Oil advances on Hurricane watch, Dollar down.

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) experienced a slow start to the week with Japan away for Ocean day and little economic data out. The Greenback lost some ground as Oil advanced on news of hurricane Dolly in the Gulf. Bank of America results offered the Dollar and Stocks some support but enthusiasm waned and both lost ground into the US session close. After market earning reports from American Express has put extra pressure on the USD and stock futures for Tuesday. June leading Indicators came in as expected at -0.1%. In the U.S. share markets, the NASDAQ was down 3 points (0.14%) and the Dow Jones was down 29 points (0.25%). Crude Oil closed up $2.16 ending the New York session at $131.04 per barrel. Looking ahead, Treasury Secretary Paulson speaks tonight. The July Richmond Fed Index which is also released came in at -12 in June.

European Euro

The Euro (EUR) gained against most currencies as Oil rebounded and the equity rally stalled. New all time records of 169.92 traded in the EUR/JPY just below the critical 170 level. Overall the EUR/USD traded with a low of 1.5830 and a high of 1.5909 before closing the day at 1.5900 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) was sold heavily after Bank of Americas results were positive with the USD/JPY trading briefly above the 107 level before easing as market sentiment reversed. The crosses were lead by the EURO and AUD which made new year highs. Overall the USDJPY traded with a low of 106.37 and a high of 107.15 before closing the day around 106.65 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) was able to rebound off the lows of the day as markets digested comments from ultra dove MPC member Blanchflower that the UK was already in recession and news that HBOS share offering was severely undersubscribed. Strong buying of GBP/JPY supported. Overall the GBP/USD traded with a low of 1.9908 and a high of 1.9990 before closing the day at 1.9984 in the New York session. Looking ahead, Bank of England Governor King speaks.

Australian Dollar (AUD)

The Australian Dollar (AUD) shrugged off lower than expected (1.6%) 2nd Quarter PPI of 1.0% as Gold and Oil made solid gains. Diverging economic outlooks sent the AUD/NZD to year highs above 1.2800. Overall the AUD/USD traded with a low of 0.9707 and a high of 0.9767 before closing the day at 0.9754.

Gold

Gold (XAU) gained in sympathy with Oil and soft equities. Overall trading with a low of USD$956.55 and high of USD$968.25 ending the New York session at USD$965 an ounce.

Technical Analysis: Dollar Down

Euro (EUR)

Euro – 1.5915 : Initial support at 1.5784 (July 17 low) followed by 1.5692 (July 10 low). Initial resistance is now located 1.5948 (July 16 high) at followed by 1.6038 (July 15 High).

Yen (JPY)

Yen – 106.55 : Initial support is located at 104.76 (July 17 low) followed by 103.78 (July 16 low). Initial resistance is now at 107.16 (July 21 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 2.0015 : Initial support at 1.9907 (July 18 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0097 (July 16 high) followed by 2.0157 (Jul 15 high and 76.4% retrace of 2.0398-1.9363).

Australian Dollar (AUD)

Australian Dollar – 0.9765 : Initial support at 0.9675 (July 17 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9818 (July 16 high) followed by 0.9849 (July 15 High).

Gold (XAU)

Gold – 967 : Initial support at 950.50 (Jul 18 low) followed by 942 (July 11 low). Initial resistance is now at 978.5 (July 17 high) followed by 988.0 (July 15 high).

