€ The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2965 level and was capped around the $1.3040 level. The big news in the market today was a weaker-than-expected result for U.S. June durable goods orders. Defying expectations of a positive print, the headline number came in at -1.0%, down from the revised May tally of -0.8%, while the ex-transportation component fell to -0.6% from the May result of 1.2%. Sub-components such as capital goods orders non-defense ex-air were also considerably weaker and these data suggest the U.S. economy sputtered lower at the end of the first half of the year. Other data saw MBA mortgage applications off 4.4% from the prior +7.6% result. Weekly initial jobless claims and continuing jobless claims data will be released tomrorow followed by GDP, PCE, and final July University of Michigan consumer sentiment data on Friday. The Federal Reserve released its July Beige Book today and its noted that economic growth decelerated in some areas over the past two months. The expiration of a homebuyers’ tax credit and a decline in commercial real estate both had a negative impact on the U.S. economy. The Fed continues to anticipate “continued moderate growth.” New Fed nominees Yellen, Diamons, and Raskin won their Senate votes today and will soon join the Board of Governors. In eurozone news, provisional German states’ July consumer price inflation data released today came in on the elevated side. The preliminary national July CPI came in at 0.2% m/m and 1.1% y/y with the harmonized measure at +0.3% m/m and +1.2% y/y. French June CPI data will be released tomorrow. The European Central Bank introduced more stringent rules today on bank collateral including new haircuts on certain bonds. Euro offers are cited around the US$ 1.3265 level.
¥/ CNY The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥87.25 level and was capped around the ¥88.10 level. Bank of Japan Policy Board member Kamezaki reported the central bank “wants to make utmost efforts proactively to escape from deflation and return to a sustainable growth path under price stability,” noting a stronger yen will hurt exporters. In contrast, other BoJ officials including Governor Shirakawa have been hesitant about commenting on the strong yen. There is speculation that industrial production growth in Japan is decelerating and this may increase pressure on the BoJ to ease further. Yen gains were also prompted by weaker-than-expected Australian consumer price inflation data, suggesting global growth continues to decelerate. Reserve Bank of Australia will likely not hike rates next week and the yen could stay bid as a result of this evolving monetary and economic landscape. While Kamezaki’s remarks may not increase the changes of yen-selling intervention by the government, traders remain fixated on the ¥85 level. Economic growth in Japan may also slow in the fourth quarter. The spread between three-month U.S. Dollar Libor and three-month yen Libor narrowed to 23.937 basis points today, the smallest difference since 20 May. Data released in Japan overnight saw July small business confidence improve to 48.1 from the prior reading of 47.4. June retail trade data will be released tonight. The Nikkei 225 stock index climbed 2.70% to close at ¥9,573.27. U.S. dollar bids are cited around the ¥86.29 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥113.20 level and was capped around the ¥114.70 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥135.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.50 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.7778 in the over-the-counter market, down from CNY 6.7784. The Federal Reserve Bank of Cleveland warned that the anticipated appreciation of the Chinese yuan will not lead to a “substantial” reduction in the U.S. trade deficit. People’s Bank of China is expected to keep monetary policy relatively stable and continue to promote domestic final private demand.
£ The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5635 level and was supported around the US$ 1.5545 level. Data to be released in the U.K. tomorrow include July Nationwide house prices, June net consumer credit, June net lending secured on dwellings, June mortgage approvals, and the July GfK consumer confidence survey. Bank of England Governor King today expressed concerns that proposed reforms to the Basel capital accord will not be strong enough. Monetary Policy Committee member Miles said now is not the proper time to change policy while MPC member Bean said sterling’s decline will likely have a larger-than-expected impact on consumer prices. Cable bids are cited around the US$ 1.5270 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8310 level and was capped around the £0.8365 level.
Plenty of important macro data from the U.S. was published yesterday. Investors were disappointed by the figures and responded mainly by moving away from riskier assets. At first U.S. Durable Goods came negative at -1%, at 12:30GMT later at 18:00GMT Beige book revealed a gloomy outlook for U.S. economy. Although company earnings are still high, yesterday fears about recovery came back to dominate the markets.
Economic News
USD - Traders Shift from EU Debts Concern to U.S. Economic Outlook U.S. macro data came far less than expected. Investors responded by moving away from riskier assets back to buying the Yen and U.S. Dollar. The EUR/USD was slightly down after U.S Durable Goods was published, The USD/JPY traded lower, currently trading at $87.22 as investors feel safer holding the Yen over the USD. The British Pound continued to rally against the U.S. Dollar, despite the move to safer assets.
U.S. demand for Durable Goods, which is usually a sign for economic strength, came negative at -1.0%. Forecasts which already expected a form of decline from last month were more moderate than the actual figure. Traders were surprised by the final figure and reacted by sending markets lower. Later the Beige Book was released by the Fed during mid U.S. day trading. It provided a mixed economic picture but eventually supported the markets from declining further. The report said that the U.S. economy was growing but there were also signs of a slowdown in some regions over the past two months.
Looking ahead to today, traders should follow the release of the Unemployment Claims at 12:30 GMT. A worse than expected result might intensify the current trend and strengthen the greenback further.
EUR - EUR's Recent Rally Losing Steam EUR's rally against its major counterparts stumbled yesterday as new economic data raised fears about the strength of global economic recovery, with the common currency ending lower against its major counterparts.
EUR/USD ended slightly lower yesterday, reaching a low of 1.2968; however, it managed to recover some of its loses to currently trade at 1.3010. The pair seemed to trade without a clear trend and moved mostly sideways. The EUR/JPY, however sent more clear signs of a correction building up. The pair's five days rally ended yesterday after it breached an 11 week high. Signals show that pair should further decline in coming days.
