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A lackluster week of economic event risk left the Euro almost exactly unchanged against the US Dollar, and it seems that the EURUSD could remain directionless absent a material shift in sentiment across financial markets. Positive German and broader Euro Zone economic data had relatively little effect on the euro’s trajectory.
Though price action for the world’s reserve currency remained extraordinarily volatile this past week; the heightened activity wouldn’t translate into direction. Aside from the Japanese yen, the dollar’s exchange rates with its major counterparts were ultimately little changed from the previous Friday’s close, reflecting a general lack of market-moving economic data and a tempered interest in risk appetite as the G8 deliberated on the path the world’s financial leaders will take in tending to the global recovery. Looking ahead, the dollar will start the new week in a relatively tight range with its most liquid pairings, looking for the fundamental spark that can encourage a breakout and reignite a trend. What could be that motivating factor? There are more than a few notable indicators populating the docket, fine tuning forecasts for the pace of recovery; but as usual, the true driver will likely come through sentiment and risk appetite.
Over the past month, risk appetite has leveled off and is even threatening to retrace the rally in optimism that began back in March. There are two considerations here for those trading the dollar. First, determine what is will drive sentiment; and then determine how the greenback will respond to the shift. It shouldn’t come as a surprise that the currency’s reaction will depend on what is moving the market. Should the global financial markets be thrown into panic, the dollar will take on the title of safe haven. On the other end of the scale, if there is a broad recovery in investor sentiment, it will be a more discriminating scale. Looking out over the coming week, there are few critical events scheduled – but this sort of thing usual comes out of the blue. More likely, the market’s bearing will feed off bigger trends. Carry over from the G8 meeting over the second half of this past week has increased the rivalry to be the first country to see positive growth and financial stability. In its comments, the group suggested there were early signs of economic “stabilization,” yet there were still hurdles and the commitment would remain with “fiscal sustainability.” This has been the motto for a few months now which only further breeds speculation. Should the calls to recapitalize “viable” banks and deal with distressed debt be taken seriously, the US is already ahead of the curve. However, beyond the short-term, America’s budget deficit dwarfs most of its counterparts; and policy officials remained staunchly opposed to moving on to the next step for a recovery – the government’s graceful exit from the financial markets.
But, when the financial seas are quiet and speculation over some other region is accelerating its exit strategy is settled, the fundamental crowd will turn back to benchmarking the United States’ relative pace of economic recovery. It is important to remember that it doesn’t necessarily matter how quickly one economy returns to positive growth or its pace thereafter. What is important is whether the US is going to pull itself out of recession and push up the throttle on expansion before its global counterparts. For this purpose, we have a slew of economic releases filling out the economic calendar. The most encompassing report to cross the wires will be the FOMC minutes. While their multi-year growth and inflation forecasts are not expected to be updated until the minutes released in August; this will nonetheless provide the short-hand version of their opinion on growth and financial markets. Less comprehensive – but more likely to stir volatility – are advanced retail sales, industrial production and housing starts. These three indicators will offer a status report on three of the most essential regions of growth. Also, though it may be under the radar, an eye should be kept on the monthly budget. The government’s ability to fund its stimulus efforts and the amount of debt they ultimately take on are critical at this point. – JK
Though price action for the world’s reserve currency remained extraordinarily volatile this past week; the heightened activity wouldn’t translate into direction. Aside from the Japanese yen, the dollar’s exchange rates with its major counterparts were ultimately little changed from the previous Friday’s close, reflecting a general lack of market-moving economic data and a tempered interest in risk appetite as the G8 deliberated on the path the world’s financial leaders will take in tending to the global recovery.
By Lisa Twaronite
The dollar was higher against most other major currencies in Asian trade Friday, taking its cues from rising risk aversion as most stock markets across the region traded with a weaker tone.
The dollar bought 93.03 yen, slightly up from 92.99 yen in late North American trading on Thursday, holding well above a more-than-four-month low of 91.81 hit Wednesday.
"The correlation between risk aversion and currencies has decreased over recent weeks. We continue to expect risk aversion to play an important role in driving currencies, but it will not be as dominant a factor as it has been over the past year," said analysts at Calyon
"Our expectations of improved risk appetite over the coming months point to further U.S. dollar weakness," they said in a research note.
The dollar index (DXY), a measure of the greenback against a trade-weighted basket of six major currencies, was at 80.181, up from 79.879 in late North American trading on Thursday.
The euro bought $1.3963, down from $1.4036 late Thursday. The British pound was at $1.6282, down from $1.6338 late Thursday.
The Australian dollar bought 78.11 U.S. cents, down from 78.46 U.S. cents Thursday.
On the data front, Japan's domestic corporate goods price index, the nation's benchmark measure of wholesale prices, fell a record 6.6% in June from the year-ago period, the Bank of Japan said Friday. The report had a muted effect on currency trading, but suggested that deflationary pressures persist in Japan.
The Bank of Japan is scheduled to hold a regular policy meeting next week, and could extend some of its programs designed to add liquidity to the nation's financial markets.
(RTTNews) - An index measuring the prices of domestic corporate goods fell 6.6 percent on year in June, the Bank of Japan said on Friday, marking the fastest pace of decline on record.
Analysts had been expecting a fall of 6.4 percent on year following the revised 5.5 percent decline in May. Originally, the decline had been reported at 5.4 percent.
On a monthly basis, the prices for corporate goods eased 0.3 percent versus expectations for a 0.1 percent decline. The May reading was revised from -0.4 percent to -0.5 percent.
(RTTNews) - Japan's corporate goods prices dropped by the steepest year-over-year pace on record in June, mainly due to a dip in petroleum and coal prices and the prices of scrap and waste products, a report by the Bank of Japan showed Friday.
The corporate goods price index dipped 6.6% year-on-year in June, after falling a revised 5.5% in the previous month, revised from a 5.4% drop. Economists expected prices to fall 6.4%. This was the also the sixth consecutive month that producer prices fell.