US banks turn from Villain to Savior

Last week’s Currency Trading Review

The Dollar had an extremely volatile week as multiple trading themes took hold. Doubts about the government’s ability to backstop GSE’s such as Freddie Mac and Fannie May saw shares touch year lows and the Dollar hit all time lows against the EURO and AUD. The second half of the week was lead by falling Oil, rising stocks and positive US banking reports. This combination proved a major catalyst for reducing fear in the market and renewing risk appetite. On the Data front we had June CPI surging 1.1% m/m the strongest rate since 1982 along with year on year at 5%. PPI also jumped to 9.2% year on year confirming inflation is a major problem for the US economy. Fed chief Bernanke spoke twice before Congress and reiterated his concerns on slowing growth and increasing inflation outlooks. June Retail Sales were weak at 0.1% m/m vs. expectations of 0.5%. The Euro surged to record highs on Tuesday as banking fears gripped the market. US banks reported better than expected 2nd quarter earnings which combined with sliding Oil let the Euro ease substantially into the weeks close. Euro data continue to deteriorate with the German ZEW economic sentiment survey dropping to -63.9 in July vs. forecasts of -55. June HICP was confirmed at 4.0% y/y and German PPI surged to 0.9% m/m and 6.7% y/y. The Euro closed down 0.57% at 1.5847 having opened at 1.5937. The Japanese Yen recovered off multi month highs as equities rebounded and risk aversion subsided. The Bank of Japan left rates at 0.5% but lowered GDP estimates while increasing Inflation forecasts. AUS/JPY and EUR/JPY traded at year highs. The USD/JPY gained 0.64% closing at 106.95, after opening the week at 106.30. The GBP traded to multi month highs at the height of USD weakness above the key 2.00 level for the first time since April. UK data was mixed for the GBP with CPI and PPI both beating expectations at 3.8% and 4.8% y/y respectively but on the downside BRC retail sales were down 0.4% in June and June Claimant count jumped 15.5K, its biggest rise in 15 years. The GBP/USD gained 0.52% closing at 1.9988 after opening at 1.9884. The AUD made new post float highs again this week surging to 0.9850 but was unable to maintain these levels as stocks recovered and Gold came off highs. The RBA minutes from the July meeting were fairly neutral commenting that demand is slowing and that current rates are adequate to control inflation. The AUD/USD closed up 0.39% at 0.9699 after opening at 0.9661.

For the week starting 21/07/08.

This Forex Trading Week Preview

In the States; June Leading Indicators on Monday are expected at -0.1%. Treasury’s Paulson speaks on the US economy Tuesday along with FOMC member Plosser. On Wednesday the Fed’s Beige book is released. Thursday sees Weekly Jobless claims at 379K and June Existing Home Sales expected at 4.94 Million. On Friday June’s Core Durable goods are seen flat at 0.0% after falling -0.9% in May. New Home Sales are expected at 505K in June. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; A host of survey data this week lead by the German IFO Business Climate Index on Thursday expected at 100.2. Also on Thursday we have July Eurozone Manufacturing PMI seen at 48.7 and Services PMI forecast at 48.9. In the UK on Tuesday BoE Governor King speaks on banking reform at the Parliamentary Treasury Committee. On Wednesday we have the BoE minutes from the July Meeting and CBI Industrial Trends forecast at -5. Thursday sees June Retail sales weakening -2.5% from May’s surprise 3.5% jump. Finally Preliminary 2nd quarter GDP is seen down at 0.2% from 0.3% in the previous. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; with a holiday on Monday Focus will be on Wednesday Trade Balance seen at 506 billion Yen. Thursday we focus on CPI data for July seen at 1.9%y/y nationally and 1.6% in Tokyo. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; Focus will be on Mondays 2nd Quarter PPI seen at 1.6%. UPDATE 2nd Q PPI 1.0%. Wednesday sees the 2nd Quarter CPI at 1.2% Q/Q and 4.3% Y/Y. We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: Foreign Exchange Weekly Preview

Euro (EUR)

Euro – 1.5845 : Initial support at 1.5765 (July 11 low) followed by 1.5612 (July 7 low). Initial resistance is now located 1.5948 (July 16 high) at followed by 1.6038 (July 15 High).

Yen (JPY)

Yen – 106.85 : Initial support is located at 104.76 (July 17 low) followed by 103.78 (July 16 low). Initial resistance is now at 107.09 (July 17 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 1.9935 : Initial support at 1.9907 (July 18 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0097 (July 16 high) followed by 2.0157 (Jul 15 high and 76.4% retrace of 2.0398-1.9363).

