(Reuters) - Euro zone economic sentiment rose strongly in July, buoyed by figures from Germany that point to a recovery as the currency area overcomes the sovereign debt crisis, but the outlook remains uncertain.
The European Commission said its economic sentiment indicator for the 16-nation currency area rose to 101.3 in July, a 28-month high, from an upwardly revised 99.0 in June. Economists polled by Reuters expected the index to stay at 99.0.
Economic morale is the latest in a string of indicators that have shown the currency area continues to recover from the worst economic crisis in decades, despite turbulence on its sovereign debt market and uncertainty about the health of banks.
"July's improvement in the (euro zone) consumer and business surveys adds to the evidence that the euro-zone is performing surprisingly well, but with stark divergences between countries," said Jennifer Mckeown, senior European economist at Capital Economics.
Martin van Vliet said: "It confirms the spillover effect of the debt crisis to the real economy was limited. But the euro zone economy is bound to lose steam in the second half of the year. For now, let's enjoy it while it lasts."
OUTLOOK GLOOMY
Growth may falter because of fiscal austerity measures ordered by many governments to prevent the sovereign debt crisis from spreading from Greece to other countries. Foreign demand for European goods is also expected to diminish.
Howard Archer, chief European economist at IHS Global Insight, noted that the index measuring consumers' willingness to make major purchases over the next 12 months fell as the did the figure showing consumers' willingness to make major purchases at present.
"This raises question marks as to whether improved consumer confidence will translate into significantly higher spending. We have our doubts on this given that the euro zone unemployment rate is currently at a near 12-year high of 10.0 percent," he said.
The Commission said economic sentiment improved thanks to an increase in the index for the export-driven industrial sector to -4 from -6 and improvement in services to 6 from 4.
Morale of consumers, whose demand is crucial for making economic growth self-sustaining, rose to -14 from -17.
The increase was driven by strong figures in Germany, the euro zone's biggest economy, where economic sentiment rose to 110.1 from 106.1. The figure also increased in France and Italy, but fell in Spain.
In the wider 27-nation European Union, economic sentiment grew to 102.2 in July from 100.3 in June.
The Commission's separate business climate indicator for the euro zone increased more than expected, rising to 0.66 in July from 0.40 in June. It was the highest reading since March, 2008.
It has forecast that the euro zone will register growth of 0.9 percent this year after gross domestic product contracted 4.1 percent in 2009.
The Commission survey also showed that euro zone inflation expectation remained muted.
Selling price expectations in industry fell to 5 in July from 6 in June, while consumers' assessment of price trends over the next 12 months remained unchanged at 11.
The European Central Bank, which watches the indicators closely, is expected to leave its main interest rate at 1.0 percent well into 2011.
The parity made a pullback on 1.0382 and then got back into its bearish channel. So, we maintain to trade only short positions as far as this level is resistance. The breakout of 1.0225 will give a new sell signal. However, if 1.0382 is broken, we could trade long positions.
EUR-USD It looks more likely that it would rise to 1.3036 - 1.3076 from 1.2981 or 1.2960. After which a downside move is expected.
USD-CHF There are initial signs of a good corrective recovery towards 1.0595 or even 1.0614. Supports at 1.0552 and 1.0528 zone.
GBP-USD While below 1.5619 - 1.5643 it is more likely to fall further towards 1.5573 or 1.5551. Premature rise above 1.5643 could see it rising above 1.5687 zone.
USD-JPY There are initial signs of a good corrective recovery towards 87.79 or even 87.96. Supports at 87.37 and 87.12 zone.
USD-CAD It should trade higher to 1.0420 while 1.0360 or 1.0344 offers support. Stop loss below 1.0328 zone.
NZD-USD Support at 0.7264 or 0.7239 should hold the downside for a correction to above 0.7321 zone.
AUD-USD Market should pop up towards 0.8979 or 0.9002 this bullish scenario would be damaged if 0.8920 - 0.8884 zone is broken, a severe break down could then occur.
EUR-JPY It looks more likely that it would rise to 114.53 - 115.39 from 113.45 or 113.02. After which a downside move is expected.
EUR-CHF Preferred view is for a fall to 1.3724 - 1.3692 while 1.3775 - 1.3794 area resists. A clear break of 1.3857 would be bullish.
EUR-GBP Current fall is near an end of wave around 0.8308 zone, a rally should then procede to above 0.8360. Fall below 0.8285 would cancel this scenario.