Looking ahead to today, traders are advised to follow the British HPI data at 6:00 GMT as well as the German Employment change at 7:55 GMT. Positive data might bring back some market optimism, pushing the Pound and EUR higher against their counterparts.
JPY - Strengthens on Safe Heaven appeal The JPY strengthened against the U.S. Dollar yesterday as investors expressed their concerns about the U.S. economy by selling the U.S. Dollar and buying the Japanese Yen. The Yen traded higher against most of its major counterparts; however, a strong currency may ultimately weigh on the Japanese economy as it is heavily dependent on exports.
A strong Yen would have bad influence on profits of Japanese companies. Consequently the Japanese government might be forced to weaken their local currency. So far no comments were published regarding Government intervention. As long as the Japanese Bank avoids market intervention the Yen is expected to keep its strengthening momentum.
Looking ahead to today traders should pay attention to the $86.88 support line, crossing down might take the USD/JPY pair even lower. Some analysts estimate that that the Yen could even reach as high as $85 in the coming months.
Crude Oil - High U.S. Inventories Send Crude Oil Price Lower Crude Oil prices ended lower yesterday after U.S Oil Inventories rose by 7.3M barrels. Lately this figure made little impact over Crude Oil prices but yesterday it came quite high compared with expectations of a 1.4M drop.
Demand for durables goods which also came surprisingly lower added to worries that demand for Oil would decrease in the near future as manufacturing declines. Crude Oil price might decline further in the short term if economic figures continue to deteriorate. Investors are worried about a possible double dip, meaning a renewed recession.
Gold price rebounded slightly during yesterday trading session. During the day it reached as low as $1156.25, but thereafter recovered and is currently trading at $1165 Gold price dropped after inflation worries began to fade and analysts begin to worry about another recession or economic slow down.
Technical News
EUR/USD The pair was relatively unchanged yesterday and as such has formed a 2nd consecutive doji candlestick which reflects the bulls and bears inability to move the price significantly. The RSI (14) has crossed below the overbought line, triggering a sell signal. But traders may want to be patient and wait for the RSI line to break its trend line before going short. A rising trend line can be drawn from the low of the RSI line that begins on June 4th.
GBP/USD The pound was stronger yesterday and has risen versus the dollar for the past 6 consecutive bars. This has pushed most oscillators into oversold territory as the Slow Stochastic is showing a bearish cross and the RSI (14) is floating in the oversold territory. However, before going short, traders may want to wait for a breach of a short term trend line that can begins at the bar on June 22nd.
USD/JPY A bearish flag pattern has formed on the 4-hour chart. The base of the flag pole begins at the high on June 14th and runs to the low for the pair at 86.25. The flag pattern is sloping upward with a previous downward trend. Therefore, a breakout may be expected to the downside in the direction of the long term trend. Traders may want to wait for a confirmation of the breakout at a price of 86.80 and enter short.
USD/CHF For the past 15 days the pair has traded in a defined range between the prices of 1.0650 and 1.0400. In this trading range a double bottom reversal pattern may be forming. A confirmation of the reversal pattern will be a close above the 1.0650 resistance line.
The Wild Card Gold The drop in the price of gold shows a potential reversal in the trend. The price has closed below the long term upward sloping trend line for the past two days, confirming a significant breach of the trend line and a breach below the support level of $1169. However, yesterday's trading closed and formed a hanging man candlestick. This may signal an upturn in the price. CFD traders may find a good opportunity to go long on a breach above the $1169 resistance level.
The dollar declined against the yen in Asia Thursday on speculation that U.S. Treasury yields will fall further due to concerns over a slowdown in the world's biggest economy.
Strong demand at a U.S. five-year sovereign note auction overnight suggested that recent weak economic reports from the U.S. have made investors pessimistic about the country's growth outlook.
The U.S. currency was weaker also because of speculation that foreign investors will buy new shares offered by Japanese companies, a process which involves yen-buying.
On Wednesday, market sentiment was dampened after data showing demand for U.S. durable goods slid for a second straight month in June. At the same time, the Federal Reserve's latest beige-book report pointed to signs that the economic recovery may be running out of steam, adding to the market's disappointment.
The dollar was at JPY87.19 as of 0450 GMT, lower than JPY87.44 in New York Wednesday.
The euro was higher at USD1.3013 at 0450 GMT from USD1.2988 overnight while it was lower against the yen at JPY113.47 from JPY113.54.
The ICE Dollar Index, which tracks the U.S. dollar against a trade-weighted basket of currencies, was at 81.970 from 82.132.
The British pound remained at a 5-month peak against the dollar despite dovish comments from the Bank of England, which did little to diminish optimism about the UK economic outlook after a run of encouraging data.
Flat Asian stock markets left the Australian dollar floundering Thursday, rising only slightly through the trading day, with crucial Chinese manufacturing data Sunday the next major test of market confidence. General U.S. dollar weakness and cross-related demand helped to put some support under the Aussie dollar.
Market expectation
Currency dealers believe Treasury yields will keep falling for the time being, meaning investors will see less returns from their dollar-denominated assets. That view helped prompt dollar selling, said analysts.
Investors will pay attention to Thursday's seven-year Treasury bond tender to see whether yields keep falling.
The euro won't be able to rise far above USD1.3, dealers said, because big U.S. hedge funds have resumed selling the euro based on their medium-term European economic forecasts.
The greenback may fall to as low as JPY86.00 in this global day, some dealers said. But the pace of any decline below JPY86.50 would be slow due to dollar-buying orders placed by Japanese importers, said analysts.
