EUR/USD Analysis

EUR/USD – 1.4935  
EUR/USD: Wave v of (c) may extend to 1.5000

The single currency did resume medium term upmove and our indicated upside target at 1.4910 has been met, price looks set to test psychological resistance at 1.5000 and later to 1.5159 (61.8% projection of 1.3747 to 1.4845 measuring from 1.4480), then towards 1.5280 (100% projection of 1.4045 to 1.4845 measuring from 1.4480).

Our preferred count on the daily chart remains that a wave (B) from 1.2329 is unfolding with A-leg ended at 1.4720, followed by wave B at 1.2457, the wave C from there is also a 3 legged move and is labeled as (a): 1.3739, (b): 1.2885, the wave iii of the 5-waver (c) from 1.2885 has ended at 1.4339 and wave iv is a triangle ended at 1.3878 and wave v is still in progress to aforesaid upside targets.

On the downside, whilst pullback to 1.4830/35 cannot be ruled out, reckon 1.4700 should hold and bring such upmove. Only below 1.4670/75 would suggest a temporary top is possibly formed and bring correction towards 1.4480. A daily close below this level would confirm a temporary top is in place, then fall to 1.4300 and then 1.4200 would follow.

Looking ahead, if euro drops below support area at 1.4177-91, this would provide confirmation that wave v as well as wave (c) has ended and bring correction to 1.4045.

Euro's long-term uptrend started from 0.8228 (26 Oct 2000) with an impulsive structure. The rise from 0.8228 to 0.9593 (5 Jan 2001) is labeled as wave I, the retreat to 0.8352 (6 Jul 2001) is wave II and the rally to 1.3670 (31 Dec 2004) is wave III. Wave IV from there ended at 1.1640 (15 Nov 2005), the subsequent upmove to 1.6040 (July 15, 2008) is treated as wave V, the major selloff from the record high of 1.6040 to 1.2329 (October 27, 2008) signals a correction of the long-term uptrend has taken place with (A) leg ended at 1.2329 and once (B) wave finishes, wave (C) will take euro lower and below 1.2329 confirms and extends to 1.2136 (50% Fibonacci retracement) and 1.2000.

USD/JPY Elliott Wave Analysis

USD/JPY – 90.59 USD/JPY – Further consolidation in wave 2 would take place

The greenback did rebound last week in line with our expectation, reinforcing our view that a temporary low has been formed at 88.01 and mild upside bias remains for retracement to 91.75 (38.2% Fibonacci retracement of 97.79 to 88.01), however, a daily close above resistance at 92.55 resistance is needed to confirm the c leg as well as wave B has ended and bring stronger rise towards 94.05 (61.8% Fibonacci retracement of 97.79 to 88.01).

We are still keeping our previous preferred count that larger degree wave V has commenced from 124.14 with wave 1 ended at 87.10 and the wave 2 is unfolding with only A leg of wave 2 ended at 101.45 and the decline from there is treated as wave B sub-divided into a double three with first a-b-c ended at 93.85, followed by wave x at 98.90, then another set of a-b-c is unfolding with second a ended at 91.73, second b at 97.79 and second c leg has either ended at 88.23 or may extend one more fall to 88.07 (100% projection of 101.45 to 91.73 measuring from 97.79) and as long as support at 87.10 holds, prospect of another rise in C leg of wave 2 remains.

Our alternate count is that wave 2 ended at 101.45 and wave 3 has commenced from there with wave i ended at 91.73 followed by wave ii at 97.79 and wave iii is still in progress. Once support at 87.10 is broken, this would put this alternate count as our preferred count, then further weakness to 85.00 would be seen.

Looking ahead, a daily close above resistance at 95.07 would add credence to our count that the fall from 101.45 is still the B leg of wave 2, then gain to 96.00 and possibly towards resistance at 97.79 would be seen. Above resistance at 97.79 would confirm the C leg of wave 2 is unfolding for headway towards 99.80-100.00 psychological level and break there would extend rise towards 101.45 and eventual upside target for this C wave of 2 would be 105.62 (50% Fibonacci retracement of wave 1 from 124.14 to 87.10).

