U.S dollar: Looking For The Line of Least Resistance
by Angelo Airaghi [Guest Analyst]
9/1/2009
As housing continues to improve, unemployment could rise again in the coming months. In Germany, confidence is growing, while the economy might take advantage of global growth.
U.S.: housing is back?
Unemployment remains the biggest challenge for the U.S. economy, despite losses declining to 220,000 from 247,000 in July. In reality, we are experiencing the lowest job contraction in more than a year, but the unemployment rate could again rise due to the slow recovery in the last part of 2009. At the contrary, the real estate market is confirming the good trend and it is expected to positively contribute to the Gross Domestic Product (GDP) numbers, along with inventory growth for various goods. In July, new home sales moved up 9.6% year-on-year to 433,000 units from June’s 395,000. It has been the fourth consecutive monthly increase and the largest gain since February of 2005. With three regions out of four posting good results, inventories are now 7.5 months supply from 8.5 months in June, far away from the peak of 12.4 months reached in January.
Nevertheless, the number of vacant houses is almost 2 million compared to the average of about 300.000, while the mortgage delinquency stays high for now. This should keep the residential construction mild, at least for the short term, although the long period of decline has definitely ended. The rebound of stocks and home sales are increasing consumer confidence. In August, the Conference Board’s consumer confidence index rose to 54.1, almost doubling the all time low registered in February. In July, durable goods new orders moved instead up 4.9% month-on-month from 1.3% in June. Non-defense aircraft and parts orders climbed 107.2%, after having declined 30% in June and having increase 60.4 in May.
Germany: economic expectation on the rise
Confirming the positive trend of last week’s ZEW and PMI in Germany, the IFO economic expectations index rose to 95.0 in August from 90.4 in July. It has been the sharpest up move since reunification and it represents the eight straight months of gains. The IFO index moved instead up to 90.5 from 87.4 with market expectations rising to 86.1 from 84.4. Wholesale led the way, along with manufacturing, while construction remained weak once more. In effect, things are moving again in the old continent although improvements are volatile for now.
In June, industrial new orders rose 3.1% month-on-month in the Euro zone after having declined 0.5% in May. However, orders fell 25.1% annually. The European economy slid only 0.1% in the second quarter, following a loss of 2.5% in the first, and it is expected to stabilize in the last part of this year, as the global economies are again moving toward growth. Germany could increase around 1.0% by year-end, despite the unemployment rate remaining negative for the largest European’s economy. The European Central Bank (ECB) will leave rates low for an extensive period of time, but it should increase them again, once the economic growth will resume its course.
EUR/USD: Testing key resistance lines.
EUR/USD: The Euro is again at crucial technical levels. They correspond to the resistance line of the past 12 months and will support the Euro to higher prices, if broken. A move above 1.4580 would target 1.4660, 1.4740. A decline below 1.3950 is instead necessary for 1.39, 13820.
GBP/USD: A move below 1.6090 would target 1.6020. A breakout above 1.6650 would take the price to 1.6700.
USD/JPY: The market is trading between 98.00 and 91.00. A move above 95.50 could target 96.00. A decline below 92.70 could instead take to price to 91.50.
USD/CAD: A move below 1.0550 is necessary for 1.04. A swing above 1.124 would instead target 1.13.
Nevertheless, the number of vacant houses is almost 2 million compared to the average of about 300.000, while the mortgage delinquency stays high for now. This should keep the residential construction mild, at least for the short term, although the long period of decline has definitely ended. The rebound of stocks and home sales are increasing consumer confidence. In August, the Conference Board’s consumer confidence index rose to 54.1, almost doubling the all time low registered in February. In July, durable goods new orders moved instead up 4.9% month-on-month from 1.3% in June. Non-defense aircraft and parts orders climbed 107.2%, after having declined 30% in June and having increase 60.4 in May.
Germany: economic expectation on the rise
Confirming the positive trend of last week’s ZEW and PMI in Germany, the IFO economic expectations index rose to 95.0 in August from 90.4 in July. It has been the sharpest up move since reunification and it represents the eight straight months of gains. The IFO index moved instead up to 90.5 from 87.4 with market expectations rising to 86.1 from 84.4. Wholesale led the way, along with manufacturing, while construction remained weak once more. In effect, things are moving again in the old continent although improvements are volatile for now.
In June, industrial new orders rose 3.1% month-on-month in the Euro zone after having declined 0.5% in May. However, orders fell 25.1% annually. The European economy slid only 0.1% in the second quarter, following a loss of 2.5% in the first, and it is expected to stabilize in the last part of this year, as the global economies are again moving toward growth. Germany could increase around 1.0% by year-end, despite the unemployment rate remaining negative for the largest European’s economy. The European Central Bank (ECB) will leave rates low for an extensive period of time, but it should increase them again, once the economic growth will resume its course.
EUR/USD: Testing key resistance lines.
EUR/USD: The Euro is again at crucial technical levels. They correspond to the resistance line of the past 12 months and will support the Euro to higher prices, if broken. A move above 1.4580 would target 1.4660, 1.4740. A decline below 1.3950 is instead necessary for 1.39, 13820.
GBP/USD: A move below 1.6090 would target 1.6020. A breakout above 1.6650 would take the price to 1.6700.
USD/JPY: The market is trading between 98.00 and 91.00. A move above 95.50 could target 96.00. A decline below 92.70 could instead take to price to 91.50.
USD/CAD: A move below 1.0550 is necessary for 1.04. A swing above 1.124 would instead target 1.13.
Angelo Airaghi is a Commodity Trading Advisor, registered with the National Futures Association and the Commodity Futures Trading Commission. He has been an active professional since 1990 working for major international financial companies. In the past 10 years, Angelo Airaghi has been an analyst and commentator for national and international media.
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