EURO: At Key Levels Against the U.S. dollar

Key Levels Against the U.S. dollar

by Angelo Airaghi [Guest Analyst]

9/8/2009

The Federal Reserve and the European Central Bank should keep rates steady for the first part of 2010 as well, since the economic recovery remains fragile in some sectors and inflation is low. The Euro is once again at key resistance lines against the U.S. dollar. A breakout would possibly set the currency for a strong move up.

U.S.: Some improvements, but not enough

Growth remains weak in the United States, but sings of improvement are showing at various levels of the economy. Housing has clearly found a bottom, while consumer confidence has increased slightly in the recent months. For the first time since 20007, the ISM manufacturing survey moved up to 52.9 in August from 48.9 the previous month. New orders rose to 64.9 from 55.3, marking the strongest gain since 2004. The ISM services climbed instead to 48.4 from 46.4 in July. Nevertheless, the price paid component jumped to 63.1 from 41.3, thus anticipating some inflationary pressure ahead. The Federal Reserve is expected to keep rates accommodative the first part of 2010 as well, since the recovery is still very fragile and household savings weak.

In effect, after having topped in January of 2009 (-741,000), nonfarm payrolls declined 216,000 in August. The previous two months were revised down a cumulative of 49,000. The fall was broadly based with manufacturing and construction registering the heaviest losses. Since the financial crisis began, almost 7.0 million people have been out of work, the worst numbers of the past fifty-years. At the contrary, temporary job data continued to improve, eventually anticipating some stabilization in the job market over the medium term. Nonetheless, the short term picture stays critical. The unemployment rate is now 9.7% (a twenty-six year high) from 9.4% the previous month.

Europe: Unemployment increasing more?

The European Central Bank’s meeting of last week was once more a non-event. The ECB will keep rates low for now, albeit it will not postpone the 12-month long term refinancing operation after September 30th. Mr. Trichet was more positive about the economics’ outlook, although uncertainty remains very high. The European economy fell 0.1% in the second quarter, less than the U.S. decline, after having slumped 2.5% in the first three months of the year. The Gross Domestic Product (GDP) has been shrinking for five straight quarters in the Euro zone. Nonetheless, German and French GDP improved lately and they might increase more in the coming months. German incentive plan to workers has mitigated unemployment so far, although the decline should continue for the first part of 2010 as well.

Inflation stays mild for now, the PPI fell 0.8% in July, but it should again pick up sometimes next year. Commodity prices are expected to rise from the lows, as a better economic picture will increase demand for raw materials. The Purchasing Manger’s Index for the Euro zone reached a fourteen month’s high in August, despite remaining below the benchmark of 50 for the longest period in history. Improvements were broad-based with only Spain and Ireland staying behind. The PMI service rose instead to 49.9 from 45.7. In Germany, the index is now above 53.0 and pointing to expansion.

EUR/USD: Trying the resume the long-term uptrend.

EUR/USD: The Euro is again at crucial technical and seasonal levels. They are at the conjunction of various resistance points and will support the Euro to better prices, if broken. As result, a move above 1.4610 would target 1.48, 1.50. A breakout failure would instead take the price back again to 1.4050.

GBP/USD: The pound has found a good support at 1.61. It corresponds to the lower
Bollinger bands and the 100 MA. However, a move above 1.654 is necessary for 1.66, 1.67. A decline below 1.5990 would instead target 1.59, 1.57.

USD/JPY: The market is trading between 98.00 and 91.50. We are currently at the support line. A rebound to 93.80 is possible. Nevertheless, a move below 90.7 would target 90.00.

USD/CAD: The market has found a strong resistance at 1.11 and could now correct to 1.0830, eventually 1.0630, if it could move below 1.0695. A breakout failure would take the price to 1.0940 again.

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.

U.S dollar: Looking For The Line of Least Resistance

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.

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.

U.S.: Unemployment’s Rate is the Achilles Heel

U.S.: Unemployment’s Rate is the Achilles Heel

by Angelo Airaghi [Guest Analyst]

8/26/2009

As housing is giving some relief to household pockets, the Federal Reserve warns about a slow recovery. The Euro, in the mean time, is testing key resistance levels against the U.S. dollar.

U.S.: housing still supportive

Tangible signs of improvements are beginning to show up, albeit the recovery remains fragile in the United States. In July, the conference board index increased 0.6% month-on-month from + 0.8% in June. It was the fourth consecutive month of increase, giving further prove that the U.S. economy might have bottomed. In a speech at the Jackson Hole Symposium, Fed Chairman Bernanke confirmed that the worst might be over for global economies, thus indirectly anticipating a safe-haven demand’s decline for U.S. dollars and Treasuries in the coming months. Nonetheless, the Federal Reserve will keep rates low for the first part of 2010 with inflation so mild. In July, the producer price index (PPI) fell 0.9% versus the expected -0.4%. In reality, after two months of gains, 6.5% in June and 15% in May, housing starts slid by 1.0% in July to 581,000 annualized (+2.5% expected). Nevertheless, singles component (three-quarters of the market) rose 1.7%, while multiple houses declined 13.3%. Starts are still above the average of the first three months of the year, although away from the over 2 million produced in 2005.

