Friday August 20, 2004 - 09:42:49 GMT
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US OPEN MARKET POINTS 08-20-04
US OPEN MARKET POINTS 08-20-04
Published By: Boris Schlossberg, Fundamental Analyst
Dollar Bears Beware?
Typically quiet summer Friday night as most majors trade in 20 pip ranges and eco news is in-line with expectations. As the week comes to a close and the Euro holds on to its highs some analysts are expecting a dollar snapback. UBS, in today’s morning note writes,” The risk is now that economic data in the US begins to surprise on the upside which would push EURUSD lower and we expect it to revert to 1.21 over the next month, before resuming its upward advance into year-end.” Dennis Gartman, too, is calling for USD bullish surprises. Writing about next months Non-Farm Payrolls he notes, “Last month's figures were skewed badly downward for a number of reasons (wet weather being primary), we look for this month's non-farm payrolls to be up and up hugely. Indeed, we'll not be surprised to see August's payrolls up at least 300,000. In fact, we'll be surprised if it is not at least that high.”
Are these pseudo-bulls correct? Is the dollar ready to rally? No. The EUR/USD may indeed have a mild retracement to work off some of the overbought condition in the pair, but fundamentals for the dollar remain negative and we believe they will stay that way. Dearth of new jobs is a function of a slowing domestic demand and skyrocketing health benefit costs. Simply put, businesses need far less employees to meet their output while each new hire saddles employers with exorbitantly expensive benefit packages making them reluctant to hire but for the most necessary headcount. August NFPs may indeed rise, but if the majority of the number is comprised of McJobs , the net result will have little substantial effect on the economy. More troubling still for US is the fact that Gartman’s own favorite indicator the Coincident/Lagging ratio from yesterday’s LEI data fell for the 1st time in 6 months (119.6 vs. 120), indicating that the slowdown in US economy may be more ominous than it appears.
Tonight’s relatively positive trade news from the Euro-zone with better than expected Current Account data is keeping the bid in the EUR/USD, but as we move into US session void of any eco news, dealers may use any decline in the oil prices as an excuse to sell down the pair and take some profits. However, we do not believe that a meaningful dollar rally is in the cards.
Key Overnight Developments
- JPY Tertiary Industry Index prints 0.8% vs. 0.4% expected as improved consumption leads to better demand for services
- EUR Current Account €4.5Bn vs. €4.0Bn expected as German surplus expands and French turns from deficit to surplus
FX Spot Overnight
- EUR trades 2360-2380 on quiet order flow
- JPY breaks 109 but bounces back as eco data supportive
- GBP holds 8300 handle after yesterday 120 point rally
- CHF very quiet unable to break 2400 despite positive data
12:30GMT – (8:30 AM EST) CAD Wholesale Sales m/m (June) Expected at 0.5%, Previous 0.3%
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