above this price could give CFD traders an opportunity to enter long with a target at the resistance level of $78.10.
Markets gained a temporary sense of optimism as FX risk-correlated trades recover from yesterday’s sell off and equity markets rally in Asia. Yesterday we saw a sharp reversal - especially in the EURUSD as leveraged players cut their long positions after the pair lost momentum and seemed to run into resistance. EU officials are on the wires talking up the bank stress test due to be released this Friday.
As we’ve already stated this week, we suspected that EU officials would throw a few sick banks under the bus in an effort to create the illusion of rigor. Greek, Spanish and now French officials have all been vocal affirming that the vast majority of their banks will pass the test. French Economic Minister Christine Lagarde stated she was "confident" about the results of the stress test for French banks, but failed to provide any details as to why.
The show boating is making us a bit concerned about the “stressfulness” of their methodology. Our best guess is that the test will measure the two major types of bond portfolios within banks. One bond type is used for trading which the ECB can apply a haircut to, the second is your traditional hold-to-maturity bonds which are going to be mark-to-market and potentially deemed immaterial. EU offical move in this direction since they are concerned with a "trading shock" more then a default. However, we hearing rumors that there’s been a fascinating migration of tradable bonds into the hold-to-maturity classification as of late.
The EU structured safe haven for these bonds and not looking at the full picture concerns us as it is a convenient place to hide bad assets and tell half the story. We don’t believe that this stress test will provide the confidence the market is searching for and certainly not be as successful as the US stress test. We suspect that the EUR will continue to come under selling pressure and we are watching for a test of the 1.2750 lvl.
In Japan, the BoJ minutes released this morning asserted the central bank’s commitment to "continues to aim at maintaining the extremely accommodative financial environment” and that the BoJ’s new scheme to encourage commercial lending to growth industries would be initiated in August. Perhaps the most intriguing aspect is that officials continue to make comments on the recent Yen strength while BoJ Deputy Governor Yamaguchi reiterated that they are watching forex moves very carefully.
While we don’t expect US yields to reverse their current direction, which would provide a great catalyst for a JPY sell-off, we do believe that Japanese comments and potential intervention around the 85 lvl will provide some ample USDJPY buying opportunities in the near-to-mid term.
Today’s focus will be on the BoE’s MPC minutes release & Chairman Bernanke’s testimony to Congress. MPC member Sentance voted for a rate hike at the June meeting and his recent public comments continue to be hawkish. However, dovish MPC member Posen maintained to Dow Jones that there was more than a 50% probability that the next BoE move would be a policy loosening, not tightening. Sterling has been very jumpy as of late as traders try to anticipate the BoE’s next move. Without any clear guidance, this is a currency we would avoid for the time being.
Today's Key Issues (time in GMT): 08:30 GBP retail sales, +0.5% m/m, +1.0% y/y eyed; last +0.6%, +2.2%. 08:30 GBP BoE MPC minutes, vote 7-1 prior 09:30 EUR German FinMin Schaeuble, French FinMin Lagarde meeting in Paris. 10:00 EUR Germany E4.0 bln 3.25% 2042 Bund auction. 00:00 EUR Portugal E1.25 bln 12-month Treasury bill auction. 10:15 EUR Schaeuble-Lagarde, Franco-German Econ-Fin"l Council press conference. 18:00 USD FOMC Chair Bernanke semi-annual Senate testimony
EurUsd Just as we suspected in yesterday’s report, the brief visit above 1.3000 (1.3028 the high) soon attracted the attention of bears who re-emerged in numbers and drove the pair all the way back down to lows of 1.2839. We feel that at these lofty levels, a short bias seems the most attractive in terms of risk-reward (recall that the rally to 1.3028 represented a 9.5% appreciation in the space of just 6 weeks), and significant resistance level appear to cap the upside to 1.3095-1.3125. That zone of anticipated selling interest includes the triple whammy of 10 May high (1.3095), the 4-week uptrend channel resistance at 1.3115, and also the 38.2% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876 which comes in at 1.3125. The tricky part here is selecting favourable entry levels and a small enough position size to tolerate a wide stop; 1.2950 would be the ideal area for us to re-load shorts, with the view that the pair should at the very least re-visit the lower edge of this 4-week uptrend channel in the coming days (currently seen at 1.2745). We still expect some buyers to lie around 1.2780 (a former pivot) and 1.2683 (last Wednesday’s low).