In June, petroleum and coal product prices dipped 41.7%, while that of scrap and waste products fell 60.6%. Double digit declines were also seen for chemicals and related products as also for non ferrous metals.
Month-on-month, the corporate goods prices were down 0.3% in June, slower than a revised 0.5% decline in the preceding month, but faster than economists' estimates of a 0.1% drop. The producer prices on a monthly basis have been declining continuously since September last year.
Iron and steel products contributed to a 0.16 percentage points decline in the prices month-on-month, the largest negative contribution among the commodity groups. Iron and steel prices were down 2.5%. Utility prices fell 3.1% and subtracted 0.15 percentage points from the index. Moreover, processed foodstuffs, electrical machinery and equipment made negative contributions. However, petroleum and coal products, scrap and waste as also non ferrous metals made positive contributions.
Consumer prices are also seeing a deflationary trend. Reflecting the weakness in the economy, consumer prices in the economy dropped 1.1% annually in May, sharper than a 0.1% drop in the preceding month, the Ministry of Internal Affairs and Communications said last month. At the same time, the core consumer prices, excluding food, dropped at a record pace of 1.1% in May.
Moreover, the Ministry said the jobless rate in the economy was 5.2% in May, which is the highest level since September 2003, following the 5% rate in April.
However, there were signs that the worst was over for the Japanese economy as the Bank of Japan upgraded its regional economic assessment for the first time in three years. The central bank said economic conditions in the economy continued to remain severe, but the pace of deterioration had slowed.
The bank said developments in inventory adjustments helped increase exports and production, although they remained at a low level. Further, the central bank said the financial system had become calmer, reflecting an improvement in the commercial paper and corporate bond markets.
Meanwhile, a report from the Cabinet Office also showed signs of improvement in the economy. The leading index, measuring signs of future economic activity climbed to 77 in May from 76.2 in April. The coincident index increased to 86.9 from 86 in the preceding month.
Japan's corporate goods prices dropped by the steepest year-over-year pace on record in June, mainly due to a dip in petroleum and coal prices and the prices of scrap and waste products, a report by the Bank of Japan showed Friday.
(RTTNews) - Pakistani President Asif Ali Zardari's confession that Islamabad created and nurtured Islamic terrorist groups for "short-term tactical objectives" has vindicated India's stand that the neighboring soil was being used for launching terror attacks on India, said foreign minister S M Krishna in Parliament Thursday.
Zardari's confessions came months after Pakistan admitted that Ajmal Amir Kasab, the lone terrorist caught alive, was indeed its citizen after denying it initially. Prior to this Pakistan never admitted to its nationals being involved in terrorist attacks in India.
"We have got some kind of confession from the highest authority of Pakistan. To that extent, India's stand has been vindicated in the eyes of the world. All through, India had been saying that the Pakistani soil was being used for attacks on India repeatedly," Krishna said in Rajya Sabha (Upper House) during a discussion on his suo-motu statement on "significant developments in the neighborhood".
"Grudgingly, Pakistan has accepted that terrorist attacks emanated against India from its soil. I would not say they were state-sponsored or engineered," he said, adding, now it's the responsibility of the government there to stop these attacks.
"If peace in the region is to be established ? and we have to lead a path of growth and prosperity, terror infrastructure has to be dismantled and perpetrators of terrorism have to be brought to justice. I hope Pakistan will dismantle terror infrastructure created on its soil."
Days before foreign secretaries and prime ministers of India and Pakistan are due to meet in Egypt, Krishna took a tough stand on terrorism emanating from Pakistani soil, also laying out bench marks for the talks next week.
Krishna emphasized that "terrorism cannot be fought selectively, it will have to be fought across the board", indicating Pakistan would have to take action against anti-India groups in the same way as it has done against Taliban.
In his statement, he said, "It is the responsibility of the government of Pakistan to take all such steps as are necessary to address this issue and expose and take action against the conspiracies and conspirators responsible for such attacks."
(RTTNews) - Boosted by stimulus spending, the prevailing low interest rate environment and signs of stabilization emerging in global economic conditions, the South Korean economy is expected to fare better than initially thought, according to Bank of Korea's latest estimates. In a communiqué, the central bank said Friday South Korea's GDP is expected to decline by 1.6% in 2009, with the economy expected to rebound in 2010 to show 3.6% growth.
The latest projections compare to the bank's earlier estimate for a 2.4% GDP decline in 2009 and 3.5% growth for 2010. The emerging Asian economy had grown at a 2.2% rate in 2008. In line with recent expectations of a small anemic growth in the second half of the year for most of the global economies ravaged by the U.S. subprime crisis and the credit crisis, Korea is also expected to see a 0.2% annual growth in the second half of the year after a steep 3.4% contraction in the first half.
Despite the relatively upbeat projections, the contraction expected for 2009 would make the economic performance the worst since 1998, a period hit hard by the Asian financial crisis, when the economy contracted 6.9%.
Incidentally, the Bank of Korea announced yesterday a status quo position on interest rates, as it held rates at 2% for the fifth straight month after reducing it by a cumulative 300 basis points since October 2008.
Dissecting the numbers that make up the GDP, the central bank noted that facilities investment is likely to take a severe beating, with the metric estimated to show 15.1% year-over-year decline. The predicament comes as no surprise, as the demand decline induced by the economic slowdown has severely impacted capacity utilization. That said, the bank expressed confidence that the decline will decelerate, given the government's unstinted support to improve the investment environment.
Private consumption is expected a show a 1.4% drop, as savings related to providence and the lagged improvement in income conditions may more than offset an improvement in consumer confidence, increases in asset prices and the stimulus-induced spending.