European stock markets are expected to have an uneven open Thursday, as investors weigh up the competing influences of disappointing U.S. economic data but upbeat second quarter corporate earnings.
The dollar was flat to lower Wednesday, slightly extending a loss versus the Japanese yen while seeing little movement versus other currencies after U.S. durable-goods orders showed an unexpected June drop.
The dollar index (DXY), which tracks the greenback against a basket of major currencies, was slightly lower at 82.123 versus 82.200 in North American trade late Tuesday.
The euro, which failed to maintain an earlier push above the USD1.30 level, slipped to USD1.2980, down slightly from USD1.2989 in North American trading late Tuesday.
Against Japan's yen, the euro erased an early gain to stand at JPY113.82, off slightly from JPY114.05 late Tuesday.
The dollar, meanwhile, slightly extended a loss versus the yen to trade at JPY87.56, down from JPY87.82 late Tuesday. The yen tends to be among the largest beneficiaries of declines in risk appetite.
The Commerce Department said orders for durable goods fell 1% in June, defying expectations for a 1% rise.
The British pound traded at USD1.5601, up 0.1%. The currency showed little reaction to testimony by Bank of England Governor Mervyn King and other central bankers, including Andrew Sentence, before a parliamentary committee.
Market expectation
Worry over the U.S. economy taking a downturn is weighing on the dollar, analysts said. Investors will pour over the Federal Reserve's Beige Book, to be released at 2 p.m. EDT, for another assessment of the U.S. recovery from the perspective of the regional Fed banks.
Economists widely expect the Reserve Bank of New Zealand to raise its key interest rate by 25 basis points during late Wednesday New York hours to 3.00%. But a slightly more cautious statement is expected as the economic recovery remains fairly tepid.
Until key data from major economies grow gloomier the franc is likely to remain on its weaker path. Should the data published in the U.S. continue to disappoint, sentiment could deteriorate once again, benefiting the franc. While that is not the case, the franc is likely to remain under pressure, said analysts.
(Reuters) - Gold steadied on Wednesday after falling 2 percent to a near three-month low the day before, when a bigger-than-expected drop in U.S. consumer confidence and an option expiry prompted heavy selling.
The position adjustment related to expiring COMEX August gold options pushed prices close to a key technical support, where the market was likely to hover before finding fresh clues for direction, traders said.
With increasing market scrutiny on nations' fiscal health and doubts over the effectiveness of ultra-low monetary policies in supporting the economy, governments around the world are facing difficulties finding fresh ways to stimulate the economy and beat deflationary pressures, said Koichiro Kamei, managing director at Tokyo-based researcher Market Strategy Institute Inc.
Expectations for rising inflation as a result of stimulative policies or concerns about a further deterioration in fiscal deficits as a result of more government spending have largely supported gold prices, which hit a record high in late June.
"Reasons supporting investor buying of gold have weakened recently, and options-related technical selling could undermine sentiment in the short-term as investors seek fresh clues for direction," Kamei said.
Spot gold was at $1,161.75 an ounce as of 0536 GMT, up 0.2 percent from late New York levels of $1,159.65 per ounce.
Spot gold could consolidate above $1,157.65 per ounce for a trading session before falling toward $1,140, as a rebound is expected after the previous session's sharp fall, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.
Spot gold fell to a low of $1,157.65 an ounce on Tuesday, the cheapest price since May 5. Bullion also posted its biggest one-day decline since July 1.
Kamei said that the market was close to the support of its 200-day moving average, which on Wednesday stood at around $1,148.
Key events closely watched by investors include the U.S. Beige Book report due later in the day, as well as U.S. monthly jobs data due next week and the U.S. Federal Reserve policy decision next month, Kamei said.
U.S. gold futures for August delivery climbed 0.3 percent to $1,161 per ounce, after settling on COMEX at a three-month low of $1,158 an ounce.
Gold priced in euros and in sterling stayed defensive a day after falling to multi-month lows.
Euro-priced gold was at 893.15 euros after hitting an almost three-month low of 891.25 euros on Tuesday. Sterling-denominated gold briefly fell as low as 743.31 pounds per ounce, a new three-month low.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD.P), said its holdings fell to 1,300.829 tonnes by July 27, down 0.913 tonnes from the previous business day.
Among other precious metals, spot platinum was at $1,537.50 per ounce, up 0.7 percent from late New York levels of 1,527.15. It stayed near a one-month high of $1,559.50 marked on Tuesday amid caution over supply disruptions.
The National Union of Mineworkers (NUM) of South Africa said on Tuesday that a strike planned for Monday at Impala Platinum (IMPJ.J), the world's No.2 platinum producer, will be delayed to allow further negotiations between management and the union.
(Additional reporting by Risa Maeda; Editing by Joseph Radford)
The U.S. currency strengthened today against the euro and the Japanese yen as the macroeconomic indicators suggested that the U.S. economy is recovering. The dollar dropped versus the Great Britain pound.
The report about the new home sales yesterday showed the unexpected surge to 330,000 in June from 267,000 in May. S&P/Case-Shiller Home Price index rose to 146.64 in April from 147.33 in May. Not all reports were favorable, though. The manufacturing index of the Federal Reserve Bank of Richmond suggested that the manufacturing growth is slowing. The consumer confidence dropped to 50.4 in July from 54.3 in June.
The U.S. economy shows signs of recovery, but it’s a long way to the certainty about its strength. Will the recovery gain momentum. The reports suggest that the consumers and the manufacturers don’t believe in this.