EUR-CAD It should try higher up to 1.3504 - 1.3543. Entry point 1.3466 or 1.3444. After this rise, a correction is expected.
EUR-NZD Current upmove should be ended around 1.7900 - 1.7960. Any correction consolidation should find support in 1.7795 - 1.7751 zone.
EUR-AUD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.4632 or 1.4640 if support around 1.4510 hold. After which a pullback to 1.4510 - 1.4464 zone is possible.
GBP-CHF A corrective rise should ideally test 1.6544 or even higher than 1.6605. Supports are at 1.6425. Stop loss below 1.6397 zone.
GBP-JPY There are initial signs of a good corrective recovery towards 136.99 or even 137.35. Supports at 136.17 and 135.71 zone.
GBP-CAD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.6221 or 1.6261 if support around 1.6149 hold. After which a pullback to 1.6149 - 1.6120 zone is possible.
GBP-AUD Current rise should end around 1.7576. Objectives of this downmove are 1.7301 or 1.7138. A rise above 1.7688 is again bullish.
CAD-JPY It looks more likely that it would rise to 85.13 - 86.07 from 84.10 or 83.63. After which a downside move is expected.
NZD-JPY There is bearish potential for a fall to 63.18 while 63.86 - 64.07 resist. After this fall a recovery up to 64.07 or 64.28 is expected.
AUD-JPY No comment!
XAG-USD It may meet resistance in 17.50 - 17.52 zone for a drift down to 17.31 zone, after which bounce to 17.71 is anticipated.
XAU-USD It should try higher up to 1164.96 - 1167.60. Entry point 1162.32 or 1160.31. After this rise, a correction is expected.
(Reuters) - There has been just an inkling in recent weeks that financial markets might start to take their lead from the 'real' economy again after three years of being tossed about by their own panics and periodic exuberance.
Since the finance industry flailed into its crisis of confidence, doubting its own practitioners and the governments who became over-dependent on them, it has been almost impossible for households and companies to work out what markets are trying to predict about production, employment and consumption.
The net result has been the tail wagging the dog.
Guess the ephemeral mood of global markets six months hence -- voracious risk appetite or bunker-seeking safety -- and you might just stand a chance of predicting where businesses, consumers and policymakers would be forced to follow.
And while PIMCO asset managers predict a post-crisis 'new normal' of years of sluggish growth and policy angst, many yearn for an 'old normal' where finance reflects, rather th7an dictates, what is happening in the real economy where people produce and consume goods and services.
A VERY FINANCIAL COUP
For some, the credit crisis and aftermath had been fomented for decades by a more than a doubling of financial services to some 7.5 percent of the U.S. economy in the 40 years to 2007.
"The 3 percent of GDP (gross domestic product) that was made up of financial services in 1965 was clearly sufficient to the task, the proof being that the decade was a strong candidate for the greatest economic decade of the 20th century," Jeremy Grantham, Chairman of Boston-based asset manager GMO, told clients this month.
Lauding this month's U.S. financial regulation bill, he added: "The extra 4.5 percent would seem to be without material value except to the recipients. Yet it is a form of tax on the remaining real economy and should reduce by 4.5 percent a year its ability to save and invest, both of which did slow down."
Former International Monetary Fund chief economist Simon Johnson's 2009 Atlantic magazine essay, "The Quiet Coup", took a more conspiratorial view of the same phenomenon in sketching the lobbying power of the financial industry over that period.
Johnson estimated U.S. financial sector profits, which had never topped 16 percent of overall corporate profits in the decade to 1985, soared to 41 percent by the noughties. Average financial sector compensation as a share of the average in other industries almost doubled to 181 percent.
There was a similar development in Britain, where financial services had reached 8.5 percent of total output just before the crisis.
Deregulation, privatization, trade globalization and demographic trends were all catalysts for this growth in finance and the current regulatory backlash against the banks is unlikely to return the sector to its 1960s size.
But if knocking the froth off finance allows a more even relationship between real economic trends and financial markets, there may be a chance of tempering the endless boom and busts.
CHANGE AFOOT?
Is there any sign of that happening right now? Well, just an inkling.
In the past three years, financial and investment flows have been violently herded in and out of "safe-haven" cash and liquid assets, correlations zoomed between all asset classes and geographic regions, and risk gauges -- largely volatility measures -- careened from historic lows to highs and back again.
This mass behavior had been building for 20 years. Computer trading strategies supercharged the effect over time.
Yet as this year's euro zone sovereign debt crisis ebbs into the second half of the year, the herd seems for now to have stopped stampeding from its own rifle shots and may be listening more carefully to the underlying economy again.