GbpUsd The fickle short-term trends in GBPUSD are making trading conditions difficult, and indeed the 1-week downtrend channel we highlighted yesterday morning has already broken its originally defined ceiling –a development made all the more frustrating by the fact it came very shortly after the pair had broken through 1.5230 support (which would have suggested in our minds that the next significant leg of this move would be to the downside). Given this whipsaw action, we prefer to steer clear of fresh trade entry for the time being, and should the bulls clear the next significant resistance at 1.5350 (19 Jul high), we could be induced to consider longs once more. Above there the likely targets are 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high). Should the pair opt to go lower instead, yesterday’s low was 1.5154, and next supports are seen at 1.5080 former neckline, 100-day moving average 1.4992, then the 12 Jul low 1.4949.
UsdJpy A very interesting picture for USDJPY at the moment with the possibility of both a bullish triangle pattern and a bearish flag pattern currently on the table. Yesterday we highlighted an ascending triangle pattern on the hourly chart with a target at 88.15 which looks to have been activated by the move up through 87.22; but having assessed the subsequent price action, it looks more accurately like this was in fact a symmetrical triangle. The consequences of this shift in definition is a mere 5 pips (the target now 88.20), so our view of the topside prospects remain unaltered;resistance is seen around 88.00 (i.e. might use discretion on taking profit a little earlier than the pattern’s defined target), and further supply remains at 89.15 (12 Jul high) and 89.50 (28-29 Jun high). What is intriguing however about the current picture is that there is also the possibility of a bearish flag coming into play in the coming sessions, and which currently suggests a break below 86.95 (lower edge of the flag) would be a good trigger for short entry –implying a target of 84.20 below. This bearish scenario does tie in nicely with the recent break of 86.97 (1 Jul low) which opened up the possibility of another plunge towards Nov 2009 lows of 84.83; but once again we should remain cautious that such a bearish target would almost certainly catch the attention of the BoJ in which case intervention may be a very real and ruthless threat.
UsdChf The 3-week downtrend channel continues to direct price action in the short term, but trendline resistance has already been under threat this morning around 1.0515. Given that the bears looked unable to muster a decent assault on 1.0400 at the end of last week, they are likely to capitulate soon enough in defending this trendline too. Having said that, it doesn’t look like the bulls are all that feisty for a move higher either, so perhaps we will be confined to ranges for the time being. If that’s the case, we think that current levels (1.0530) actually look pretty attractive for short entry given the previous price action around 1.0550-60. We’d be satisfied using 1.0580 as our stop, and set a first target on the downside of 1.0450 (Monday’s low), with 1.0400 (double bottom seen last week) as a possible extended target. Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
The euro’s gains are close to petering out amid “fragile market confidence,” Royal Bank of Scotland Group Plc said.
The euro’s gains are close to petering out amid “fragile market confidence,” Royal Bank of Scotland Group Plc said. “Confidence will take a hit if European economic growth begins to fade,” Greg Gibbs, a currency strategist in Sydney, wrote today in a report. “It is hard to see confidence in European debt markets improving further from here. Perhaps the stress tests will deliver one more spurt of confidence. But it is close to a peak and so is the euro.”
Trading Tactics
A clear uptrend could be an opportunity to buy EUR/USD.
A buying point is at 1.2987; Pivot point is the take profit at 1.3060; Fibonacci 23.6% is the stop loss at 1.2910
A selling point is at 1.2880; Fibonacci 50% is the take profit at 1.2775; Pivot point is the stop loss at 1.2935
Technical: Euro breaks the previous resistance level upwards and may form a new support level. A move back higher could set up a test of 1.3060
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice histogram MACD is in a bullish direction; RSI (Relative Strength Index) and Momentum are in an uptrend; stochastic oscillator crosses %D line downwards for a small correction.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
EURUSD was able to shake off yesterday’s Moody downgrade of Ireland and the speculation that a German Bank would fail the stress test to rally to 1.3028. The Hungarian decision to halt talks with the IMF/EU remains risk negative but was not able to weigh on the Euro. While none of the events are on-their-own monumental or unexpected for the Euro, we still believe that the there is a growing fundamental argument that the recent EUR run is losing momentum and should reverse in the near-term.