EUR/USD dropped to 1.2981 from 1.2994 as of 15:54 GMT today after it jumped as high as 1.3045. GBP/USD rose to 1.5536 from 1.5489 after it reached 1.5576, the highest level since February 23d. USD/JPY currency pair went up to 87.81 from the opening level of 86.87.
The euro edged lower against the yen as the single currency's overnight gains to a more than two-month high encouraged Japanese exporters to sell the unit to lock in profits. Further declines in the risk-sensitive euro are likely to be short-lived, as rising Asian shares are supporting sentiment toward the currency.
As of 0450 GMT, the European single unit stood at JPY114.05 compared with its New York overnight levels of JPY114.37 and JPY114.42, its highest since May 18.
Cross-yen sales, which involve selling the dollar for the yen in the process, contributed to the dollar's fall. The U.S. unit was at JPY87.73 as of 0450 GMT, from JPY87.97 overnight.
The euro changed hands at USD1.3000 compared with USD1.3006 in New York late Tuesday. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.142 from 82.138.
The U.K. pound, now little changed, earlier bucked the trend of losses in higher-yielding currencies, hanging onto its strong gain on the dollar and trading near its highest level since February after U.K. retail sales smashed through economists' expectations with their best reading in three years.
The Australian dollar was lower late Wednesday after weaker-than-expected second quarter inflation data buried the idea that interest rates might be raised next week. Late Wednesday, financial markets were pricing virtually no chance of a rate hike in August, down from 30% ahead of the inflation report.
Market expectation
The European single currency may reverse course later in the global day if European and U.S. equities track firm Asian stock performances, prompting investors to sell the safe-haven yen, traders said.
EURJPY, EURUSD up as various investors including non-Japan hedge funds, Japan life insurance firms buy at lower levels, says traders. Players holding ample cash are gradually becoming focused on risk-tolerance with Nikkei +2.7% after market participants reduced risk exposure in past weeks to await release of Europe bank stress test results. Says EURJPY may rise to JPY115.00 vs last JPY114.26 (near JPY114.43, highest since May 18); EURUSD may gain to USD1.3040 vs USD1.3010. Adds if Friday's 2Q U.S. GDP data improve (+2.5% expected vs +2.7% in previous quarter), increasing Treasury yields, players may buy USD, risk-sensitive EUR further vs JPY, pushing EURJPY to JPY115.00 into weekend, JPY117.00 next week.
Market participants will pay attention to the Federal Reserve's Beige Book and the U.S.'s advance report on durable goods for June, both slated for release later in the day.
European stock markets are expected to open in an uncertain manner Wednesday, with U.S. economic weakness adding some downside pressure to Wall Street overnight, but relatively strong earnings news offering a degree of confidence.
The pound sterling was the top performer on Tuesday, bolstered by some strong economic data from the Confederation of British Industry, and some weak consumer confidence figures from the United States.
According to the CBI, UK reported sales rose to 33 level in July, surprising expectations for a gain to just 3 from -5 in June. July’s print was the highest in three years, and resulted in a 0.7% gain in the pound against major currencies.
Otherwise, FX trading on Tuesday has been rather lackluster with markets largely ignoring the fact that U.S. equities markets managed a four-day wining streak despite some downbeat consumer confidence index.
According to the Conference Board, headline consumer confidence fell to a reading of 50.4 in July from an upwardly revised 54.3 the month prior. Expectations had been for a 51.0 print.
As markets set their sights on the Asia-Pacific session, Australia is in focus with its consumer price report expected later today, and the U.S. publishing durable goods and the Federal Reserve’s Beige Book Economic Report.
The U.S. Dollar advanced on Wednesday, gaining 1% against the Japanese Yen and pushing the EUR back under $1.30, after a report showed U.S. consumer confidence fell more than expected, pressuring equities lower and reducing investors' appetite for risky assets. Economic News
USD - Dollar Rises on Demand for Greenback's Safety The U.S Dollar advanced against most of its major counterparts as a decline in U.S. consumer sentiment to a 5 month low revived demand for the relative safety of the world's main reserve currency. The U.S. consumer confidence for July fell to its lowest level since February with all eyes on consumer durable goods numbers for June later in the session for more evidence about the world's largest economy. The greenback advanced as much as 1.3% to 87.97 Yen in the biggest intraday gain since June 2. Treasury two-year note yields increased as much as 0.06 percentage point to 0.64% in the biggest intraday climb since June 10. The USD/JPY recent weakness has been related to the very low level of U.S. yields, analysts said. And the fact that the yields are rebounding at this stage is likely to lend some support to the pair.
EUR - EUR Erases Gains; Slips Below $1.30 level The European currency hovered below a key level on Wednesday, running into profit taking after it hit a 11-week high against the U.S. Dollar, with attention turning toward the Australian Dollar ahead of crucial inflation data. The EUR slipped below the psychological, and technically crucial, level of $1.30, having hit a high of $1.3045 on Tuesday.
The 16-nation currency held some impressive gains against the Japanese yen, trading above 114 yen after having jumped over 1% on Tuesday to a 2-month high. Traders said the EUR/JPY looked increasingly bullish on charts, especially after it rose above 113.50 yen where it had met lots of offers from Japanese exporters.
Moreover, despite the EUR/USD easing from highs, sentiment toward the single currency remains bullish in the short term with a number of commentators surprised by the resilience of the Euro-Zone economy. On the other hand, doubts remain over the ability of the U.S. economy to avoid a slowdown. Market players say that a sustained break above the $1.30 level could place the single currency against the greenback in a new $1.30-$1.35 trading range in the coming weeks.
JPY - Yen Rises on Safety Demand Japan's currency gained versus all 16 major counterparts ahead of U.S. reports in two days which are forecasted to show economic and business activity grew at a slower pace. The Yen rose from near a two-month low against the EUR on speculation signs of a slowing U.S. recovery will spur demand for safer assets.
The Yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders. The Yen traded at 87.77 per Dollar from 87.90. The currency gained to 113.95 per EUR from 114.24 yesterday, when it reached 114.42, the weakest level since May 18.
Crude Oil - Oil Falls a 2nd Day after Consumer Confidence Drops Crude Oil declined for another day after an industry report showed U.S. crude inventories rose and the Conference Board said confidence among the nation's consumers fell, signaling growth and energy demand may falter. Rising oil production capacity in the Gulf of Mexico after Tropical Storm Bonnie fizzled over the weekend without damaging infrastructure also weighed on Oil prices, analysts said. Oil prices dropped the most in more than 3 weeks Tuesday as the U.S confidence index declined to the lowest level in 5 months. Traders mentioned that there was a sell-off in the crude market because of a fall in U.S. consumer confidence and the sentiment is still weak.
Technical News
EUR/USD Yesterday the pair pushed to its highest level in the past 3 months before falling backwards to finish almost unchanged, forming a spinning top candlestick formation. This may signal indecision on the part of traders and a lack of buyers in the current uptrend.
GBP/USD The pound was a big gainer in yesterday's trading as the cable breached and closed above the resistance level of 1.5520. The pair has been a strong performer as of recent, recording gains over the past 5 trading sessions. However, technical resistance is forming on the daily chart. The RSI (14) is dropping below the overbought zone while the Slow Stochastic oscillator is forming a bearish cross, indicating the next move may be to the downside. Traders may want to tighten their stops on any long positions.
USD/JPY The yen suffered during yesterday's trading, rising as high as 87.96 while closing above the 20-day simple moving average and the downward sloping trend line that began on June 14th. However, traders may be able to fade the trend as a bearish cross has formed on the 4-hour Slow Stochastic oscillator, indicating that the pair's next move may be lower. Traders can target the resistance level of 87.40 with an extended target at the year to date low of 86.25.
USD/CHF The pair may see a continuation of its recent downtrend in today's trading as the RSI for the pair floats in the overbought territory on the 2 hour and 8 hour charts with most other indicators floating in neutral territory. Traders may be advised to go short for the day.
The Wild Card GBP/NZD The pair may see some downward correction today as the RSI for the pair is floating in the overbought territory on the hourly and 2 hour charts while a bearish cross is evident on the 2 hour and 4 hour charts Slow Stochastic, indicating an imminent downward movement. Furthermore, a breach of the upper Bollinger Band is evident on the 2 hour chart. Forex traders may be advised to go short for the day.
(Reuters) - State tax revenue is improving, but only slightly, and may not be enough to end steep spending cuts or replace the loss of assistance from the federal stimulus plan that expires in December, according to a report on Tuesday.
The National Conference of State Legislatures said states faced a collective budget gap of $83.9 billion when creating their budgets for fiscal 2011, which for most began on July 1.
Officials surveyed by the group, which represents state lawmakers, said revenue was beginning to pick up or at least slow its rate of decline. Nearly every state expects tax collections this fiscal year to surpass last year's.
"For the first time in a long time we're seeing some slight improvement in the state revenue situation," Corina Eckl, the NCSL's fiscal program director, said in a statement accompanying the report. "But glimmers of improvement are tarnished by looming problems."
Already, 33 states are forecasting budget gaps for fiscal 2012 and 23 anticipate shortfalls for fiscal 2013, highlighting the fragile state of their finances. Last year's collapse in state revenue -- one of the largest on record-- has shaken all parts of the U.S. economy.
Investors in the U.S. municipal bond market wonder about the future of debt issuance as state deficits swell.
Public employees see threats to their livelihoods and pensions as governments turn to layoffs. Citizens worry how the revenue crash will affect spending on schools and other services, and whether their tax bills will rise.
There are also concerns states will lead the country into a "double dip" recession. All except Vermont are required by law to balance their budgets.
Last week, Federal Reserve Chairman Ben Bernanke said state and local government budgets are reducing the speed of the recovery from the economic recession that began in 2007. He warned that in order to balance budgets, those governments would likely cut "several hundred thousand jobs."
White House Chair of the Council of Economic Advisers Christina Romer has said state budget shortfalls will be equal to about 1 percent of the country's gross domestic product.
The Center on Budget and Policy Priorities, a think tank that tracks state economic conditions, said earlier this month the recession had caused the steepest decline in state tax receipts on record and that more than 30 states raised taxes.
At least 46 states started fiscal 2011 addressing a shortfall. The Center estimated budget gaps for the fiscal year will total $121 billion, 44 percent higher than the forecast from the state legislatures.
The U.S. Census has also found state revenue is picking up, with state and local government tax revenue rising 0.82 percent in the first quarter of 2010. The Rockefeller Institute of Government, a New York-based research group, recently said overall state tax revenue rose 2.5 percent in the first quarter.
Still, those increases are not enough to push revenue back to pre-recession levels, the NCSL found.
"State lawmakers are going to need extra stamina to push through this next round of budget challenges," said William Pound, executive director of the NCSL. "It will be a long march before state revenues return to their pre-recession levels, not to mention other hurdles lawmakers have to clear."
The economic stimulus plan passed last year included the largest transfer of funds from the U.S. government to states, at $135 billion, but the aid runs out in less than six months.
Measures in Congress to extend some of that aid have stalled over fiscal conservatives' concerns about the deficit. Without the extension of Medicaid money, states will face new budget shortfalls topping $10 billion, the NCSL found.
