Forex - Waiting for Corporate Earnings and US Retail Sales

Forex News and Events: Risk-correlated FX currencies saw a rebound and continue to perform alongside risky assets. Positive risk sentiment took full flight on Wall Street, with the financial sector leading the charge (a Wall Street analyst's report was credited with sparking the rally) with the S&P closing up 2.49%. Regional Asian equity indexes followed, with the Hang Seng up 3.65% and currently Europe is green across the board. Crude wti fell to a low of $58.30bbl before rallying above $60bbl, while gold drove above $921oz (oil and gold correlations with the USD have grown over the past months). Overall, FX trading pattern have been choppy and lacking broad based confirmation across pairs. In addition, with relatively low volume and tight ranges in most of the majors the markets smells of the summer doldrums. The sterling has been benefiting from a shift in risk appetite and slightly better economic data trading up to 1.6318 against the USD. UK RICS house prices survey data surprised to the upside, improving to -18.1% from -44.1% (strongest reading since sept 2007). Also while critic of the BoE QE program is commonplace BoE’s Charlie Bean jumped into the fray stating that it would take up 9 months before the real effects are fully in, but the UK is already moving in the right direction. In New Zealand, RBNZ's Bollard stated this morning, that the country economy requires a weaker exchange rate. "What is needed is for the New Zealand dollar to be persistently weak over the coming years, to encourage the needed business investment to be export-oriented and supportive of improvement in New Zealand 's external liability position”. The first economic data of the day was a splash of cold water to risk appetite. German ZEW, both economic sentiment and current situation, severely underperformed the market's expectations. The EURUSD dropped 50 pips on the news from 1.4015 to 1.3965. However, equity market were able to hold onto their gains. Moving forward with the eye opening ZEW already putting traders on guard, this afternoon's US retail sales and business inventories will be carefully watched ( in addition to equity indexs & corp. earnings from GS, Intel and J&J).

Today's Key Issues (time in GMT): 08:30 GBP CPI, % m/m (y/y) Jun 0.3 (1.8) exp 08:30 GBP RPI, % m/m (y/y) Jun 0.3 (-1.6) exp 08:30 GBP RPIX, % m/m (y/y) Jun (1.0 y/y) exp 09:00 EUR Germany: ZEW economic expectations index Jul 47.8 exp, 44.8 prior 09:00 EUR Industrial production, % m/m (y/y wda) May 1.0 exp -1.5 (-20.7) prior 12:30 USD Retail sales, % m/m (y/y) Jun 0.5 (-9.3) exp 0.5 (-9.5) prior 12:30 USD Retail sales ex autos, % m/m (y/y) Jun 0.5 (-7.6) exp 0.5 (-7.2) prior 12:30 USD PPI, % m/m (y/y) Jun 0.8 (-5.2) exp 0.2 (-5.0) prior 12:30 USD Core PPI, % m/m (y/y) Jun 0.1 (2.9) exp -0.1 (3.0) prior 14:00 USD Business inventories, % m/m (y/y) May-1.0 (-7.5) exp, -1.1 (-6.6) prior

The Risk Today: EurUsd A sideways consolidation is the trend, or lack of. Today we should see the single currency comfortably in it's 1.3825 to 1.4050 range. A relatively calm instrument at the moment given the moves elsewhere GbpUsd Moving averages show cable to be mildly bearish, but its a grind lower. We are in a wide range, but see risk to the downside and in the medium term the 1.5800 level to slow the slide, on top 1.6370 the top. On the day see 1.6260 to provide the cap and 1.6000 the low UsdJpy The USDJPY broke out of its previous range that has remained intact for the past five months. Once 94.00 gave way conclusively the head and shoulders formation gave way to the downside. We see a continuing support for a strong Japanese currency, and expect a move toward 90.00 handle. UsdChf A sideways moving, rangebound USDCHF sits in it's two months old 1.1020 to 1.0630 zone. We see unexciting price action and choose to avoid this pair until a concerted move in either direction is seen. There is a small trendline which comes in at 1.0770/80 which could provide intraday support.

Resistance and Support: EURUSD GBPUSD USDJPY USDCHF 1.4140 1.6520 95.60 1.1060 1.4050 1.6490 94.60 1.1020 1.4000 1.6380 93.80 1.0930 1.3978 1.6308 93.08 1.0844 1.3860 1.6150 91.80 1.0800 1.3800 1.6090 91.00 1.0720 1.3748 1.5980 89.80 1.0630 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot