The dollar and yen fell on Tuesday as investors sought riskier assets. July US economic data were mixed. Producer prices rose for the first time since March and industrial production grew for the fourth time in five months, but building permits fell to the lowest level since May 2009. The S&P 500 gained 13.16 to 1,092.54.

The USD/JPY advanced today, supported by speculation that the Bank of Japan will intervene if the yen rises further. The EUR/USD rose after Spanish and Irish borrowing costs declined following successful bond auctions for the highly indebted countries. Sterling fell ahead of the release of Bank of England policy meeting minutes.

The GBP/USD is at a critical support. If the minutes are dovish, the pair may break the support and drop substantially. July UK consumer-price inflation slowed to 3.1% y/y but remained more than 100 basis points above the BOE's target, forcing Governor Mervyn King to write to Chancellor George Osborne to explain why inflation is so high. The Canadian dollar rose after Potash Corp of Saskatchewan said it had rejected a $39 billion takeover bid from BHP Billiton. A successful takeover would lead to significant Canadian dollar buying.

The AUD/USD, up for a second day, climbed above the 0.90 handle, boosted by higher commodity prices and easing global growth pessimism. Reserve Bank of Australia minutes showed policy makers felt comfortable with the level of interest rates at 4.5%, stressing that the outlook for stronger economic growth has not changed. The AUD/USD broke its short-term uptrend last week but remains in a long-term uptrend; thus, indicating further gains. If the 0.88-area support is broken, the outlook will turn bearish.

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Financial and Economic News and Comments

US & Canada
US producer prices grew as forecast 0.2% m/m in July, the first increase in four months, after a 0.5% m/m decline in June, according to PPI data from the Labor Department. The producer-price inflation rate accelerated as expected to 4.2% y/y from June's 2.8% y/y. The July PPI month-on-month increase was mostly due to food costs, which rose 0.7% m/m, the first rise since March. Energy prices fell 0.9% m/m, a fourth consecutive monthly fall. The core PPI, which excludes food and energy, was up a marginally more-thanexpected 0.3% m/m in July, a ninth straight monthly advance and the biggest since January, after a 0.1% m/m increase in June. The core CPI rate quickened to 1.5% y/y, the highest year-over-year pace since September 2009, from June's 1.1% y/y.

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US housing starts increased a less-than-expected 1.7% m/m to a seasonally adjusted 546,000 annual rate in July, the first gain in three months, after a downwardly revised 8.7% m/m decrease to a 537,000 pace in June, figures from the Commerce Department showed. July housing starts fell 7.0% y/y. The July month-on-month increase was due to a 17.3% m/m gain in multi-family housing starts to a 95,000 rate. Single-family housing starts declined 4.2% m/m to a 432,000 pace in July from a downwardly revised 451,000 rate in June.

Multifamily housing starts surged 31.9% y/y in July while single-family housing starts fell 13.6% y/y. Meanwhile, building permits fell a more-than-expected 3.1% m/m to a seasonally adjusted 565,000 annual rate in July, the lowest level since May 2009, after a downwardly revised 1.6% m/m increase to a 583,000 pace in June. July building permits fell 3.7% y/y. Single-family building permits decreased 1.2% m/m to a 416,000 rate in July from a 421,000 pace in the previous month. Multi-family building permits dropped 9.2% m/m to a 129,000 rate from June's downwardly revised 142,000 pace.

US industrial production increased a more-than-expected 1.0% m/m in July, the fourth gain in five months, after a downwardly revised 0.1% m/m June decline (vs. previously reported +0.1% m/m), according to data released by the Federal Reserve. April's gain was revised up to 0.4% m/m (vs. previously reported +0.3% m/m).
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Canada's manufacturing sales increased a modest 0.1% m/m to C$44.8 billion ($43.4 billion) in June, up 11 of the past 13 months, after an upwardly revised 0.5% m/m advance in May, Statistics Canada reported. June manufacturing sales rose 12.7% y/y, a seventh straight year-on-year gain.
Europe

The euro-area seasonally adjusted current account registered a €4.6 billion ($5.9 billion) deficit in June, a sixth straight monthly shortfall, narrowing from a revised €7.4 billion deficit in May, a report from the European Central Bank showed. However, the non-seasonally adjusted current account posted a €1.0 billion surplus in June after a revised €17.9 billion deficit in the prior month.

The ZEW German economic expectations index fell to a lower-than-anticipated 14.0 in August from 21.2 in July, indicating German investor sentiment slumped for a fourth consecutive month to the lowest level since April 2009, according to a report released by the ZEW Centre for European Economic Research. The current economic situation index surged to 44.3 from July's 14.6, showing the current economic situation in Germany improved to the highest level since January 2008. Meanwhile, the ZEW eurozone economic expectations index rose to 15.8 in August from 10.7 in July, and the current economic situation index improved to -13.0 from July's -26.5.
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The UK consumer-price inflation rate eased as forecast to 3.1% y/y in July from 3.2% y/y in June, CPI data from the Office for National Statistics showed. Core CPI decelerated to 2.6% y/y from June's 3.1% y/y. Both monthly CPI and RPI declined 0.2% m/m in July. The retail-price inflation rate slowed to 4.8% y/y in July from 5.0% y/y in June. Excluding mortgage interest payments, the RPI rate also slowed to 4.8% y/y from June's 5.0% y/y.
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Asia-Pacific
The Conference Board Chinese leading economic index, a measure of future economic activity, rose for a second month in June, rising 0.8% m/m to 147.0, after a revised 0.9% m/m advance to 145.9 in May and no change in April, according to a report from the Conference Board, signaling China's economic growth will likely remain intact even as it cools modestly. The coincident economic index, measuring current economic activity, was up 1.0% m/m to 186.4 in June after increases of 0.9% m/m in May and 1.4% m/m in April.
FX Strategy Update


 EUR/USDUSD/JPYGBP/USDUSD/CHFUSD/CADAUD/USDEUR/JPY
Primary TrendNegativeNeutralNegativePositiveNegativeNeutralNegative
Secondary TrendPositiveNegativePositiveNegativeNeutralPositiveNegative
OutlookNegativePositiveNegativePositivePositiveNeutralNegative
ActionSellBuyNoneNoneLongNoneNone
Current1.288085.551.55721.04331.03270.9050110.18
Start Position1.282385.35N/AN/A1.0247N/AN/A
ObjectiveN/AN/AN/AN/AN/AN/AN/A
Stop1.306084.40N/AN/A1.0075N/AN/A
Support1.275084.801.55001.03501.03000.8900108.00
1.255082.001.53001.02001.02000.8750106.00
Resistance1.300086.501.58001.06001.06000.9200115.00
1.330089.001.60001.07501.07500.9400120.00
 EUR/USDUSD/JPYGBP/USDUSD/CHFUSD/CADAUD/USDEUR/JPY
Primary TrendNegativeNeutralNegativePositiveNegativeNeutralNegative
Secondary TrendPositiveNegativePositiveNegativeNeutralPositiveNegative
OutlookNegativePositiveNegativePositivePositiveNeutralNegative
ActionSellBuyNoneNoneLongNoneNone
Current1.288085.551.55721.04331.03270.9050110.18
Start Position1.282385.35N/AN/A1.0247N/AN/A
ObjectiveN/AN/AN/AN/AN/AN/AN/A
Stop1.306084.40N/AN/A1.0075N/AN/A
Support1.275084.801.55001.03501.03000.8900108.00
1.255082.001.53001.02001.02000.8750106.00
Resistance1.300086.501.58001.06001.06000.9200115.00
1.330089.001.60001.07501.07500.9400120.00