Medicaid is the healthcare program for the poor, jointly administered by states and the U.S. government, which takes up 20 percent of state budgets. The stimulus boosted federal reimbursements for the program, freeing up money for other programs.
At least 25 states will have new budget gaps if the enhanced reimbursements are not continued for another six months, according to the NCSL, with 21 of those gaps greater than $100 million. Texas, North Carolina, New York and California risk having budget shortfalls of more than $1 billion.
(Reporting by Lisa Lambert; Editing by Dan Grebler)
€ The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2950 level and was capped around the $1.3045 level. The common currency continues to orbit the psychologically-important US$ 1.3000 figure as traders weigh an improving eurozone sovereign outlook against a deceleration in U.S. economic activity. Dealers reacted to last Friday’s eurozone bank stress tests results by pushing the euro back above the US$ 1.3000 figure on the perception the European banking system should be able to withstand additional dislocations in the sovereign credit market. European Central Bank officials talked up the stress tests late last week and yesterday, suggesting the eurozone received more than a passing grade. Data released in the eurozone today saw the June M3 money supply increase 0.2% y/y and the ECB’s bank lending survey will be released tomorrow. German data saw the August GfK consumer confidence survey climb significantly to 3.9 from the prior reading of 3.6 and the June import price index was up 0.9% m/m and 9.1% y/y. Provisional July CPI data will be released tomorrow. French data saw total June jobseekers off 8,600, an indication of an improving labour market there. In U.S. news, dealers reacted negatively to a lower-than-expected July consumer confidence print of 50.4, compared with the previous revised total of 54.3. These data suggest consumer spending may be relatively weak as final private demand is limited by current sentiment. Other data saw the July Richmond Fed manufacturing index decline to +16 from the prior print of +23 while the May S&P/CaseShiller home price index was up 0.47% m/m and 4.61% y/y. MBA mortgage applications, June durable goods orders, and the Fed’s Beige Book will be released tomorrow. Philadelphia Fed President Plosser yesterday suggested the current economic situation does not warrant additional Fed stimulus but added the FOMC is prepared to move if and when needed. Euro offers are cited around the US$ 1.3265 level.
¥/ CNY The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥87.90 level and was supported around the ¥86.80 level. Dealers pushed the yen lower today on expectations Bank of Japan could ease monetary policy further. Demand for Japanese government bonds remains strong and this is a signal that many investors expect Japanese yields could fall further. There is still talk the government may look to protect the psychologically-important ¥85 handle by selling yen for U.S. dollars or other currencies in what would be the country’s first official yen-selling intervention in several years. Many BoJ-watchers believe the central bank will maintain its ultra-accommodative monetary policy for at least two more years. Japanese banks have been investing in longer-dated debt and the swaps market to record profits as yields on five-year JGBs move lower. Data released in Japan overnight saw the June corporate service price index decline 1.0% y/y, lower than the previous -0.8% May result and the latest evidence that deflation remains a major problem for the Japanese economy. The Nikkei 225 stock index lost 0.07% to close at ¥9,496.85. U.S. dollar bids are cited around the ¥86.29 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥114.10 level and was supported around the ¥112.75 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥136.65 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.30 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.7784 in the over-the-counter market, down from CNY 6.7790. Data released in China overnight saw the June leading index decline to 102.84 from the revised prior tally of 103.25. People’s Bank of China reported China’s economic fundamentals remain “good” and said the recent deceleration in economic growth will likely stabilize.
£ The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5575 level and was supported around the US$ 1.5440 level. Cable reached its strongest level since February 2010 as traders reacted positively to a surprise +33 print in July CBI reported sales, up from the prior reading of -5. Additionally, none of the £355 million in corporate bond securities Bank of England said it would purchase in its twice-weekly program was tendered today, the first time investors did not seek a BoE bid since March. This is indicative of improving sentiment in the credit markets. A perceived relaxation of terms in the Basel 3 capital accord terms is also supporting sterling. The key functions of the Financial Services Authority will be relegated to the BoE. Cable bids are cited around the US$ 1.5270 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8345 level and was capped around the £0.8415 level.
CHF The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0635 level and was supported around the CHF 1.0480 level. Data released in Switzerland today saw the June UBS consumption indicator improve to 1.810, up from the revised May result of 1.712 and its highest level since July 2008. Swiss unemployment remains at about half the level as the eurozone’s rate and this is resulting in positive economic activity. There is some speculation Swiss National Bank may have intervened by selling francs today given the significant move lower for the currency but SNB would not confirm this speculation. U.S. dollar offers are cited around the CHF 1.0980 level. The euro appreciated vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.3795 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6525 level.
The euro surrendered an 11-week high against the dollar after better-than-expected U.S. home-prices data helped the greenback recoup some its earlier losses.
The S&P/Case-Shiller home price index for 20 major U.S. cities rose 4.6% in May versus year ago, beating analysts' expectations for a 4.1% rise. The data sent the dollar to an intraday high against the yen. The euro dipped below USD1.30 to trade at a slight loss on a day after the data.
Currencies closely tied to the pace of global growth, such as the Australian and Canadian dollars, rode the coattails of improved investor sentiment, gaining on the greenback as worries over the euro-zone's sovereign-debt crisis fade to the background - at least for now - as a steady stream of solid global economic data come into focus.
The U.K. pound also gained to its highest level since February after U.K. retail sales posted their strongest growth in three years, smashing through economists' expectations.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 82.120 from 82.022.
Earlier euro-zone data sent the safe-harbor dollar to its lowest level since May against a basket of its competitors. The euro gained to its highest level in 11 weeks, ticking to near USD1.3050 before surrendering its gains on the heels of the U.S. home prices data.
