Pound crashes on BOE Inflation report

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) had a busy trading day with multiple themes present. During the Asian session stock weakness provoked an unwinding of the JPY carry trades with the AUD/JPY and NZD/JPY taking the brunt of the pressure. In the European session heavy Cable sales supported the Dollar but stock weakness capped gains. Crude Oil shot higher in New York as US oil inventories fell more than expected at -0.4M barrels. US Retail Sales in July were weak but as expected at -0.1% and 0.4% (0.5%) Core. A warning from Merrill Lynch weighed on the stock market. In the U.S. share markets, the NASDAQ was down 2 points (-0.08%) and the Dow Jones was down 109 points (-0.94%). Crude Oil closed up $2.99 ending the New York session at $116.00 per barrel. Looking ahead, July CPI is seen up 0.4% or 5.1% y/y and the weekly Jobless claims are seen at 432K.

European Euro

The Euro (EUR) spent most of the day pivoting the 1.4900 level with little impetus to break either way as large offers above 1.5000 and option protection at the 1.4800 levels limited action. Industrial production
weakened to 0.0% in June vs. expectations of 0.3%. Overall the EUR/USD traded with a low of 1.4840 and a high of 1.4980 before closing the day at 1.4930 in the New York session. Looking ahead, July CPI is seen at -0.1% and 4.1% Y/Y. German Q2 is seen at -0.8 after a strong 1.5% in Q1.

Japanese Yen (JPY)

The Japanese Yen (JPY) heavy unwinding of the carry trades early in Asia yesterday preceded a gradual rally that lasted into US close for almost all crosses except GBY/JPY. AUD/JPY fell over two big figures along with the NZD/JPY at the height of the panic selling. The June Japanese Tertiary Industry Activity Index fell -0.8% vs. expectations for a -0.3%. Overall the USDJPY traded with a low of 108.35 and a high of 109.74 before closing the day around 109.30 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) dropped 3 big figures after the BoE Inflation Report predicted that CPI in the UK will fall back to 2.0% in two years time and that growth projection for the H1 in 2009 has been dropped to 0.0%. July CPI jumped 0.6% to 4.4% y/y. The Claimant Count Change jumped to 20.1K above forecast of 17.K. Overall the GDP/USD traded with a low of 1.8639 and a high of 1.9037 before closing the day at 1.8700 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) came under server pressure as heavy AUD/JPY sales pushed the Aussie through 86 cents. A recovery in Gold and Oil allowed some relief to the commodity currency during the European and American session. Overall the AUD/USD traded with a low of 0.8590 and a high of 0.8772 before closing the US session at 0.8730.

Gold

Gold (XAU) Jumped as Oil surged on the US inventory data and financial concerns flared up. Overall trading with a low of USD$805.90 and high of USD$830 ending the New York session at USD$826 an ounce.

Technical Analysis: Pound Crashes

Euro (EUR)

Euro - 1.4890 : Initial support at 1.4842 (Aug 13 low) followed by 1.4715 (Aug 12 low). Initial resistance is now located 1.4981 (Aug 13 high) at followed by 1.5084 (Aug 11 high).

Yen (JPY)

Yen - 109.40 : Initial support is located at 108.22 (Aug 6 low) followed by 107.29 (Aug 7). Initial resistance is now at 109.39 (Aug 13 high) followed by 110.40 (Aug 11 high).

Pound Sterling (GBP)

Pound - 1.8670 : Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

Australian Dollar (AUD)

Australian Dollar - 0.9695 : Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8743 (Aug 13 low) followed by 0.8846 (Aug 12 high).

Gold (XAU)

Gold - 830 : Initial support at 803 (AUG 12 low) followed by 789.9 (61.8% retrace 640.00 to 1032.5). Initial resistance is now at 846 (May 2 support) followed by 865 (Aug 11 high).

