Share This Story
Forex Market Update
Published: Aug. 14 2006, 06:44 GMT
USD Consolidates After Last Week's Rally
This week looks to continue last weekâ€™s choppy pattern. Traders need to watch economic indicators for guidance.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€¢ European CPI figures generally in line with expectations.
â€¢ French GDP QoQ (2Q A) out at 1.2% vs. 0.7% expected.
â€¢ Italian GDP (2Q P) out at 0.5% as expected.
â€¢ US Import Price Index MoM (Jul) out at 0.9% vs. 0.8% expected.
â€¢ US Advance Retail Sales MoM (Jul) out at 1.4% vs. 0.9% expected.
â€¢ US Retail Sales Less Autos MoM (Jul) out at 1.0% vs. 0.5% expeced.
â€¢ US Business Inventories (Jun) out at 0.8% vs. 0.5% expected.
â€¢ NZ Retail Sales MoM (Jun) out at 0.1% vs. -0.4% expected.
â€¢ NZ Retail Sales Ex Inflation QoQ (2Q) out at -0.5% vs. -0.4%.
â€¢ German GDP sa QoQ (2Q P) out at 0.9% vs. 0.8% expected.
THEMES TO WATCH â€“ UPCOMING SESSION
The greenback continued to be supported by the much higher then expected Advanced Retail Sales figure, which printed at a massive 1.4% vs. 0.9%. The renewed strength, after a downwardly revised decline of 0.4% in June, was broad based across all categorizes. Perhaps the most interesting figure, and the one which most of the USD rally has been based, is the core retail sales. This number excludes transportation, gasoline and construction materials and is directly related to estimates of consumer spending in GDP. Traders bid USD on the basis that US growth might not be slowing as the FED had anticipated and further tightening would be warranted. The Fed Fund rates estimates jumped to 37% from 25% on this data. Now that we are starting to see the growth side of the FOMC equation, this week traders will be focused on inflation i.e PPI and CPI.
There are no US releases today.
Yen looked very soft on the close Friday and hasnâ€™t faired to well in Asia. After last week disappointing GDP data which printed at (annualized) 0.8% vs. 2.0% expected, Japanâ€™s economic outlook has dimmed significantly. While the BoJ continues to assess the economy as expanding moderately, this decline from the previous quarterâ€™s 0.7% is of concern. The softer growth has traders doubtful the BoJ will hike above current .25% level and the market should expect considerable rhetoric from the government that ending ZIRP was premature. This confusion should continue JPY selling. We will be waiting for the BoJ minutes on Wednesday to provide some clarity.
After the BoE surprise rate hike traders will be watching todayâ€™s PPI and tomorrows CPI figures with heightened interest. In particular traders should watch for deviation in PPI Output Core. With expectations at 2.7% any increased will have inflation scratching the 3.0% ceiling and filtering into tomorrows CPI. The recent GBP rally has been partially based on rising interest rates and a figure that lessens or increase the probability of further BoE action will signal a significant market reaction.
Note: the support/resistance levels used in the matrixâ€™s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
EURUSD (1.2749 @ 06:31 GMT)
EURUSD- from the steep reversal from last Thursdayâ€™s 1.2910 high, the pair stabilized above Asiaâ€™s 1.2710 lows. Focus will be on the downside, a break of the psychological 1.2700 lvlâ€™s will risk a test of 1.2685 resistances (fibo 50% retracement). We are looking to sell at 1.2770 for a test of 1.2685 / 70 resistance.
14 Aug 06
British Pound/US Dollar
GBPUSD (1.8924 @ 06:32 GMT)
GBPUSD â€“ USD strength provided the momentum to retrace to 38% fibo. Recent rejection at 1.8980 lvl suggests strong downside support. Look for renewed bullishness to retest 1.9000 lvls.
14 Aug 06
US Dollar/Japanese Yen
USDJPY (116.38 @ 06:34 GMT)
USDJPY â€“ after a strong rally the pair stalled at 116.20-40 lvls. With the JPY looking soft, we are looking for breakout of current consolidation pattern. On the break look for 116.70 resistance, while dips should hold above 115.90.
14 Aug 06
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclaimer.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."