Market expectation
Important resistance is seen for the pound near USD1.5560, which is near the 200-day moving average and also marks the 50% retracement of the down move from the November highs at USD1.6880 and the low this year near USD1.4230, said traders.
A run toward USD1.5900 is possible if the pound can press through USD1.5610, which marks a 61.8% retracement of the down move from USD1.6460 to USD1.4230, they said.
The U.S. dollar weakened today as the new home sales surged in the U.S. and the corporate earning increased, improving the appetite for the risk among the investors. The greenback fell versus most of other major currencies.
The U.S. new home sales jumped in June to 330,000 (23.6 percent) from the revised May rate of 267,000. The U.S. house market was showing the awful values previously, and this improvement, while not unexpected, is much better than the economists hoped for. The Standard & Poor’s 500 Index rose 0.6 percent after jumping more than 3.5 percent in the previous week.
The improving risk sentiment spurred the investors to the riskier currencies, decreasing the appeal of the U.S. currency. The signs of rebound in Europe’s economy helped the euro to gain versus the greenback, while the Great Britain pound rose against the dollar after all major Britain’s banks passed the stress tests.
EUR/USD rose to 1.2997 as of 17:41 GMT today after it opened at 1.2887. GBP/USD reached the highest level in three months, climbing to 1.5490 from 1.5416. USD/JPY traded at 86.94 after it opened at 87.45 and jumped as high as 87.71.
The euro rose slightly against the yen and the dollar in Asia Tuesday as firm Asian equities raised non-Japanese investor confidence toward the risk-sensitive unit, and traders said the euro may climb a tad more later if global shares follow Asia's lead.
Also helping the euro were last week's results from stress tests on European banks that didn't elicit any big negative surprises.
Concerns that the tests might have lacked enough rigor appeared to subside, while positive economic data from the U.S. and Europe supported riskier assets. The safe-haven dollar dipped to its lowest level since early May against a basket of its competitors as U.S. stocks rallied and demand increased for higher-yielding currencies.
The euro climbed to intraday highs of JPY113.20 and USD1.3018, compared with JPY112.91 and USD1.2297 in New York late Monday. As of 0450 GMT, the unit was at JPY113.02 and USD1.2998.
The U.S. unit was at JPY86.99 as of 0450 GMT from its New York overnight level of JPY86.89. The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 81.965 from 82.022.
The British pound's strength was showcased yet again as it climbed over 1% vs. the USD on the day, boosted by data showing Britain's economy grew almost twice as fast as expected in Q2. Data showed gross domestic product jumped 1.1% on the quarter, the strongest growth in four years and almost twice as fast as forecasts for 0.6%.
The Australian dollar was higher late in Asia Tuesday ahead of all-important local inflation data Wednesday which analysts expect to make or break the case for a rate hike by the central bank next week.
Market expectation
Investors are waiting for U.S. economic reports to assess the health of the world's biggest economy. Better-than-expected figures may lift stock markets, pushing up the euro toward JPY113.50 and USD1.3050 in the global day, dealers said.
Of interest to the market are the Standard & Poor's Case-Shiller Home Price Index for May and the consumer confidence index for July, due later in the day. The Federal Reserve's Beige Book on Wednesday and second-quarter gross domestic product data Friday will also draw attention.
Economists surveyed tip the consumer confidence index, due at 1400 GMT, to log 50.8 in July from 52.9 in June.
Still, traders said the euro's long-term outlook remains grim due to expectations for the currency zone's stagnant financial sector and economy.
European stock markets are expected to open a little lower Tuesday, as market participants cautiously look to key corporate earnings before adding further risk.
€ The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3005 level and was supported around the $1.2875 level. The common currency briefly traded above the US$ 1.3000 figure before settling back during the North American session. Dealers continued to chase the pair higher following the release of Friday’s stress test results on 91 eurozone banks, the details of which were better than expected. Data released in the U.S. today saw the June Chicago Fed national activity index decline to -0.63 from the revised prior reading of +0.31 while the July Dallas Fed manufacturing activity index fell sharply. Also, June new home sales evidenced a surprising 23.6% m/m increase to an annualized 330,000 units. May CaseShilller home prices data will be released tomorrow along with July consumer confidence data and and the July Richmond Fed manufacturing index. Philadelphia Fed President Plosser reported “there is underlying strength that is still there,” adding there is not much of a role for additional Fed action in the near term but conceded Fed policymakers “have ammunition to act if we want to.” San Francisco Fed President Yellen, the presumed next Vice Chairman of the Fed, reported it would be “risky” to adopt a long-run inflation goal of 4% and said regulation and supervision are the “first line of defense” against financial risks. In eurozone news, June M3 money supply data will be released tomorrow followed by the ECB’s bank lending survey on Wednesday. European Central Bank President Trichet reported the stress test on the banks was a “very important transparency exercise” while ECB member Ordonez said the tests “for sure have been enough to restore investor confidence.” Eurogroup chaiman Juncker said the stress tests evidence a “robust” European banking industry. Euro offers are cited around the US$ 1.3265 level.
