Dollar flayed as US mortgage lenders come under pressure

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) was sold across the board on Friday as speculation of trouble in the US banking sector reached fever pitch. Freddie Mac and Fannie Mae the two largest mortgage lenders in the US were at one stage down 50% before recovering on comments from the Federal Reserve that the two GSE’s would be able to use the FED discount loan facility. On the Economic news front the May US trade balance
was better than expected at -59.8 Billion vs. forecasts of -62.5B. The Preliminary University of Michigan Consumer Sentiment was slightly improved from 55.5 in June to 56.6 in July. Oil soared to above $147 per barrel as the weak dollar and continued geopolitical concerns boosted. In the U.S. share markets, the NASDAQ was down 18 points (0.83%) and the Dow Jones was down 128 points (1.14%). Crude Oil closed up $3.43 ending the New York session at $145.08 per barrel.

European Euro

The Euro (EUR) made solid gains against the dollar as banking concerns weighed breaking above 1.5900 as Oil and Gold surged higher. With the Euro close to all time highs of 1.6019 there was once again talk in the markets of intervention to stem the Euros rise. Overall the EUR/USD traded with a low of 1.5765 and a high of 1.5949 before closing the day at 1.5925 in the New York session. Looking ahead, May Industrial production
for the Eurozone is expected to fall -2.3% down from +0.9% in April.

Japanese Yen (JPY)

The Japanese Yen (JPY) was able to make some solid gains against the Dollar as the Dow Jones traded briefly below 11000. Equities were able to recover from there lows and this allowed the USD/JPY to recover lead by strong gains in the EUR/JPY cross. Overall the USDJPY traded with a low of 105.66 and a high of 107.30 before closing the day around 106.46 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) made solid gains against the USD but weakened against the EUR breaking through the key 0.8000. The market continues to debate whether the next movement from the BoE will be a rate hike to counter inflation or a rate cut to combat economic weakness. Overall the GBP/USD traded with a low of 1.9755 and a high of 1.9958 before closing the day at 1.9870 in the New York session. Looking ahead, June PPI Output Prices is expected to rise 1.2% (1.6% May) and Input Prices 2.5% (3.8% May).

Australian Dollar (AUD)

The Australian Dollar (AUD) broke through record highs of 0.9667 before surging through 0.9700 to hit a new all time record of 0.9717. The weak USD and surge in Gold both supported. Overall the AUD/USD traded with a low of 0.9592 and a high of 0.9717 before closing the day at 0.9663.

Gold

Gold (XAU) broke through topside resistances surging to multi-month highs. New records in Crude Oil and safe haven flows supported the rally. Overall trading with a low of USD$942 and high of USD$967.60 ending the New York session at USD$964 an ounce.

Technical Analysis: Dollar Flayed

Euro (EUR)

Euro – 1.5895 : Initial support at 1.5765 (July 11 low) followed by 1.5692 (July 10 low). Initial resistance is now located 1.5948 (July 11 high) at followed by 1.6019 (Apr 22 high).

Yen (JPY)

Yen – 106.65 : Initial support is located at 105.66 (July 11 low) followed by 104.99 (Jun 30 low). Initial resistance is now at 107.3 (July 11 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 1.9840 : Initial support at 1.9754 (July 11 low) followed by 1.9673 (July 9 low). Initial resistance is now at 1.99959 (July 11 high) followed by 2.0008 (July 1 high)

Australian Dollar (AUD)

Australian Dollar – 0.9670 : Initial support at 0.9597 (July 11 low) followed by 0.9546 (July 10 low). Initial resistance is now at 0.9718 (July 11 high) followed by 0.9792 (July open + June range* 0.618).

Gold (XAU)

Gold – 964 : Initial support at 942 (Jul 11 low) followed by 926 (Jul 10 low). Initial resistance is now at 967.95 (July 11 high) followed by 988.49 (76.4% retracement of the 1032.50-846.00 decline).