Existing home sales increased at the contrary by 7.2% (+2.0% expected) to 5.24 million in July from 4.89 million in June. Inventories remained unchanged at 9.4 months of supply. However, both single homes and condos improved. The first climbed by 6.5% and the second by 12.5%. Clearly, the first-time homebuyers tax credit program, which allows first time buyers to receive a refundable credit of USD 8.000.-. (10% of the home value, if lower) until December 1st, have helped home sales. Nonetheless, the positive domino’s effect created by the activity in the housing sectors could continue in the future as well supported by low interest rates and affordable prices. Home ownership remains an American dream. Consequently, a bipartisan group of U.S. senators are requesting that the tax credit program to be renewed for an extensive period of time.

Is the German’s recovery sustainable?

The decrease of inventories and the rise of exports, the European trade balance registered a surplus of Euro 4.6 million in June from Euro 2.1 billion in May, are helping the European economy out of the recession. This is what stands out from the latest data, albeit the recovery might be slow and fragmented. In effect, after improving for six straight months since February, the Euro zone composite Purchasing Manager’s Index finally climbed to the critical level of 50 in August. The manufacturing sector printed 47.9 from 46.3, while the services PMI showed 49.5 from 45.7. In Germany, the composite index was 54.2 in August from 49.0 in July, the highest level in more than one year. In France, it rose instead to 50.9.

The Euro zone Gross Domestic Product (GDP) declined only an estimate of 0.1% in the second quarter from the 2.5%, while in Germany and France, the GDP increased 0.3%. The German’s economic sentiment index from the ZEW center of Economic Research climbed to 56.1 in August, way above the average of 26.5. However the current economic situation index, which rose only to -82.1 points, testifies how Germans remain prudent over the health of the economy. In fact, the European Central Bank is warning that the German rebound might have been exacerbated by the economic measures introduced this year and could not be sustainable over the short term. As a result, ECB will keep rates low for now, the Producer Price Index (PPI) fell almost 8.0% year-on-year in July, and might increase them again once the economic momentum will trend higher.

EUR/USD: Testing key resistance lines.
EUR/USD: The Euro is again at crucial technical levels. A move above 1.4560 would target 1.4620, 1.4740. A decline below 1.3750 is instead necessary for 1.3550.
GBP/USD: A move below 1.6125 would target 1.6020. A breakout above 1.6820 would take the price to 1.6880.
USD/JPY: The market is trading between 98.00 and 92.00. A move above 95.40 could target 96.00. A decline below 92.30 could instead take to price to 91.70.
USD/CAD: The US dollar finds support at 1.06. The resistance is instead at 1.1050.

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.

Short Term Rebound for the U.S. Dolla

Short Term Rebound for the U.S. Dollar?

by Angelo Airaghi [Guest Analyst]

8/17/2009

The U.S. dollar is gaining momentum over weak economic data. The trend should continue over the short/medium term. However, the longer term picture stays bearish for the greenback

U.S.: The trade balance to widen further?

The FOMC meeting of last week was basically a non-event, since the Fed reiterated the need to keep rates low for an extensive period of time, albeit it sees the U.S. economy stabilizing. Rates should again rise in the second part of next year, despite expectations mounting for an increment in December. In fact, after WW2, the Federal Reserve started to increase rates six months following the top in the unemployment rate, which, at present time, might happen sometimes this year or at the beginning of the next. Finally, the Fed has apparently no intention of expanding the purchase of USD 300 billion of longer-term U.S. bonds after the October’s target. With inflation so low, the consumer price index was down 2.1% year-on-year in July, a “wait and see” approach could be the best solution. In reality, economic data remains volatile.

For the first time since December 2007, the US industrial production rose 0.5% in July (+0.4% expected) after having declined 0.4% in June. The increase in motor vehicle production supported the industrial output. Nevertheless, capacity utilization stays near the lows at 68.5%. During the same month, retail spending fell 0.1% (+0.9% expected) versus June +0.8%. The decline was broad-based with the exception of the motor vehicle component which rose 2.8%. However, consumer spending might move higher in the second quarter, after having declined 1.2% in the first quarter. Lastly, higher oil prices drove the US trade balance wider in June to USD 27 billion (USD 29 billion expected) from USD 26 billion in May. Both imports (+2.3%) and exports (2.0%) rose. The trade balance is expected to rise further in the medium/long term, as demand for imports will improve along with the economic recovery.

EUROPE: Awaiting for the German’s traction

Inflation stays near the lows in Europe, in July it declined to 0.7%, and the European Central Bank (ECB) should keep rates accommodative for this year and the first part of 2010 as well. In effect, the economic data is still fragmented and it swings from the positive to the negative of the weekly basis. In June, the Euro zone industrial production fell 17% year-on-year after having declined 17.6% in May. On a monthly basis, the decline was 0.6% compared to the increase of 0.6% registered the previous month. Some nations are lagging behind. As an example, Italy and Spain showed sharp losses during the month. Nonetheless, despite imports remaining low, exports are mildly increasing in the Euro zone. As a result, the German Gross Domestic Product (GDP) rose 0.3% in the second quarter (-0.2% expected) and the French GDP rose 0.3% as well (-0.3% expected). The coming months will be crucial for the Euro-zone, since the global economic recovery should help German exports to climb substantially from current levels. An improvement of the German output will be beneficial for the entire European continent.

GBP/USD: Divergence points to a bearish correction.

EUR/USD: The market is testing the important support at 1.4040. A decline below 1.3950 would target 1.3850.

GBP/USD: A move below 1.6260 would target 1.62, eventually 1.5940, if 1.6040 is broken.

USD/JPY: The yen is dancing on the support line at 94.50. A move below 94.25 would target 93.80.