Australian Dollar (AUD)

Australian Dollar – 0.9725 : Initial support at 0.9675 (July 17 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9818 (July 16 high) followed by 0.9849 (July 15 High).

Gold (XAU)

Gold – 958 : Initial support at 950.50 (Jul 18 low) followed by 947.88 (Tread line support). Initial resistance is now at 978.5 (July 17 high) followed by 988.0 (July 15 high).

Citigroup Earnings Aid Dollar

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) had a relatively quiet trading day with little economic data out, equities and commodities directed the market. Citigroup’s earning came in better than expected leading to an overall buoyant mood on the equities markets and dollar. Cooling Middle Eastern tensions allowed Oil to slip again slightly, also helping dollar sentiment. In the U.S. share markets, the NASDAQ was down 29 points (1.28%) and the Dow Jones was up 49 points (0.44%). Crude Oil closed down $0.41 ending the New York session at $128.88 per barrel. Looking ahead, June National Activity Index is released along with the June Leading indicators seen at -0.1%.

European Euro

The Euro (EUR) traded at day highs after June German PPI came in stronger at 0.9% vs. expectations of 0.7%. The Euro was unable to hold these gains in the face of general USD strength but regained the 169 level on the EUR/JPY. Overall the EUR/USD traded with a low of 1.5807 and a high of 1.5886 before closing the day at 1.5845 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) lost ground against most currencies as investors sought to take advantage of renewed risk appetite as US banks reported better than expected results. Overall the USDJPY traded with a low of 105.97 and a high of 106.94 before closing the day around 106.91 in the New York session. Looking ahead, Public holiday in Japan Today.

Pound Sterling (GBP)

The Sterling (GBP) traded in a slightly offered tone due to Dollar strength and rumors of a relaxing of Government Public debt guidelines. Strong buying of GBP/JPY supported. Overall the GBP/USD traded with a low of 1.9909 and a high of 2.0020 before closing the day at 1.9985 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) lost ground as Gold and Oil continued to retrace gains but was supported buy continued demand for the high yielder especially against the JPY. Overall the AUD/USD traded with a low of 0.9702 and a high of 0.9739 before closing the day at 0.9705. Looking ahead, 2nd Quarter PPI is seen at 1.6% slightly lower than 1.9% in the first Quarter.

Gold

Technical Analysis: Foreign Exchange News Today

Euro (EUR)

Euro – 1.5845 : Initial support at 1.5765 (July 11 low) followed by 1.5612 (July 7 low). Initial resistance is now located 1.5948 (July 16 high) at followed by 1.6038 (July 15 High).

Yen (JPY)

Yen – 106.85 : Initial support is located at 104.76 (July 17 low) followed by 103.78 (July 16 low). Initial resistance is now at 107.09 (July 17 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 1.9935 : Initial support at 1.9907 (July 18 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0097 (July 16 high) followed by 2.0157 (Jul 15 high and 76.4% retrace of 2.0398-1.9363).

Australian Dollar (AUD)

Australian Dollar – 0.9725 : Initial support at 0.9675 (July 17 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9818 (July 16 high) followed by 0.9849 (July 15 High)

Gold (XAU)

Gold – 958 : Initial support at 950.50 (Jul 18 low) followed by 947.88 (Tread line support). Initial resistance is now at 978.5 (July 17 high) followed by 988.0 (July 15 high).

USD surges as Oil dips below $130 per barrel

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) gained against most of the majors for the 2nd day as stocks continued to rebound off the year lows seen on Tuesday. Earning Reports from JP Morgan were better than expectations helping to boost financials. Crude Oil dipped below the key $130 level inspiring a modest USD rally. US data was marginally positive with Housing starts back above 1 million (1.066 actual vs. 0.960 expected) and Weekly Jobless claims gaining less than forecast at 360K. In the U.S. share markets, the NASDAQ was up 27 points (1.2%) and the Dow Jones was up 207 points (1.85%). Crude Oil closed down $4.69 ending the New York session at $129.91 per barrel.