The key catalyst should be the inadequacy of the bank stress test due to be released Friday. We doubt that this report will provide the clarity investors need and participants will potentially find significant flaws in the methodology. Even with EU officials throwing a few well-publicized “sick” banks under-the-bus such as German lender Hypo Real Estate Holding AG, we suspect the market will remain nervous.
The path to the next resistance at 1.3093 looks heavily congested which should provide the barrier we are looking for.
In Australia the published RBA minutes were slightly less hawkish than the markets had anticipating prompting traders to cut their long AUDUSD spec positions. The language was broadly in line with the policy statement released two weeks ago but highlighted two core issues that is on the market’s mind.
The RBA stated that the "critical medium-term question was the extent to which economies in Asia could continue to grow strongly in the face of what could be an extended period of subdued conditions in the major North Atlantic economies" and discussing the EU stress test stated "it’s critical that the stress tests be regarded as credible and that plans be in place to deal with any capital shortfalls identified." Questions we too would like to see addressed and convincingly answered. Given the overall tone we suspect that the RBA will opt to pause in August but will raise rates another 25 basis points in September.
As for the AUD prospects, clearly there has been little decoupling from risk which will be the key determinate for the currency’s movement.
Today, markets are expecting that the Bank of Canada will continue to tighten monetary policy when they meet on Tuesday, with the median forecast for a hike of 25 bps to 0.75%. After holding interests rates at 0.25% for over a year, the central bank finally submitted to restarting monetary tightening at the last meeting and since then data from Canada has been rather encouraging, including a surprisingly strong June employment report (+93.2K) that has brought the unemployment rate back below 8% to 7.9%. There is still a small probability that the BoC might choose to wait on raising rates till after the EU banks stress tests, however we now believe this is a long shot. A lack of scheduled economic data and events will place the short term focus on GS and BONY earning releases.
Today's Key Issues (time in GMT): 06:00 EUR GER PPI 06:15 CHF Trade 08:00 EUR ITA Ind orders 08:00 EUR ITA Ind sales 08:30 GBP Money supply 08:30 GBP PS new brwing 08:30 GBP PSNCR 09:00 EUR ITA Trade non-EU 10:00 GBP CBI orders -23 exp 12:30 USD Housing starts, thous saar Jun 580 exp, 593 prior 12:30 USD Building permits, thous saar 570 exp, 574 prior 13:30 CAD Interest rate announcement, % .75 exp vs. 50 prior 14:00 USD Fed Governor Tarullo (FOMC voter) testifies on financial regulation
EurUsd The rally continues for EURUSD, with today’s surge clocking up a high of 1.3028. Over the last few sessions our focus has predominantly been on the hourly chart (and the 4-week uptrend channel that has guided up from 1.2150), but today it is worth taking a look at the bigger picture revealed by the daily chart as it appears we may be approaching a significant juncture where the bears may start to exert their force once more. Since touching the lows of 1.1876 back on 7 Jun, EURUSD has taken a mere 6 weeks to rally over 9.5% (!), but a formidable resistance zone is now on the horizon which would prompt us to start getting short and selling on any rallies towards 1.3050 (we may not even get to see that level though so our preference is to scale into the position gradually above 1.3000). For one thing, the 4-week uptrend channel resistance we’ve been monitoring on the hourly chart now comes in at 1.3080, and is backed up by a significant former high at 1.3095 (seen on 10 May). The added information the daily chart can give us is that at 1.3125 there is also the 38.2% fibonacci retracement of the entire sell-off from 1.5145 to 1.1876 which should present a major hurdle for this relief rally to overcome. We still expect some buyers to lie around 1.2905 (100-day moving average), 1.2871 (yesterday’s low), 1.2780 (a former pivot), and 1.2683 (last Wednesday’s low).
GbpUsd A 1-week downtrend channel appears to be the main driver of GBPUSD so far this week, but the pair still hasn’t posed a serious threat to the significant support down at 1.5230. Indeed, as mentioned yesterday, we have been using that 1.5230 level as a pivot to buy off and after picking up some cheap GBPUSD late yesterday afternoon we have managed to scalp 50-60 pips of upside this morning. With the 1-week downtrend now imposing its effect even lower down today (trendline resistance 1.5305) we won’t attempt to go long again just yet –at least until the price action is able negate that downtrend and make the risk-reward profile more attractive. Once the bulls can break above that downtrend we’d be more confident of a continued rally to targets around 1.5350 (yesterday’s high), 1.5472 (last Thursday’s high), and 1.5525 (15 Apr high). Should the downtrend actually outlast the support at 1.5230, we would be willing to flip to a shortbias andexpect next supports at the 1.5080 former neckline, 100-day moving average 1.4989, then the 12 Jul low 1.4949.