Mindful of near-zero interest rates in cash, an expected dash back to safe-haven money market funds never really materialized during the worst of the euro crisis in April and May and 2010 outflows from these funds are still close to half a trillion dollars.
Partly as a result, stresses evident in lock-step asset correlations have ebbed and investors seem easier with idiosyncratic trends in selected stocks and credits.
Equity volatility has halved from April/May peaks and quartered from post-Lehman Brothers highs in 2008 and is holding closer to 20-year averages just above 20 percent rather than returning to unrealistic pre-2007 levels in single digits.
Even the world's main exchange rates between the U.S. dollar and euro -- long captive to "risk on/risk off" swings -- are starting to reflect interest rate gaps more than stress.
For active and diversified investors, this is how it is supposed to be and allows them to do what it says on the tin.
To be sure, we've been here before. But there are rays of hope for some return to old normals.
(Graphic by Scott Barber; Editing by Ruth Pitchford)
Risk correlated trades had a strong showing yesterday as banking stocks rallied and concerns over the inadequacies of the Stress Test dissipated. The USD lost ground to both the GBP and EUR while longs in JPY and CHF were equally cut. Risky trades continued to benefit throughout the trading day in spite of US Consumer confidence data coming in negative. We especially like the appreciation we saw in sterling. We suspect there has been a fundamental shift in GBP prospects due to the sturdy GDP reading last Friday and we anticipate further upside to sterling in the near-to-mid term.
Asian equity markets are having a roaring day and the positive effects are spilling over into European indexes. We are seeing other encouraging signs as VIX dropped below its 200-day moving average and Gold continues to come under heavy selling pressure. There has been a noticeable lack of 1st tier economic data and we are cautious in accumulating too much risk just yet. These are the dog days of the trading summer – as such, low liquidly and inconsistent participants will continue to be as important as real data.
During the Asian session, the big news was the disappointing Australian Q2 CPI reading which came in well below markets expectations. The market was quick to shift rate hike expectations from August to later in the fall (ACM expects a November hike). The AUDUSD dropped like a rock to .8923 from .9020 in response to the release. With the inflation rate now within the RBA’s 2-3% target, markets now pricing in a late fall hike. The large AUD interest rate differential will further erode, which in turn will lend added support to currencies like CAD and NOK. Look for CAD & NOK to gain in the near term.
We are still highly constructive on the global economy and suspect commodities prices to trend higher which should give AUD a boost against the USD. With all the excitement around AUD, the CPI watchers will now be turning their gaze toward New Zealand.
In NZ, July business confidence and activity outlook surveys showed a significant deterioration from the June results. Analysts are in unanimous agreement that the RBNZ will raise the OCR 25 bps to 3.00% at its policy meeting tonight. Market and media interest will be focused on the accompanying statement released with the rate hike. Although recent NZ CPI readings have come in lower-than-expected, the markets are still pricing in roughly 75 bps worth of hikes between now and the year’s end.
We believe that the RBNZ statement will sound slightly more dovish, signaling a minor shift in interest rate trajectory as policy makers prepare for a global economic slowdown later this year. The sudden adjustment in rate path should translate into short-term NZD weakness, especially against the AUD.
As for today, US Durable Goods data is due to be released as investors continue to look for directional signals for the US recovery. The Fed’s Beige Book will likely reflect recent data softness.
Today's Key Issues (time in GMT): 00:00 EUR GER Jul HICP - prelim, +0.2% m/m, +1.1% y/y exp; prior unch, +0.8%. 07:00 EUR ESP Jun retail sales; prior -1.9% y/y. 08:45 GBP BoE Gov King, other MPC member testimony before Parliament. 10:00 GBP Jun Land Registry house prices. 12:30 USD Jun durable goods orders, +2.9% m/m exp; prior -0.6%. 12:30 USD Jun - ex-transport, +1.0% m/m exp; prior +1.6%. 18:00 USD Fed Beige Book release. 18:30 USD Senate vote on Fed nominees 21:00 NZD RBNZ interest rate announcement, % 3.00% exp, 2.75% prior
EurUsd The symmetrical triangle pattern on the hourly chart is still very much in play, and thus far we have seen a couple of nudges through the 20 Jul high at 1.3028. We are long from the original break above 1.2950 (there was even the re-test of that level yesterday which we suggested as a chance to add to longs) and expect the triangle to yield a target in the region of 1.3290. At present the bulls are steadying themselves above 1.3000 so further progress has been somewhat laboured; the next resistance level is expected at 1.3093 (10 May high) with weak resistance also anticipated at 1.3213 and 1.3254 (14 and 13 May highs respectively). Support at 1.2950 is still valid, with trendline support at 1.2905 –but should the pair drop below there we would have to concede the failure of the bullish triangle breakout, and would then expect technical levels below at 1.2793 (Friday’s low), 1.2733 (21 Jul low), 1.2683 (14 Jul low) and 1.2522 (13 Jul low).
