Weak US Housing Data stalls Dollar Advance

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) lost ground against all currencies as weakness in the US housing sector dampened speculation of Fed Rate Hikes anytime this year. US financials were under pressure again and a spike higher in Oil hurt the general stock market. US PPI for July at 1.2% was considerable higher than the 0.6% forecast but was dismissed as backwards looking and not containing the recent Oil correction. US housing data was harder to ignore as July Building Permits dropped to .94M from 1.14M in June a drop of 16.7%. Housing Starts also slumped to a 16 year low at 965K in July vs. 1066K in June. In the U.S. share markets, the NASDAQ was down 32 points (-1.35%) and the Dow Jones was down 130 points (-1.14%). Crude Oil closed up $1.66 ending the New York session at $114.53 per barrel. Looking ahead, Crude Inventories are seen rising 0.7M.

European Euro

The Euro (EUR) bounced off lows grinding higher as economic data surprised to the upside. German PPI was white hot at 2.0% m/m in July vs. forecasts of 0.7%. The German ZEW Index rebounded to -55.5 from -63.9 but this was tempered by the ZEW current conditions falling to -9.2. Overall the EUR/USD traded with a low of 1.4630 and a high of 1.4794 before closing the day at 1.4780 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) a resurgence in risk aversion aided the yen to gain against the USD. Large gains in their respective majors for GBP and EUR meant the crosses were relatively unchanged after bouncing off lows of the Asian and European session. The Bank of Japan held rates at 0.5% and downgraded the economic outlook. Overall the USDJPY traded with a low of 109.55 and a high of 110.33 before closing the day around 110.70 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) came under pressure early in the European session as the market digest comments from hawkish BoE Member Beazley that inflation should moderate over time suggesting he did not vote for a rate hike at the last meeting. Cable followed the Euro higher as the Dollar weakened throughout the US session. Overall the GDP/USD traded with a low of 1.8538 and a high of 1.8680 before closing the day at 1.8670 in the New York session. Looking Ahead, MPC Minutes from the August rate meeting and August CBI Orders is forecast at -12 from -8 in July.

Australian Dollar (AUD)

The Australian Dollar (AUD) bounced in line with a rebound in the commodity complex. Earlier in the day the market digested and shrugged of some dovish minutes from the August RBA meeting suggesting an early rate cut was a possibility. Overall the AUD/USD traded with a low of 0.8625 and a high of 0.8734 before closing the US session at 0.8714.

Gold

Gold (XAU) broke above $800 convincingly as the Feds inability to fight inflation saw Gold glitter again as a suitable inflation hedge. Overall trading with a low of USD$783 and high of USD$815 before ending the New York session at USD$814 an ounce.

Technical Analysis: Weak US Housing Data

Euro (EUR)

Euro – 1.4790 : Initial support at 1.4631 (Aug 19 low) followed by 1.4611 (Feb 18 low). Initial resistance is now located 1.4808 (Aug 15 low) at followed by 1.4981 (Aug 13 high).

Yen (JPY)

Yen – 109.75 : Initial support is located at 109.55 (Aug 19 low) followed by 109.04 (Aug 14 low). Initial resistance is now at 110.67 (Aug 15 high) followed by 112.15 (Jan 2 high).

Pound Sterling (GBP)

Pound – 1.8675 : Initial support at 1.8513 (Aug 15 low) followed by 1.8385 (Jul 25, 2006). Initial resistance is now at 1.8679 (Aug 19 high) followed by 1.8722 (Aug 18 high).

Australian Dollar (AUD)

Australian Dollar – 0.8730 : Initial support at 0.8626 (Aug 19 low) followed by 0.8593 (Aug 13 low). Initial resistance is now at 0.8757 (Aug 18 High) followed by 0.8797 (Aug 12 high).

Gold (XAU)

Gold – 815 : Initial support at 773.5 (Aug 15 low) followed by 773 (Nov 20 reaction low). Initial resistance is now at 816.8 (Aug 19 high) followed by 836.8 (Aug 14 high).