UsdJpy USDJPY has managed to consolidate for the last 24 hours despite the recent break of major support at 86.97 (1 Jul low) which has opened up the possibility of another plunge back towards the November 2009 low of 84.83. The potential bearish pennant we highlighted on the hourly chart yesterday failed to activate (so no position entered), and indeed the move back above 86.97 has negated the possibility of that pattern playing out later on. Instead, we now see the possibility of an ascending triangle in play which would become active on a break above 87.22 and which would look to target 88.15. We are slightly wary that resistance may come into play around 88.00 so will have to use discretion on perhaps taking profit a little earlier than the pattern’s defined target. Further supply remains at 89.15 (12 Jul high) and 89.50 (28-29 Jun high).
UsdChf The 3-week downtrend channel continues to direct price action in the short term, but thus far the bears have not managed to muster a decent attempt at breaking below 1.0400 despite a couple of attempts late last week. We think that current levels (1.0530) actually look pretty attractive for short entry given the previous price action around 1.0550-60 is now bolstered by downtrend resistance at 1.0535. We’d be satisfied using 1.0580 as our stop, and set a first target on the downside of 1.0450 (yesterday’s low), with 1.0400 (double bottom seen last week) as a possible extended target. Some bulls may favour buying on the dips towards, 1.0400, but should they be wrong the landscape below 1.0400 is only dotted with stale support levels at 1.0365, 1.0315 (trendline support), then 1.0230 –could be a nasty plunge with few buyers to slow the descent.
The British Pound pared the rally from earlier this week and slipped to a low of 1.5357 during the European trade as investors scaled back their appetite for risk, and the shift in market sentiment may drag the exchange lower
The British Pound pared the rally from earlier this week and slipped to a low of 1.5357 during the European trade as investors scaled back their appetite for risk, and the shift in market sentiment may drag the exchange lower going into the end of the week as investors maintain a cautious outlook for global growth. Former Bank of England board member David Blanchflower said policy makers should be cautious when withdrawing support from the economy as the recovery “is being driven by stimulus,” and went onto say that central bank around the global should wait for clear evidence of private sector growth before normalizing policy during an interview.
Trading Tactics
A clear uptrend could be an opportunity to Buy GBP/USD.
The buying point is at 1.5321; Pivot point is the take profit at 1.5410; Fibonacci 38.2% is the stop loss at 1.5270
The selling point is at 1.5240; Fibonacci 61.8% is the take profit at 1.5150; Pivot point is the stop loss at 1.5340
Technical: Sterling forms a new support level on the previous resistance and may continue the uptrend. A move back higher could set up a test of 1.5410
To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice MACD crosses the signal line upwards; Momentum and RSI (Relative Strength Index) are in an uptrend; stochastic oscillator crosses %D line upwards.
*Analysis is for information purposes only and does not constitute advice in any form. Past performance is not an indicator of future performance. Trading in financial products carries a high degree of risk to your capital and it is possible to lose more than your initial investment.
(Reuters) - The dollar eased on Tuesday, inching closer to a two-month low versus the euro hit last week as investors continued to cut long positions on more disappointing U.S. economic data.
The greenback rose a little against the yen on bids from Japanese importers, but remained close to a seven-month low marked last week, leading many market players to look to what authorities in Japan could do about a firm yen.
The Australian dollar jumped more than 1 percent thanks to a rise in Chinese shares as well as buying against the yen amid wariness about Japanese yen-selling intervention.
The Wall Street Journal reported the Bank of Japan could consider taking additional steps to support the economy if the yen climbs to around 85 per U.S. dollar and stays there.
In Asian trade, the dollar rose about 0.4 percent to 87.01 yen, on buying by Japanese importers, off a seven-month low of 86.27 hit on trading platform EBS on Friday.