On the monthly chart, we have changed our preferred count that an impulsive wave is unfolding with major wave III with circle ended at 79.75, then followed by wave IV with circle and is labeled as a triangle with A: 147.64 (11 August, 1998), B: 101.25, C: 135.20, D: 101.67 and E leg ended at 124.14 to end the wave IV with circle. Hence, wave V with circle is taking place with wave 1 ended at 87.10 earlier this year in January and wave 2 should falter well below 110.67 resistance and bring wave 3 in 2010. Once support at 87.10 is broken, the major downtrend should resume for fall to 85.00, 82.00 but the major low at 79.75 should hold on first attempt.

EUR/JPY Elliott Wave Analysis

EUR/JPY – 135.75
EUR/JPY: Wave 2 correction from 139.26 ended at 127.00

The single currency rallied after breaking indicated resistance at 132.00/10 and the move gathered momentum thereafter and surged to 136.03 earlier today. This breach of indicated key resistance at 135.49 has reinforced our view that the fall from 138.72 is merely a wave ii correction, which has ended at 129.02 and bullishness remains for subsequent test of 138.72.

Our preferred count remains that the upmove from 112.08 is wave 1 of C has ended at 139.26 with minor wave iii ended at 137.42, followed by triangle wave iv at 126.98, then the move from there to 127.00 is wave 2 with a: 131.42, b: 136.90, wave c: 127.00. The rise from 127.00 to 138.72 suggests the wave 3 has possibly commenced with wave i ended at 138.72 and wave ii has ended at 129.02 and wave iii of 3 is taking place for gain to aforesaid upside targets. Looking ahead, a rise above resistance at 138.72 is needed to add credence to this view for retest of recent high at 139.26 and 140.00.

On the downside, whilst pullback to 134.00 cannot be ruled out, 132.25 should remain intact and bring such an upmove. Loss of latter support would prolong choppy consolidation and risk 131.00 or even 130.00 but support at 139.02 should remain intact.

To re-cap the corrective upmove from the record low of 88.93 (18 Oct 2000), the wave A from there is subdivided as: 1:88.93-113.72, 2:99.88 (1 Jun 2001), 3:140.91 (30 May 2003), 4:124.17 (10 Nov 2003) and 5 was ended at record high of 169.97 (21 Jul 2008). The brief but sharp selloff to 112.08 is viewed as a-b-c x a-b-c type of correction in wave B. The subsequent rally from 112.08 showed impulsive structure, therefore, we labeled it as wave 1 of C.

The long-term downtrend started from calculated price of 359.26 (Dec 1979). The sharp fall from there to 226.60 (Aug 1981) with impulsive structure is labeled as wave I and wave II was capped at 256.59 (Nov 1982). Wave III decline was contained at 140.58 (Feb 1989), the subsequent rebound to 198.59 (Aug 1990) is seen as wave IV, the subsequent 5-wavers decline from there finished at 88.93 (18 Oct 2000). The strong rebound from there to 169.97 (21 Jul 2008) is tentatively viewed as wave A and wave B selloff was followed and is possibly ended at 112.08 (21 Jan 2009). Our alternate count is that entire wave IV correction already ended at 169.97, hence fall to 112.08 would be treated as the wave 1 of V.

USD/CHF Analysis

USD/CHF – Wave b from 1.2298 should be limited to 1.0000.

The greenback finally resumed medium term decline this week, broke below support at 1.0170 and hit a fresh 2009 low of 1.0119 yesterday, suggesting the (c) leg of larger degree wave b is still in progress and weakness towards 1.0011-39 (previous chart support and 100% projection of (a) leg at 1.0039) cannot be ruled out but reckon psychological support at 1.0000 should limit downside and 0.9900 should hold, bring rebound later this month.

Our preferred count is that early selloff to 0.9630 is an end of the larger degree wave (C) and major correction is unfolding from there with a leg of a larger degree wave A ended at 1.2298 (Nov 2008 with (a): 1.0625, (b):1.0011 and (c):1.2298), wave b is now in progress in the form of an (a)-(b)-(c) with (a): 1.0370, (b): 1.1967, (c) is still under way (wave i: 1.1160 , wave ii: 1.1742, wave iii is unfolding) for fall to aforesaid downside targets.