Greenback surging on Global slowdown

Last week’s Currency Trading Review

The Dollar staged one of its biggest rallies of the year as the global economy look set for a significant slowdown and the decoupling theory was thrown out the window. High yielders such as AUD and NZD were hurt the most as falling commodities provided a second incentive to sell. US data continued to impress with only the Weekly jobless claims surprising with a jump to 455K. The big market event was the FOMC rate decision on Tuesday where the Fed held at 2.00% and accompanied with a neutral statement highlighting Inflation concerns and downgrades to growth. June Core PCE jumped to 0.3% vs. expectations of 0.2% and Personal spending at 0.6% also impressed. June factory orders greatly exceeded forecasts of 0.7% coming in at 1.7%. The Euro fell heavily this week as the 1.5300 level gave way leading to a mass exodus of long positions. Eurozone PPI jumped to 8.0% in June but many see this as the cycle high and are anticipating the fall in Oil to relieve pressure in the coming months. Eurozone Retail Sales fell 0.6% but the big market mover was the ECB Presidents post Rate meeting comments on slowing Eurozone growth. The Euro closed down 3.6% at 1.5005 having opened at 1.5562. The Japanese was also sold heavily against the USD but managed to eek out gains against most other currencies. The Japanese government warned the Economy may be heading for a Recession and this prompted a trimming of carry trades. The USD/JPY gained 2.2% closing at 110.19, after opening the week at 107.68. The GBP was under sustained pressure as the USD strengthened hitting year lows on a break of 1.9400. UK Industrial production fell -1.6% Y/Y and the Halifax House Price Index showed a decline of -1.7% m/m. The Bank of England held rates at 5.25%. The GBP/USD lost 2.8% closing at 1.9209 after opening at 1.9750. The AUD weakened the most of the G10 currencies for the second week running as commodities weakened considerably. The RBA held rates at 7.25% on Tuesday but in the accompanying statement opened the window for cuts next month. Unemployment data surprised to the upside but could do little to alter the bearish sentiment that had engulfed this pair. The AUD/USD closed down -4.4% at 0.8887 after opening at 0.9290.

For the week starting 11/08/08.

This Forex Trading Week Preview

Technical Analysis: Forex Weekly Preview

In the States; June Trade Balance kicks off Tuesday expected at -61.8B. Tuesday we have the keenly awaited July Retail Sales are expected at -0.1% as government stimulus checks wear off. On Thursday Core CPI is expected at 0.2% and the Weekly Jobless claims are seen at 432K. Finally on Friday we have the Empire State Manufacturing Index forecast at -4.3. TIC net long term Transactions are seen at 55B out on Friday and the Preliminary UoM Consumer Sentiment seen at 62.0. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; Industrial Production on Wednesday is seen at 0.3% for June. On Thursday German Preliminary GDP is seen at -0.8% along with French Nonfarm Payrolls forecast to fall-0.1% and the ECB bulletin. Also on Thursday we have CPI for July seen at -0.1%m/m and 4.1%y/y along with a Preliminary Q2 GDP for the Eurozone forecast at 0.2% In the UK; July PPI is seen at 1.0% on Monday along with the June Trade Balance forecast at -7.4B. On Tuesday July CPI is seen at 4.4% and the DCLG House Price Index is seen at 1.5% Y/Y. On Wednesday we have the Claimant Count forecast at 17.5K along with the Average Earning Index forecast at 3.6% Y/Y. Wednesday also sees the release of the BoE Inflation Report. Europe has a Holiday on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Wednesday Preliminary Q2 GDP is keenly awaited as it is expected to be negative -0.6% the first leg of a possible recession. On Thursday we have the Tertiary Activity Index forecast at -0.3%. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; light data week with the RBA Monetary Policy Statement on Monday expected to confirm a more dovish stance and the WPI index out on Wednesday expected at 1.0%. We will provide our previews and reviews of these data releases in the daily summary.

Euro (EUR)

Euro – 1.4890 : Initial support at 1.4842 (Aug 13 low) followed by 1.4715 (Aug 12 low). Initial resistance is now located 1.4981 (Aug 13 high) at followed by 1.5084 (Aug 11 high).

Yen (JPY)

Yen – 109.40 : Initial support is located at 108.22 (Aug 6 low) followed by 107.29 (Aug 7). Initial resistance is now at 109.39 (Aug 13 high) followed by 110.40 (Aug 11 high).

Pound Sterling (GBP)

Pound – 1.8670 : Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

Australian Dollar (AUD)

Australian Dollar – 0.9695 : Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8743 (Aug 13 low) followed by 0.8846 (Aug 12 high).

