Market Update
The softer USD is being blamed for much of the recent spike higher in commodity prices, and while this makes sense on a basic level (European’s can buy more gasoline as it is cheaper in EUR’s), chances are that the USD effect on non-precious metal commodities is being greatly overestimated by commodity bulls. Still, for the Fed this is another worrying inflation risk, see if the speakers today address this. Interesting to note that recent ECB comments have referred to the G7 texts on them not wanting excessive FX movements and to the US stance on wanting a strong currency. Broad hints to Treasury that they would need to intervene first to stop a falling USD becoming a one way bet? ? Hmmm… On the charts the new EUR/USD highs keeps the bias on 1.43/1.4380 probes, but above 1.40 the EUR/USD is really into thin air. Looking for $2.03 to draw out Cable sellers still, while the AUD, NZD and CAD are having a heck of a run here, key highs at risk for further gains so… USD/YEN at 115 should find buyers, risk below 114.80 today, aiming for 116 and then 117.20 still…
Slowly but sure the dollar lose new pips.
Slowly but sure the dollar lose new pips against the euro. After the report for U.S. New Home Sales the rumors was confirmed that the crisis in the housing sector is deep. The forecast is for test of the levels of 1.42 tomorrow ahead the key reports for Personal Income and Spending. The forecast here in World-Signal.com is the crisis to continue till the end of 2007. The Fed will cut still once the interest rates. Even is possible new aggressive benchmark interest rates cut with half percent.
For the coming Asian session the forecast is EURUSD long @ 1.4135/45 target 1.4180 and recovery back to 1.4135 again.
Market Update
The EUR/USD pushed to new highs on Thursday, with the market feeling pretty good about the Eurozone economy as the German jobless rate ticked lower, money growth remains a bit too high for the ECB’s comfort, while the US economic data remains patchy. The ECB’s Trichet was on the wires suggesting that it was too early to gauge the impact of the subprime crisis on the Eurozone economy, while also saying that the uncertainties to the ECB’s forecasts have increased. US new home sales will be key later today, see if this continues to slump as the market expects, which will keep the USD under pressure if seen. Fed speakers later on will be interesting, especially if they try and ringfence the subprime woes and hint that the 50 bp rate cut will not automatically be followed by further rate cuts – the data will need to really soften for the Fed to start cementing in the view that further rate cuts are a ‘done deal’. The ECB confirmed that the lent 3.9bln eur at the penalty rate on Wed., suggesting that liquidity is still a problem, and banks continue to be wary of lending. On the charts, same risks as before – $1.43+ in the EUR seems open, 1.41 now offers support.
Market Update
The USD remained under pressure in Asian trading on Thursday with the EUR/USD bumping above $1.4140, Cable pushing towards $2.0180 and the AUD and NZD looking pretty well bid. The yen remains soft on the cross rates and the USD, and while BoJ members were on the wires suggesting that the BoJ would need to raise rates at some point or else risk an overheating economy, given the run of data recently, one would expect they were talking about a theoretical situation, not what is at hand. The markets remain split in their thinking = Fed funds are looking for a rate cut before year end, while the bounce in Asian stock markets o/n is being partially attributed hopes for a quick bounce back in the US economy. Hmmm… the Aug. durables data was soft on the outside (-1.8% ex-transport) but given that the July figures were quite strong this was to be expected, while the non-defense capital goods shipments was up 0.8% (used for GDP figures), while the unfilled orders of capital equipment component was up 1.2% – pipeline for goods still healthy? The data is whippy at the best of times, and with aircraft orders and seasonals probably swinging the figures around time will tell whether or not demand is holding up. For today, there are plenty of Fed speakers on the table with the data focus on the new home sales figure. The final Q2 GDP reading will only move markets if it really changes away from 3.9%-4.1% sort of range, and even then the markdowns for Q3 and Q4 are so severe (economists lining up behind a 2% yoy GDP reading for ‘07) that Q2 data may not matter. Housing sales are expected to slump, while Fed speakers will probably try and draw a line under the subprime fall out again. On the charts the USD is soggy vs. the European and commodity FX rates, bottom fishing looks a bit premature except vs. GBP and maybe the CAD, but the latter remains the puzzle as energy plays are one thing, but parity with the USD is a bit rich. Still, trend is your friend and all that, unless the EUR/USD starts to turn below $1..41 today then $1.43+ remains at risk, CAD needs to push through 1.0180 to look more basey, while the AUD is eyeing 0.88 for a push to new highs, NZD tagging along. Top picking? Tempting, but waiting for payrolls next Friday may be best?
Market Update
The EUR/USD remained bid in London morning trading on Wed., with the $1.4160+ zone probed in Asia, no real joy in pullbacks thus far though. The big mover in London was the yen, pushing back through Y115 which is leaving Y116 open for Y118 and higher. See if dips can hold Y114.60/30 now, with Y114/113.85 expected to offer USD support on dips. A turn through the latter would leave 112/111.60 open for a bigger test of the downside, possible but not really favored. Instead, aiming for a pullback towards 117.20+ still, early days and regaining 115 on a sustained basis would help to keep the focus on the USD upside. The CAD is a touch weaker, with the USD holding up and the EUR and other crosses finding buyers. The EUR/CAD turn is interesting and should be able to clear 1.4260/80 for 1.4460 and then a lot higher, if the CAD turn is ‘for real’. Watch the 1.4180/1.4140 area as chart support just now, with 1.40 area key support marking m/t risk for the next leg lower on a break. The USD/CAD probe below 1.00 failed to draw in fresh sellers (so far) and the risk has to be that with so much good news priced into the CAD a pullback towards 1.0180 unfolds, then up and running to 1.03+. Early days… Cable? Still struggling to bounce, favoring $2.01 to give way for $2.00 and lower, while EUR/GBP is still bouncing, 0.7250 looks open as long as the move above 0.70 keeps gathering momentum. EUR/USD? Up, new highs are tough to fight, 1.43+ is open with $1.41 serving as support now, interesting to see ECB members on the wires opposing ‘brutal’ moves in the FX markets. Pundits have given up on guessing where the ECB will intervene in the FX market, with many probably thinking that $1.50+ levels would be needed to give the ECB a nudge.
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