On the upside, whilst recovery to 1.0300 cannot be ruled out, only break of resistance at 1.0453 would signal a temporary low is possibly been formed and then correction to 1.0563 would follow. Looking ahead, only break of 1.0885 resistance would confirm and bring test of 1.0935. A daily close above this level would signal the (c) wave has ended and bring test of 1.1026, however, only a break of this level would confirm low has finally been formed and rise towards 1.1290/00 and then the trendline resistance at 1.1400 would follow.

Dollar's long-term downtrend started from 2.9343 (Feb 1995) and it was unfolding as a (A)-(B)-(C) with (A): 1.1100, (B): 1.8310 (26 Oct 2000), then followed by another impulsive wave (C) which ended at 0.9630 (Mar 2008). Under this count, a major correction is now in progress with a leg of larger degree A ended at 1.2298 and b leg is still in progress but downside is likely to be limited to 1.0000/11 and bring c leg rebound of A in Q4. In the event dollar drops below1.0000, this would suggest only wave III (our alternate count) has ended at 0.9630, then the final wave V of (C) would extend weakness to 0.9500.

The U.S. stock market review

The next wave of activity increase in the mergers and acquisitions sector on Monday restored the investors propensity to risk and their stocks demand that helped Dow Jones Industrial Average index to grow more than by 100 points. Increase of analysts ratings promoted growth of Cisco, Citigroup and some other companies stock quotes both in technological, and in financial sector.

As it happened time and again, the increase in sector was noted on Monday. The Xerox agreement on Affiliated Computer Services purchase became significant for securities of the companies with the big capitalization. Initial cost of the deal is estimated in 6,4 bln dollars. Xerox shares fell by 1,29 dollars or 14 %, to 7,68 dollars, and Affiliated Computer shares grew by 6,61 dollars or 14 %, to 53,86 dollars.

Dow Jones Industrial Average moved upward by 124,17 points or 1,28 %, to 9789,36 points. Standard and Poor's 500 rose by 18,60 points or 1,78 %, to 1062,98 points, also having interrupted the 3-days falling. Nasdaq Composite surged by 39,82 points or 1,9 %, to 2130,74 points. It is the most considerable index growth following the results of day in points and in percentage more than for two months. The technological sector is on of the leading among the S&P 500 components one. Securities of this sector rose in price by 1,7 %.

Cisco Systems shares have become one of the leaders of growth the technological companies stocks, they ticked up by 99 cents or  4,4 %, to 23,61 dollars after in Barclays raised their rating to “above the market” from “on a level with the market” owing to the prospects of company business improvement in Europe and the North America.

Among the S&P 500 components most favorable dynamics was shown by the financial companies stocks after Morgan Stanley analysts presented the forecast according to which banks credits losses will decrease in the following 12-18 months.







Regards,

Analyst: Vladimir Donin

Analytical review of the EUR/USD currency pair for 28.09.09.

Monday's trades passed in a rather calm way. The absence of important macroeconomic statistics and a steady stock market did not lead to any significant changes in the currency pair EUR/USD. With the opening of the trading session there was a slight drop of the Euro from its Friday's highs to the level of 1.4567. It mainly can be connected with a little way latecomer Asian market which could not properly respond for the US dollar strengthening and also with an obvious Euro overbought to the previous trading session closing. During the European trading session we saw how the pair had been gradually reestablishing its lost positions and was able to reach the level of 1.4681, where it was met by the 200 day exponential moving average. To what it had led, you saw by yourselves – another decrease to the base of the 46th figure and the closure near this area. Totally, the US dollar grew against the European currency by 79 points. The trading volume was also at a high level, despite the first trading day of the week. 

 

The publication of German CPI became the key insight at the yesterday's deals, which lowered to -0.40% versus the growth to 0.20% at the beginning of September. Remind you, that the Consumer price index (CPI) determines the inflation expansion rate level amid the consumer demand for goods and services. The uptrend has a positive impact to the national currency. On the other hand, it is worth mentioning the lack of inflation risk in the Europe's largest economy.
 
