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Forex Market Update: Range Bound Before US Figures
Published: Aug. 23 2006, 12:55 GMT
Range Bound Before US Figures.
After yesterdays volatility we see a slow mid- Asia and European sessions.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€¢ US Mortgage Applications (Aug) 0.1% vs. 1.4% exp.
â€¢ Canadian Leading Indicators (Jul) MoM 0.2% vs. 02% exp.
FROM THIS MORNING UPDATE
â€¢ French GDP QoQ (2Q P) out at 1.1% vs. 1.2% expected.
â€¢ Euro-Zone Current Account (Jun) out at 4.0B vs. -5.0B expected.
â€¢ Euro-Zone ZEW Econ Sentiment (Aug) out at 1.3 vs. 15.0 expected.
â€¢ German ZEW Econ Sentiment (Aug) out at -5.6 vs. 11.4 expected.
â€¢ German ZEW Current Assessment (Aug) out at 33.6 vs. 27.0 exp.
â€¢ Canadian CPI MoM (Jul) out at 0.1% vs. -0.2% expected. â€¢Canadian CPI Ex Core 8 MoM (Jul) out at -0.2% vs. -0.3% exp.
â€¢ US Richmond Fed Manufacturing Index (Aug) out at 3 vs. 10 exp.
â€¢ Japanese Merchandise T-Bal (Jul) out at 860B vs. 950B expected.
â€¢ Japanese Adj. Merchandise T-Bal (Jul) out at 799B vs. 750B exp.
â€¢ AU DEWR Skilled Vacancies MoM (Aug) out at -3.2% vs. -1.2% prev.
THEMES TO WATCH â€“ UPCOMING SESSION
The market is clearly waiting for Existing Homes Sales this afternoon, having showing no clear biases in any direction. Markets have been trading in a very tight range since mid-Asian session. Traders should take advantage of these technical moves and trade the ranges before US figures. We believe Existing Homes Sales will post a lower then 6.55 exp. figure and we should see some minor short term USD selling.
In order to take advantage of low vols. and EM movement we traded an EM basket. See Global Report for further information.
FROM THIS MORNING UPDATE
A damaged greenback found timely support from risk aversion trades and overnight comments by Fed President Moskow, as the USD continued its impressive rally against the majors in Asia session. In early NY, the market felt the tensions building as Iran envoy met with security counsel members (Permanent plus German) to delivery the countries response to uranium enrichment. A temporary â€˜flight to qualityâ€™ sent the USD higher. The in a surprise hawkish speech Fed Reserve Bank of Chicago President Michael Moskow hinted the FOMC might vote to raise rate further. ``The risk of inflation remaining too high is greater than the risk of growth being too low,'' Moskow said. ``Thus, some additional firming of policy may yet be necessary to bring inflation back into the comfort zone within a reasonable period of time.'' It should be noted that Moskow is a nonvoting member and historically hawkish on monetary policy.
The USD should come under pressure again as todayâ€™s only US figures Existing Home Sales and MBA Mortgage Applications highlight a slowing housing market and a linchpin to the USD economy. However if it interest rate expectation story carries over from Moskow speech the USD could gain additional support.
Japan posted disappointing Trade figures as surplus narrowed on the back of slowing export and growing imports. Continued declining numbers for Japan (ie Retail Sales and GDP) look to cloud Japans economic outlook. We see the USDJPY in a consolidation phase until the USD defines its direction.
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 (1.2816 @ 12:51 GMT)
EURUSD- Strong reversal on weak ZEW, Iran, and a Hawkish Moskow. The Pair consolidated around the 1.2790 /1.2810 lvl. 1.2780 â€“ 1.2850 range should hold before US data. Break in either direction will test 1.2710 â€“ 1.2895 intra day.
23 Aug 06
British Pound/US Dollar
GBPUSD (1.8943 @ 12:52 GMT)
GBPUSD- Retreated from Mondays 1.8990 high, finding support at 1.8870 forming a bearish channel. Intra day trading within the channel. 1.8815 strong support and 1.8890 minor resistance.
23 Aug 06
US Dollar/Japanese Yen
USDJPY (116.30 @ 12:52 GMT)
USDJPY- Failure to hold momentum above the 116.90 lvls sent the pair down in Asia to 116.25. Range bound 116.02 â€“ 116.85 lvls. Break should provide a longer term direction.
23 Aug 06
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