Traders suspect Japanese officials would not want to see the 85 level breached in a hurry, though many traders doubt Tokyo is ready to intervene at this point.
"I guess the authorities will be nervous. There will be verbal intervention or they might do rate checks as they did before. But I don't think they can do actual intervention," said a trader at a Japanese financial institution.
Indeed, traders say they saw marginal yen-selling by Japanese investors.
"Japanese investors' risk appetite hasn't come back. They are not ready to sell the yen yet. It's hard to expect upside for the dollar/yen," said a trader at a European bank.
Demand for the dollar waned further on Monday after the NAHB/Wells Fargo Housing Market index fell more than expected in July to its lowest level since April 2009, after a popular tax credit for homebuyers expired in April.
The report was the latest in a string of data that has flashed warnings about the state of the U.S. economy and quashed expectations of a Federal Reserve interest rate hike this year.
If Fed Chairman Ben Bernanke drops any hint of further easing at testimony on Wednesday it could push the dollar down further, some traders said.
"The overall bearish setup remains intact for dollar/yen," JPMorgan said in a morning report. "This follows last week's breakdown below the key 87.00/22 yen support zone while affirming the intermediate term bearish setup and a closer test of the 84.82 November 2009 cycle low."
The euro edged up 0.15 percent to $1.2963/64, not far from a two-month high of $1.3008 hit last Friday.
Traders expect the pair to trade in a $1.28-1.31 range in the coming days ahead of EU stress test results for banks and Fed chief Bernanke's testimony.
Support for the euro is seen around the previous day's low of $1.2870. Resistance comes in at Friday's high of $1.3008, while some traders say a break of that level could push it to around $1.3113, a Fibonacci retracement of its decline from last December to early June.
The results of stress tests on 91 European banks are due on Friday and there is a consensus building in the forex market that it could be positive for the euro.
Bankers and officials in Greece, Spain and Belgium joined a chorus of countries expecting their banks to pass the stress tests, but doubts linger over whether the checks are tough or transparent enough.
Some traders suspect the euro could be in for a "buy on the rumor sell on fact" retreat, after having risen nearly 10 percent from a four-year low, mostly shrugging off negative news on the euro zone.
It brushed aside news that Moody's had cut Ireland's debt rating and concerns that negotiations between Hungary and international lenders had broken down.
Meanwhile, the Aussie rose 1.1 percent to $0.8775 and 1.4 percent to 76.38 yen, helped by an upbeat mood in Chinese share markets and wariness about Japanese yen-selling intervention.
The Australian dollar quickly recovered the ground it had lost after minutes from the Reserve Bank of Australia's (RBA) July policy meeting that suggested it was unlikely to raise interest rates next month if coming inflation data showed the moderation it expected.
The currency has strong support around $0.8575-8590, where there is a 50 percent retracement of its rally this month as well as a cluster of previous lows.
(Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney; Editing by Michael Watson)
(Reuters) - The dollar weakened on Friday, crawling toward a seven-month trough against the yen after a series of U.S. data this week underscored a slackening in the economy's recovery.
Market players closely watched whether the dollar could hold above its July 1 low of 86.96, its lowest since early December, as a fall below that level could boost the possibility of the greenback dropping to 84.82 yen, a 14-year low reached last November.
Last December the Bank of Japan called an emergency meeting soon after the dollar slid to the 14-year tough, and decided to pump 10 trillion yen ($114.5 billion) in three-month funds into the banking system.
The yen's latest rise has brought it to levels that could cause pain to Japanese exporters if its gains are sustained, with the BOJ's tankan survey showing the average forecast for the dollar/yen rate in the year to next March among large manufacturers is 90.18 yen.
Market players said there was talk of stop-loss dollar offers at levels below 87.00 yen.
The dollar slid 0.5 percent to 87.02 yen after falling as low as 86.97 yen. Some speculative players who are betting further losses in the greenback would be limited against the yen bought back dollars below 87.00 yen, traders said.
U.S. data this week, including retail sales and producer price numbers have been soft, raising questions about the sustainability of a U.S. recovery..
The euro hovered near a two-month peak of $1.2955 hit on trading platform EBS on Thursday, when it jumped 1.6 percent against the greenback.
Traders said investors were shifting funds away from the dollar and toward the euro due to a combination of factors including receding concerns about sovereign debt problems in the euro zone, worries about a U.S. recovery and strong U.S. earnings results. Lower U.S. Treasury yields also undermined the greenback..