Concerning yesterday's ECB President Trichet speech, I want to notice some features. The first one is that Banks have to accredit the real economy. Secondarily, the ECB president announced that the policy of a strong dollar on the part of the USA is very important. In conclusion, it was told about the European economy recovery in the coming months, which unfortunately would be slower, than expected.
 

A slight strengthening of oil futures during Monday deals imparted the confidence to several major investors. It was expressed in testing of the first resistance levels at the European trading session.
 

 

Speaking about the technical picture, I want to mention a few main features. Yesterday's pair decrease to the upper bound of ascending price channel of August,13 was met by a strong support level, which also resisted during the second decline to the end of American trading session and at the opening of the Asian one today. As we can see, each testing of this level by the pair was accompanied by a sharp rebound to the level of 1.4638, which could be determined as the first resistance level. The next possible target for the pair will be the 200 day exponential moving average, which is currently located at 1.4672, near more serious resistance level of 1.4680.

 

The pair's entrance to the sideways trend is observed on the MACD indicator, as this indicator has come close by to the zero mark. Bollinger bands are located in a parallel way to each other, but with a high liquidity position.
 
Today, I recommend to buy the pair at 1-hour timeframe closing above 1.4647 with the target – T/P 1.4690 and S/L 1.4621.
Sell the pair at 1-hour timeframe closing below 1.4585 with the target – T/P 1.4522 and S/L 1.4619.
 

Best regards,
Analyst: M.A.Magdalinin.

Analysis of the EUR/USD

 

Typical Friday trading revealed its true colours. The first growth attempts in the European grounds opening were accompanied by the US dollar purchase that led to the pair's lowering almost to the session low which was fixed at the Asian market at 1.4617. Thereafter, followed a slight increase amid the US housing market data release, which showed sales tick up that caused the Euro strengthening against the greenback. By the trades closing the pair rallied from the opening level by 22 points that allowed the bulls to gain a victory.

Now, a piece of Eurozone fundamental review. GfK German consumer climate jumped from the last month reading of 3.80 to 4.30, coming in higher than the experts forecasts, which expected the index to remain unchanged. Money supply M3 contracted to 2.50% versus 3.00% month earlier.The economists were waiting for a decline just to 2.70%. This indicator drop puts pressure on the European currency. Last year indexes were at 9.30%. Italy retail sales saw no changes and stayed at -0.4%, compared to the last period, and the private lending has almost touched zero level reaching 0.10% against 0.70% in the last month. Durable goods orders, which exclude the transportation factors and defence industry orders in the USA, did not show any changes in comparison with the last period and stood at 0.00% versus 1.10%. The experts were looking for a slowdown to 0.90%. Durable goods orders including the transport costs, also fell to -2.40% versus strong uprise of 5.1% witnessed in the last month. Such diversified data was the reason of significant fluctuations in the market due to absence of major investors single view concerning the current situation. The Michigan University Sentiment Index demonstrated a moderate tick up to 73.50, despite all predictions. And the key factor for the European currency rally turned out to be the new home sales data, not coming in line with the experts estimates and rose to 429000 versus 426000 in the preceding month.

Concerning the technical pattern, worth pointing out that break through of the rising price channel of August 31 on Thursday affirmed itself during the Friday trading, as any trials of the pair's uptick to existing resistance level were promoting a huge Euro sale versus the American currency. As we could see, such sale took place three times, taking into account the Asian session where was seen the other resistance level testing at 1.4715 that resulted in considerable Euro slump. There are also two strong support levels, the first one— at 61.8% correctional Fibo level, which takes its rise from the August market fall last year, the second — the upper bound of up-going price channel of August 13, 2009, which used to be a resistance.

To sum up, I should notice that presently, the pair managed to break through below 200-day exponential moving average constructed at 1-hour graph, so I would not not recommend to expect the pair lowering continuation.