GbpUsd GBPUSD continues to march unwaveringly higher, making easy work of the tangle of technical resistance levels between 1.5525-75 (15 April high, 200-day moving average and 23 Feb high) and going on to touch 1.5627 this morning. As previously discussed, we feel that the UK GDP figures last Friday were a game changer, and from here we would relish any dips towards the lower edge of the current uptrend channel now seen at 1.5350 (coinciding with a recent pivot level) to get long, and set a stop through 1.5300. Really there is not much standing in the way of an assault on the 17 Feb high 1.5816 in the coming days, then only uptrend resistance (currently at 1.5905) before the psychological significant 1.6000. Supports now seen below at 1.5525, 1.5450 and 1.5350.
UsdJpy Finally, a breakout from the 86.25 –87.75 range; and as expected, this has occurred on the topside –in the process activating a double bottom pattern we proposed earlier in the week. Given the depth of the two troughs we should therefore anticipate a target around 88.85, and after this morning’s break above the significant 88.00 pivot level, that now seems an extremely attainable goal. Sellers may still hinder progress up through the remaining trendline resistance around 88.45 but then the next discernable levels are all beyond our target; 89.15 (12 Jul high) and 89.50 (28-29 Jun high). Adding conviction to our view is the bullish engulfing candlestick carved out on the daily chart which suggests the bears have become overwhelmed and further upside is likely. Dips back towards the 87.75 breakout level will likely meet good bids, with the supports below there at 86.82 (yesterday’s low) and 86.25 (recent range floor).
UsdChf The bulls finally got a better grip on USDCHF yesterday, and not only managed to take out the stubborn 1.0565 resistance level, but then to print a bullish engulfing candlestick on the daily chart. We now see a fresh bullish flag pattern possible on the hourly chart which would suggest that on a break above 1.0620 we should go long and aim for a target around 1.0770. Standing in our way before that would be yesterday’s high 1.0640 (roughly coinciding with the 200-day moving average at 1.0644), the top of the 1-week uptrend channel at 1.0685, then the major 1.0700 level. Bidders are very likely to lurk around 1.0565 where the old resistance level once stood, then 1.0450and 1.0400.
The Canadian dollar weakened today after the decline of the U.S. consumer confidence and the decreasing prices for commodities damped the appeal of the currencies tied to growth.
The Conference Board’s index of the U.S. consumers’ sentiment dropped to 50.4, compared to the median forecast of 51.3. The Standard & Poor’s 500 Index declined 0.3 percent. The S&P 500 rose previously by 0.5 percent and gained more than 8 percent since June 30th, while crude oil went up 2.7 percent.
Previous gains encouraged the traders to perform profit taking, curbing the equities and the oil prices, which also affected Canada’s currency. The rebound is possible, but some analysts point out that that fundamentals and technicals signal about further decline before recovery.
USD/CAD rose to 1.0360 form 1.0320 as of 18:41 GMT today after it tumbled as low as 1.0255. EUR/CAD rose to about 1.3456 from the opening level of 1.3405.
The parity made a pullback on 1.0360 and is now moving into a bearish channel. Currently, the parity is testing again the support at 1.0225. The breakout of this level will give a new sell signal. We maintain to trade only short positions as far as the price is moving into its channel. If an exit occur, we will stay neutral. Only the breakout of 1.0382 will allow us to trade long positions.
EUR-USD Resistances lie around 1.3021 and 1.3044. It should test lower towards 1.2950 zone. A clear break of 1.2990 would be bearish.
USD-CHF Uptrend is still intact in a triangle configuration. It should continue to rally to 1.0643 or 1.0670 if support around 1.0576 hold. After which a pullback to 1.0576 - 1.0544 zone is possible.
GBP-USD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.5633 or 1.5648 if support around 1.5546 hold. After which a pullback to 1.5546 - 1.5518 zone is possible.
USD-JPY Current rise seems to be over near 87.94 or 88.31 for a retracement towards 87.57 - 87.37 area.