Exports are likely to decline by a more modest 2.8% compared to a 6.8% drop in imports. The improvement foreseen in global economic conditions should bode well for exports. Meanwhile, constructions investment, which held up even in the first half is expected to rise 2.2% for the whole of the year, as the government's expansion of SOC-Social Overhead Capital - investment more than offset lackluster residential and non-residential construction.
A rebound in facilities investment would set the stage for a return to positive growth in 2010. The bank expects facilities investment to rise by 13.6%, construction investment by 2.1%, private consumption by 2.6%, exports by 8.5% and imports by 9.8%.
After the economy lost about 160,000 jobs in the first half, the central bank expects job losses to mitigate to 70,000 in the second half of the year due to concerted efforts from the government to create jobs. The job losses for the whole of the year are estimated at 110,000. The unemployment rate is expected to touch 3.5% in the latter half of the year, a slowdown from a 3.8% rate in the first half.
Inflationary environment is expected to remain benign, as the overall consumer price inflation rate is estimated at 2.9% for 2008 and 3% for 2010, with the increase in 2010 attributed to a modest recovery in the domestic economy and upward pricing pressure exerted by higher oil prices. If the forecasts prove right, the inflation rate for the three year period between 2007 and 2009 will be at 3.4%, which is within the central bank's target of 3%, plus or minus 0.5%. The core consumer price inflation for 2009 is likely to be 3.5%. In comparison, consumer prices and core consumer prices rose by 4.7% and 4.2%, respectively in 2008.
On the fiscal side, the current account surplus is estimated at $29 billion in 2009, with the surplus for the second half likely to be come in at $8 billion compared with the first half's 21 billion euros. The Bank of Korea expects the current account surplus for 2010 to narrow to $7 billion due to a recovery in domestic demand.
Just like its global counterparts, the Korean government doled out stimulus packages to help the economy emerge out from the pandemic economic crisis. Since last year, the South Korean government has offered about $50 billion in fiscal stimulus and tax cut plans and sealed a $30 billion currency swap arrangement with the U.S. Federal Reserve to shield the country's economy from the global crisis.
It may be recalled that the South Korean government earlier in June raised its GDP forecast for 2009 to a 1.5% contraction from a 2% contraction it estimated earlier, although it held firm to its 2010 forecast for 4% growth.
Even as many of the developed nations saw a recession in the aftermath of the financial crisis, South Korea narrowly averted a recession by showing 0.1% growth in the first quarter. Technically, a recession is two straight quarters of GDP declines.
Boosted by stimulus spending, the prevailing low interest rate environment and signs of stabilization emerging in global economic conditions, the South Korean economy is expected to fare better than initially thought, according to Bank of Korea's latest estimates. In a communiqué, the central bank said Friday South Korea's GDP is expected to decline by 1.6% in 2009, with the economy expected to rebound in 2010 to show 3.6% growth.
(RTTNews) - India's Industrial production for May rose 2.7% on year from revised 1.2% growth in April, beating expectations, report media. Analysts estimated a growth of 1.4% in May.
Manufacturing sector output rose 2.5% in the month while mining and power generation grew 3.7% and 3.3% respectively.
(RTTNews) - Friday, a number of key statistical reports are due from European economies.
At 2.00am ET, wholesale price data for the month of June is due from Germany's Federal Statistical Office.
At the same time, the Statistics Finland would be releasing a report on building cost index for June and another report on manufacturing new orders for May. Industrial output data for May is also scheduled to release.
At 2.45am ET, French industrial and manufacturing output data is due from the INSEE. Economists forecast a monthly increase of 0.4% and an annual drop of 17% in manufacturing output and a 0.2% monthly fall in industrial production.
At the same time, French current account data and central government balance report for May are due.
Inflation figures for June is slated to be out from the Spanish statistical office at 3.00am ET.
Italian industrial production data is scheduled to release from the ISTAT at 4.00am ET. On a monthly basis, production is expected to fall 1.1%.
Half an hour later, U.K.'s Office for National Statistics is likely to release a report on industrial producer prices. Producer input prices are forecast to rise 0.8% month-on-month and to fall by 12.1% year-on-year.
Output prices are expected to grow 0.3% on a monthly basis, while it may fall .8% annually. Core output price index is likely to rise 0.2% month-on-month and 1.1% year-on-year.
Friday, a number of key statistical reports are due from European economies. At 2.00am ET, wholesale price data for the month of June is due from Germany's Federal Statistical Office.
(RTTNews) - Friday, a report by the Turkish Statistical Institute said the rate of capacity utilization in the manufacturing sector increased to 72.7% in June from 70.4% in the preceding month. Economists expected the rate to be 74%. A year ago, the rate stood at 82.3%.
The statistical office said shortage of demand, financial problems, shortage of raw materials and labor problems were the main reasons for working below full capacity.
Meanwhile, production quantity rose 5.8% in June compared to the previous month.
After a six-day selloff, the British Pound is finally attracting buyers. Fundamentally this market has been getting beat-up since June 30th when an economic report showed that the U.K. economy had its worst quarter since 1958. Since then there have been signs that the economy is improving. The service sector is beginning to show growth, housing prices have stabilized and inflation is running ahead of the Bank of England’s target.
Despite these small signs of recovery, the Bank of England announced early this morning that it had decided to leave interest rates at their historically low level of 50 basis points.
This news came as no surprise since investors do not expect the BoE to touch interest rates until it is absolutely sure that the U.K. economy is well on its way to recovery. Although these are small signs of a recovery, credit issues still exist with lending to businesses well down from recent peaks. Mortgage approvals are also down which is a common problem around the world.
Interest rates may not be an issue at this time, but rumors that the Bank of England would increase the level of funds available for quantitative easing helped trigger a sharp sell-off in this market since Sunday night. Quantitative easing, which is essentially the printing of money, is an economic program in which the central bank buys government assets. It is a very dangerous maneuver because it can lead to an inflationary environment which will lead to a debasing of the economy.