Today, I recommend to buy the pair at 1-hour timeframe closing above 1.4658 with the target – T/P 1.4724 and S/L 1.4612

Sell the pair at 1-hour timeframe closing below 1.4562 with the target – T/P 1.4522 and S/L 1.4608

Best regards,

Analyst: M.A.Magdalinin

Pound Hit on BoE Easing Talk

Pound Hit on BoE Easing Talk
by Korman Tam

The greenback was higher against the pound, rising to 1.64-figure and pushing the euro back towards the 1.46-level. Several key US economic reports were released this morning, including retail sales, producer price index and the New York Fed manufacturing survey. Retail sales in August were sharply higher than expected, with the headline figure jumping by 2.7% versus a revised 0.2% decline in July and the excluding automobiles retail sales report increasing by 1.1% compared with a revised 0.5% decline in the previous month. The September NY Fed manufacturing survey was also sharply better than forecast, rising to 18.88, beating calls for an improvement to 14.0 from 12.08 a month prior.

King pounds Sterling

The British pound plunged by over 200-pips in early Tuesday trading, slammed by commentary from Bank of England Governor Mervyn King. In King’s Parliamentary testimony, he hinted at further cutting the bank deposit rate, suggesting that the BoE was mulling over “reducing the remuneration” of bank reserves and that it would be a “useful supplement” to stimulate the ailing UK economy. While King expressed optimism that the sharp deterioration in economic fundamentals may have passed, he also added, “the strength and sustainability of the recovery is highly uncertain and the balance of risks to inflation around the 2% target remains on the downside”.

Economic data released from the UK overnight reaffirmed BoE Governor King’s outlook on inflation, with August CPI relatively tame, up 0.4% on a monthly basis and up 1.6% on an annualized basis. Meanwhile, the retail price index for August increased by 0.5% versus a flat reading in the previous month and posting a 1.3% decline versus a 1.4% drop a year earlier.

Cable stabilized just above the 1.64-level, hovering near 1.6430. Resistance is seen at 1.6460, followed by 1.65 and 1.6550. Additional ceilings are seen at 1.6580, backed by 1.66 and 1.6630. On the downside, support begins at 1.64, followed by 1.6370 and 1.6340. Subsequent floors are eyed at 1.63, followed by 1.6250 and 1.62.

Euro Sideways

The euro drifted sideways despite a softer than expected report on Germany’s sentiment survey, hovering just above the 1.46-level. Germany’s ZEW expectations survey jumped to its highest level in 3-years to 57.7 in September from 56.1 in August, albeit less than forecasts for a stronger improvement to 60.0. The ZEW current conditions index improved by less than forecast at -74.0, compared with -77.0 in the previous month and missing calls for an improvement to -68.0.

EURUSD holds steady around 1.46, with resistance beginning at 1.4650, followed by 1.47 and 1.4740. Additional ceilings will emerge 1.4770, followed by 1.48 and 1.4830. Support starts at 1.46, followed by 1.4560 and 1.4530. Subsequent floors are seen at 1.45, followed by 1.4450 and 1.44.

USD Edges Higher

USD Edges Higher
by Korman Tam

The dollar edged up higher against the euro and sterling, while sliding against the yen at the start of the week. Oil and gold eased early in the session, slipping to $68.22 per barrel and $992.9 per ounce, while the US equity bourses were marginally higher.

The US economic calendar kicks off with several releases tomorrow, including August PPI, retail sales, July business inventory and the September NY Fed manufacturing survey. The headline retail sales figure is estimated to post a dramatic improvement in August, increasing by 1.2% versus a 0.1% decline a month prior, while the excluding-automobiles retail sales figure is seen rising by 0.3% from a 0.6% decline in July.

Euro Steady above 1.46

The euro pulled off its session highs near 1.4650 but held steady above the 1.46-figure. The Eurozone July industrial production figures improved to 2.1% versus 1.9% from the previous month, while improving to -15.9% from -17.0% a year prior. Meanwhile, Q2 employment declined by 0.5% on a quarterly basis, while falling by 1.8% on an annualized basis.

In the session ahead, the key highlight will be Germany’s ZEW sentiment survey is seen improving to -67.1 in September from -77.2 in August, while the economic sentiment component is estimated to improve to 62.0 from 56.1.

