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US Session - Minimal Relief for the Dollar in European Trading
June 30, 2008 6:10 PM CEST
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G10 Advancers and Decliners vs USD |
| | JPY | 0.09 |  |  | CHF | -0.03 | | | DKK | -0.04 | | | EUR | -0.06 | | | GBP | -0.13 | | | NZD | -0.19 | | | NOK | -0.44 | | | CAD | -0.52 | | | AUD | -0.59 | | | SEK | -0.73 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 13,481.38 | - 0.46 | | Hang Seng Index | 22,102.01 | + 0.27 | | FTSE 100 Index | 5,625.90 | + 1.73 | | DAX Index | 6,418.32 | - 0.50 | | DJIA Index | 11,409.69 | + 0.55 | | NASDAQ 100 Index | 2,319.81 | + 0.18 | | S&P 500 Index | 1,287.18 | + 0.68 |
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World Markets |
Current Level |
% Change |
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| Gold | 922.75 | - 0.54 | | Silver | 17.31 | - 1.22 | | VIX | 23.42 | - 0.80 | | Crude wti | 139.97 | - 0.15 | | USD Index | 72.56 | + 0.27 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| Tankan Manufacturing Index (Q2) | +3 | +11 | JP / 23.50 | | Tankan Non-Manufacturing Index (Q2) | +8 | +12 | JP / 23.50 | | RBA Interest Rate Announcement | 7.25% | 7.25% | AU / 4.30 |
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Currency Tech |
AUDUSD
R 3: 0.9825
R 2: 0.9700
R 1: 0.9690
CURRENT: 0.9564
S 1: 0.9600
S 2: 0.9542
S 3: 0.9490
EURJPY
R 3: 170.00
R 2: 169.45
R 1: 168.60
CURRENT: 167.23
S 1: 166.75
S 2: 166.00
S 3: 165.50
USDMXN
R 3: 10.4700
R 2: 10.4690
R 1: 10.3890
CURRENT: 10.3040
S 1: 10.2640
S 2: 10.2500
S 3: 10.2000
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Market Brief |
The dollar saw no relief in the European session with continued selling by increasingly bearish investors. The EurUsd traded in the high 1.57 level, while the UsdJpy moved to 105.9 on continued dollar weakness. The GbpUsd is trading with a 1.99 handle, approaching the 2.00 price. Equity markets are mixed with European indices higher and US stocks lower extending last week’s losses. Gold is off slightly at 927, while silver holds strength at 17. Bonds fell slightly in the US and in Europe, with yields on the UK, French, German, and Italian widening between 5 and 7bps. The market seems to be in a state of risk aversion, and we should remain attentive to further moves in commodity prices, particularly oil which is up at 142.
Inflation rose to 4.0% in the Eurozone vs. 3.9% expected, which is the highest level since 1992. The ECB cited that current inflation levels are “too high”, and it is critical that a wage-price spiral be prevented. Future inflation expectations will be a key component in identifying ECB monetary policy, and specifically the length of a possible tightening cycle. As of now, the market expects the ECB to raise rates a .25pt, but most likely halt at those levels in the near term. If the market sentiment shifts into expectations of longer tightening cycle, we can be confident that the Euro will strengthen across the G-10. The UK housing sector continues to decline, with mortgage approvals lower at 42k versus a consensus figure of 52k. In addition, net lending to individuals dropped to 5.4B as opposed to the 7.0B estimate. Credit markets in the UK are clearly restraining as consumers and lenders are experiencing losses due to declining housing prices and weaker consumer confidence. The June GfK consumer confidence survey fell to -34 compared to -31 expected. The cable is seeing similar economic weakness as the US, but the US is a bit further down the cycle, which makes for an interesting pair to trade. The GbpUsd is most likely to remain at current levels due to the bearish sentiment on the US economy.
Chicago PMI came in higher than expected at 49.6 vs. the consensus figure of 48.2. With this slight rise in PMI, the dollar saw little or no change in the recent price decline. A series of positive data will have to be released in order for us to see any significant or sustained rally in the dollar. With oil trading at current levels, the ECB rate hike expected, and an aggregate triple digit loss in the Dow last week, the dollar will have a challenging week ahead. The yield differential in the dollar is becoming attractive from a carry trade perspective. The Fed Funds Rate is currently at 2.00%, while the ECB is moving to raise rates to 4.25%. The Fed will have to be express vigilance against inflation and a clear concern about the current state of the US dollar in order to prevent an extended depreciation of the currency.
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Asian Session - Usd Near Term Prospects Bearish
June 30, 2008 9:28 AM CEST
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G10 Advancers and Decliners vs USD |
| | JPY | 0.54 | | | | CAD | 0.46 | | | | CHF | 0.30 | | | | AUD | 0.27 | | | | NZD | 0.26 | | | | NOK | 0.25 | | | | DKK | 0.23 | | | | EUR | 0.22 | | | | GBP | 0.03 | | | SEK | -0.05 | |
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Global Indexes |
Current Level |
% Change |
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| Nikkei 225 Index | 13,481.38 | - 0.46 | | Hang Seng Index | 22,044.63 | + 0.01 | | Hang Seng Index | 2,742.77 | - 0.41 | | FTSE futures | 5,547.50 | + 0.02 | | CAC futures | 4,413.00 | + 0.18 | | SMI Futures | 6,887.00 | - 1.07 | | DJIA futures | 11.383.00 | + 0.22 |
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World Markets |
Current Level |
% Change |
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| Gold | 928.45 | + 0.07 | | Silver | 17.62 | + 0.54 | | VIX | 23.44 | - 2.04 | | Crude wti | 141.66 | + 1.04 | | USD Index | 72.24 | - 0.16 |
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Todays Calender |
Estimates |
Previous |
Country / GMT |
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| BoE Mortgage Approvals (May) | 50,000 | 58,000 | UK / 8.30 | | Index of Services (Apr) 3m/3m | -- | +0.5% | UK / 8.30 | | Productivity (Q1) | -- | 0.0%(+1.7% | UK / 8.30 | | CPI (Jun Prov.) | +3.8% | +3.7% | EZ / 9.00 | | GDP mom (Apr) | 0.3 | -0.2 | CA / 12.30 | | Chicago PMI (Jun) | 48.4 | 49.1 | US / 13.45 | | BoJ Tankan (Q2) | -- | -- | JP / 23.50 |
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Currency Tech |
AUDUSD
R 3: 0.9655
R 2: 0.9648
R 1: 0.9635
CURRENT: 0.9647
S 1: 0.9540
S 2: 0.9490
S 3: 0.9448
EURJPY
R 3: 170.00
R 2: 169.46
R 1: 168.60
CURRENT: 166.95
S 1: 166.79
S 2: 166.00
S 3: 165.53
USDSGD
R 3: 1.3850
R 2: 1.3825
R 1: 1.3730
CURRENT: 1.3615
S 1: 1.3609
S 2: 1.3580
S 3: 1.3554
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Market Brief |
Usd was stable but with a weaker tone in the Asian Session as higher oil prices and weak equity markets carried over from Friday's close. EurUsd trended upwards to 1.5798 from Friday's 1.5730 close. UsdJpy slipped to 105.77 from 106.40 while GbpUsd bounced around the 1.9940 level. With the Jpy gaining strength, volatility on the rise and risk appetite declining carry trades have come under pressure in recent sessions. In Asian trading, AudJpy fell to 101.80 from 102.50 while EurJpy collapsed to 167.04 from 168.11. With the Dow dropping roughly 9% on the back of new record high oil prices (Usd $142.99) and Trsy yields falling as traders paired down inflation expectations (due to steady PCE figures) on Friday, we expect the Usd to continue to come under pressure as the growth side of the story comes back into play. Given our base scenario we expect EurUsd to make another attempt at 1.6000 this week.
US stock markets closed lower on Friday as higher energy prices scared investors. Asia stocks continued the sell off with Nikkei down -.45% mid day. However, European futures are trading slightly in the green and look to open above fair value. WTI is still holding safely above 140.00 at 141.66bll.
With markets focused on growth in the US there is no data this week that will the Usd's cause. We are expecting both ISM to fall below the 50 threshold (after prior indication of stability) while NFP could come out as low as -100k. In addition, with Friday’s core PCE deflator holding steady and lower than market expectations at 2.1% yoy inflation is less of an immediate concern. Also, we expect the ECB to hike rates on Thursday to 4.25% (ECB Starks comments on Friday were decidedly hawkish, warning that inflation was rising and second round effect from energy prices were increasing) while in whole of the Euro zone exhibits resilient economic activity. Given these expectations we believe Usd will stay weak against Eur and to a lesser extent Jpy.
In New Zealand Business Sentiment June improved to -38.7 from -49.7; However, expectations remained weak -4.0 from -4.4 (looks like Q2 GDP will go negative). While inflation levels remain elevated and worrisome for the RBNZ in the near term, a sharp turn in economic prospects will help easy pressure and we expect the central bank to being easing in Sept.
In Europe we expect CPI inflation to increase to 3.8%. This insight will only amplified the ECBs resolution to tighten rates on Thursday.
In the UK April's Index of Services will be the first official look at at the well-being of the UK economy in Q2. With national accounts being revised down we can expected service to follow the trend downwards. With Mortgage Approvals collapsing there is always a risk of an unexpected spike upwards as opportunity seekers look for a bottom. But baring this unseen event, we see slightly lower figures (note levels are below 1990s so downside is limited).
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ACM Advanced Currency Markets SA (hereinafter referred as ACM) is a professional financial intermediary, directly regulated by the Swiss Federal Department of Finance, Anti Money Laundering Control Authority. As forex specialist, ACM provides only currency trading via highly professional forex trading software. All customers are aware that this information or any part thereof has been prepared without taking account of your objectives, financial situation and/or needs. This information is not intended as personalized investment advice and does not constitute a recommendation. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. The analysis is based on the information which ACM finds reliable and accurate, but ACM does not assume any responsibility for any material nor for the transactions made on the basis of the information or the estimates of the analysis. ACM cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct, indirect and/or consequential loss arising from any use of this information, document or its content. All opinions and estimates constitute ACM analysis as of the data and are subject to change without notice. ACM does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions. Past performance is not a reliable indicator of future performance.
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