USD-CAD It looks set for gains to 1.0412. Supports at 1.0305 and 1.0277. A break of 1.0199 will damage this bullish structure.
NZD-USD There are initial signs of a good corrective recovery towards 0.7364 or even 0.7381. Supports at 0.7323 and 0.7299 zone.
AUD-USD There are initial signs of a good corrective recovery towards 0.9046 or even 0.9062. Supports at 0.9012 and 0.8993 zone.
EUR-JPY Uptrend is still intact in a triangle configuration. It should continue to rally to 114.81 or 114.85 if support around 113.82 hold. After which a pullback to 113.82 - 113.51 zone is possible.
EUR-CHF Uptrend is still intact in a triangle configuration. It should continue to rally to 1.3858 or 1.3846 if support around 1.3734 hold. After which a pullback to 1.3734 - 1.3703 zone is possible.
EUR-GBP Prefer a fall to 0.8334 or 0.8306. Then a correction to 0.8375 is anticipated. A clear break of 0.8279 is again bearish.
EUR-CAD It should trade higher to 1.3511 while 1.3428 or 1.3400 offers support. Stop loss below 1.3371 zone.
EUR-NZD Market should hold major support at 1.7636 before rising towards 1.7779 or even 1.7834 limit.
EUR-AUD It looks set for gains to 1.4449. Supports at 1.4372 and 1.4348. A break of 1.4295 will damage this bullish structure.
GBP-CHF Uptrend is still intact in a triangle configuration. It should continue to rally to 1.6631 or 1.6645 if support around 1.6439 hold. After which a pullback to 1.6439 - 1.6386 zone is possible.
GBP-JPY Uptrend is still intact in a triangle configuration. It should continue to rally to 137.84 or 138.04 if support around 136.25 hold. After which a pullback to 136.25 - 135.76 zone is possible.
GBP-CAD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.6163 or 1.6235 if support around 1.6080 hold. After which a pullback to 1.6080 - 1.6035 zone is possible.
GBP-AUD It should trade higher to 1.7351 while 1.7185 or 1.7149 offers support. Stop loss below 1.7018 zone.
CAD-JPY While below 85.15 - 85.50 it is more likely to fall further towards 84.50 or 84.20. Premature rise above 85.50 could see it rising above 86.11 zone.
NZD-JPY Currently uptrend should end around 64.94 - 64.89 area. A correction down to below 63.82 is expected. A rise above 65.32 will abort the expected correction.
AUD-JPY Currently uptrend should end around 79.57 - 79.76 area. A correction down to below 78.55 is expected. A rise above 80.21 will abort the expected correction.
XAG-USD Market should not go lower than 17.63 - 17.42. After this move down it should go up to 17.94 - 18.06 area.
XAU-USD Market should not go lower than 1159.95 - 1150.87. After this move down it should go up to 1174.47 - 1179.92 area.
The Canadian dollar went up today against its U.S. counterpart as the gains of the U.S. equities and the improving conditions on the U.S. housing market bolstered the currencies tied to the growth, including the loonie. The Canadian currencies declined somewhat versus the euro.
The Standard & Poor’s 500 Index rose by 1.1 percent. The futures for crude oil, main Canadian export, traded near $78.99 per barrel after touching $79.30 per barrel on July 22, the highest level since May 5 on a closing basis. The new home sales in the U.S. reached 330,000 in June, compared to the median forecast of 317,000.
The Canadian dollar tends to move according to the commodity prices and the risk appetite. Today the appetite for the risk was definitely present at the markets.
USD/CAD reached 1.0322 today as of 22:17 GMT after it opened at 1.0372. EUR/CAD currency pair went up to 1.3402 from the opening level of 1.3377.
In the absence of any notable European economic data on Monday, the regional day has been dominated by the performance of equity indexes in the aftermath of the release of the bank stress tests on Friday.
European equities are currently mixed. The German DAX stock index was recently lower by 0.2% at 6,156 after falling as low as 6,141. Meanwhile, the Eurostoxx 50 is 0.1% higher at 2,721 versus a high of 2,741 and a low of 2,711.
Earlier on Monday, regional markets heard from a couple of European central bankers. In an op-ed written in Frankfurter Allegemeine Zeitung, ECB Executive Board member Lorenzo Bini Smaghi said the EU-IMF loans package is the “best route” to make sure Greece achieves fiscal consolidation.
He added that decisions made by Athens in recent weeks indicate that the Mediterranean country will be able to reduce its budget deficit to manageable levels.