European Euro

The Euro (EUR) consolidated recent falls, trading in a range with rally’s capped by further falls in Oil. Large gains in the EUR/JPY supported. Overall the EUR/USD traded with a low of 1.5782 and a high of 1.5894 before closing the day at 1.5850 in the New York session. Looking ahead, we have June German PPI expected at 0.7% and the EU May Trade Balance is seen at 0.9 Billion.

Japanese Yen (JPY)

The Japanese Yen (JPY) was sold heavily as the carry trade roared back into life on positive equities gains. All the crosses made substantial gains especially the GBP/JPY. Overall the USDJPY traded with a low of 104.76 and a high of 107.11 before closing the day around 106.25 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) traded in a tight range pivoting the key 2.00 level. Overall the GBP/USD traded with a low of 1.9949 and a high of 2.0073 before closing the day at 2.0020 in the New York session. Looking ahead, Public Sector net borrowing is seen at 7.4 Billion.

Australian Dollar (AUD)

The Australian Dollar (AUD) Declined for the third day as Oil and Gold took another leg lower. Strong AUD/JPY buying supported and limited any Aussie weakness. Overall the AUD/USD traded with a low of 0.9678 and a high of 0.9791 before closing the day at 0.9725. Looking ahead, 2nd Quarter Export and Import prices seen at 10% and 1.7% respectively.

Gold

Gold (XAU) traded lower but managed to hold up well relative to Oil and other Commodities as the USD rallied. Overall trading with a low of USD$954.20 and high of USD$978.25 ending the New York session at USD$959 an ounce.

Technical Analysis: USD Surges

Euro (EUR)

Euro – 1.5855 : Initial support at 1.5765 (July 11 low) followed by 1.5612 (July 7 low). Initial resistance is now located 1.4948 (July 16 high) at followed by 1.6036 (July 15 High).

Yen (JPY)

Yen – 106.25 : Initial support is located at 103.78 (July 16 low) followed by 103.69 (38.2% retracement of 0.9576-108.59). Initial resistance is now at 107.09 (July 17 high) followed by 107.76 (July 7 high).

Pound Sterling (GBP)

Pound – 1.9975 : Initial support at 1.9933 (July 15 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0157 (July 15 high) followed by 2.0193 (Mar 27 high)

Australian Dollar (AUD)

Australian Dollar – 0.9725 : Initial support at 0.9675 (July 17 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9818 (July 16 high) followed by 0.9849 (July 15 High).

Gold (XAU)

Gold – 959 : Initial support at 953 (Jul 17 low) followed by 950 (Round Number). Initial resistance is now at 981.25 (July 15 high) followed by 988.0 (July 15 high).

Rise in Crude Inventories drop Oil, Boosts stock and USD

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) was able to make solid gains yesterday as US data came out mostly dollar positive. US crude Inventories unexpectedly gained 3.0M Barrels leading to a sharp sell off in the Crude Oil Futures. The drop in oil combined with positive results from Wells Fargo for a significant relief rally in the equity markets. June US CPI came in very high at 1.1% vs. expectations 0.7% and on top of 0.6% in May confirming that inflation was becoming a problem in the world largest economy and sparking speculation of interest rate rises sooner rather than later. June Industrial production surprised to the upside at 0.5% along with an increase in Capacity to 79.9% from 79.4% in May. Fed Chief Bernanke spoke again last night in his second night testifying before congress. The FOMC minutes from the June meeting were mostly looked over as Bernanke gave more up to date and detailed responses over the last 2 days. In the U.S. share markets, the NASDAQ was up 69.14 points (3.12%) and the Dow Jones was up 276 points (2.52%). Crude Oil closed down $4.14 ending the New York session at $134.60 per barrel. Looking ahead, June Housing starts are seen at .960 Million down slightly from .975 in May. Weekly Jobless claims are seen 380K after last week surprised drop at 346K. The Philly Fed is seen at -15 in July after falling to -17.1 in June.