USD/CAD: A move above 1.1160 would target 1.1270.

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.

The Euro zone Lagging Behind

The Euro zone Lagging Behind

by Angelo Airaghi [Guest Analyst]

8/10/2009

The economic growth remains fragmented and volatile, as the recovery process is just in its early stage and consumes are low in the U.S. The U.S. dollar is rebounding from the lows and the trend might continue for the short/medium term.

U.S.: consumes still low

As the economy is slowing moving out the worst recession since WWII, data remains fragmented and volatile. In June, the personal consumer expenditure (PCE) rose 0.4% (+0.2% expected) from +0.1% in May following the surge in spending on non-durable products. Personal income, at the contrary, slumped 1.3%, as social security payments run out of steam. However, numbers should improve tangibly in 2010, albeit the recovery process could be the shortest of the past seventy years. In fact, some productive capacity might have been lost forever, while consumes could decline along with the rising saving rates. The job market remains weak overall. In July, 247,000 people (320,000 expected) were out of work. Nevertheless, the number of unemployed was less then June¡¦s 443,000 and May¡¦s 303,000. In addition, the hours worked are increasing and might anticipate some new hiring along the way. The work week hours rose to 33.1 from 33.0. In effect, an increase of the global trade will help the industries in the coming months. After four months of improvements, the U.S. ISM non-manufacturing index declined to 46.4 in July from 47.0. In reality, the contraction of the index was minimal overall. The trend still points toward a recovery for the sector, since factory orders rose 0.4% (-0.7% expected) after having moved up 1.1% in May.

EUROPE: rebound slow

As expected, the European Central Bank (ECB) left rates unchanged last week. In the conclusive speech, Mr. Trichet confirmed some improvements for the economy, but expects the recovery to take place only in 2010. In effect, the Euro zone real Gross Domestic Product (GDP) has declined almost 5.0% from the 2008¡¦s peak and the recovery should be slow, since the tight labor laws are making employer very prudent in their hiring process. In addition, the banking meltdown has been approached individually by each nation and the impact of the various interventions might have been less incisive than elsewhere. Growth remains subdued compared to other nations. German industrial production, as an example, fell 0.1% in June (-0.4% expected), after having increased 0.6% in May. During the same month, retail sales, declined 1.8% following a down move of 1.3% the previous month. In the Euro zone, retail sales slid 2.4% year-on-year in June after having slumped 3.0% in May. Nonetheless, some positive elements are already emerging. The final PMI manufacturing for the Euro zone increased to 11 months high of 46.3 in July from 42.6 in June. The service sector rose instead to 45.7 from 44.7. In Germany, factory orders jumped 4.5% month-on-month in June on the top of May +4.4%. Finally, the trade surplus is at Euro 11.0 billion from Euro 10.2 billion, as exports rose 7.0% and imports increased 6.8% month-on-month.

GBP/USD: Divergence points to a bearish correction.

EUR/USD: The Euro was unable to sustain the up move above key resistance levels at 1.4450 and could now correct to 1.4120, 1.40, 1.38.

GBP/USD: The market has found a strong resistance at 1.70 and could now correct to 1.62, 1.60. In fact, there is divergence between the Rsi indicator and the daily price. A decline below 1.60 would target 1.58.

USD/JPY: The U.S. dollar broke above the 100 MA and targeted the higher Bollinger band. A move above 98.40 would now lift the price to 99.00. A breakout failure would take the dollar to 96.00.

USD/CAD: The Canadian $ is bouncing off the support line of the past two years to target 1.0920/1.10, eventually 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.

ECB On Hold Once More?

ECB On Hold Once More?

by Angelo Airaghi [Guest Analyst]

8/3/2009

The ECB meets this week in Frankfurt (Germany). Rates should stay on hold once more, as the recovery process is just beginning in Europe. The U.S. dollar, in the mean time, is still at key support levels against major currencies.

U.S.: Consumer confidence weak.

The process might be slow and the recovery could not take the form of the classical V shape. However, the worst should be over for U.S. economy, after more than one year of losses. Leading indicators increased last month for the third consecutive time, while some corporate earnings have risen above expectations. In addition, manufacturing industries have reduced inventories and orders have improved, despite the sector remaining very volatile. In June, durable goods new orders slumped 2.5% after having increased 1.3% in May and 1.4% in April. Nevertheless, excluding transportation, orders would have jumped 1.1%. The real estate market has found a bottom at current levels and the increase of sales could boost consumer confidence. New home sales moved up 11% in June to 384,000 units. The up move was well distributed among all the U.S. regions with the exception of the South where sells declined 5.3%. Inventories are now at 8.8 months of supply from 10.2 months, while building permits, a forecasting indicator, rose almost 9.0%.

Finally, for the first time in many months, the number of people asking for unemployment benefits insurance declined to April’s level. Nonetheless, consumers remain prudent as the unemployment rate is still at the top. So, for the second straight month, the U.S. Conference Board’s Index fell more than expected to 46.6 in July, although it remained above February’s low of 25.3. Employment will remain weak for the near future as well, but the picture should brighten up over the medium term. In fact, the auto industry is expected to increase production, as exports are on the rise, since China and other important buyers are ahead in the recovery process. Additionally, the Federal Reserve should keep rates accommodative for most part of 2010 and eventually move them up again to balance a possible increase in inflation.

EUROPE: companies still cutting jobs.