The GBP USD surged to the upside following the news that the Bank of England would refrain from increasing the amount of funds available for the purchase of government assets. This came as a surprise to traders who had factored in an increase in the amount of funds available for quantitative easing.
Technically, the British Pound is in a down trend, however it may be short-term oversold. This means that this market may retrace 50% of its recent break back to 1.6362 to 1.6452.
At this time the current up move looks like a simple counter-trend retracement. This means that this market is likely to attract sellers on the first test of the retracement zone at 1.6362 to 1.6452. Traders will have to watch this market carefully while this zone is being tested to determine if new shorts start to build positions.
It may take a couple of days to determine whether this market is going to resume the uptrend or start a serious retracement to the downside.
Please do not hesitate to contact us at 1-800-971-2440, with any questions.
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The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.
The dollar was mixed in the New York session; firmer against the euro toward the 1.39-region and weaker versus the yen near the 94-figure. The dearth of US economic data out today will keep the focus on stocks, which were marginally higher in early Wednesday trading as earnings season kicks off in earnest.
The British pound rallied sharply in London trading, prompted by the results of the Bank of England’s monetary policy decision and sending cable above the 1.63-level. The BoE left interest rates unchanged at 0.5% and announced that it would maintain its current asset purchase plan at 125 billion pounds. The Bank said it would “review the scale of the program again at its August meeting, alongside its latest inflation projections”.
The dollar lost ground against the euro and the sterling, relinquishing its gain from the previous session to fall to 1.4071 and 1.6379, respectively. The data released earlier included weekly jobless claims, wholesale sales and wholesale inventories. Weekly jobless claims improved to 565k, down from 614k a week earlier. The May wholesale inventories declined by less than estimated at -0.8% and improving from the April reading of -1.4%.
The central bank in the U.K. kept the benchmark interest rate unchanged at 0.50% in June, and maintained its GBP 125B asset purchase program in an effort to stimulate the ailing economy. The Bank of England minutes showed the board voted unanimously to carry out its current policy objects in place, with the MPC stating ‘that the second-quarter decline in consumption would be less than the committee had previously anticipated.’
The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.
The dollar was mixed in the New York session; firmer against the euro toward the 1.39-region and weaker versus the yen near the 94-figure. The dearth of US economic data out today will keep the focus on stocks, which were marginally higher in early Wednesday trading as earnings season kicks off in earnest.
GMT Ccy Events Actual Consensus Previous Revised
1:00 AUD Consumer Inflation Expectation Jul 3.20% -- 2.80%
1:30 AUD Employment Change Jun -21.4K -20.0K -1.7K -5.1K
1:30 AUD Unemployment Rate Jun 5.80% 5.90% 5.70%
6:00 EUR German Trade Balance (EUR) May 9.2B 9.4B
6:00 EUR German CPI M/M Jun F 0.40% 0.40%
6:00 EUR German CPI Y/Y Jun F 0.10% 0.10%
8:00 EUR ECB Publishes Monthly Report Jul -- --
8:30 GBP Visible Trade Balance (GBP) May -6.7B -7.0B
11:00 GBP BoE Interest Rate Decision 0.50% 0.50%
12:15 CAD Housing Starts Jun 130.0K 128.4K
12:30 USD Initial Jobless Claims 608K 614K
14:00 USD Wholesale Inventories May -1.00% -1.40%
14:30 USD Natural Gas Storage -- 70B
U.S. Dollar Trading (USD) enjoyed gains against most currencies as Oil tumbled to $60 a barrel and risk currencies were pared back. Wall St. managed to finish slightly stronger but the damage done via the Yen and it crosses as market volatility surged. US Consumer Credit came in at -3.2B vs. -9.8B forecast in May. Crude Oil closed down $2.68 at $60.14. In US share markets, S&P ended -1.47 points (-0.17%) at 879.56, NASDAQ ended 1 points (0.06%) at 174 and DOW JONES ended -161.27 points (-1.94%) at 8163.60. Looking ahead, Weekly jobless claims forecast at 605k vs. 614k previously.
The Euro (EUR) came under pressure as EUR/JPY capitulated but held up better than other currencies against the USD. Very strong May German Industrial Production at 3.7% vs. 0.5% previously added to the strong Factory Orders seen yesterday. Support at 1.3830 from Asian Central Banks helped reverse the slide. Q1 GDP was revised lower to 2.5% as expected. Overall the EUR/USD traded with a low of 1.3831 and a high of 1.3940 before closing at 1.3880. Looking ahead, June German CPI forecast at 0.4% vs. -0.1%. May Trade Balance forecast at 9Bn.
The Japanese Yen (JPY) was the major mover as the USD/JPY broke through support at 94, 98.35 and 93.50 in capitulation like trading hit 91.80. All the crosses were crushed 4-5% lower even as the US stock market recovered. A large bounce did eventuate at the end of the day but is technically extremely oversold on multiple pairs. Overall the USDJPY traded with a low of 9178 and a high of 94.76 before closing the day around 92.95 in the New York session.
The Sterling (GBP) was one of the hardest hit by the Yen strength with the GBP/JPY falling over 4 yen on the USD/JPY move and the GBP/USD being dragged through 1.6000. The pair managed to reclaim the 1.60 figure but the market is fragile and may come under more selling of Oil falls further. The market is focused on the Quantitative Easing measures the BOE may discuss post rate decision today. Overall the GBP/USD traded with a low of 1.5982 and a high of 1.6142 before closing the day at 1.6060 in the New York session. Looking ahead, BOE announcement widely expected to hold at 0.5%.
The Australian Dollar (AUD) was sold aggressively as the AUD/JPY broke lower and the bottom of the month long range at 0.7780 was broken to the downside. AUD had received support from better economic data but this was overshadowed by concerns about Global growth and slumping commodities. Overall the AUD/USD traded with a low of 0.7722 and a high of 0.7894 before closing the US session at 0.7790. UPDATE Australian Employment for June is forecast at -21.4k vs. -25K forecast and 5.8% vs. 5.9% Unemployment Rate.