European Euro

The Euro (EUR) dropped in sympathy with the large sell off in Oil and Gold. Euro Sentiment has soured slightly as economic conditions continued to weaken suggesting there will be little decoupling from US problems. June CPI was confirmed at 4.0% y/y. Overall the EUR/USD traded with a low of 1.5801 and a high of 1.5948 before closing the day at 1.5817 in the New York session. Looking ahead, the June HICP is seen at 0.4% after jumping 0.6% last month.

Japanese Yen (JPY)

The Japanese Yen (JPY) was able to make good gains as Europeans shares traded lower but reversed as positive data out of the US initiated stock gains. EUR/JPY traded at multi week lows of 165.35. Overall the USDJPY traded with a low of 103.77 and a high of 105.12 before closing the day around 105.10 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) had a fairly mixed day with cable breaking below the key 2.00 level on US strength. UK data continued to under perform with June Claimant Count rising to 15.5K vs. expectations of 10K in its fastest rate in 15 years. Average earning rose by 3.8% in May. Overall the GBP/USD traded with a low of 1.9958 and a high of 2.0097 before closing the day at 1.9984 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) pulled back from all time highs as commodities were broadly lower lead by Oil. AUD/JPY bounce off what is becoming a solid support at 101.40 as equities recovered and risk appetite increased. RBA governor Stevens spoke yesterday and was relatively dovish commenting that “in the future we will look back at this period as one of high interest rates” .Overall the AUD/USD traded with a low of 0.9730 and a high of 0.9815 before closing the day at 0.9738.

Gold

Gold (XAU) was sold off substantially as Oil fell and Equities rebounded. Overall trading with a low of USD$961.10 and high of USD$980.75 ending the New York session at USD$961 an ounce.

Technical Analysis: [Insert Title here]

Euro (EUR)

Euro – 1.5845 : Initial support at 1.5765 (July 11 low) followed by 1.5612 (July 7 low). Initial resistance is now located 1.4948 (July 16 high) at followed by 1.6036 (July 15 High).

Yen (JPY)

Yen – 104.85 : Initial support is located at 103.78 (July 16 low) followed by 103.69 (38.2% retracement of 0.9576-108.59). Initial resistance is now at 105.14 (July 16 high) followed by 106.28 (July 15 high).

Pound Sterling (GBP)

Pound – 2.0005 : Initial support at 1.9933 (July 15 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0157 (July 15 high) followed by 2.0193 (Mar 27 high)

Australian Dollar (AUD)

Australian Dollar – 0.9760 : Initial support at 0.9708 (July 15 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9818 (July 16 high) followed by 0.9849 (July 15 High).

Gold (XAU)

Gold – 964 : Initial support at 957.9 (Jul 16 low) followed by 954.85 (Jul 14 low). Initial resistance is now at 981.25 (July 15 high) followed by 988.0 (July 15 high).

USD finds support from record drop in Oil.

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) was under severe pressure most of yesterday as shares continued to slump driven by financial and energy stocks. Fed Chief Ben Bernanke commented on slowing growth and President Bush held a press conference to talk about his plans for offshore drilling with the combined effect of a severe pullback in Crude Oil falling over $9 per barrel at one point. The large drop in Oil allowed the dollar to pare some losses in the US session. US data included June PPI surging 1.8% m/m above expectations of 1.3% although Core PPI was a more moderate 0.2%. June Retail Sales were slightly weak at 0.1% m/m vs. forecasts of 0.4% although Core Retail sales came in 0.8%. In the U.S. share markets, the NASDAQ was up 2 points (0.13%) and the Dow Jones was down 92 points (-0.84%). Crude Oil closed down $6.44 ending the New York session at $138.74 per barrel. Looking ahead, June CPI is seen at 0.7% m/m with year on year at 4.5%. June Capacity Use is seen at 79.3 slightly down from 79.4 in May along with June Industrial Production expected flat at 0.0%. FED Chief Bernanke testifies again tonight.