Europe is lagging behind the economic recovery and some tangible results might start to be seen in the last part of the year. European companies are still cutting jobs and only the massive use of part-time work is moderating the downturn for now. In June, the unemployment rate increased to 9.4% (the highest of the past 10 years) in the Euro zone from 9.3% the previous month. Spain was once more among those countries to show the highest rate, while Holland had the lowest. In Germany, the economy fell 3.8% in the first quarter of this year, the worst result in more than three decades. The slowdown is expected to moderate in the second part of 2009, but uncertainty should persist for the medium term as well.

In July, the people out of work in Germany increased 30,000 to 3.46 million on an adjusted basis, while the unemployment rate remained unchanged at 8.30%. Nevertheless, the economic sentiment for the Euro zone rose for the fourth consecutive month to 76 from 73.2 in June, despite remaining below the historical average. In August, the German consumer confidence increased to 3.5 points from 3.0 points in July, as the buying propensity index rose to 25.1 from 14.7. The economic outlook remained at the contrary in the negative territory at -14 from -22.6. Nonetheless, the European Central Bank (ECB) is expected to keep rates steady, although inflation is at the lowest level. In July, the Consumer Price Index declined 0.6% year-on-year in the Euro zone.

Can$ meets key support

EUR/USD: The Euro is still trapped between 1.44 and 1.38. The resistance is at the conjunction of various long term lines and must be overcome with decision for higher prices. A move 1.4450 would target 1.46, eventually 1.52 A breakout failure would take the price back to 1.38.

GBP/USD: The market is still consolidating. A move above 1.6995 would take the price to 1.7390, 1.74. A breakout failure would instead target 1.64, 1.61.

USD/JPY: The dollar is meeting a strong resistance at these levels. They correspond to the 50 days MA and the two months trend line. A move above 96.40 is necessary for 96.80/97.10. A breakout failure could take the price back again to 93.00.

USD/CAD: The Canadian $ reached both the lower Bollinger band and the support of the past two years. A move below 1.0660 is necessary for 1.06/1.0350 A breakout failure would take the price back to 1.10, 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.

USD: Breakout or Failure?

USD: Breakout or Failure?

by Angelo Airaghi [Guest Analyst]

7/27/2009

The U.S. dollar is at key support lines against major currencies and the short/medium/long term trend remains bearish. However, a breakout failure from current levels could signal a short (medium term) rebound for the green back.

U.S: Recession is over or not?

During his testimony in front of the house panel name="ProgId" last week, president Bernanke confirmed a tentative stabilization for the U.S. economy at these levels, although rates should remain low for the next months as well. In reality, the huge consumer and business debit will require years to be repaid. Private sector spending has fallen to record lows and savings have increased. The average duration of the unemployment rate in the United States is at a record high, while tax incomes have declined sharply for the government agencies. The decrease of spending by the private sector has been only marginally substituted by the farious government interventions and the trend should continue in the years to come. Unemployment remains the weakest spot, as jobless claims rose to 554,000 in the week of July 18th from 524,000 the previous week. The housing market is at the contrary designing an interesting bottom, albeit prices are still declining. For the third consecutive month, home sales rose 3.6% in June (+1.3% expected) to 4.84 million. The increase was broad-based with condos rising 14% and single-family homes moving up 2.4%. Unsold home inventories declined instead to 9.4 months from the all-time high of 11.3 months registered in March of 2008. In effect, the worst might be over for the real estate market, if history repeats itself. Since1963 important bottoms occurred every 8/9 years: 1967, 1975, 1983, 1991, 2000, 2008/9 (?).

Europe: Investors still skeptics

The European economy remains weak overall with some sings of improvements. However, the European Central Bank (ECB) is keeping rates steady, despite inflation staying near the lows. In June, the German PPI fell 4.6% year-on-year after having slid 3.6% in May and 2.7% in April. It has been the third straight month of decline and the sharpest down move since 1968. Numbers are improving, albeit the Euro zone is not out of trouble yet. The composite Purchasing Manager’ Index (PMI) for the service sector rose to 44.6 in June from 44.00 in May. In Germany, the PMI printed 45.2 from 44.3. In France, it declined to 47.2 from 48.3. In Italy, if moved to 42.3 from 43.1. The IFO business climate index for Germany rose to 87.3 from 85.9. Current conditions improved to 84.3 from 82.4, while expectations rose to 90.4 from 89.5. Nevertheless, foreign investors are apparently moving away from the Euro zone bond and stock market to target those economies that are running ahead of schedule in the calendar of the economic recovery. In particular, the holding of Italian bonds has been declining steadily since last Autumn, as the Italian public sector deficit is at record high and is expected to hit 5.0% of the GDP by year end. Italy is the second largest European debt market and the economic growth is forecasted to remain only flat in 2010.

US DOLLAR: on focus

EUR/USD: The market is still trapped between 1.44 and 1.38. The resistance is at the conjunction of various long term lines and must be overcome with decision for higher prices. A move 1.4470 would target 1.46. A breakout failure would take the price back again to 1.40, 1.38.

GBP/USD: A move above 1.6660 would target 1.6750. A breakout failure would take the price back to 1.6210, 1.6020.

USD/JPY: The dollar is meeting a strong resistance at these levels that corresponds to the 50 days MA. A move above 96.40 is necessary for 96.80/97.10. A breakout failure could take the price back again to 93.00.

USD/CAD: The Canadian $ reached the lower Bollinger band. A move below 1.0730 is necessary for 1.06. A breakout failure would take the price back to 1.10, 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.

