• The dollar fell against its rivals on Thursday. Risk appetite and global equity prices rose as a less-thanexpected 0.1% q/q decline in Q2 2009 eurozone GDP boosted economic recovery hopes. The optimism was lessened somewhat in the US as retail sales unexpectedly fell and initial jobless claims unexpectedly rose. The S&P 500 was up 6.92 points to 1012.73, approaching the 1020 resistance. Both the dollar and US equity indexes are at important technical levels. The dollar index fell to 78.40, just above the critical 77.50-area support. The yen rose against the dollar but declined versus other major currencies. The pound and commodity currencies were supported by rising equity and commodity prices.

  • The EUR/USD rose for a third day, supported by an unexpected rise in German and French Q2 2009 economic growth as well as rising equity prices. There is support from the short-term uptrend in the 1.41 area. Today the pair failed to rise above the 1.43 handle. In an uptrend, the EUR/USD is approaching the important 1.45-area resistance. If this is broken, the pair is likely to advance to the 1.48-area resistance.


Financial and Economic News and Comments

US & Canada

  • US retail sales unexpectedly declined 0.1% m/m in July after an upwardly revised 0.8% m/m gain in June, data from the Commerce Department showed. Auto sales rose 2.4% m/m in July, a fourth consecutive monthly gain. Nevertheless, most other categories of sales fell, led by gas station sales, building materials, and department stores. Retail sales excluding autos unexpectedly slipped 0.6% m/m, following June's upwardly revised 0.5% m/m advance. July retail sales fell 8.3% y/y and fell 8.5% y/y excluding autos.


  • US initial jobless claims in the week ending August 8 unexpectedly increased 4,000 to 558,000, the sixth consecutive time claims were under 600,000, following the previous week's upwardly revised 554,000, figures from the Labor Department showed. The 4-week moving average of new jobless claims rose 8,500 to 565,000, the highest level since July 18. Continuing jobless claims in the week ending August 1 dropped 141,000 to 6,202,000, the lowest level since April 11, from the preceding week's upwardly revised 6,343,000. The 4-week moving average of those continuing claims decreased 27,750 to 6,259,250. The insured unemployment rate for the week ending August 1 declined to 4.7% from the prior week's upwardly revised 4.8%.

  • US import prices fell a more-than-expected 0.7% m/m in July, the first fall in six months, after a downwardly revised 2.6% m/m increase in June, according to a report from the Labor Department. Prices excluding petroleum in July decreased 0.2% m/m. July import prices tumbled 19.3% y/y, following June's revised 17.7% y/y drop. Export prices declined 0.3% m/m in July after a 1.0% m/m increase in June. July export prices fell 8.1% y/y.


  • US business inventories fell for a tenth consecutive month in June, falling a more-than-expected 1.1% m/m to a seasonally adjusted $1.350 trillion, after a revised 1.2% m/m slide in May, figures from the Commerce Department showed. Business sales rose 0.9% m/m to $975.8 billion in June after being flat in May. The inventory-to-sales ratio declined to 1.38 from May's 1.41, higher than June 2008's 1.26. Inventories fell 9.8% y/y in June; sales dropped 18.0% y/y.


  • Eurozone GDP declined a less-than-expected 0.1% q/q in Q2 2009 after a record 2.5% q/q contraction in Q1, according to Q2 GDP flash estimates released by Eurostat. The eurozone economy shrank a less-thanexpected 4.6% y/y, following Q1's 4.9% y/y contraction.


  • Germany's GDP unexpectedly grew a seasonally adjusted 0.3% q/q in Q2 2009, the first gain since Q1 2008, after a revised 3.5% q/q contraction in Q1, preliminary Q2 GDP data from the Federal Statistical Office showed. The German economy contracted 5.9% y/y wda and 7.1% y/y nsa in Q2 after falling a revised 6.7% y/y wda and a revised 6.4% y/y nsa in Q1.

  • Switzerland's producer and import prices remained on average stable in July and June after declining 0.3% m/m in May, the Swiss Federal Statistical Office reported. Domestic products posted a 0.2% m/m price decline in July while import products registered a 0.2% m/m increase. July producer and import prices fell a morethan- expected 6.1% y/y, following June's 5.6% y/y decrease.


  • Australia's expected inflation rate rose to 3.5% in August from 3.2% in July, according to the latest Melbourne Institute survey of consumer inflationary expectations.

FX Strategy Update

Primary TrendPositiveNegativePositiveNegativeNegativePositiveNeutral
Secondary TrendPositivePositivePositiveNeutralNegativePositivePositive
Start Position1.4142N/A1.4845N/AN/A0.6601N/A

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