Forex News and Reports

The steady pace of dollar appreciation over the past week took a break in the morning hours Thursday’s New York session as the come down from yesterday’s positive shift in the trade balance led into the initial speculation of tomorrow’s retail sales report.  Looking over price action in the majors, the dollar spent most of the Asian and European sessions on sell lists.The EURUSD had worked its way up to around 1.2730 around 7:30 GMT, making a choppy return to the previous day’s low at 1.2675.  In the other three most liquid dollar-denominated pairs, the retracements in the greenback were less momentous.  In the yen backed currency pair, the dollar dipped to 115.00 while three tests were made on the strengthening 115.50 resistance level.   For the USDCHF, steady shorting from yesterday’s close shed 100 points from the pair until dollar bulls instigated a rally off of 1.2275 support to secure a hefty 60 point retracement.  Anti-dollar sentiment in the overnight sessions was most serious in the GBPUSD where multiple tests off 1.8330 sparked a 130 point advance before being topped by the open of the US capital markets.

(more…)

It was a tradeoff for Canadian dollar in Thursday’s session.  The Bank of Canada’s quarterly monetary policy report killed any possibility of an eighth interest rate hike in the foreseeable future, while crude oil prices were soaring to fresh all-time highs.  This situation brings to the forefront the battle of what will drive the loonie in the months to come – the commodity correlation or the halt to interest rate hikes and the implications for dour growth expectations.

(more…)

The Euro posted a modest retracement following yesterday’s dive, settling above 1.2710 and ranging for during late Asian and early European trade.  The decline in EUR/USD came in anticipation of the US trade balance, which reported at -63.8, only  modestly better than the month prior.  The pair has since rallied off the 1.2674 low mid-day Wednesday to as high as 1.2733.  European economic data consisted of German and French CPI, which were slightly below expectations in both countries and helped to ease some of the recent inflation concerns.  EU Harmonized German CPI for June showed a 0.1% month over month increase  with an annual rate of 2.0%, in line with ECB targets and below the 2.1% mark for May.  French EU Harmonized CPI for June later showed no change from May, while the yearly rate declined from 2.4% to 2.2%.  Although further ECB rate hikes are expected before the end of the year, the new data gives the central bank something to ponder as it considers the timing on the increases.  Policymakers have noted that global monetary policy has been very accommodative for the past few years and notes that this may soon come to an end.  As of 9:00GMT EUR/USD traded at 1.2721, up from Wednesday’s New York close at 1.2700.

(more…)

The pound strengthened in early European trade Thursday, despite having only one economic release.  The jump above 1.8400 followed yesterday’s substantial drop to a low of 1.8309 following the release of the US trade deficit, which showed only a modest increase.  The retracement of some losses today came before the release of the BCC Second Quarter Economic Survey.  Cable was relatively unaffected by global uncertainty, despite oil reaching a new high above $75 in New York on Nigerian turmoil, and Israel launching attacks against a Beruit airfield.  On tap at 10:30 are two late announcements out of Britain.  The Leading Indicator Index for May and the Coincident Indicator Index are not expected to show major differences from their respective 0.6% and 0.2% readings in April.  As of 10:05 GMT GBP/USD traded at 1.8376, up from Wednesday’s New York close of 1.8339.

(more…)

OTTAWA (AFX) - The Bank of Canada has kept its main interest rate unchanged at 4.25 pct, after a series of monthly rises.
The bank said its outlook for economic growth and inflation in Canada has not changed, despite “a little stronger” than expected growth in the first half of the year and a dollar trading “somewhat higher” than expected.
There was a further shift in demand from exports to domestic consumption while the economy continues to operate “just above its production capacity,” the bank said.
But, inflation has remained above its 2 pct target, due to higher energy prices, the bank said.
(more…)

Market OutlookOnce again the market is largely being driven by the degree of global risk rather than anything specific on interest rates. Despite the slightly softer interest rate background developing in the US, the US equity market remains a nervous place, with concern about earnings the latest source of uncertainty. This in turn is weighing on global risk appetites and helping to check both the recent recovery in some emerging currencies as well as existing positioning on the majors. Part of this yesterday, at least initially, was a JPY story, with position cutting on the JPY weighing on the EUR in general. As far as the JPY is concerned, there may be more of this to come ahead of Friday’s policy decision, but it is unlikely to be sustained. There is a risk the BoJ does not hike rates at all or opts for a smaller than expected rise and even if they hike by 25bp, this is likely to be accompanied by a dovish message to head off any negative fallout for markets and/or criticism from the government.

(more…)

LONDON (AFX) - The UK’s trade position with the rest of the world deteriorated sharply in May with the monthly shortfall the second highest ever, official figures showed.
The office for National Statistics said the UK’s trade in goods with the rest of the world widened to 6.8 bln stg in May from 5.6 in April. The April figure was revised down from 5.8 bln stg previously.
Analysts polled by AFX News had predicted a much narrower deficit of 5.7 bln stg for May.
The widest ever deficit was recorded in February this year, when the shortfall stood at 7.2 bln stg.
(more…)

US Dollar

The US dollar starts the new week stronger against all of major currencies as it continues to shake off its post non-farm payrolls weakness.  The ambiguous message from the mixed NFP report last Friday kept the door open for another rate hike in August while the record high in energy prices hit last week only further escalates the inflation concerns for the Federal Reserve.  Many traders were short dollars going into the non-farm payroll release and the rally today was an extended reversal of those trades. Oil is all we have to rely on for the time being as the other inflation gauges such as consumer prices are not due out until next week.  CPI comes out on the very same day that Bernanke is scheduled to give his semiannual testimony on the economy, which means that prices could consolidate towards a breakout point on that day.  All traders should have July 19th circled on their calendar because at this point, it should be an extremely market moving day.