EURO: Setting The Long Term Trend?

EURO: Setting The Long Term Trend?

by Angelo Airaghi [Guest Analyst]

9/15/2009

As the European economy is moving out of recession, the Euro currency is at key levels against the U.S. dollar. A movement above the next resistance could set the trend for the next weeks/months.

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U.S.: consumer spending to increase?

More time is needed to see some tangible results, but the economy is on the move again in the United States. Last week, the Beige Book confirmed that the economic activity is stabilizing, as the job market and the manufacturing sectors are registering some minor upticks. In reality, the average duration of unemployment is at historical highs and jobless rate for young people is almost 26%. Public offices are laying-off employees, since some states are registering declines in tax revenues. Initial jobless claims fell to 550,000 in the week of September 5th, versus the expected down move of 570,000. Nevertheless, they remain near the high of the year. Housing, at the contrary, appears to be finally out the woods. Inventories are declining, while building permits are increasing.

As a result, prices should start to climb again over the medium term, as well as new investments, since consumer spending is expected to improve. In July, the U.S. trade balance widened to USD -32 billion from USD 27.5 billion, supported by the strong move of imports, which rose 4.7%, while exports increased 2.2%. All major categories reported some gains, except food and beverages, probably anticipating consumer spending to return positive in the near future. In effect, retail sales were well supported in August. Nonetheless, gains might have been inspired by the cash-for-clunkers program. Automakers are meeting strong requests and the industrial production can rise shortly.

Europe: domestic demand improving

Good domestic and foreign demands are helping the German economy out of recession. In July, exports rose 2.3% month-on-month after having increased 6.10% in June, while imports remained flat compared to the rise of almost 6.0% registered the previous month. The trade surplus is now at Euro 13.9 billion from Euro 12.1 billion. Both manufacturing and services are beginning the trend again. For the fifth straight month, German factory orders rose 3.5% (2.50% expected) in July from June’s 3.8%. Nevertheless, orders are still 19.8% below the level of one year ago, but domestic demand increased 10.3% in July. In its most recent monthly bulletin, the European Central Bank (ECB) confirmed that growth should stabilize in the third quarter, although it could be uneven among the European states. The ECB is expected to keep rates steady for the near future, as inflation remains near the lows and the economic growth is just beginning the resume its uptrend. In fact, industrial production remains weak, albeit improving. In July, it fell 0.3% month-on-month and is down almost 16.0% on an annual basis.

EUR/USD: Resistance holding for now.

EUR/USD: The euro is still testing key levels against the U.S. dollar. A move above 1.4715 would target 1.48, 1.50. A breakout failure would take the price back to 1.45, 1.44.

GBP/USD: The market rebounded from the lower Bollinger bands and is finding resistance at 1.67. It corresponds to the higher Bollinger bands. A move above 1.6840 would target 1.69/1.70. A breakout failure would take the price again to 1.65, 1.64.

USD/JPY: The market is meeting a good support at current levels. Nevertheless, a move below 89.70 would target 89.00. A swing above 92.10 would target 93.00.

USD/CAD: The market has found a strong resistance at 1.11. It could correct to 1.0830, eventually 1.0630, if it moves below 1.0695. A breakout failure would take the price to 1.0940.

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.

Swiss Franc Rallies As SNB Retains Key Rate

Swiss Franc Rallies As SNB Retains Key Rate, Revises 2009 Growth Outlook

The Swiss currency traded higher against its major opponents on Thursday morning in New York after the Swiss central bank retained its key interest rate and revised its growth outlook for 2009 after economic conditions improved in the third quarter. The franc thus stayed near a 14-month high against the US dollar, 3-week high against the Japanese yen and moved closer to yesterday's fresh 4-month high against the pound.

The Swiss National Bank left its three-month libor target range unchanged at 0-0.75%, as expected. In effect, the bank kept its key interest rate unchanged at 0.25% for the second rate setting session.

The central bank said it will continue providing a generous supply of liquidity and, if necessary, to purchase Swiss franc bonds with a view to reducing risk premia on long-term debt instruments issued by private sector borrowers.

In addition, it will continue to act decisively to prevent any appreciation of the Swiss franc against the euro.

Citing the signs of improvements in the global economy, the SNB revised its GDP growth forecast for the current year. It now expects Switzerland's real GDP to fall by between 1.5% and 2%. That compares with a June prediction of a GDP fall between 2.5% and 3%.

The SNB also revised its inflation outlook for 2010 and 2011. According to the latest forecast, average annual inflation for 2009 would be negative, at 0.5%. Prices are expected to rise 0.6% in 2010 and 0.9% in 2011.

Rebounding from its recently hit 2-day low, the Swiss franc advanced near a 0.7 percent against UK's sterling to touch 1.6992 by 10:25 am ET. The franc thus headed closer to yesterday's 4-month high of 1.6987 against the pound. The pound-franc pair is currently quoted at 1.702, compared to 1.7028 hit late New York Wednesday.

UK's retail sales remained flat in August, the Office for National Statistics said today. On a yearly basis, retail sales volume climbed 2.1%. Economists were looking for a monthly 0.1% rise and annual 2.7% increase.

Inflation expectations in the UK were steady in August, results of the Bank of England/GfK NOP inflation attitudes survey revealed today. In its quarterly survey, the BoE said median expectations of the rate of inflation over the coming year were 2.4%, the same response as in May.