"Given the dollar's weakness, it won't be surprising to see the euro rising to $1.3000, although the euro could tread water in the near-term after yesterday's sharp rally," said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Morgan Stanley Securities.
The euro dipped 0.2 percent to $1.2916, giving back some of its 1.6 percent gain from Thursday, when it scaled a two-month high of $1.2955 on trading platform EBS.
Thursday's rally lifted the euro above the daily Ichimoku cloud, meaning it has broken through a major resistance zone and may have more room to rise. In another positive sign, the euro rose above its 100-day moving average on Thursday for the first time since December.
One possible upside target is $1.3125, a 38.2 percent Fibonacci retracement of the euro's drop from November to June.
EURO'S RISE MAY SLOW
Although technical charts suggest the euro is still trending higher, there were some indications that its rise may lose steam for now.
A senior trader for a major Japanese bank said many euro option barriers were likely to lie at levels near $1.3000, adding that the pace of the euro's rise may slow in the near-term.
The euro's 14-day relative strength index (RSI) rose above 70 on Thursday, showing that the euro had entered overbought territory. That was also the highest since September 2009. The euro's RSI was near 68 on Friday, still near overbought territory.
Earlier this week, minutes of the Federal Reserve's latest meeting revealed policymakers may need to do more to boost the economy if a sputtering recovery slows further.
That was in sharp contrast to the euro's fortunes. The single currency has risen more than 8 percent after smooth government debt auctions in Greece, Portugal and Spain eased concerns about the euro zone's sovereign debt problems.
The dollar index dipped 0.1 percent to 82.443. Earlier this month the dollar index broke below the daily Ichimoku cloud, suggesting more losses may be in store.
The New Zealand dollar dropped after inflation data was weaker than expectations..
The kiwi fell 1 percent on the day to $0.7201, having stood at around $0.7270 before the data.
(Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney, FX analyst Rick Lloyd in Singapore, and Hideyuki Sano and Rika Otsuka in Tokyo; Editing by Joseph Radford)
The U.S. Core CPI is the primary publication today that is set to determine the level of the dollar when the report is released at 12:30 GMT. The other main releases that are set to dominate forex trading, especially for currencies such as the dollar and euro is the publication of the U.S. TIC Long Term Purchases and Prelim Consumer Sentiment at 13:00 GMT and 13:55 GMT respectively. Traders may find good opportunities to enter the market following these vital announcements.
Economic News
USD - USD Falls on Negative Economic Data The dollar fell broadly against most of its major currency pairs on Thursday, as soft inflation and manufacturing data added to concerns about the strength of the U.S. economy. By yesterday's close, the dollar fell around 1.5% against the EUR to 1.2940, a 2-month low. The dollar experienced similar behavior against the GBP and closed at 1.5455.
U.S. producer prices declined for a third straight month. The data came just a day after minutes of the Federal Reserve's latest meeting revealed that policy makers think they may need to do more to boost the economy if a sputtering recovery slows any further. The news helped push the EUR to its highest against the dollar since May.
Another leading indicator released yesterday was U.S. Unemployment Claims. This number handedly beat last week's result but failed to provide strength to the dollar as investors may be waiting for key data due to be released today to implement their trading strategies.
As for today, data releases are expected from the U.S. economy. These figures are expected to set the tone for the USD's pairs and crosses. Special attention should be given to the Core CPI which is expected to be unchanged from its previous reading. Traders pay close attention to this figure as it has a strong correlation with the value of the U.S. dollar. Also today, the Prelim UoM Consumer Sentiment is scheduled and should also have an impact on the market because if it delivers unfavorable figures it will validate a problematic U.S. economy, and the USD is likely to weaken as a result.
EUR - EUR/USD Hits 2-Month High The EUR strengthened against most of its major counterparts yesterday, continuing to prove for the time being that this is a solid currency that traders can rely on to provide them with steady profits. The 16 nation currency extended gains versus the USD on Thursday, nearing 1.2940 for the first time in 2 months after the Philadelphia Federal Reserve's business conditions index fell sharply in July. The EUR experienced similar behavior against the
JPY and closed up at 113.10. Weakness in the Philadelphia's Fed's mid-Atlatnic district added to concern about the U.S. economy, which has been heightened in recent days by a clutch of disappointing inflation, manufacturing and retail sales data.