EURUSD will find support at 1.46, followed by 1.4570 and 1.4540. Subsequent floors are eyed at 1.45, backed by 1.4460 and 1.4420. On the upside, resistance begins at 1.4650, followed by 1.4680 and 1.47. Additional ceilings are seen at 1.4730, backed by 1.4760 and 1.48.

USD Slides vs GBP, CHF

USD Slides vs GBP, CHF
by Korman Tam

The greenback was weaker against the British pound, falling to its lowest level in a month to 1.6676 and tumbling to its lowest level since December 2008 versus the Swiss franc at 1.0367. The US economic releases saw weekly jobless claims, which improved to 550k from 570k and the July trade deficit. The deficit figures revealed an increase in July to $31.96 billion versus the June reading at $27.49 billion.

The reports due out on Friday include July wholesale inventory, wholesale sales and the September University of Michigan consumer confidence survey. The preliminary confidence report is seen marginally lower to 65.3 from 65.7 while the current component edging up slightly to 67.0 from 66.6.

Sterling Rallies

The pound jumped to its highest level since August against the dollar at 1.6676 on the heels of the Bank of England’s monetary policy announcement earlier in the session. The BoE, as expected, held its benchmark lending rate unchanged at 0.5% and maintained its asset-purchase plan at its current level at 175 billion pounds.

Cable was initially softer just prior to the policy announcement as traders were factoring the possibility of a bump in the Bank’s asset purchase plan. When it was revealed that the BoE would stand pat, the market pushed the pound higher on hopes that the UK economy may be bottoming out and policy will likely remain unchanged for the coming months.

Interim resistance in the pair will emerge at 1.6675, followed by 1.67 and 1.6740. Subsequent ceilings are eyed at 1.6770, backed by 1.68 and 1.6830. On the downside, support starts at 1.6620, followed by 1.66 and 1.6560. Additional floors will emerge at 1.6530, backed by 1.65 and 1.6465.

Swissie Whipsaws on Intervention Fears

The Swiss franc whipsawed against the dollar and euro amid rumors that the SNB would intervene in the foreign exchange market to halt to currency’s strength. The SNB declined to comment on whether it had intervened, with traders pushing the Swissie higher from 1.0464 to its highest level since December 2008 at 1.0359.

USD Tumbles to Lowest Levels of 2009

USD Tumbles to Lowest Levels of 2009
by Korman Tam

The dollar fell to its lowest level of the year as traders returned from the Labor Day holiday, relinquishing the 1.45-level against the euro and sliding to 1.6586 versus the British pound. Commodities continued to test higher at the start of the week, with spot gold breaching the key resistance level of $1,000 per ounce and crude oil firming above the $70 per barrel mark to $71.20. Meanwhile, the Asian equity bourses climbed higher overnight, with Hong Kong’s Hang Seng index rallying by over 2% and the Shanghai Composite gaining by 1.7%.

The US economic calendar is light for most of this week as the majority of the releases are slated for Friday. Weekly jobless claims, which are due on Thursday, are expected to improve marginally to 560k from 570k a week prior. On Friday, the data to be released consists of July wholesale inventory, wholesale sales, and the University of Michigan consumer confidence survey. The wholesale sales reading is estimated to edge up to 0.6% in July from 0.4% a month prior, while the wholesale inventory figure is seen posting a 1.0% decline, albeit improving from a decline of 1.7% previously. The preliminary reading for the September University of Michigan consumer confidence survey is largely unchanged, seen slipping marginally lower to 65.3 from 65.7 in August and the expectations component is estimated to ease to 64.2 from 65.0.

Euro buoyed above 1.45

The euro jumped to its highest level in 2009 above the 1.45-level to 1.4534 as traders shifted back into riskier assets. Germany’s July trade surplus was better than expected, climbing by more than forecasts to 12.4 billion euros and beating out estimates for an improvement to 11.7 billion euros from 11.0 billion euros in June. In the coming session, traders will turn to Germany’s August HICP and CPI figures, due out at 2:00 AM.

EURUSD will encounter interim resistance at 1.4540, followed by 1.4570 and 1.46. Subsequent ceilings are eyed at 1.4630, backed by 1.4660 and 1.47. On the downside, support will start at 1.45, backed by 1.4450 and 1.44. Subsequent floors are seen at 1.4360, followed by 1.4320 and 1.43.