European Euro

The Euro (EUR) made new record highs during the European session as US banking concerns intensified. The July German Zew survey stunned to the downside at -63.9% vs. expectations of -55%. The Euro shrugged off the poor data though trading above the 1.6000 level before a large slump in Crude Oil pushed the single currency lower. Overall the EUR/USD traded with a low of 1.5866 and a high of 1.6040 before closing the day at 1.5975 in the New York session. Looking ahead, the June HICP is seen at 0.4% after jumping 0.6% last month.

Japanese Yen (JPY)

The Japanese Yen (JPY) gained across the board as risk aversion spiked high and carry trades were liquidated. The Bank of Japan held rates at 0.5% yesterday and reported a lower growth forecast this year in the BOJ monthly report. EUR/JPY fell significantly through supports at 168 and 167. Overall the USDJPY traded with a low of 104.16 and a high of 106.27 before closing the day around 105.06 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) broke through resistance at 2.0000 level surging to highs of 201.57 as USD weakness and UK inflation data supported. June CPI hit 3.8% vs. expectations of 3.6% will above the 3% mandate set out for the MPC. Overall the GBP/USD traded with a low of 1.9933 and a high of 2.0157 before closing the day at 2.0018 in the New York session. Looking ahead, June claimant count is seen at 10K up from 9K and May Unemployment Rate seen at unchanged at 5.3%.

Australian Dollar (AUD)

The Australian Dollar (AUD) surged to new post float highs as gold surged and the USD weakened. The July RBA meeting minutes were seen balanced with the central bank reiterating that current rates were appropriate and that demand should slow tempering inflation. Overall the AUD/USD traded with a low of 0.9709 and a high of 0.9849 before closing the day at 0.9779. Looking ahead, RBA Governor Stevens will be speaking on the challenges of monetary policy

Gold

Gold (XAU) continued to rally as safe haven flows increased on slumping stocks. Overall trading with a low of USD$968.70 and high of USD$988.15 ending the New York session at USD$977 an ounce.

Technical Analysis: USD Finds Support

Euro (EUR)

Euro – 1.5905 : Initial support at 1.5866 (July 15 low) followed by 1.5841 (July 14 low). Initial resistance is now located 1.6038 (July 15 high) at followed by 1.6064 (1 month potential bull channel top).

Yen (JPY)

Yen – 104.75 : Initial support is located at 104.16 (July 15 low) followed by 103.69 (38.2% retracement of 0.9576-108.59). Initial resistance is now at 106.28 (July 15 high) followed by 106.82 (July 14 high).

Pound Sterling (GBP)

Pound – 2.0055 : Initial support at 1.9959 (July 11 low) followed by 1.9815 (July 14 low). Initial resistance is now at 2.0157 (July 15 high) followed by 2.0193 (Mar 27 high)

Australian Dollar (AUD)

Australian Dollar – 0.9805 : Initial support at 0.9708 (July 15 low) followed by 0.9664 (July 14 low). Initial resistance is now at 0.9849 (July 15 high) followed by 0.9895 (Bull channel top).

Gold (XAU)

Gold – 975 : Initial support at 968.4 (Jul 15 low) followed by 954.85 (Jul 14 low). Initial resistance is now at 988.4 (July 15 high) followed by 988.49 (76.4% retracement of the 1032.50-846.00 decline).

