Dollar Consolidating Gains, Pound under pressure
Last week’s Currency Trading Review
The Dollar reached new highs against most majors this week before an Oil inspired rally on Thursday induced a slight pullback. The pullback was short-lived however as Thursday’s $6 dollar rally in Oil was followed by a $6 drop on Friday. US data was mixed with housing data underperforming with July Building permits dropping to 0.94 Million from 1.14 Million in June and Housing starts also falling to 965K in July its lowest rate in 17 years. July PPI came in very strong at 1.2%m/m or 9.8%y/y. Core CPI also jumped up to 0.7%. Weekly Jobless Claims continues to be high at 345K but the Philly Fed Manufacturing Index at -12.7 in August showed a modest improvement from the -16.7 seen in July. The Euro hit new multi month lows even as Eurozone data surprised to the upside. German ZEW survey in August rebounded from -63.9 to -55.5. German PPI also surged 2.0% in July giving cause for concern about 2nd round inflation effects in Europe’s largest economy. Eurozone PMI data was mixed with weak German Numbers of 49.9 in manufacturing and 50.6 in Services. Combined Eurozone Manufacturing PMI did tick higher in Manufacturing to 47.5 from 47 in July but still remained in the contractionary state below 50. Finally on Friday we had the July the Current Account Deficit increasing to 8.2Billion. June Industrial Orders fell by less than expected at -0.3%. Once again Oil flows provided much of the catalyst to sell or buy during the week. The EUR/USD gained 0.7% closing at 1.4687 after opening at 1.4791. The Japanese Yen continued to trade in a large range as violent movements on the crosses pressured USD/JPY. Sustained weakness in equities resulted in USD/JPY trading to low 108 levels before reversals in Risk sentiment saw the pair trade above 110 at close for the third week. The Bank of Japan held rates at 0.5% with the statement ‘global inflation expectations have increased’ being tempered by slowing growth. The USD/JPY fell 0.37% closing at 110.07, after opening the week at 110.48. The GBP traded in a range bouncing off 1.8500 before rallying on Thursday to highs just below the 1.88 figure. A surprising jump in Retail Sales of 0.8% in July was offset by weaker Q2 business investment of -1.9% and a fall in CBI trend Orders to -13. Friday saw the Pound give up all of its gains on Revised GDP figures to 0.0% from 0.1% first forecast. The GBP/USD lost 0.71% closing at 1.8523 after opening at 1.8655. The AUD stabilized and was able to lift off lows as commodities rebounded lead by Oil on supply concerns and Gold on soft equities. Very quiet on the data front with RBA minutes from the August meeting revealing that members considered an early unscheduled rate cut a possibility. The Aussie ended the week on the backfoot as commodities came off highs. The AUD/USD closed flat at 0.8660 after opening at 0.8660.
For the week starting 25/08/08
This Forex Trading Week Preview
In the States; Heavy data week beginning on Monday with Existing Home Sales for July forecasted at 4.90M. On Tuesday we have the Aug Board Consumer Confidence increasing to 53 from 51.9 in July. Also on Tuesday New Home Sales are forecast to drop to 525K from 530K previous. The FOMC minutes from the Aug 5 meeting are also released. On Wednesday we have Durable Goods Orders for July are seen at 0.1% with Core at -0.5%. On Thursday we have the Weekly Jobless claims forecast lower at 427K vs. 432K previous. Preliminary GDP for Q2 is seen up at 2.8% from 1.9% in Q1. On Friday July Personal spending is forecast to increase 0.3% along with a flat Personal Income reading. Also on Friday the UoM consumer confidence is expected at 62.0. We will provide our previews and reviews of these data releases in the daily summary.
In the Eurozone; Tuesday kicks off the week with September German Consumer Confidence seen at 2.0 slightly down from 2.1 in Aug. Also released is the Final Q2 GDP is seen at -0.5%. August IFO Business climate is predicted to be weak at 97.2 vs. 97.5 in July. August IFO Business expectations are also forecasted to drop to 90.0 from 90.5 in July. On Wednesday German CPI will be tentatively released, expected to drop 0.2% in August. Thursday sees German Employment Change expected to fall -10K slightly better than the -20K in July with an Unemployment rate of 7.8%. Friday the Eurozone Aug flash estimate is expected to remain at 4.0% Y/Y along with an unchanged Unemployment rate of 7.3%. In the UK; Monday is a bank Holiday in what is a light data week. Tuesday we have the BBA Mortgage Approvals for July. On Thursday Nationwide HPI seen at -1.5% m/m and August CBI trends forecasted to improve to -30 from -36 in July. Finally on Friday GFK Consumer Confidence is expected to continue falling to -41 from -39 previously. We will provide our previews and reviews of these data releases in the daily summary.
In Japan; BOJ Governor Shirakawa speaks on Monday before we have a gap till Friday. On Friday Tokyo Core CPI is forecast at 1.7% in Aug up slightly from 1.6% in July along with Nationwide Core CPI seen at 2.3%. Industrial Production is expected to fall -0.50% in July M/M. July Retail Sales forecasted at 1.3% jumping from 0.3% in June. We will provide our previews and reviews of these data releases in the daily summary.
In Australia; light data week with Capex for Q2 being the highlight forecasted at 2.0% bouncing back from -2.5% reading in Q2. Private Sector Credit released on Friday is seen at 0.5% in July. We will provide our previews and reviews of these data releases in the daily summary.
Technical Analysis: Pound Under Pressure
Euro (EUR)
Euro – 1.4785 : Initial support at 1.4732 (Aug 21 low) followed by 1.4673 (Aug 20 low). Initial resistance is now located 1.4901 (Aug 22 low) at followed by 1.4963 (23.6% retrace 1.6038 to 1.4631).
Yen (JPY)
Yen – 109.95 : Initial support is located at 108.43 (Aug 22) followed by 108.04 (38.2% retrace 103.78 to 110.67). Initial resistance is now at 110.14 (Aug 22 high) followed by 110.67 (Aug 15 high).
Pound Sterling (GBP)
Pound – 1.8425 : Initial support at 1.8385 (July 25 2006 low) followed by 1.8177 (July 17 2006 low). Initial resistance is now at 1.8787 (Aug 14 high) followed by 1.8901 (23.6% retrace 2.0157 to 1.8513).
Australian Dollar (AUD)
Australian Dollar – 0.8680 : Initial support at 0.8651 (Aug 22 low) followed by 0.8626 (Aug 19 low). Initial resistance is now at 0.8807 (Aug 22 High) followed by 0.8846(Aug 12 high).
Gold (XAU)
Gold – 822 : Initial support at 812.3 (Aug 22 low) followed by 801 (Aug 20 low). Initial resistance is now at 838.60 (Aug 21 21) followed by 846 (Former May 2 support).