USD Edges Higher, Eyes Jobs

USD Edges Higher, Eyes Jobs
by Korman Tam

The dollar climbed higher against the majors on softer US economic reports, pushing the euro to 1.4245 and the Loonie toward 1.1072. Weekly jobless claims were unchanged from the previous week, missing forecasts for a decline to 560k, instead holding steady at 570k. Meanwhile, the August non-manufacturing ISM figure improved by more than forecast, edging up to 48.4 and beating estimates for an increase to 48.0 from 46.4 in the previous month.

The key highlight for this week will be the August labor data, scheduled for release at 8:30 AM on Friday. The market expects the August unemployment rate to creep up to 9.5% from 9.4% in July. The non-farm payrolls are expected to improve further to post a loss of 230k jobs, compared with 247k jobs shed a month prior.

The G-20 Finance Ministers meeting kicks off this weekend in London. US Treasury Secretary Tim Geithner had prefaced the meeting yesterday, saying “this is a stock-taking meeting not a new-initiatives meeting”, adding that “the important thing to do is to try to figure out what cooperative framework or phased differentiated withdrawal of support is going to be appropriate”. The agenda seems to be focused on European government curbs on banking bonuses.

Euro Drifts Lower

The euro drifted lower against the greenback, sliding to 1.4237. The ECB left monetary policy unchanged when it announced its decision earlier in the session, keeping rates steady at 1.0%. In the subsequent press conference by Bank President Trichet, he stressed that current interest rates remain appropriate, with inflation to remain subdued. Moreover, he said that there are increasing signs that the global recession is bottoming out and global policy stimulus should support growth. Trichet suggested that interest rates will likely remain unchanged for the medium-term, emphasizing inflation expectations are firmly anchored and that risks to growth outlook and inflation expectations remain balanced.

EURUSD holds steady near 1.4240, with support seen at 1.42, backed by 1.4160 and 1.4130. Subsequent floors are eyed at 1.41, followed by 1.4050 and 1.40. On the upside, resistance is seen at 1.4270, followed by 1.43 and 1.4350. Additional ceilings are eyed at 1.4380, backed by 1.44 and 1.4440.

Upbeat US Data amid Lackluster FX

Upbeat US Data amid Lackluster FX
by Korman Tam

The dollar was mixed against the majors in the Wednesday session, largely confined within recent ranges in lackluster trading. The greenback recovered from its session lows versus the euro at 1.4350 to hover near the 1.4230-level, while pushing the Canadian dollar just shy of the 1.10-figure.

New home sales posted a strong reading in July, surging by its largest figure in nearly 4-years, up by 9.6% to 433k units versus 384k units from June. Building permits were drifted by 1.1% to 564k units in July. Meanwhile, durable goods orders were sharply better than expected, posting a gain of 4.9% versus a 2.2% decline a month earlier in June. The excluding transports July durable goods orders also improved, edging higher by 0.8% compared with a 1.6% increase a month earlier.

In the coming session, traders will look ahead to weekly jobless claims and more importantly, the preliminary reading for Q2 GDP. Weekly jobless claims are expected improve to 565k from 576k a week earlier. Meanwhile, economic growth in the second quarter is expected to post a 1.4% contraction, deteriorating further from a 1.0% contraction in the previous quarter. The Q2 PCE is expected to hold steady at 1.3%.

Euro Trades Sideways

The euro continues to hover around the 1.4240 figure after pulling back from the session high near 1.4350. Eurozone economic reports released overnight saw Germany’s August Ifo index improved by more than expected to 90.5 from 87.3 in July while the expectations index jumped to 95.0 from 90.4. Germany’s CPI figures are due out in early Thursday trading and are seen remaining tempered in August.

EURUSD trades sideways, remaining confined within recent ranges. Interim resistance is seen at 1.4270, followed by 1.43 and 1.4350. Subsequent ceilings are eyed at 1.4380, backed by 1.44 and 1.4440. On the downside, support begins at 1.42, followed by 1.4160 and 1.4120. Additional floors will emerge at 1.41, followed by 1.4065 and 1.4030.