The single currency, which slid below $1.19 in June on euro-zone debt trouble, has since risen by more than 8% after smooth government debt auctions in Greece, Portugal and Spain eased concerns.
JPY - Yen Experiences Mixed Results against Major Currencies The yen completed yesterday's trading session with mixed results versus the other major currencies. The JPY was broadly unchanged versus the CHF yesterday and closed its trading session around the 83.85 level. The JPY also saw bullishness against the USD and closed at 87.50.
The JPY's trends will be affected by the rallies of its primary currency pairs today. It seems that the USD and EUR are expected to continue a volatile trading session today, especially against the Japanese currency. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY's movement today, especially the U.S Core CPI at 12:30 GMT. It is also advisable for traders to follow any unexpected comments coming from key Japanese governmental figures, as this is also likely to lead to further JPY volatility.
OIL - Oil Prices Fall Based on Weak U.S. Data Oil fell below $77 a barrel on Thursday after disappointing U.S. economic data curbed expectations for future demand growth. Oil prices fell as low as $75.80 before it rebounded again and closed at $77.35
Oil has traded between $70 and $80 this month as investors ponder how much a pullback of government stimulus spending could undermine global economic growth and crude demand in the second half.
However, Crude oil prices were supported by the weekly inventories report from the Energy Department's Energy Information Administration on Wednesday, which showed crude supplies shrank more than analysts had forecasted, a sign demand may be improving.
Technical News
EUR/USD Bullishness in the pair continues as the price breached and closed above the upper channel line that the pair has been trading in since early June. The close was also above the 100-day simple moving average line. The 10-day RSI is sloping sharply higher, indicating that the momentum is to the upside. Near term resistance for the pair rests just below 1.3100.
GBP/USD The pound was a strong mover in yesterday's trading as the cable closed above the 23.6% Fibonacci retracement level for the long term downward trend, as well as a close above the long term downward sloping trend line that began in July of 2008. Traders should be long on the pair with a minimum target at the resistance level of 1.5520.
USD/JPY A significant drop in the value of the pair was registered yesterday as the pair fell as low as the support level at 87, the year to date low. The downward momentum looks to continue as an absence of technical resistance on the charts could move the pair as low as 84.80, the November 2009 low.
USD/CHF Yesterday the pair breached below the near term resistance levels of 1.0480 and 1.0430, ending the short term consolidation that the pair had experienced. The next target for the pair will be the 74.6% Fibonacci retracement level from the previous bullish trend at a price of 1.0350.
The Wild Card Oil The daily chart shows two candlestick patterns that hint to a slowdown of the recent bullishness of spot crude oil. Wednesday's trading ended slightly higher but formed a doji candlestick, signaling potential short term weakness. Yesterday's trading was more volatile with the pair falling as low as the support level of 75.80 and rising as high as 78.06, forming a long legged doji candlestick. This shows indecisiveness on the part of traders and signals wavering support for the bullish move. CFD traders may want to tighten their stops on any long positions they may have in spot crude oil.
MORNING BRIEFING: Global Economic Growth back in the limelight What’s new: US FED: Concerned about the pace of economic recovery China: Slowing economic growth, but cooling inflation Equities: Asian indices in the red, even European markets China: Agbank trading debut disappoints
Today: Rates in Asia and Indices: EURUSD: 1.2764 - 1.2709. USDCHF: 1.0547 - 1.0505. GBPUSD: 1.5289- 1.5237. EURJPY: 112.82 – 112.04. USDJPY: 88.50 – 88.01. DowJones: 10’366.72 +0.04% NASDAQ: 2'249.84 +0.35% S & P 500: 1'095.17 -0.02% Nikkei: 9’688.33 -1.09% Shanghai: 2'461.62 -0.36% Gold: $ 1'211.05 Crude Oil: $ 76.47
Comments: Minutes released of the Fed’s June meeting, revealed concern about the pace of economic recovery and exacerbated worries over the poor June retails sales figures released earlier yesterday. Later news from China came out as disappointing as well, with a registered slowing economic growth for the second quarter. Despite the reduced growth the registered cooling inflation gave hopes that monetary stimulus may not be tightened further.