Gold (XAU) finally broke out of its recent range to the downside with $900 the natural target on the downside in Oil continues lower. Overall trading with a low of USD$904 and high of USD$927 before ending the New York session at USD$909 an ounce.
Currency Sup 2 Sup 1 Spot Res 1 Res 2
EUR/USD 1.3749 1.3827 1.3885 1.4051 1.4201
USD/JPY 91.33 92.52 92.75 93.86 95.46
GBP/USD 1.5803 1.5986 1.6060 1.6346 1.6546
AUD/USD 0.7630 0.7790 0.7785 0.8038 0.8155
XAU/USD 895.00 906.00 909.00 913.00 934.00
Euro 1.3885
Initial support at 1.3827 (Jun 22 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4051 (July 7 high) followed by 1.4201 (Jun 1 high)
Yen 92.75
Initial support is located at 92.52 (Feb 20 low) followed by 91.33 (Feb 16 low). Initial resistance is now at 93.86 (May 22 high) followed by 95.46 (Jul 7 high).
Pound 1.6060
Initial support at 1.5986 (Jun 9 low) followed by 1.5803 (Jun 8 low). Initial resistance is now at 1.6386 (Jul 6 high) followed by 1.6546 (July 1 Level).
Australian Dollar 0.7785
Initial support at 0.7780 (Previous range low) followed by the 0.7630 (May 19 low). Initial resistance is now at 0.8038 (Jul 7 high) followed by 0.8155 (Jun 30 high).
Gold 909
Initial support at 906 (May 8 low) followed by 895 (May 8 low). Initial resistance is now at 913 (Jun 23 high) followed by 934 (Jul 3 high).
Gold prices are falling at the moment as the dollar remained firm, sapping gold's appeal as an alternative investment, and on easing inflation fears as oil prices weakened. Gold has been hurt by the dollar's strength as investors have recently preferred the U.S. currency to bullion as a safe store of value amid fears over the economic outlook. 'At the moment, gold prices have been driven heavily by the movement in the U.S. dollar, but if we get down toward $900, we might see some opportunistic buying,' said David Moore, a commodities analyst at the Commonwealth Bank of Australia. Gold is trading at $920 as of 9:18am, London Time. Gold's Pool-Position is 42% Long, meaning that most Finotec clients are Selling the precious metal.
Spot Gold prices fell to a new two-week low lunchtime Wednesday in London, dropping 1.5% from this week's start to bounce off $918.50 an ounce. US stock futures meantime held flat after Tuesday's sell-off, while stock markets across the Far and Middle East ended the day lower.
Written by Easy Forex | Wed Jul 08 09 22:23 ET
Gold (XAU) finally broke out of its recent range to the downside with $900 the natural target on the downside in Oil continues lower. Overall trading with a low of USD$904 and high of USD$927 before ending the New York session at USD$909 an ounce.
Commodity prices continued to sink deeper Wednesday amid renewed concerns about global economic recession. The energy complex got the biggest hit with crude oil plunging -4.4% to close at 60.14 while gasoline and heating oil diving -5.7% and -3.9% to 1.63 and 1.54, respectively. Although the black gold's selloff stabilizes and recovers slightly after hitting 60.01 (currently trading at 60.8), we find the level can just provide temporary support and further decline after consolidation is likely.
The inventory report by the US Energy Department was generally bearish. Although -2.9 mmb decline in crude inventory came in higher than consensus and API's estimates, Cushing stock rose for the second consecutive week and by an impressive +1.6 mmb. We worry that, as the peak driving season ends and refinery facilities enter the maintenance season, crude stockpile will set to increase in coming weeks.
Gasoline inventory came in higher-than-expected as high gasoline price continued to motivate refiners but discourage consumers. 4-week average gasoline demand was down -1.4% yoy. We believe the high margin is unsustainable and recommend selling short on every rebound in gasoline crack.
Condition for distillate was disastrous. Its inventory level rose +3.74 mmb to 158.74 mmb, the highest since 1985. At the same time, its demand reached the lowest level since mid-2003 with 4-week average falling -21.6% yoy. Same as gasoline, we are bearish on distillate crack.
Natural gas is expected to have gained +85 bcf to 2806 bcf in storage in the week ended July 3. Gas price plummeted -2.2% to 3.35 Wednesday as driven by broad-based decline in energy and commodity prices. Its fundamentals remain weak as industrial consumption is expected to fall -8.2% while total demand will decline -2.3% to 62.1 bcf a day in 2009.
OPEC revised down its forecasts for world oil demand by -5.7M bpd to 87.9M bpd for year 2013 as world economic outlook remains uncertain and recovery from global recession will only take place gradually, thus demand for crude should only 'rise slowing over the medium term and return to 2008 level by around 2013'. At the same time, the cartel's production will be reduced to 31M bpd by that time, compared with 31.2M bpd in 2008 as increase in Canadian oil sands and biofuels, together with stable non-OPEC crude and NGLs, will take up the balance.
While the market has expected discussions about 'exit strategies' at the G-8 summit, world leaders concluded that it's too early to 'exit' as world economy remains weak. Rather, more stimulus measures may be needed. Although IMF revised upward its economic forecasts in 2010, its trimmed inflation outlook as well as underlying comments still pointed to the fragility of world economy which was negative for risky assets including commodities.
IMF forecasts the world economy will contract -1.4% in 2009, down from -1.3% projected in April. However, in 2010, the lender expected it will grow by +2.5%, compared with +1.9% in April's estimate, as led by emerging countries including China while Europe will be lagging both the US and Japan. For advanced economies alone, GDP will contract -3.8% in 2009 before expanding +0.6% (April's projection: +0%) in 2010. For the US, the world's largest oil consumer, GDP is expected to contract -2.6% this year and then rise +0.8% in 2010.
