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The Euro has become range bound between 1.4100-1.4050 after giving back some of its gains from yesterday. Forex traders are awaiting the next significant news event to determine sentiment as the global economic outlook has become cloudy.

Talking Points
• Japanese Yen: Found Support On Recovery Questions
• Pound: Range Bound Despite Prospect of More QE
• Euro: Risk Sentiment Dictating Price Action
• US Dollar: Initial Jobless Claims Philly Fed on Tap

Euro, Pound Range Bound As Traders Await Earnings News, J.P. Morgan Chase To Report

The Euro has become range bound between 1.4100-1.4050 after giving back some of its gains from yesterday. Forex traders are awaiting the next significant news event to determine sentiment as the global economic outlook has become cloudy. French consumer prices crossed the wires with very little reaction with prices falling 0.5% versus expectations of -0.4% on a yearly basis. Falling crude prices continue to filter through the economy and declines in food and apparel underline the weak domestic demand. Yet, EUR/JPY falling nearly 200 pips from its high yesterday may be a sign that concern is creeping back into the market.

Overnight we saw some signs that a global recovery may not be imminent with the Japanese Tertiary index declining 0.1% versus expectations of a 0.4% gain as the service sector remains weak. Meanwhile, New Zealand saw its credit rating downgraded by Fitch to negative which fueled concerns that an economic recovery may be protracted. Additionally, we also saw a report from Realty Trac Inc that U.S. foreclosures hit a record high 1.5 million in the first six months of the year. Unless we see corporate earnings results continue to impress, we could see a reversal in risk appetite which could weigh on the Euro as the single currency has been highly correlated with equity markets. The 20-Day SMA at 1.3999 may be a support level that is tested.

The Pound has traded in a tight range due to an empty economic calendar and markets awaiting more earnings news. The better than expected U.K. employment figures have fueled speculation that the BoE will not have to add to their quantitative easing efforts. However, BoE policy maker Kate Barker that it is too early to asses the impact of their efforts on banks ability to lend. Therefore, next month the central bank may decide to add tot heir asset purchase program as they look to limit the risks of a double dip recession. Deputy Governor Charles Bean stated that too much shouldn't be read into last month's pause which could be a sign that more easing will come in August. Indeed, Prime Minister Gordon Brown stated today that the economic outlook still remains uncertain.

The dollar has consolidated its losses overnight as investors await the next wave of earnings news. The greenback has been under pressure from positive earnings from Goldman Sachs and Intel. J.P. Morgan Chase will report today and give insight into whether the banking names are truly rebounding. Initial jobless claims are expected to remain below 600,000 for a second week at 550K which may reignite risk appetite and dollar weakness. However, the expected decline in the Philadelphia Fed manufacturing reading to -5 from -2.2 could reverse optimism found from yesterday's strong industrial production results. Additionally, small business lender CIT is reporting that bankruptcy may be imminent as a government bailout is unlikely which could sink optimism. Its 300,000 customers may be forced to cut workers as they look to shed costs if they see their access to credit dry up.

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To discuss this report contact John Rivera, Currency Analyst: jrivera@fxcm.com