(more…)

Pound bulls were in for a nasty surprise this morning when UK Visible Trade Balance reported a much larger than expected deficit of -6.75 Billion pounds versus consensus calls of -5.7 Billion.  Higher oil prices and continued decline of competitiveness in UK’s industrial sector  produced the second largest deficit on record. The news does not bode well for cable longs still hoping for an end of the year rate hike from the BOE as the deteriorating trade position of the UK economy will depress the country’s GDP growth going forward and will likely keep the Central Bank on the sidelines for the rest of the year. After rallying to 1.8450 sterling dropped bellow the 1.8400 level in the aftermath of the announcement while the EUR/GBP cross bounced off .6900 support to challenge yesterday’s highs. As we noted in our weekly piece, “with the BOE standing still while the rest of the majors central banks are aggressively hiking the pound continues to be the weakest member of the pack.”

(more…)

A surprisingly large U.K. trade deficit hit the pound today, sending GBP/USD lower and creating some unease in the market.  The Trade Balance for May reported at -6.753 billion pounds against -5.700 billion expected and down from the revised -5.568 billion total for the month prior.  The non-EU portion of the balance also declined to -3.715 billion from -3.386 billion.  The deficit represents the second largest gap ever, and the non-EU deficit is the largest since January of 2006.  The data suggests that foreign trade could weigh down domestic growth in the British economy.  Further concern was generated by the BRC Retail Sales Monitor, which posted a 4.7% reading against 6.2% the period prior, while same store sales slowed to 2.3% against 3.4% expected and 3.6% the period prior.  As of 10:15 GMT GBP/USD traded at 1.8413, up slightly from Monday’s close at 1.8406.
(more…)

The Yen suffered losses against the dollar with major events looming at the end of this week and negative economic data casting further doubt on an already uncertain situation.  The Yen retreated from yesterday’s one month-high against the dollar on a declining consumer confidence survey for June, which reported at 47.3 against 48.0 expected and 49.9 the month prior.  Household confidence for June was similarly down to 47.2 against 49.1 expected and 49.8 in May.  The numbers have continued their descent from April’s high, and adds still more confusion to the ZIRP question.  While recent economic data has shown positive growth in Japan, several releases have surprised to the downside and domestic conditions remain cloudy.  The Bank of Japan is expected to raise rates before the end of the year, but whether that decision will come this week or at a future meeting remains uncertain.  The G8 meeting this weekend also looms over traders, as questions surround world policy with global changes in politics and economics.  As of 7:20 GMT USD/JPY traded at 114.23, up from Monday’s New York close of 114.19.
(more…)

CADJPY– CAD/JPY has plummeted from the upper end of a 7 month range, breaking below support from daily lows at 102.08 and currently testing the 50% fibo of 98.24-104.40 at 101.32.  The decline from 104.17 (7/5 high) is currently correcting the rapid decline to yesterday’s low at 101.06.  To complete a 5 wave decline, the pair needs to break below the 101.06 low – even for just a moment.  Support is strong though – with the 200 day SMA at 101.09, and the 6/5 and 6/6 lows at 101.11.  A break lower could test the 61.8% fibo of 98.24-104.40 at 100.60 before a larger correction of strength takes place.  Another target would be 100.98 – which is where the initial wave 1decline from 104.17-103.31 would equal wave 5 (beginning at 101.83).    
(more…)

EUR/USD – The EUR/USD decline from Friday’s high at 1.2859 appears to have completed 5 minor waves down to 1.2705 to make a short term double bottom with the 7/5 low.  The bullish divergence on the hourly at the 1.2705 low gives scope to a continued rally to test the 38.2% fibo of 1.2859-1.2705 at 1.2763 with additional resistance at former intraday support from Sunday at 1.2783.  The next big move is likely down in a C wave decline to correct strength to 1.2859 with support at the 61.8% fibo of 1.2481-1.2859 at 1.2626 and the 78.6% fibo at 1.2562.   

(more…)

The European Central Bank signaled that it is poised to quicken the pace of interest rate increases and tighten again in early August, after it left its key rate on Thursday unchanged at 2.75 percent.

ECB President Jean-Claude Trichet said the central bank is on high alert over inflationary risks and will break with tradition by making its early August rate decision in person, rather than by teleconference.   

(more…)

AUDCAD– AUD/CAD has made a massive triple bottom with daily lows from 6/13 (.8142) , 6/21 (.8122) , and 6/29 (.8119).  The triple bottom along with bullish divergence on the daily points to a turn in this pair.  Favoring the bullish stance is the 78.6% fibo of the .7502-1.0546 April 2001 to February 2004 bull wave at .8156.  CCI on the daily has crossed above 0 and MACD slope is positive.  The hourly chart shows that a correction of the rally from .8119-.8310 has found support at the 38.2% fibo of that rally at .8237.  Additional weakness probes the 50% and 61.8% fibos at .8214 and .8192.
(more…)