In an interview with Spanish radio station Cadena Ser, ECB Executive Board member Jose Manuel Gonzalez-Paramo said that the European stress tests indicate the strength of the regional banking sector.
Noting that they were very demanding, the central banker added that he was satisfied with the tests’ results.
Against this backdrop, the euro is slightly weaker against the U.S. dollar. However, the three Scandinavian currencies are all underperforming the euro.
Outperforming is the pound sterling after UK Treasury Minister Mark Hoban told an audience in London that the government will create a consumer protection and markets agency.
He added that prudential regulation will be overseen by the Bank of England. Hoban also said that the central bank unit, whose members will be from banks, will also regulate clearing houses and is scheduled to meet four times a year.
The remainder of Monday will focus on the U.S. June new home sales report.
The parity continues its bearish movement and is currently testing the support at 1.03. The breakout of this level will give a new sell signal. We maintain to trade only short positions as far as 1.0360 is resistance. The next support is at 1.0225. If 1.0360 is broken, we will stay neutral. Only a breakout of 1.0382 will allow us to trade long positions.
EUR-USD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.3008 or 1.3041 if support around 1.2959 hold. After which a pullback to 1.2959 - 1.2936 zone is possible.
USD-CHF It looks more likely that it would rise to 1.0540 - 1.0595 from 1.0473 or 1.0446. After which a downside move is expected.
GBP-USD One move lower to 1.5427 or 1.5364 is anticipated while below 1.5505 - 1.5536 area. Stop loss above 1.5583 zone.
USD-JPY Current move should be supported in 86.85 - 86.57 zone for a rise to 88.03. A break below 86.25 opens the way down.
USD-CAD Market should not go lower than 1.0313 - 1.0288. After this move down it should go up to 1.0355 - 1.0372 area.
NZD-USD Currently uptrend should end around 0.7376 - 0.7377 area. A correction down to below 0.7277 is expected. A rise above 0.7416 will abort the expected correction.
AUD-USD Currently uptrend should end around 0.9038 - 0.9065 area. A correction down to below 0.8958 is expected. A rise above 0.9103 will abort the expected correction.
EUR-JPY While below 113.51 it is more likely to fall further towards 112.86 or 112.56 level.
EUR-CHF Currently uptrend should end around 1.3685 - 1.3656 area. A correction down to below 1.3570 is expected. A rise above 1.3687 will abort the expected correction.
EUR-GBP It should test 0.8444 area after which a sell off down to 0.8343 or extended to 0.8297 area is expected.
EUR-CAD It should trade lower to 1.3359. Resistances are at 1.3455 and 1.3494. A break of 1.3552 is bullish, confirmed by a close above 1.3473.
EUR-NZD One more dip to 1.7683 or 1.7646 is likely followed by a grind higher to 1.7749 - 1.7779. After which it can resume its downtrend.
EUR-AUD Support at 1.4382 or 1.4358 should hold. Then a correction to above 1.4491 is anticipated. A clear break of 1.4320 is again bearish.
GBP-CHF A corrective rise should ideally test 1.6330 or even higher than 1.6417. Supports are at 1.6195. Stop loss below 1.6099 zone.
GBP-JPY Should fall around 134.14 while below 134.58 - 135.09 zone. Then a recovery up to above 135.09 is expected.
GBP-CAD Should test support at 1.5933 while below 1.5991. If support at 1.5933 holds it can rise up to 1.6061, if not it should fall to below 1.5875 zone.
GBP-AUD There are initial signs of a good corrective recovery towards 1.7236 or even 1.7268. Supports at 1.7151 and 1.7098 zone.
CAD-JPY It looks more likely that it would rise to 84.69 - 85.22 from 83.97 or 83.71. After which a downside move is expected.
NZD-JPY A correction down to 63.31 or lower is now expected from 63.90 or 64.12. A break above 64.49 is needed to turn bullish.
AUD-JPY Current upmove should end around 78.62 - 78.82 area. A correction down to 77.90 or even 77.38 is expected. A rise above 79.23 will abort the expected correction.
XAG-USD It should trade higher to 18.30 while 18.08 or 18.02 offers support. Stop loss below 17.87 zone.
XAU-USD Market should not go lower than 1181.82 - 1177.47. After this move down it should go up to 1189.27 - 1192.37 area.
(Reuters) - Sales of new U.S. single-family homes rebounded strongly in June from the prior month's record low, driving the number of houses on the market to its lowest level in nearly 42 years.