This negativity reflected in Asian equity indices and even at the opening of the European equity markets. The Euro managed however to preserve its 1.27 level as it traded in the 1.2709-1.2764 range this morning.
On four hourly charts for the EUR/USD, we can see, to the upside next resistance levels are 1.2784 (50% Fibonacci retracement level (from 12th April highs to 7th June lows), and 1.30 a significant key psychological level. While to the downside we see support at 1.2700, 1.2692/1.2640.
In their first trading debut, shares of Agricultural Bank Of China Ltd (AgBank) staged a disappointing performance opening at 2.74 yuan easing to 2.70 yuan later during trading(even though the IPO was a world record at USD22bln). In anticipation of its listing AgBank’s shares were predicted to see a rise between 3% and 12% for the session. The dismal performance is a reflection of concerns over slowing growth and worrying loans, it is also seen as an indication of demand for bank’s fund raisings.
(Reuters) - The Australian dollar fell on Thursday, as selling by model-based funds weighed on the currency against the yen, while it took in stride data that pointed to a mild slowdown in China, rather than a deeper one as some had feared.
The Australian dollar slid in early Asian trade after the China Securities Journal reported the economy may lose momentum more than expected later this year.
It temporarily pared losses following the release of Chinese official data but soon started to ease again on the selling by model-based funds, traders said.
"The data has attracted much attention but at the end of the day it wasn't far from market expectations. It showed the Chinese economy is slowing down, but that's what markets have been looking for," said Hideaki Inoue, manager of foreign exchange at Mitsubishi Trust and Banking Corp.
The Australian dollar stood at $0.8772, down 0.7 percent on the day. It hit a two-month high of $0.8871 on Wednesday.
It also dropped 1 percent to 77.28 yen.
The euro erased its losses to change hands at $1.2722, not far from its two-month high of $1.2778 hit on Wednesday as traders bought back the currency. Long dogged by worries over euro zone debt problems the euro tends to benefit from rising risk appetite.
China's economic growth slowed to 10.3 percent in the second quarter from 11.9 percent in the first quarter in response to the fading effect of government fiscal and monetary stimulus as well as a high base of comparison a year earlier.
With Chinese data out of the way, the market's focus is likely to shift back to the strength of the U.S. economy, traders said.
Investors will look to a raft of U.S. data due later in the day, including industrial output, jobless claims and regional business activity, for clues to the health of the world's biggest economy. <ECI/US>
"U.S. data will be a very important market-moving factor today, especially after the minutes from the Federal Reserve's last meeting fanned speculation of further policy easing," said Hideki Hayashi, a global economist at Mizuho Securities.
Fed officials slightly revised down their outlook for economic growth in the second half of the year, while minutes from the central bank's June 22-23 meeting said the officials would need to consider whether "further policy stimulus might become appropriate if the outlook were to worsen appreciably.
The Commerce Department reported on Wednesday that U.S. retailers' June sales declined 0.5 percent -- more than twice the 0.2 percent drop forecast by economists polled by Reuters.
That sapped some of the optimism triggered by strong U.S. corporate earnings being released this week, leaving the U.S. dollar near a two-month low on a basket of currencies.
The dollar index .DXY stood at 83.344, down 0.1 percent on the day and not far from a two-month low of 83.205 hit on Wednesday.
The index is holding just above support at around 83.15, a 38.2 percent retracement of its rise from a low of 74.17 in November 2009 to a high of 88.59 on June 8.
Against the yen, the dollar slipped 0.3 percent to 88.13 yen.
Charts looked increasingly bearish for the dollar after the greenback failed the previous day to rise above 89.23 yen -- a 38.2 percent Fibonacci retracement of the dollar's fall from its June high of 92.68 yen to a July 1 low of 86.96 yen, traders said.
The Bank of Japan said on Thursday it expected the economy to grow at its fastest pace in a decade in the year to March 2011, but said the euro zone debt crisis could pose a risk to the outlook.
The central bank kept interest rates unchanged at 0.1 percent, as widely expected.
Sterling was little moved on the day at $1.5266, staying near a 10-week high of $1.5298 hit the previous day. Better-than-expected British employment data released on Wednesday added to speculation that the Bank of England may have to start considering raising interest rates.
(Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney and Hideyuki Sano and Masayuki Kitano in Tokyo; Editing by Joseph Radford)