Concerning inflation, the IMF forecast global CPI will increase +0.1% in 2009 and then rise to +0.9% in 2010. In its previous Outlook in April, it had forecast increases of +0.3% and +0.6% respectively. The Fund said that although there's small risk for sustained deflation, the risk of inflation remains subdued through 2010 due to the significant output gap.
Diminished inflation outlook, strength in dollar and weakness in commodity prices continued to drive precious metals lower. The benchmark contract for gold slipped to as low as 904.8 Wednesday before finishing the day at 909.3 (-2.1%). Others in the precious metal complex also got hammered with silver, platinum and palladium losing -2.8%, -3% and -2.7% to 12.85, 1101.8 and 234.1, respectively. While we see buying interest above 900, near-term outlook for gold remain skewed to the downside. USD rallied against major currencies except for Japanese yen as risk-averse investors sought safe investments. Against the euro, the greenback rose to 1.383 before retreating to 1.394. Against the pound, USD surged to 1-month high at 1.5984 before pulling back.
Dollar continues to attempt to strength in general as mixed data from US provides little inspiration to the markets. Finalized Q1 US GDP was revised up from -5.7% to -5.5% annualized contraction unexpectedly. GDP price index was unchanged at 2.8%. However, initial jobless claims unexpectedly climbed back to 627k. Continuing claims rose again to 6.74m. From Eurozone, industrial new orders dropped much more than expected by -35.5% yoy in April.
Dollar is back under pressure again as stocks and commodities rebound. Following the 172pts rebound in DOW, Nikkei opened higher today and is back to 9877, up 81 pts. Crude oil is back above 71 level after diving to as low as 61.37 earlier this week while Gold is also back above 944 level. Nevertheless, note that the outlook in greenback is still rather unclear. The developments in GBP/USD and AUD/USD are supporting new high in these pairs, i.e. new low in dollar. However, USD/CHF is still in favor to extend recent rebound from 1.0590. While some pull back might be seen in USD/CAD, the whole rise from 1.0784 is still in healthy shape. The outlook in EUR/USD is also mixed with somewhat 50/50 chance of breakout of this week's range on either side. Markets are still in search for direction.
Dollar falls further today as more reserve talk from China. PBoC said in the annual financial stability report release today that there is a need to create a "super-sovereign reserve currency" that's delinked from the economies of the issuers so as to "prevent the deficiencies in the main reserve currency". Without naming the dollar, the report also said that "an international monetary system dominated by a single sovereign sovereign currency has intensified the concentration of risk and the spread of the crisis." The bank also urged IMF to manage part of its members' FX reserves. However, some support is seen in early US session as commodity pares earlier gains. Crude oil reached as high as 71.29 earlier today but is back under 70 level while
It was a rather mixed week with sentiments flipped flopped a few times. Dollar weakened against most major currencies in general but remained in familiar range. Markets are still undecided on which way to push the greenback further. Euro staged a strong rebound against Swissy, thanks to another round of SNB intervention and also managed to gain some ground against higher yielders but there was also lack of follow through buying in general. Nevertheless, traders will be prepared for a breakout this week considering the list of important events including Non Farm Payroll, ISM, ECB and Japanese Tankan.
Dollar recovers as the week starts following comment from PBoC Governor Zhou that there are no "sudden changes" in China's stable foreign exchange reserve policy. Zhou emphasized that the policy aims at "liquidity, safety and returns." The dollar was sold off last Friday after PBoC called for a "super-sovereign reserve currency" that's delinked from the economies of the issuers in the annual financial stability report. Traders pare some speculation that China will be speeding up diversifications of its $1.95T reserve soon after today's comment from Zhou.
Dollar pares earlier gain as markets remains cautiously in range ahead of the key events later this week. Euro was lifted mildly in European session following release of generally better than expected business and consumer survey data. Sentiments across different components improved for the third consecutive months in Jun. Economic sentiments rose from 70.2 to 73.3. Industrial confidence was up from -33.2 to -31.9. Consumer confidence was up from -28.1 to -25.1. Services confidence also rose from -22.5 to -19.8. The overall sentiment index is also at highest level since November. Though, the data were not strong enough to suggest sustainable near term recovery in economic activity yet. Markets will likely remain cautious on Euro ahead of ECB meeting later this week.
Sterling is leading the breakout in forex markets today with GBP/USD taking out this year's high of 1.6617 and soars to as high as 1.6747 so far while strength of the pound is also clearly seen against Euro and Yen. While risk appetite is cited as the main driving force somewhere on the market, we're a bit skeptical as the rebound is Aussie is not as clear as in Sterling. On the other hand, while Crude oil breaches 73 level briefly, there is no comparable strength seen in Canadian dollar. Hence, while Sterling's strength is clear, as seen with recent resilience, some more evidence is needed to confirm broad based downside breakout of dollar.
Dollar strikes back in early US session, with the help from falling oil and gold prices, and rebounds against most major currencies. In addition, worse than expected consumer confidence data from US sends stocks back into negative territory, which in turn lifts the dollar further against commodity currencies. As noted earlier, while Sterling's rally earlier today was impressive, the strength in other major currencies, including Euro, Aussie and Loonie were not that apparent which cast some doubts about weakness of the greenback. Markets look indecisive for the moment and would likely continue to gyrate inside established range until Thursday's key events of ECB and NFP.
Risk appetite is driving the dollar lower in early US session as stocks rebound strongly after yesterday's fall. Dow opens higher and the development continues to indicate it has bottomed out in near term at 8259 last week. Rally in stocks provide some support to commodity and pressure the greenback in general. In addition, dollar is pressured by disappoint employment data released today even though the impact is somewhat offset by better than expected ISM report. Euro, and to a lesser extent, Sterling, are lifted by upside surprises in today's PMI manufacturing data. Some more downside might be seen in the greenback today. But after all, traders remain generally cautious and will likely keep major pairs in range ahead of tomorrow's key events of NFP and ECB.