The Swiss franc also advanced to 1.5167 against the European currency by 10:45 am ET, up by more than 0.4 percent from a 20-day low of 1.5235 hit around 8:00 am. On the upside, resistance is seen around the 1.513 level.

First Estimates released by Eurostat, the statistical agency of the European Commission, revealed that the euro area's trade balance showed a surplus of 12.6 billion euros on a seasonally adjusted basis in July compared to a deficit of 3.5 billion euros in the year-ago period. Economists had expected the surplus to come in at a much more modest 1.1 billion euros.

Another report released by Eurostat showed today that construction output declined by a bigger than expected 2% in July compared with the previous month. Economists had estimated a more modest 1.1% drop for the month. In June the output was down 0.3%.

The Swiss franc climbed to a 20-day high of 88.81 against the Japanese yen before moving on holding pattern around 10:00 am ET. The next upside target for the franc-yen pair is seen around the 89.5 level. The pair was worth 88.16 at Wednesday's close.

Today, the Bank of Japan decided to leave the key interest rate unchanged as expected to support recovery and raised its economic assessment. In its Monetary Policy Meeting, the Policy Board of the BoJ decided by a unanimous vote to maintain the uncollateralized overnight call rate at 0.1%. The last change in the rate was a 0.1% cut in interest rates at the December 2008 meeting.

The Swiss franc rose to 1.0278 against the US dollar by 10:50 am ET, the highest level since July 22, 2008. The domestic unit has thus advanced more than 4 percent against the buck thus far this month. The greenback-franc pair that closed yesterday's deals at 1.0322 is currently quoted at 1.0298.

In the US, the Commerce Department released a report on today showing that housing starts rose 1.5 percent to an annual rate of 598,000 in August from the revised July estimate of 589,000. Economists had expected starts to edge up to 583,000 from the 581,000 originally reported for the previous month.

The U.S. Labor Department revealed that initial jobless claims came in at 545,000 for the week ended September 12. This was down 12,000 from the previous week's revised total. Economists had expected claims to rise to about 575,000.

Later, the Philly Fed said its index of manufacturing activity rose to 14.1 in September from 4.2 in August, with a positive reading indicating growth in the sector. Economists had been expecting a more modest increase by the index to a reading of 8.0.

Canadian Dollar Trades

Canadian Dollar Trades Near 1-year High Against Greenback

The Canadian dollar surged up against its major counterparts on Thursday morning in New York as a rally in oil prices and encouraging economic reports prompted investors to buy resource linked assets. The loonie jumped to a fresh 11-month high against the US dollar and multi-day highs against the euro and yen.

Crude oil prices continued an upward move today as encouraging economic data added to hopes for strong demand. Light sweet crude oil rallied to $73.09, up 59 cents on the session. Prices hit $73.16 after earlier touching as low as $71.66.

Statistics Canada said in a report that Canada's consumer price index fell 0.8 percent in August from a year earlier. Economists had expected a 0.7 percent decline. In July, the CPI dropped to 0.9 percent, its biggest since 1953.

On a monthly basis the index was unchanged in August, after a 0.3 percent fall in July. Economists predicted 0.1 percent gain.

At the same time, the leading index of Canadian economic indicators rose at its fastest pace in more than seven years in August, according to data released today by Stats Canada. The composite leading index rose by 1.1% last month, after a 0.6% gain in July. The increase was the largest since April 2002.

The Canadian dollar advanced to a 9-day high of 86.09 against the Japanese yen by 10:00 am ET, compared to yesterday's close of 85.36. The pair is presently worth 85.9 with 87.0 seen as the next target level.

The Bank of Japan decided to leave the key interest rate unchanged as expected to support recovery and raised its economic assessment. In its Monetary Policy Meeting, the Policy Board of the BoJ decided by a unanimous vote to maintain the uncollateralized overnight call rate at 0.1%. The last change in the rate was a 0.1% cut in interest rates at the December 2008 meeting.

Against the US dollar, the Canadian currency touched 1.0594 by 10:45 am ET. This set the highest level for the loonie since October 1, 2008. On the upside, resistance is seen around the 1.054 level for the domestic unit. The greenback-loonie pair, which closed Wednesday's deals at 1.0661, is presently quoted at 1.0618.

In the U.S., the Commerce Department released a report today showing that housing starts rose 1.5 percent to an annual rate of 598,000 in August from the revised July estimate of 589,000. Economists had expected starts to edge up to 583,000 from the 581,000 originally reported for the previous month.

At the same time, the U.S. Labor Department revealed that initial jobless claims came in at 545,000 for the week ended September 12. This was down 12,000 from the previous week's revised total. Economists had expected claims to rise to about 575,000.

Later, the Philly Fed said its index of manufacturing activity rose to 14.1 in September from 4.2 in August, with a positive reading indicating growth in the sector. Economists had been expecting a more modest increase by the index to a reading of 8.0.

The Canadian dollar also advanced to an 8-day high of 1.5626 against the European currency by 10:45 am ET. This may be compared to yesterday's close of 1.5682. If the Canadian currency climbs further, resistance is seen around the 1.56 level. Currently, the euro-loonie pair is quoted at 1.565.

First Estimates released by Eurostat, the statistical agency of the European Commission, revealed that the euro area's trade balance showed a surplus of 12.6 billion euros on a seasonally adjusted basis in July compared to a deficit of 3.5 billion euros in the year-ago period. Economists had expected the surplus to come in at a much more modest 1.1 billion euros.