FX Drifts, Focus on Central Banks

FX Drifts, Focus on Central Banks
by Korman Tam

With little economic data released at the start of the week, the focus in the currency market has shifted to Central Bank rhetoric, with the key highlights attributed to commentary from Fed Chairman Ben Bernanke and ECB President Jean-Claude Trichet. Speaking from the Fed’s annual symposium in Jackson Hole, Wyoming, Bernanke offered an optimistic assessment over the economic outlook saying, “economic activity appears to be leveling out, both in the US and abroad, and the prospects for a return to growth in the near-term appear good”. His upbeat outlook spurred on gains in the equity and commodities markets, while pushing the dollar slightly lower against the majors.

Meanwhile, ECB President Trichet sounded a cautious tone over the economic outlook for the Eurozone, suggesting that interest rates will likely remain low for a protracted length of time. He said, “We see signs confirming that the real economy is starting to get out of the period of freefall”, yet it “does not mean at all that we do not have a very bump road ahead of us”.

Nonetheless, the major currency pairs continue to drift in a lackluster manner as the summer doldrums have confined foreign exchange to rangebound trading. We remain biased for further dollar weakness in the coming weeks as economic data from the US continue to gradually improve and support the equity markets.

Euro Drifts Lower

The euro was confined within range at the start of the week in a lackluster session, with the single currency drifting slightly lower against the greenback overnight. The economic data released saw June industrial orders, which posted a steep improvement, up 3.1% versus a 0.2% decline in the previous month and improving to -25.1% from -30.1%.

In the coming session, data slated for release include Germany’s import prices and Germany’s Q2 GDP. Growth in the Eurozone’s largest economy is seen expanding by 0.3% versus the previous quarter and contracting by 5.9% from the previous year.

EURUSD holds steady just beneath the 1.43-level with interim resistance seen at 1.4330, followed by 1.4360 and 1.44. Subsequent ceilings are eyed at 1.4440, backed by 1.4470 and 1.45. Support is seen at 1.4280, followed by 1.4230 and 1.42. Additional floors will emerge at 1.4150, followed by 1.41 and 1.4070.

USD Drifts Lower on Mixed Data

USD Drifts Lower on Mixed Data
by Korman Tam

The major currencies were mixed in the Thursday session as US equities edged up marginally into positive territory, following a sharp rebound in the Shanghai Composite – which rallied by 4.52% overnight. The dollar eased lower against the euro and pound but largely remained confined within its recent range while the yen also relinquished some of its recent strength.

The Philadelphia Fed manufacturing index improved by more than forecast in August, expanding to a reading of 4.2 and beating estimates for an improvement to -2.0 from -7.0 in July. Meanwhile, the leading economic indicators index fell short of consensus forecasts for an unchanged monthly reading at 0.7%, instead slipping to 0.6%. Weekly jobless claims were also slightly higher than the prior week, edging up to 576k from 558k previously.

The economic calendar for Friday is light, with just the release of existing home sales due out at 8:30 AM. Existing home sales are seen increasing by 2.3% to 4.99 million units in July, versus 4.89 million units a month earlier.

Sterling Tops 1.66

The British pound climbed back above the 1.66-figure overnight following a stronger than expected report on UK retail sales in July. The report edged out expectations with annualized retail sales increasing by 3.3% versus 2.9% in the previous year and holding steady at 1.2% on a monthly basis. Also, the UK revealed its largest budget deficit on record at 8 billion pounds in July versus a 5.2 billion surplus a year earlier. The ballooning deficit figures will likely weigh heavily on the pound over the coming months.

Cable has since relinquished some of its earlier gains, slipping back to the 1.65-figure and lower from its session high at 1.6605. Support is seen at 1.6460, followed by 1.6430 and 1.64. Additional floors will emerge at 1.6370, backed by 1.6340 and 1.63. Meanwhile, interim resistance is eyed at 1.6550, followed by 1.66 and 1.6640. Subsequent ceilings are seen at 1.6670, followed by 1.67 and 1.6730.