Dollar recovers strongly on supportive comments from China again but after all, financial markets are generally indecisively mixed ahead of key events of ECB rate decision and US Non-Farm Payroll report today. In the currency markets, note that EUR/USD's rebound from 1.3747 is still looking corrective in nature. Meanwhile, yesterday's rebound in GBP/USD and AUD/USD was rather unconvincing and both pairs were held below this week's low. There isn't any follow through selling to send the greenback out of recent range yet but on the other hand, dollar is not decisive enough to have a reversal from recent decline. In other markets, Asian stocks are generally mixed even though DOW did have some nice recovery yesterday. Crude oil continue to hover around 70 level while Gold is also gyrating in range of 920 and 950. All eyes will be on today's key events for inspiration for some sustainable move.
Yen and, to a lesser extent, dollar are generally higher in early US session on risk aversion following the release of worse than expected Non-Farm Payroll report from US. The report showed deeper than expected -467K contraction of the job market in Jun, versus consensus of -375K. Though, prior month's data was revised up from -345k to -322k. The figure in Jun was indeed quite close to ADP number of -467k released yesterday. Unemployment rate, on the other hand, climbed less than expected to 9.5% in Jun. Higher yielders are generally lower as futures point to lower open in US stocks. Commodities are also pressured, in particular with Crude oil falling back to below 68 level again.
Dollar and yen were under much pressure in the early part of last week as optimistic investors sent global stocks higher. Economic data were generally positive, until the release of worse than expected ADP employment and then the disappointing non-farm payroll. NFP alone sent DOW -223pts lower to close the week near the low. Dollar and yen rode on the turn in investor sentiments and rebounded, additionally supported by weakness in commodities. But after all, major pairs are still staying in prior week's range and it needs something more drastic to trigger a breakout. Nevertheless, some large moves in the forex markets could be around the corner considering the technical developments in stocks and crude oil.
Japanese yen surges across the board as the week starts as risk aversion is back to be the theme of the markets. Aussie, Kiwi and Sterling are hardest hit in yen crosses which also dragged them lower against dollar. While Euro also weakens sharply against yen, it remain steady against the green back so far even though EUR/USD looks vulnerable. Nikkei dropped over -1.3% or -135 pts today while European indices are set to open lower. Crude oil dives through 65 level which further confirms the double top reversal pattern.
Japanese yen remains firm in early US session as risk aversion continues to dominate the markets. Yen's strength is seen across the board and in particular against AUD, GBP and NZD. Some stabilization is seen in early US session after release of stronger than expected ISM non-manufacturing index. However, today's sharp fall in yen crosses still carry some technical significance as the medium term trend line support are finally taken out in EUR/JPY, GBP/JPY and AUD/JPY which is building up the case for medium term rally in yen. Major global indices including Nikkei, FTSE 100, DAX, CAC 60, are down over 1% on concern of sustainability of recovery in the economy. Dow opens lower in early US session and dives to as low as 8211 level but recovers mildly. Nevertheless, the break of head and shoulder neckline support in Dow does suggest more downside ahead. Crude oil also falls to as low as 63.4 so far and remains pressured.
Major currencies recover against dollar and yen as markets stabilize following yesterday's late recovery in US stocks. Asian equities are mildly higher but lack clear momentum in the rebound yet. With some intraday levels taken out in dollar and yen crosses, some consolidation will likely be seen in near term. While reversal in crude oil is clear, the head and shoulder tops in DOW and S&P 500 are not confirmed by a close below neckline support yet. But after all, we'd expect risk aversion to continue to build up on summer doldrums and hence, more upside is favored in dollar and yen in general
Euro rebounds strongly today, boosted by combined effect of strong Germany data and rebound in stocks. Germany factory orders posted strong upside surprise today, showing 4.4% mom gain in May while markets expected a mere 0.5% rise. This was the third consecutive month of expansion and the fastest pace since June 2007. The data argues that German industrial production's deterioration may be coming to an end and worst of recession in the economy has passed. Major European stocks index also recovers mildly from yesterday's loss. Euro takes the lead to rebound against dollar and yen and is followed by strength in Aussie. Canadian dollar is also lifted by strong building permits data which rose 14.8% mom in May even though crude oil remains soft.
Yen and, to a lesser extent, dollar rise sharply today riding another round of risk aversion trades in the markets. Asia stocks followed yesterday's decline in US and fell broadly today while European stocks are also generally lower. Indeed MSCI world index dropped for fifth consecutive days and reaches the lower level since mid May. The case for reversals in global equities continue to build up as DOW finally closed below head and shoulder top neckline support yesterday and opens up the case for deep fall to 7389/7673 region at least. Crude oil is also moving away from mentioned double top neckline support and dipped to as low as 62.03 so far today.
Yen and dollar turns sideway in early US session after strong rally earlier today. With no important economic data from US scheduled, some sideway trading might be seen in the currency markets in US session. But after all, further rally in dollar and yen is expected in general. Recovery in US stocks at the open is so far mildly and did nothing to change the near term bearish view. Falling commodity prices are providing additional support to dollar and yen. And the next main focus will be on Crude Oil Inventory report which could trigger volatility in oil and thus stocks and currencies indirectly.
As expected the RBA decided to keep the cash unchanged at 3% as Australia's economic conditions have 'not been as weak as expected a few months ago while 'growth in China strengthened' which have positively impacted Australia.
After cutting the policy rate by 25 bps in April, the RBA has left interest rates unchanged at current level for the 3rh consecutive months. Decisions by policymakers have been unanimous as they saw diminished downside risks to the economic outlook. In the accompanying statement, the central bank said that 'conditions in global financial markets improving this year and action to strengthen balance sheets of key financial institutions under way'.