Another report released by Eurostat showed today that construction output declined by a bigger than expected 2% in July compared with the previous month. Economists had estimated a more modest 1.1% drop for the month. In June the output was down 0.3%.

Forex - No Break from USD Selling - EUR and Gold Surge

Forex News and Events: The USD sank to new lows on broad based selling, as participants ponder whether the Fed is really concerned about potential inflationary pressure of QE and actually moving toward an exit strategy. In addition, risk appetite remains high and risk correlated trades are gaining across the board, many making yearly highs. The EURUSD traded up to 1.4755, while the AUDUSD traded up to 0.8772. Considering the wide spread, the USD selling the reaction in USDJPY has been muted, with the pair stuck in a mild 90.0- 91.80 range. Asian region indexes are currently trading higher across the board, with Shanghai leading gainers up 1.96%. Precious metals continued to rip through resistances, with spot Silver and spot Gold peaking at $17.65 and $1024.25, respectively. At this point, pressure is mounting on the greenback from all sides and we don’t see the selling abating any time soon. The BoJ left policy rates unchanged overnight, as was universally expected. However, the tone regarding economic prospects was slightly more optimistic. But markets are not too concerned over the BoJ 's stagnate monetary policy, but more interested in the incoming DPJ remarks on intervention and the JPY. So far, we have not gotten much insight, just random comments. The general sell-off of the USD has been distorting the historically positive correlation between USDJPY and SPX. We still believe the JPY is overbought and still remains a risk trade. When the USD stabilizes, then JPY will be next to come under significant selling pressure. In Switzerland, the SNB will be meeting today. We are inline with consensus and expected no change in interest rates. However, while the CHF is trading at the SNB implicit ceiling against the EUR , the recent strength against the USD might come under question. We would not be completely surprised if the Central Bank renewed its focus on exchange rates. While domestic data has improved, including yesterday's ZEW whopper, and global recovery well underway, deflation fears still linger and there is a clear understanding that backing away from their current stance will lead to substantial CHF gains. Currently, EURCHF is trading around horizontal resistance located at 1.5193 as traders unwind long CHF positions due to event risk. The sterling was able to shrug off Governor King's statement about the likelihood of lowering the rate paid on banks' reserves for most of Asian trading. However, when UK retail sales failed to reach market expectations printing at 0.0 vs. 0.1% m/m (2.1 vs. 2.7% exp y/y) sellers jumped in, trading the GBPUSD down to the 1.6500 handle. In the US, data should continue to surprise to the upside (House Starts, Build Permits, Continuing Claims and Philly Fed) to the detriment of the USD. In Canada, the CPI will be released and markets are expecting it to remain weak. The data will be less important than the fact that traders will be watching CAD. Markets have been jittery around the CAD since BoC continues to warn against elevated CAD levels. Just yesterday, BoC Deputy Governor Murray stated that a strong CAD is a 'headwind' that threatens economic recovery. With USDCAD trading to yearly lows (breaking key horizontal support at 1.0630) we expect verbal intervention to begin in earnest now.

Today's Key Issues (time in GMT): 08:30 GBP Retail sales, % m/m (y/y) Aug 0.1 (2.6) exp 09:00 EUR Trade balance, € bn (sa) Jul 0.3 1.1 1.0 4.0 1.2 11:00 GBP CBI industrial trends, total orders, net bal Sep -50 exp, -54 prior 11:00 CAD CPI, %y/y Aug 0.1 -0.6 exp, -0.6 exp, 0.9 prior 11:00 CAD Bank of Canada core CPI, %y/y Aug 1.6 exp, 1.8 prior 12:00 CHF SNB Interest rate announcement, % Q3 0.0 - 0.75 exp/prior 12:30 EUR ECB non-policy meeting 12:30 USD Initial jobless claims, thous (4wk ma) 12-Sep 561 (565) exp 12:30 USD Housing starts, thous Aug 594 exp, 581 prior 14:00 USD Philadelphia Fed mfg index Sep 8.0 exp, 4.2 prior 16:00 USD Flow of Funds accounts Q2

The Risk Today: EurUsd Well well well. EUR USD continues to ramp higher on the "carry trade theme" and a continuation of risk appetite in the equities markets. Looking at the 4 hour chart, we can see that while the Euro is moving higher, the RSI on the pair is going in completely the other direction..... not particularly confidence inspiring for those looking to get into a long trade as RSI divergence of this magnitude usually equals upcoming weakness. Furthermore, while the world's journalists continue to bang the tables about the USD carry trade, one can easily argue that the smart money behind the theme is already in, precisely why the pair has moved 6 big figures since it touched the 10 month uptrend only 2 weeks ago. GbpUsd While on the carry trade theme, sterling has just added another feather to the bow of weakness. If risk appetite subsides, sterling should get hit. If risk appetite increases, sterling should still get hit because of the carry trade. Doesnt leave much hope for the cable bulls. Only a break above 1.6750 would put the current head and shoulders formation in jeopardy. UsdJpy The 6 week downtrend continues to dominate for the pair. With some support found at 90.20 and positive RSI divergence there is a chance that we see a pop up to the upper downtrend and resistance at 91.80 where one would expect to see short sellers coming back for more. Keep a close eye on the 4 hourly RSI to see if ti breaks its uptrend over the next 24 hours as this can give an early indication to whether we see a break of 90.20 or not. UsdChf We mentioned a few days back that sicne the descending triangle breakdown, there is a very clear trend channel on USD CHF 15 minute chart that can be traded very easily. This point remains firm with shorts expected on the upper trendline and resistance in the 1.0340 / 50 area with 1.0260 as the next support in the pair's continued march towards the text book target of 1.0050. Bear in mind that text book targets are applicable only in a perfect world so it is more likely that the pair will find major support at 1.0150.