Gold (XAU)

Gold – 830 : Initial support at 803 (AUG 12 low) followed by 789.9 (61.8% retrace 640.00 to 1032.5). Initial resistance is now at 846 (May 2 support) followed by 865 (Aug 11 high).

US Inflation surges to fastest pace in 17 years

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) continued to gain as US CPI surged to 17 Year Highs. July m/m Jumped 0.8% and an 5.6% annual rate. July Core CPI was more moderate at 0.3% slightly higher than the 0.2% expected but adding to arguments for interest rate hikes to control inflation. Weekly Jobless claims remained high at 450K, slightly greater than the 440K forecasted. The Dollar also found strength through another significant fall in commodities and gains in the US share market. In the U.S. share markets, the NASDAQ was up 25 points (1%) and the Dow Jones was up 82 points (0.72%). Crude Oil closed down $0.99 ending the New York session at $115.01 per barrel. Looking ahead, June TIC Net Long-Term Transactions are forecast at $65 Billion. July Capacity Utilization is seen at 79.8% along with Industrial Output at 0.0%. Also released is the Preliminary August Consumer Sentiment expected at 62 up slightly from 61.2 in July.

European Euro

The Euro (EUR) received a small boost as German Q2 GDP was not as bad as expected at -0.5% vs. -0.8% forecast. July Eurozone Inflation ticked down to 4.0% Y/Y from 4.1%Y/Y in June supporting the view that inflation had topped last month. Q2 Provisional GDP was seen at -0.2% for the Eurozone confirming the weakening growth outlook. Overall the EUR/USD traded with a low of 1.4777 and a high of 1.4936 before closing the day at 1.4780 in the New York session. Looking ahead, Public Holiday in the Eurozone.

Japanese Yen (JPY)

The Japanese Yen (JPY) lead by the USD/JPY which regained a lot of the losses seen on Wednesday’s carry trade unwind. AUD/JPY and NZD/JPY had considerable bounces during the European session and Strong US stocks also supported. A slide in commodities towards the end of the day capped further gains in the crosses. Overall the USDJPY traded with a low of 109.03 and a high of 109.99 before closing the day around 109.60 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) managed a slight recovery during the European session after the heavy falls seen yesterday but was unable to sustain the gains as the USD started to appreciate on falling Oil and increasing US rate hike speculation. Support at the 1.8620 held for the time being. Overall the GDP/USD traded with a low of 1.8619 and a high of 1.8788 before closing the day at 1.8680 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) was able to recover strongly on heavy AUD/JPY buying and a bounce in both Gold and Oil. During the US session sentiment turned again as Oil dropped nearly $4 dollars off highs and gold dropped over $20 an ounce. Comments from the RBA calling for rate cuts to be passed on from the banks was seen by some as an overt declaration of rate cuts in September. Overall the AUD/USD traded with a low of 0.8670 and a high of 0.8798 before closing the US session at 0.8700.

Gold

Gold (XAU) continued to recover during the day before another wave of selling forced Gold back towards the $800 level. Overall trading with a low of USD$805.40 and high of USD$836.50 ending the New York session at USD$810 an ounce. UPDATE GOLD BREAKS $800

Technical Analysis: US Inflation Surges

Euro (EUR)

Euro – 1.4775 : Initial support at 1.4719 (76.4% retrace 1.4311 to 1.6038) followed by 1.4700 (Round Number). Initial resistance is now located 1.4815 (Aug 12 low) at followed by 1.4981 (Aug 13 high).

Yen (JPY)

Yen – 109.90 : Initial support is located at 109.04 (Aug 14 low) followed by 108.22 (Aug 6 low). Initial resistance is now at 110.40 (Aug 11 high) followed by 112.15 (Jan 2 high).

Pound Sterling (GBP)

Pound – 1.8660 : Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

Australian Dollar (AUD)

Australian Dollar – 0.8660 : Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8797 (Aug 14 High) followed by 0.8846 (Aug 12 high).

Gold (XAU)

Gold – 794 : Initial support at 789.93 (61.8% retrace 640.00 to 1032.5) followed by 773 (Nov 20 reaction low). Initial resistance is now at 803 (Aug 12 low) followed by 836.8 (Aug 14 high).