Concerning domestic economy, the RBA acknowledged a pick-up in housing credit demand and increase in housing prices. Although economic conditions improved faster than previously anticipated, the RBA still has its worries. 'Output has been sluggish and capacity utilization has fallen back to about average levels, with some further decline likely over the rest of the year. Weaker demand for labor is leading to lower growth in labor costs. These conditions should see inflation continue to abate over the period ahead'.
In the last paragraph, the RBA said that 'outlook for inflation allows some scope for further easing of monetary policy, if needed. In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for a sustainable recovery in economic activity'. Although the RBA has reserved the right to ease monetary policy further if necessary, we find the tone is less strong than previous meetings. In June, RBA stated 'Nonetheless, the prospect of inflation declining over the medium term suggests that scope remains for some further easing of monetary policy, if needed. In assessing how it might use that scope, the Board will continue to monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity'. In May, the central bank said that 'In assessing whether further reductions in the cash rate are required over the period ahead, the Board will monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity'. Comparing the change in tones in the 3 meetings, we increasingly believe that the current easing cycle in Australia has probably ended.
In fact, the most critical issue that will trigger another rate cut is employment condition. Thursday's report should show that Australia's unemployment rate have risen to 6% in June, compared with 5.7% in May and a surprising drop to 5.5% in April. The unemployment rate has soared by 1.48 percentage point in the last 12 months and it's likely that unemployment will continue to head higher over the rest of the year. However, the pace of increase should slow down and the RBA may refrain from cutting rate by counting on this point.
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The euro tumbled against the yen and dollar overnight, falling to 130.44 and 1.3861, respectively. The equity markets are still the key drivers of foreign exchange movements with lingering questions over the global economic recovery and bouts of heightened risk aversion dictating sentiment.
Story By: Crude oil prices rallied early last week to new 2009 highs at $73.38 on dollar weakness and an attack on an oil pipeline by Nigerian militants, but failed to hold on to gains as the end of the 2nd Quarter ignited profit taking while a slew of bearish reports reversed momentum for the remainder of the week. Crude oil settled lower for the 3rd straight week at $66.73, down $2.43 from the prior week.
Chartwhiz.com
With oil rallying 41% for the 2nd quarter, it was not surprising for profit taking to come in. But the real story last week was a turn in the fundamentals. For starters, consumer confidence set the bear tone, falling to 49.3 in June, down from 54.8 in May as consumers grew more pessimistic about an economic recovery. This came as a surprise as analysts were expecting to see a rise to 55.5. The weekly inventory report added pressure to oil prices as supplies at Cushing rose 200,000 barrels to 28.6 million while gasoline and distillates posted larger-than-expected builds as demand for the products remains weak. To top things off, a disappointing jobs report sent the market tumbling to close the shortended week with 467,000 jobs lost in June vs. an expected loss of 325,000 jobs, a clear indication the economy is not yet improving. Additional selling came as traders sqaured off positions ahead of the long 4th of July holiday weekend.
The ‘fundamental reality’ appears to have set in as the 2nd half of 2009 begins and substantial evidence of an economic recovery is non-existent. The technicals gave us a heads up 2-weeks ago on the break of the major 10-week uptrend line while last week’s ‘double top’ rejection at the 2009 highs provides decisive evidence a correction is underway. The Bulls will continue to watch for dollar weakness and geo-political tensions to keep prices high, however, with lack of support from the fundamentals, rallies will likely be short lived.
own a bit, up a bit and then back down a bit. That's the story for the JPY crosses and I would suggest that the remainder of the session will be quiet. Technical resistance in the form of the previous bullish trendline in EUR/JPY is holding thus far. The major level to watch now is 94.50 in USD/JPY- if that level can be broken then many non-believers such as myself start to take notice of the bear argument.
All currencies gained against the yen this Thursday as the Japanese government stated that national investors bought more assets than sold for the seventh week in a row, adding to the negative outlook for the Japanese currency today. A Federal Reserve statement signaled that the recession might be easing in the United States, creating a bullish pattern for virtually all high-yielding assets and equities markets as a whole, damping demand for the Japanese currency, often purchased when risk aversion is high among traders. Mixed signs regarding the depth of the global slump caused the yen to become extremely volatile having sequential days of losses and gains, creating ideal opportunities for day-traders to profit lately.
Analysts refer to the Fed’s statement as the main driver for the yen’s bearish scenario, being such declaration the reason traders needed to regain confidence and purchase high-yielding currencies fueled by a spree of risk appetite this Thursday in world financial markets. The yen is likely to swing considerably for the next weeks, as the actual global slump scenario remains undefined.
USD/JPY climbed to 96.53 as of 11:24 GMT from 95.45 yesterday. EUR/JPY also rose from 133.80 to 134.45.
The U.S. currency lost today against 14 of the 16 main currencies, after Dallas Federal Reserve Governor Richard Fisher is likely to include in the next central bank statement that interest rates in the United States will remain at exceptionally low levels, disagreeing with previous forecasts that mentioned an eventual rate hike to follow in the second semester, as long as the rates remain at the present levels, the attractiveness of the greenback is likely to fade, as investors will tend to purchase higher-yielding options. The Australian dollar was one of the biggest winners against the greenback this Friday as commodities prices rebounded, spurring demand for assets in that country.
The current recovery in the stock markets brought risk appetite once again to high levels among traders, which were recently opting for the greenback as a safe refuge during downmarket days, adding to that, lowered expectations for the Fed benchmark interest rate damped even more the weakening demand for the U.S. currency. Analysts affirm that the dollar might enter a new bearish period, if risk aversions continues to fade.
EUR/USD fell and traded at 1.4036 as of 9:41 GMT, from yesterday’s rate of 1.3945. AUD/USD followed the same path and rose from 0.7955 to 0.8041.
