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19/07/'07 - USD - Will a new all time record low be set toda
Economic News USD Yesterday The dollar fell to new lows against the Euro and broke its previous record of $1.3813, at the same time the British pound has arrived at a new trading level against the American dollar, over 2.05, this is a all time high more than a quarter of a century. The pair moved up from 2.0490 to 2.0549 in a little more than an hour. The strength in the GBP/USD is driven almost exclusively by dollar weakness and not pound strength. If anything, the Bank of England signaled that even if we do have another rate hike this year, it will not be until the latter part of the fourth quarter, at the earliest With the US dollar hitting a record low against the Euro and the British pound many Americans wonder whether more weakness is expected for the US dollar. The main fear is that the situation will eventually lead to weaker spending and lower growth across the nation, but on the other hand, many people have also forgotten the benefits that the weaker dollar can bring to the economy. With the outlook so dire, a weak currency could actually be what ends up saving the economy. Also yesterday, Federal Reserve Chairman Ben Bernanke Delivered the Fed's semiannual report to Congress. Bernanke told to the Congress that the housing market could dampen an expected pickup in U.S. economic growth, but at the same time, he restated that the central bank's main worry is inflation. However, Bernanke also listed a number of factors that could spark inflation, including a tight job market and the possibility energy prices could move higher. As a result of weaker-than-expected home building, the Fed cut its forecast for growth this year by a quarter-percentage point to a range of 2.25% to 2.5%, and downgraded its 2008 projection as well. Bernanke warned that a recent moderation in core inflation may simply reflect temporary influences. He also said there was a risk lofty energy and food prices could cause expectations of future inflation to rise, possibly unleashing an upward spiral of wages and prices. Bernanke didn't give any hint that the Fed was considering relaxing its inflation-fighting bias, warning instead that recent "favorable" core inflation readings, which strip out food and energy prices, are subject to "considerable noise" and "could also be the result of transitory influences." The Fed cut its economic growth projections by a quarter percentage point to a range of 2.25% to 2.5% this year and 2.5% to 2.75% in 2008, mainly due to a steeper-than-expected downturn in housing construction. The Commerce Department said housing starts set an annual rate of 1.467 million units in June compared with a revised 1.434 million unit pace in May. Economists had forecast June housing starts to drop to a 1.45 million unit pace from the 1.474 million unit rate originally reported for May last month. Building permits fell 7.5% in June to a pace of 1.406 million units. That's just above the 1.402 million unit rate seen in June 1997 and below the 1.48 million unit rate that economists had expected. EUR The currency pair climbed to a new record high of 1.3835 following the comments from the US central bank. At the moment the European Central Bank is less stressed about the need to raise rates, the growing chance of a rate cut before a rate hike in the US is driving the dollar lower. One would expect that the ECB begin backing off, given the recent appreciation in their EUR, but instead of showing any signs of concern; yesterday, Trichet warned that any attempts to influence the ECB would be in violation of the EU treaty. This situation suggests that they are not willing to talk down the Euro and will only do so under their own terms. The Euro was choppy against the majors in trading on Wednesday afternoon in New York. The currency moved as the Euro zone reported its trade surplus for May. Yesterday afternoon, the European currency bounced between a high of 1.3829 and a low of 1.3761. On the whole, the Euro continues to move at a multi-year high against the American dollar. Today, The Swiss will report at 07:15GMT on the trade balance for June, while at 09:30GMT the UK is set to announce its Retail Sales. Other news from the area will include German producer prices. Switzerland will report on its Trade Balance for June on Thursday. The prior period showed a level of 1.04 billion, and is expected to advance slightly in tomorrow's data. Other news from the area will include the results of a ZEW Survey for Expectations for July. Great Britain will announce Retail Sales data on a monthly and annual basis for June on Thursday. The previous month saw a rate of 0.4%, and is expected to decline in tomorrow's data. Meanwhile, the prior year's results were 3.9%, and are also anticipated to drop slightly. Other news from the area will include Public Finances and Sector Net Borrowing for June, the M4 Money Supply and Sterling Lending and BSA Mortgage Approvals for the same period. JPY Yesterday, Japan's All-Industries Activity Index, which covers a broad range of economic activity including the tertiary index, dropped 0.3 % in May from the previous month, the first decline in two months, the ministry said the downturn was due to the weakness in the tertiary index as well as industrial output . The electric machinery makers' confidence rose to a four-month high and non manufacturers' sentiment improved, a sign that corporate-sector strength continues to underpin Japan's solid economic recovery. The Tankan Index, a monthly survey of leading Japanese companies, produced a diffusion index (DI) of plus 23 for manufacturing firms in July. That was down from a five-month high of plus 31 in June this figure usually notes on slowing the economic growth in Japan which eventually supposed cause to a JPY reduction. Carry traders aren't quite ready to give up yet. The only currencies that the JPY managed to rally against were the Euro, Swiss franc, US and Canadian dollars and for the most part, the damage was small. Looking ahead, we expect a flat trading after night session when no significant data due to be out in near days however the JPY will be effected from the other majors. Technical News EUR/USD The daily chart is bearish as the Slow Stochastic crossed at 86 and also RSI 80 implying on the continuation of the current trend and will test the 1.3775 Fibonacci 76.4% level. On the 4 H chart a bullish flag is establishing however an upcoming reversal is not yet expected and the bears will stay in the picture for a while. GBP/USD The pair range traded yesterday after quite a steady uptrend which seems to be calmer. The daily charts are heading up as the hourlies are unwinding from overbought levels ,and support relatively flat trading. The next target price might be around 2.0540. USD/JPY On the daily chart a mild bearish channel is observed which might indicates the near future behavior of this pair as also RSI 39 and Slow Stochastic at 38 as them both having a negative slope implying that the next target is 121.00 and will be tested in the upcoming weeks. On the 4 H chart indicators seem to be sailing in neutral territory as usually indicates an upcoming breakout of the neutral channel barriers which is located at 121.57 - 122.35. Hedging seems to be the right strategy until the breakout direction will be determine. USD/CHF The pair shows consolidation around the key level of 1.2010 which proves to be very significant level. A preferable strategy might be to wait for the oversold hourlies levels as traders should pay close attention to the 1.1990 level to unwind before taking a long position. The Wild Card Silver Silver is expected to be more attractive then ever since the daily chart is bullish. However, there is an upcoming reversal which forex traders might use for profit taking in the coming days. On short term there is more room to go as silver expected to test the 13.41 Fibonacci 76.4% retracement level before the reversal will take place. |