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) staged a minor recovery during the Asian and European sessions as the markets digested the latest plan from the Treasury to stabilize the Government Sponsored Entities (GSE) Freddie Mac and Fannie May. Gains were reversed in the US session as equities turned south on doubts about the viability of the government GSE backstop. In the U.S. share markets, the NASDAQ was down 26 points (0.90%) and the Dow Jones was down 45 points (0.41%). Crude Oil closed up $0.20 ending the New York session at $145.18 per barrel. Looking ahead, June PPI is expected to rise 1.3% slightly slower than 1.4% in May while the Core PPI is seen at 0.3%. Markets will be paying attention to Fed Chief Bernanke as he gives his semiannual monetary policy testimony.

European Euro

The Euro (EUR) was able to pare losses sustained from the GSE’s rescue plan as the market focused on regional banks when the FIDC commented that more banks are expected to fail in the US. May Industrial Production came in weak at -1.9% confirming the slowdown in the Eurozone. Overall the EUR/USD traded with a low of 1.5842 and a high of 1.5971 before closing the day at 1.5908 in the New York session. Looking ahead, the July German Zew survey is seen at -55 from -52.4 in June.

Japanese Yen (JPY)

The Japanese Yen (JPY) was sold as stocks recovered and risk taking came back into the market but as equities turned south in the US session the USD/JPY gave up all of its gains. EUR/JPY came off new year highs of 169.67 early in the Asian session as the EUR/USD came off highs. Overall the USDJPY traded with a low of 106.06 and a high of 106.81 before closing the day around 106.16 in the New York session. Looking ahead, Bank of Japan interest rate announcement and the BOJ monthly report released during the Asian session.

Pound Sterling (GBP)

The Sterling (GBP) took advantage of USD weakness during the US session regaining the 1.9900 level. June PPI input was slightly lower than expected at 2.1% contributing to a more dovish stance the BoE is expected to take on interest rates into the future. The BoE”s Kate Barker was reported as saying that the central bank is concerned about keeping rates too tight allowing the economy to weaken more than is necessary. Overall the GBP/USD traded with a low of 1.9816 and a high of 1.9962 before closing the day at 1.9941 in the New York session. Looking ahead, June CPI seen at 0.4% down slightly form 0.6% in May but year on year is expected to jump to 3.6% from 3.3%.

Australian Dollar (AUD)

The Australian Dollar (AUD) was able to sustain the new levels above .9700 as gold continued to make solid gains. AUD/NZD reached new record highs trading above 1.2750. In NZD data we had the 2nd Quarter CPI coming in at 4.0% year on year and May Core Retail Sales rising 0.7%. Overall the AUD/USD traded with a low of 0.9665 and a high of 0.9735 before closing the day at 0.9721. Looking ahead, the RBA meeting minutes will be scrutinized for future rate movement.

Gold

Gold (XAU) had another good day as investors flocked to the precious metal seen as a safe haven and inflation hedge. Overall trading with a low of USD$954.40 and high of USD$974.65 ending the New York session at USD$972 an ounce.

Technical Analysis: Gold Shines

Euro (EUR)

Euro – 1.5890 : Initial support at 1.5765 (July 11 low) followed by 1.5692 (July 10 low). Initial resistance is now located 1.5972 (July 11 high) at followed by 1.6019 (Apr 22 high).

Yen (JPY)

Yen – 106.20 : Initial support is located at 105.66 (July 11 low) followed by 104.99 (Jun 30 low). Initial resistance is now at 107.30 (July 11 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 1.9955 : Initial support at 1.9754 (July 11 low) followed by 1.9673 (July 9 low). Initial resistance is now at 1.9959 (July 14 high) followed by 2.0008 (July 1 high)

Australian Dollar (AUD)

Australian Dollar – 0.9720 : Initial support at 0.9597 (July 11 low) followed by 0.9546 (July 10 low). Initial resistance is now at 0.9737 (July 14 high) followed by 0.9792 (July open + June range* 0.618).

Gold (XAU)

Gold – 972 : Initial support at 942 (Jul 11 low) followed by 926 (Jul 10 low). Initial resistance is now at 975.3 (July 14 high) followed by 988.49 (76.4% retracement of the 1032.50-846.00 decline).