The Commerce Department said on Monday sales jumped 23.6 percent to a 330,000 unit annual rate from a downwardly revised 267,000 units in May. The sales pace last month was still the second lowest since records started in 1963. The percentage increase was the largest increase since May 1980, and partially unwound the prior month's historic 36.7 percent decline.
Analysts polled by Reuters had forecast new home sales rising to a 320,000 unit pace last month from May's previously reported 300,000 units.
"Right now we're running about 60 percent below the average annualized rate for the last decade, so there's a lot of potential out there for improvement," said Michael O'Rourke, chief market strategist at BTIG LLC in New York.
"It seems like sales are bottoming, so its just a matter of that foreclosure inventory clearing up. After that, then we can start seeing some upside. I expect that to happen later this year, maybe next year."
U.S. government debt prices dipped on the home sales data, while U.S. stocks added to gains. The U.S. dollar pared losses against the yen.
Recent data have suggested the economy's recovery from its longest and deepest recession since the 1930s moderated somewhat in the second quarter. Economists expect weak housing activity to act as a drag on growth for much of the year.
The government is expected to report on Friday that gross domestic product growth slowed to a 2.5 percent annual rate in the April-June period from a 2.7 percent pace in the first three months of the year.
The Commerce report suggested the housing market may be close to working through the distortions following the end of a popular home-buyer tax credit in April, an incentive that brought forward sales. Data last week showed home construction fell to an eight-month low in June, while sales of existing home sales were the lowest in three months.
Analysts, however, believe a drop in home building is unlikely to ignite a new recession since housing is a much smaller share of the economy now than it was at the top of the housing boom.
The impact of a 10 percent drop in home construction has about one-third the impact now as it did in 2006, according to economists at Bank of America-Merrill Lynch.
Last month's surge in sales saw the supply of new homes available for sale dropping to 7.6 months' worth from 9.6 months' worth in May.
The number of new homes on the market dropped 1.4 percent to 210,000 units, the lowest level since September 1968. The median sale price for a new home fell 1.4 percent last month to $213,400. In the 12 months to June, prices dipped 0.6 percent.
Underscoring the pullback in growth, a measure of national economic activity fell in June for the first time since February. The Chicago Federal Reserve Bank said its national activity index fell to minus 0.63 from a positive 0.31 in May.
A reading above zero indicates the economy is growing above trend. However, the three-month moving average indicates growth has returned very close to its historical trend, and suggests subdued inflationary pressure for the coming year, the Chicago Fed said.
(Reporting by Lucia Mutikani; Editing by Neil Stempleman)
After a pullback on 1.0441, the parity continued its bearish movement. We maintain to trade only short positions as far as 1.0412 is resistance. The breakout of 1.03 will give a new sell signal. However, if 1.0412 is broken, we will stay neutral. Only the breakout of 1.0441 will allow us to trade long positions.
EUR-USD Uptrend is still intact in a triangle configuration. It should continue to rally to 1.2967 or 1.2989 if support around 1.2892 hold. After which a pullback to 1.2892 - 1.2855 zone is possible.
USD-CHF It should trade higher to 1.0597 while 1.0502 or 1.0472 offers support. Stop loss below 1.0441 zone.
GBP-USD Current rise seems to be over near 1.5436 or 1.5497 for a retracement towards 1.5374 - 1.5337 area.
USD-JPY Currently uptrend should end around 87.43 - 87.67 area. A correction down to 87.05 - 86.90 is expected. A rise above 87.97 will abort the expected correction.
USD-CAD Market should not go lower than 1.0353 - 1.0325. After this move down it should go up to 1.0399 - 1.0416 area.
NZD-USD One move lower to 0.7236 or 0.7200 is anticipated while below 0.7281 - 0.7298 area. Stop loss above 0.7326 zone.
AUD-USD Current rise should end around 0.8995. Objectives of this downmove are 0.8922 or 0.8874. A rise above 0.9019 is again bullish.
EUR-JPY Currently uptrend should end around 113.48 - 113.36 area. A correction down to below 111.96 is expected. A rise above 113.89 will abort the expected correction.
EUR-CHF Current rise seems to be over near 1.3608 or 1.3671 for a retracement towards 1.3544 - 1.3512 area.
EUR-GBP It is likely to fall towards 0.8346 - 0.8310 as its corrective rally could falter in 0.8414 - 0.8446 area. Stop above 0.8519 zone.
EUR-CAD It looks more likely that it would rise to 1.3488 - 1.3595 from 1.3345 or 1.3291. After which a downside move is expected.
EUR-NZD Market should hold major support at 1.7612 before rising towards 1.7879 or even 1.7996 limit.
EUR-AUD One more dip to 1.4366 - 1.4320 is likely followed by a grind higher to 1.4451 - 1.4490. After which it can resume his downtrend.
GBP-CHF Current rise seems to be over near 1.6261 or 1.6379 for a retracement towards 1.6142 - 1.6077 area.
GBP-JPY Current rise seems to be over near 134.88 or 135.69 for a retracement towards 134.07 - 133.59 area.
GBP-CAD Strength can extend to 1.6047 or even 1.6124 as declines are expected to find support at 1.5971 or 1.5898. Stop Loss below 1.5826 zone.
GBP-AUD Current upmove should continue up to 1.7426. Supports at 1.7186 and 1.7128. Stop Loss below 1.7070 limit.
CAD-JPY Currently uptrend should end around 84.76 - 84.69 area. A correction down to below 83.70 is expected. A rise above 85.05 will abort the expected correction.
NZD-JPY While below 63.64 - 63.93 it is more likely to fall further towards 63.14 or 62.93. Premature rise above 63.93 could see it rising above 64.34 zone.
AUD-JPY Currently uptrend should end around 79.01 - 78.76 area. A correction down to below 77.61 is expected. A rise above 79.14 will abort the expected correction.
XAG-USD Should test support at 18.02 while below 18.10. If support at 18.02 holds it can rise up to 18.23, if not it should fall to below 17.93 zone.
XAU-USD It is a triangle configuration. Market should break either side. Acceleration should occur above 1204.05 or under 1183.43 limits.
EUR-USD While below 1.2971 - 1.3051 it is more likely to fall further towards 1.2756 or 1.2596.
USD-CHF Market should hold major support at 1.0419 before rising towards 1.0601 or even 1.0667 limit.
GBP-USD Current rise seems to be over near 1.5436 or 1.5540 for a retracement towards 1.5332 - 1.5273 area.
USD-JPY It should test 88.18 area after which a sell off down to 86.61 or extended to 85.86 area is expected.
USD-CAD While above 1.0353 - 1.0276 zone a corrective dip could test 1.0431 or 1.0515.
NZD-USD It should trade higher to 0.7364 while 0.7150 or 0.7104 offers support. Stop loss below 0.6936 zone.
AUD-USD It should try higher up to 0.8970 - 0.9083. Entry point 0.8858 or 0.8802. After this rise, a correction is expected.
EUR-JPY It should be subject to more sell off towards 110.79 or 108.73. Corrective upward swings should face resistance around 115.14 area. A break of 115.41 is bullish.
EUR-CHF It should try higher up to 1.3642 - 1.3741. Entry point 1.3542 or 1.3475. After this rise, a correction is expected.
EUR-GBP It looks more likely that it would rise to 0.8498 - 0.8622 from 0.8346 or 0.8284. After which a downside move is expected.
EUR-CAD It looks more likely that it would rise to 1.3627 - 1.3872 from 1.3324 or 1.3202. After which a downside move is expected.
EUR-NZD While above 1.7690 - 1.7440 zone a corrective dip could test 1.7941 or 1.8263.
EUR-AUD While above 1.4366 - 1.4164 zone a corrective dip could test 1.4568 or 1.4804.
GBP-CHF It should trade higher to 1.6396 while 1.6125 or 1.6051 offers support. Stop loss below 1.5977 zone.
GBP-JPY It should be subject to more sell off towards 132.05 or 129.36. Corrective upward swings should face resistance around 138.36 area. A break of 137.71 is bullish.
GBP-CAD It looks more likely that it would rise to 1.6180 - 1.6381 from 1.5888 or 1.5787. After which a downside move is expected.
GBP-AUD While below 1.7456 - 1.7590 it might drop to 1.6927 or 1.6659.
CAD-JPY It should test 86.79 area after which a sell off down to 82.58 or extended to 80.84 area is expected.
NZD-JPY It should trade higher to 64.55 while 62.22 or 61.71 offers support. Stop loss below 59.89 zone.
AUD-JPY It should be subject to more sell off towards 75.91 or 73.45. Corrective upward swings should face resistance around 82.02 area. A break of 80.85 is bullish.
XAG-USD It may attempt a test higher to 18.19 - 18.44 after which weakness may set it to a drift down to below 17.61 limit.
XAU-USD One more dip to 1181.75 is likely followed by a grind higher to 1202.62. After which it can resume its downtrend.