¥/ CNY The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥86.80 level and was capped around the ¥87.70 level. New political party “Your Party” called on the government to weaken the yen and undertake a more expansionary fiscal policy to stimulate the domestic economy and counter deflation. Nomura, Japan’s largest brokerage, downgraded its assessment of Japanese equities to “neutral,” citing a bleaker profit outlook and decelerating economic growth prospects. Nomura expects economic growth of 2.6% this fiscal year and 1.5% next fiscal year. Data released in Japan today saw the June merchandise trade balance increase to ¥687 billion from the revised previous tally of ¥320.9 billion. The June corporate services price index will be released overnight. The Nikkei 225 stock index climbed 0.77% to close at ¥9,503.66. U.S. dollar bids are cited around the ¥86.29 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥112.20 level and was capped around the ¥113.45 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥135.55 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥82.50 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.7790 in the over-the-counter market, down from CNY 6.7799. The June leading index will be released this week along with the July MNI business conditions survey and July PMI manufacturing. People’s Bank of China Deputy Governor Hu Xiaolian reported the “fixed” yuan exchange rate system caused excess liquidity that may cause “heightened inflation expectations and speculation in assets.”
£ The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5515 level and was supported around the US$ 1.5405 level. Data to be released in the U.K. tomorrow include CBI July reported sales data followed by July Nationwide house prices data on Thursday and other mortgage and consumer credit numbers. Bank of England announced its new Financial Policy Committee will have eleven members and be in place by the autumn. The key functions of the Financial Services Authority will be relegated to the BoE. CEBR reported BoE will not need to raised rates for eighteen months. Chief Economist Dale has warned of lower economic growth, higher inflation, and rising unemployment. There is talk of a possible three-way split on the MPC this year if one or more policymakers voted to expand policy accommodation. Some believe the MPC may resort to increasing its asset purchase program. Cable bids are cited around the US$ 1.5140 level. The euro depreciated vis-à-vis the British pound as the single currency tested bids around the £0.8325 level and was capped around the £0.8380 level.
CHF The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0490 level and was capped around the CHF 1.0555 level. The June UBS consumption indicator will be released tomorrow followed by the July KOF Swiss leading indicator on Friday. U.S. dollar offers are cited around the CHF 1.0980 level. The euro depreciated vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.3565 level while the British pound moved higher vis-à-vis the Swiss franc and tested offers around the CHF 1.6345 level.
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 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 euro is up slightly against the dollar Monday, gaining only modest support from the results of last week's European bank stress tests.
Investors are relieved to find that the results of the tests, released Friday, included no new calamities. The euro didn't soar on the outcome of the tests, but it didn't plummet either. The dollar was lower early Monday, with the yen, euro and U.K. pound posting slight gains.
Forex investors didn't find anything scary enough in EU bank stress tests to cause them to sell off the euro, but nothing encouraging enough to prompt a major rally, either. EURUSD has now given back intraday gains and has returned to late Fri levels. So far yen has been the global session's winner, up on both the euro and dollar. EURUSD trades at USD1.2921 from USD1.2918 late Fri in NY. EURJPY down at JPY112.30 from JPY112.98 while USDJPY at JPY86.90 from JPY87.45.
European officials hope the tests, which just seven of the European Union's 91 major banks failed, will ease worries about the health of the EU economy and its banks, unlock bank funding markets and encourage investors to buy bank bonds.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.314, from 82.475.
Market expectation
The euro, at USD1.2932, if it takes out USD1.2970 daily resistance, would be going for USD1.3033, which is the current high for the uptrend since mid-June. New uptrend highs would be the signal for a test of USD1.3100. If trades are stopped below USD1.2856 expect a dip to test USD1.2726.
The U.S. economic calendar will be closely eyed this week, in light of Federal Reserve Chairman Ben Bernanke's remarks last week that the U.S. economy is heading for a period of "unusual uncertainty." His comments, before Congress, follow a string of disappointing economic indicators.
The euro rose to a seven-week high against the yen in Asia Monday as hedge funds in the region bought the common currency, feeling relieved that results of stress tests of European banks did not bring any big surprises.
This buying pushed the euro to a high of JPY113.49 in morning trade in Tokyo. The common currency had not been that high since marking JPY114.16 on June 3.
Also helping the euro were gains in many of Asia's bourses, which prompted U.S. and other short-term investors to buy the risk-sensitive currency, dealers said. Leading the rises, Japan's benchmark Nikkei Stock Average was up 0.8% in early afternoon trade.
Also likely to limit any further gains in the common currency against the yen were selling orders from Japanese exporters around JPY113.50, dealers said.
Elsewhere, the dollar traded hands at JPY87.63, up from JPY87.45 late Friday in New York. Economists expect the report to show sales rose 3.7% on month after falling 32.7% in May.
The euro stood at USD1.2925 compared with USD1.2918. The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies including the euro, was at 82.471 from 82.475.
The British pound's strength was showcased yet again as it climbed over 1% vs. the USD on the day, boosted by data showing Britain's economy grew almost twice as fast as expected in Q2. Data showed gross domestic product jumped 1.1% on the quarter, the strongest growth in four years and almost twice as fast as forecasts for 0.6%.
The Australian dollar was higher late Monday, albeit below its day's peak as news that producer price inflation was lower than expected in the second quarter damped speculation of a near-term interest rate hike.
Market expectation
The U.S. unit could rise further if U.S. new residential sales for June, due at 1400 GMT, come in stronger-than-expected, dealers said.
The stress test results, which were largely as expected, dispelled short-term concerns. Still, many investors believe the test standards may have been too lenient, a view that could weigh on the euro in the months ahead, dealers said.
EURJPY down as short-term players sell to book profits; view that bids from Japanese exporters to limit gains above JPY113.50, near cross's earlier high at JPY113.49, highest in seven weeks, likely prompting speculators to lock in gains now, says traders. Traders expect EURJPY to hover in relatively narrow band for rest of global day, while tips a slight upward bias in JPY110.00-JPY115.00 band for week.
European stock markets are expected to open a touch higher Monday, as market participants react with relief to Friday's release of European bank stress tests. However, these gains could be limited amid a degree of skepticism over the rigor of the tests.