Resistance and Support:

EURUSD	GBPUSD	USDJPY	USDCHF
1.4910	1.6745	93.30	1.0700
1.4860	1.6700	92.30	1.0550
1.4800	1.6660	91.80	1.0452
1.4737	1.6538	90.70	1.0314
1.4640	1.6445	90.10	1.0220
1.4560	1.6425	89.90	1.0175
1.4520	1.6365	89.20	1.0135
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

Forex - Prospect Of Carry And Protectionism Put Dollar Under Pressure

Forex News and Events: An interesting but little-used adjective is ‘kafkaesque’, a word meaning “marked by a senseless, disorienting, often menacing complexity”, and one that seems appropriate to describe the confusion that has pervaded FX themes in recent weeks. Established relationships have diverged and interpretation of the interaction between the most liquid currencies, equity markets and economic data have digressed; defying our most determined efforts to apply logic to the scenarios. This week however, it seems the market has returned to some semblance of rational sense, and USD weakness is the new buzz. Protectionist face-offs with China have added some spice to the usual headlines, and despite Obama’s defiance, you can be sure that China is one country loathed to lose face. That combined with record-low libor levels in the US really make selling the USD a no-brainer for most traders. EURUSD squeezed to a high of 1.4653 in the NY session, followed later by AUDUSD to a high of 0.8640, and even the lowly GBP has managed to surge higher against the USD; despite an apparent absence of decent reasons why anyone would want to buy that particular currency. Perhaps some may come from Mervyn King later today as he gives evidence to the Treasury Committee; however given his outspoken support for even more QE going forward, he may spoil the party for the GBP. In the commodity space, gold has broken back above $1000/oz, echoing the inverse relationship of the USD and oil that played out so saliently last year. In addition, the RBA minutes gave the strongest indication yet they’ll be the first central bank to tighten policy out of this recession, possibly before the end of this year. For the first time in a while, the story seems clear; carry trades are back in fashion, but with the USD now featuring as the funding currency of choice.

Today's Key Issues (time in GMT): 07:15 CHF Industrial Production, % q/q (y/y) Q2 8.2 (-10.6) exp 08:30 GBP CPI, % m/m (y/y) Aug 0.3 (-1.4) exp 08:30 GBP RPI, % m/m (y/y) Aug 0.2 (-1.5) exp 08:30 GBP RPIX, % m/m (y/y) Aug 0.2 (1.2) exp 08:45 GBP BoE Governor Mervyn King and other MPC members give evidence on the August Inflation Report at the Treasury Committee 09:00 EUR Hourly labour costs, y/y Q2 3.4 4.0 3.7 3.0 - 09:00 EUR Germany: ZEW economic expectations index Sep 61.0 exp, 56.1 prior 12:30 USD Retail sales, % m/m (y/y) Aug 1.7 (-6.5) exp, -0.1 (-8.3) prior 12:30 USD Retail sales ex autos, % m/m (y/y) Aug 0.4 (-7.1) exp, -0.6 (-8.5) prior 12:30 USD Producer price index, % m/m (y/y) Aug 0.8 (-5.3) exp, -0.9 (-6.8) prior 12:30 USD Core producer price index, % m/m (y/y) Aug 0.1 (2.2) exp, -0.1 (2.6) prior 12:30 USD Empire State mfg. index Sep 15.00 exp, 12.08 prior 14:00 USD Business inventories, % m/m (y/y) Jul -0.8 (-11.1) exp, -1.2 (-9.9) prior 14:00 USD Fed Chairman Bernanke speaks on the financial crisis 15:00 EUR ECB Executive Board member Stark speaks on "Monetary and fiscal policy: criteria and timing for the phasing out of crisis measures"

The Risk Today: EurUsd Not expecting any notable long interest until we test the breakout level at 1.4445 or the uptrend at 1.4360. Moreover the pair is under pressure from the Wave 1 resistance between 1.4684 and 1.4876. GbpUsd GBPUSD failed to advance above 1.6745 and currency facing significant headwinds in overbought conditions. Sterling came under significant selling pressure as BoE Governors words spooked the market. The Cable sold off from 1.6630 to 1.6500. Support now stands at 1.6425 breakout level. UsdJpy USD/JPY is unwinding an oversold condition. The lethal combination of verbal intervention and the psychological 90.0 lvl has sent seller packing. Focus is now on 92.60 (61.8% retracement) yet below 93.30 remains bearish. Strong support now stands at 90.20. UsdChf The pair has been trading higher since the open off 1.0340 support. Mid term the trend is bearish but intraday we are seeing oversold conditions however with no sign of divergence implies a range bound trading. Expect a period of consolidation before the SNBs meeting then focus will be on 1.0210.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.4725 1.6900 92.47 1.0700 1.4684 1.6840 92.30 1.0550 1.4635 1.6750 91.80 1.0452 1.4606 1.6621 91.03 1.0373 1.4510 1.6480 90.10 1.0340 1.4445 1.6445 89.90 1.0264 1.4381 1.6365 89.20 1.0265 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot