The dollar traded mixed on Tuesday ahead of Federal Reserve Chairman Ben Bernanke's semiannual congressional testimony on the economy tomorrow. June US housing starts decreased to the lowest level since October 2009 and employment fell in 27 states led by declines in California and New York. However, a more-than-expected increase in June building permits substantiated the claim that the US housing sector is stabilizing. The S&P 500, recovering from earlier losses from earnings disappointment, rose 12.23 to 1,083.48.

The yen declined for a second consecutive day. The May Japanese LEI fell for a second straight month. The euro was unable to break the 1.30-area resistance and down modestly despite higher-than-expected German producer-price inflation and good demand for Irish, Greek and Spanish debts. Sterling rose for the first time in three days. The Australian dollar advanced. The July 6 Reserve Bank of Australia minutes indicated the RBA eventually needs to increase interest rates and signaled that the central bank will use the results of European bank stress tests and local inflation figures to determine whether it should resume raising rates.

The USD/CAD fell today. The Bank of Canada increased its policy rate by 25 basis points for the second time in less than two months to 0.75%, as expected, but said it may slow the pace of rate hikes. The BOC cut its GDP forecast to 3.5% from 3.7% for 2010 and to 2.9% from 3.1% for 2011. Technically, the USD/CAD seems to be forming a head-and-shoulder bottom. If the neckline in the 1.07 area is broken, the pair will rally. Supports are in the 1.04 and 1.03 areas.

 

Financial and Economic News and Comments

US & Canada

US housing starts declined a more-than-expected 5.0% m/m in June to a seasonally adjusted 549,000 annual rate, the lowest level since October 2009, after a downwardly revised 14.9% m/m decrease to a 578,000 pace in May, according to figures from the Commerce Department. June housing starts fell 5.8% y/y. Single-family housing starts declined 0.7% m/m to a 454,000 rate in June, a 13-month low, after an 18.8% m/m drop a month earlier; they fell 4.6% y/y. Multi-family housing starts dropped 19.3% m/m to an 88,000 pace in June, the lowest level since February, and declined 8.3% y/y. Meanwhile, building permits increased a more-thananticipated 2.1% m/m to a seasonally adjusted 586,000 annual rate in June, the first gain in three months, after a 5.9% m/m decrease to a 574,000 pace a month earlier. June building permits declined 2.3% y/y. The June month-on-month gain was led by a 20.8% m/m jump in multi-family building permits to a 145,000 rate. Single-family building permits fell 3.4% m/m to a 421,000 pace in June, the lowest level since April 2009.

 

Europe

German's producer prices grew a more-than-expected 0.6% m/m in June, a fourth straight month-on-month gain, after a 0.3% m/m increase in May, PPI data from the Federal Statistical Office showed. Producer prices rose 1.7% y/y, a third consecutive year-on-year rise, following May's 0.9% y/y advance.

 

 Britain's budget deficit narrowed to £14.5 billion ($22.1 billion) in June from a £14.7 billion shortfall in June 2009, the Office for National Statistics said. The public sector net cash requirement showed a £20.9 billion deficit in June, compared with a £20.2 billion shortfall a year earlier. Net debt was £926.9 billion, equivalent to 63.9% of GDP. Excluding government support for the financial sector, net debt was £813.7 billion, equivalent to 56.1% of GDP. M4, the broadest measure of money supply, was unchanged m/m in June and up 3.0% y/y, Bank of England data showed. M4 lending increased 2.4% y/y, the weakest since records began in 1983.

UK mortgage approvals unexpectedly declined to 48,000 in June from 51,000 in May, according to BOE figures. Gross mortgage lending rose 15.0% m/m to £13.1 billion ($20.0 billion) in June and increased 7.0% y/y, a separate report from the Council of Mortgage Lenders showed.

Asia-Pacific

The Japanese leading economic indicators index, a measure of future economic activity, fell to 98.6 (vs. preliminarily reported 98.7) in May, a second consecutive monthly fall, from 101.7 in April, according to final May LEI data from the Cabinet Office. The coincident index, measuring current economic activity, edged down to an unrevised 101.2, the first decline in 14 months, from April's 101.3.

 

FX Strategy Update

 
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
EUR/JPY

Primary Trend
Negative
Neutral
Negative
Positive
Negative
Neutral
Negative

Secondary Trend
Neutral
Negative
Positive
Negative
Neutral
Neutral
Negative

Outlook
Neutral
Positive
Neutral
Neutral
Positive
Neutral
Neutral

Action
None
Long
None
None
Long
None
None

Current
1.2885
87.45
1.5266
1.0522
1.0423
0.8833
112.71

Start Position
N/A
87.75
N/A
N/A
1.0247
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
N/A
85.75
N/A
N/A
1.0075
N/A
N/A

Support
1.2550
86.00
1.5200
1.0500
1.0400
0.8600
107.50

1.2150
84.80
1.5000
1.0300
1.0300
0.8300
106.00

Resistance
1.3000
90.00
1.5500
1.0750
1.0600
0.8850
113.50

1.3250
92.00
1.5700
1.1000
1.0800
0.9050
120.00

 
EUR/USD
USD/JPY
GBP/USD
USD/CHF
USD/CAD
AUD/USD
EUR/JPY

Primary Trend
Negative
Neutral
Negative
Positive
Negative
Neutral
Negative

Secondary Trend
Neutral
Negative
Positive
Negative
Neutral
Neutral
Negative

Outlook
Neutral
Positive
Neutral
Neutral
Positive
Neutral
Neutral

Action
None
Long
None
None
Long
None
None

Current
1.2885
87.45
1.5266
1.0522
1.0423
0.8833
112.71

Start Position
N/A
87.75
N/A
N/A
1.0247
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
N/A
85.75
N/A
N/A
1.0075
N/A
N/A

Support
1.2550
86.00
1.5200
1.0500
1.0400
0.8600
107.50

1.2150
84.80
1.5000
1.0300
1.0300
0.8300
106.00

Resistance
1.3000
90.00
1.5500
1.0750
1.0600
0.8850
113.50

1.3250
92.00
1.5700
1.1000
1.0800
0.9050
120.00

Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

Past performance is not indicative of future results. Trading OTC Forex on margin carries a high level of risk, and may not be suitable for all investors. Please contact a registered trading advisor if you have any questions.

This report is intended solely for distribution to customers of Capital Market Services, LLC. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, LLC with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, LLC accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Globicus International, Inc.

©2004-2010 Globicus International, Inc. and Capital Market Services, LLC.