Freddie and Fannie causing USD headaches

Last week’s Currency Trading Review

The Dollar lost ground against all the major currencies as the US banking sector swirled with rating writedowns and bailout rumours. News that Iran had test fired missiles added to Middle Eastern tension sending Crude Oil to record highs above $147 per barrel. Gold also reached multi month highs as equities traded at year lows. The dollar was able to recover off its lows as Fed Chief Bernanke stated late on Friday that the Government Sponsered entities (GSE’s) would be able to use the Fed discount loan facility. On the data front we had May Pending Home Sales falling -4.7% weaker than the -2.4% expected. The June Trade Balance was stronger than forecasts at -59.8 Billion while the July Consumer sentiment improved slightly to 56.6 up from 55.5 in June. The Euro surged higher on Friday after being relatively rangebound during the week tracking the Crude Oil rally to new multi months highs of 1.5949. Trichet reiterated his ‘no bias’ comments on future rate movements but signaled his concern about 2nd round inflation effects. 1st Quarter GDP was revised down to 0.7% from 0.8% along with a bevy of disappointing May Industrial production reports (German -2.4%, French -2.6%, Italy -1.4%). The Euro closed up 1.42% at 1.5930 having opened at 1.5704. The Japanese Yen gained against USD but lost ground the Euro taking most of its direction from the equities markets. Core Machinery Orders surprised to the upside coming in at 10.4% fir Nay after a 1.1% gain in April. The USD/JPY fell -0.44% closing at 106.30, after opening the week at 106.77. The GBP struggled during the week as economic data continued to weaken. The Bank of England held rates at 5.00% in a widely expected move with the market in two minds as to the direction of the next rate movement. Halifax House Price Index -2.0% in June on top of the -1.0% in May. Also poor was the May Manufacturing Consumer Confidence sliding to a two year low of 61. The GBP/USD gained 0.30% closing at 1.9820 after opening at 1.9947. The AUD was able to capitalize on the USD weakness surging to new 24 year post float high of .9717. Weak business and consumer confidence early in week was outweighed by a surprising jump in June employment numbers coming in at 29.4K vs. expectations of 10K. The positive result went along way to make up for the -25K in May providing the Aussie with a positive footing. Also helping the bullish tone was the significant rally in commodities and Gold. The AUD/USD closed up 0.25% at 0.9632 after opening at 0.9608.

For the week starting 14/07/08.

This Forex Trading Week Preview

In the States; Tuesday sees June retail sales expected at 0.3% after gaining 1% in May along with June PPI expected at 1.3%. US Fed Chief Bernanke reports on the economy and Fed policy on Tuesday. Wednesday sees the June Core CPI seen at 2.3% y/y along with June Industrial Production forecast at 0.0%. Thursday sees the release of June Housing starts (expected .965 Million) and the Weekly Jobless claims seen at 380k. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday the German Zew Survey is expected to weaken to -55 in June from -52.4 in May. On Wednesday the Eurozone CPI is forecasted at 4.0% y/y. On Friday also of note is the German PPI for June forecast at 0.8%. In the UK we have a heavy data week starting with June PPI forecast at 2.5% input and 1.2% output. Also out on the RICS House Price Balance seen at -93.8% vs. -92.9% in May. On Tuesday we have the June CPI seen at 3.6% y/y. Wednesday sees the June Claimants Count Change forecast at 10K and the May Average Earning Index at 3.7%. Thursday attention will be on MPC member Dale as he testifies at the Treasury Committee. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; Focus will be on Tuesday’s interest rate decision widely expected to remain at 0.50% but clues as to future rate direction could be found in the BOJ Monthly report and Press conference also on Tuesday. Wednesday we have the May Tertiary Activity Index forecast at 0.0%. Friday sees the Monetary policy meeting minutes released along with the BOJ Governor Shirakawa Speaking. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; light data week with the RBA meeting minutes the highlight along with RBA Governor Stevens speaking on Wednesday on the “Challenges for Economic Policy” . We will provide our previews and reviews of these data releases in the daily summary.

Technical Analysis: Foreign Exchange Weekly Update

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).

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).

Oil rebounds as Bernanke and Paulson’s gloomy talk hurts the Dollar

U.S. Dollar Trading (USD)

U.S. Dollar Trading (USD) took hits from multiple US officials speaking. Former Fed member Poole stated that the government backed Fannie Mae and Freddie Mac were technically “insolvent” and would need to be bailed out. Fed chief Bernanke requested legislation for stronger supervision of investment banks and large dealers while Treasury Secretary Paulson noted that financial firms must be allowed to fail with taxpayer backstops reserved only for extraordinary events. Weekly jobless claims did provide some upside though coming in at 346K vs. expectations of 395K. In the U.S. share markets, the NASDAQ was up 22 points (1.03%) and the Dow Jones was up 81 points (0.73%). Crude Oil closed up $5.25 ending the New York session at $141.30 per barrel. Looking ahead, July Trade Balance is expected at -62.5 Billion after June came in at -60.9 Billion. Also scheduled for release the July Consumer Sentiment expected 55.5 slightly weaker then 56.4 in June.

European Euro

The Euro (EUR) gained against the USD as surging oil and comments from US officials supported. Economic data out of the Euro zone continued to weaken with the May French Industrial production coming at -2.6%. Overall the EUR/USD traded with a low of 1.5691 and a high of 1.5803 before closing the day at 1.5780 in the New York session.

Japanese Yen (JPY)

The Japanese Yen (JPY) again tracked the stocks very closes in a tight range around the 107 level in the USD/JPY. Gain in the EUR/JPY and AUD/JPY supported. Overall the USDJPY traded with a low of 106.70 and a high of 107.40 before closing the day around 107.20 in the New York session.

Pound Sterling (GBP)

The Sterling (GBP) came under selling pressure as the Halifax House price index disappointed to the downside coming in at -2.0% in May after falling 2.5% in April. The Bank of England held rates 5.00% as widely expected and along with the weakening USD allowed the Cable to pare losses. Overall the GBP/USD traded with a low of 1.9712 and a high of 1.9839 before closing the day at 1.9780 in the New York session.

Australian Dollar (AUD)

The Australian Dollar (AUD) received a major boost from the strong Employment change figures for May coming in at +29.8K beating expectation of +10K and negating the -25K in April. The Unemployment Rate also decreased from 4.3% to 4.2% which along with soaring commodities allowed the Aussie to regain the 0.9600 level. Overall the AUD/USD traded with a low of 0.9545 and a high of 0.9640 before closing the day at 0.9620.

Gold

Gold (XAU) gained as USD weakness, banking concerns and soaring Oil all benefited the precious metal. Overall trading with a low of USD$926 and high of USD$948 ending the New York session at USD$945 an ounce.

Technical Analysis: Oil Rebounds

Euro (EUR)

Euro – 1.5780 : Initial support at 1.5651 (July 9 low) followed by 1.5606 (50.% retracement 1.5303 to 1.5910). Initial resistance is now located 1.5802 (July 10 high) at followed by 1.5910 (July 3 high).

Yen (JPY)

Yen – 107.05 : Initial support is located at 106.25 (July 8 low) followed by 105.78 (Jul 3 low). Initial resistance is now at 107.76 (July 7 high) followed by 108.19 (Jun 26 high).

Pound Sterling (GBP)

Pound – 1.9780 : Initial support at 1.9673 (July 9 low) followed by 1.9637 (61.8% retracement of 1.9410 to 2.008 rally). Initial resistance is now at 1.9837 (July 10 high) followed by 1.9849 (July 4 high)

Australian Dollar (AUD)

Australian Dollar – 0.9620 : Initial support at 0.9546 (July 10 low) followed by 0.9477 (July 9 low). Initial resistance is now at 0.9642 (July 7 high) followed by 0.9670 (June 30 high).

Gold (XAU)

Gold – 948 : Initial support at 913.35 (Jul 8 low) followed by 885.1 (Jun 26 low). Initial resistance is now at 946.50 (July 3 high) followed by 950 (Psychological round number).