EUR/USD Consolidates Gains Ahead of ECB Rate Decision

By @ibtimes on

The dollar rose against its major counterparts except the Australian and Canadian dollars on Wednesday after July ISM US non-manufacturing and ADP data were higher than anticipated. The dollar index increased for the first time in five days. The S&P 500 rose 6.78 to 1,127.24.

Higher commodity prices boosted the aussie and loonie. The yen fell from an 8-month high as global growth worries eased. The GBP/USD declined for the first time in ten days following an unexpected decrease in July UK services PMI data. The Bank of England is expected to leave its key interest rate unchanged at 0.50% on Thursday, while the European Central Bank is likely to maintain its benchmark rate at 1.00%.

  • The EUR/USD consolidated recent strong gains ahead of the ECB rate decision. The pair recovered most of the losses occurred during the European debt crisis. The pair is overbought and below strong resistance. If the 1.33-area resistance is broken, the EUR/USD will likely test the important 1.35-area resistance. There are supports from the uptrend and in the 1.29 area.

    Financial and Economic News and Comments

    US & Canada
    The ISM US non-manufacturing index unexpectedly rebounded to 54.3 in July from 53.8 in June, indicating US service industries expanded for a seventh consecutive month and at a faster pace, data from the Institute for Supply Management showed. The index' key components were mixed in July but above 50.0, signaling growth. The business activity index declined to 57.4 from 58.1, showing business activity grew for an eighth successive month but at a slower rate. The new orders index rose to 56.7 from 54.4, suggesting new orders expanded for an 11th straight month and at a faster pace. Non-manufacturing employment expanded in July to the highest level since December 2007, with the employment index increasing to 50.9 from June's contractionlevel 49.7. The supplier deliveries index slipped to 52.0 from 53.0, indicating supplier deliveries expanded for a fourth consecutive month in July but at a slightly slower rate. The prices paid index declined to 52.7 in July from 53.8 in June, suggesting prices paid by non-manufacturing organizations for purchased materials and services rose for a 12th straight month but at a slightly slower pace.

    US nonfarm private payrolls rose 42,000 in July, a sixth straight monthly gain and larger than market expectations, after an upwardly revised 19,000 increase (vs. previously reported +13,000) in June, according to estimates by Automatic Data Processing, Inc. and Macroeconomic Advisers, LLC. However, over those six months increases have averaged a modest 37,000, with no evidence of acceleration, ADP said. The August 6 employment report from the Labor Department will possibly show overall job losses approximately 65,000 for July, with the unemployment rate increasing to 9.6% from June's 9.5%.

    Europe
    Eurozone retail sales were unchanged m/m in June after an upwardly revised 0.4% m/m increase in May, Eurostat reported. Retail sales posted a second consecutive year-on-year gain in June, rising 0.4% y/y, following an upwardly revised 0.6% y/y May advance.

    The eurozone composite PMI rose to an unrevised 56.7 in July from 56.0 in June, indicating euro-area services and manufacturing industries expanded for a 12th straight month and at the highest level in three months, according to final July PMI data from Markit Economics. The services PMI increased to 55.8 (vs. preliminarily reported 56.0) from June's 55.5, suggesting the services sector grew for an 11th consecutive month and at a slightly faster pace.

    The German composite PMI advanced to 59.0 (vs. preliminarily reported 59.3) in July from 56.7 in June, showing Germany's services and manufacturing sectors expanded for a 12th successive month and at the second-highest level in almost three years, final July PMI data from Markit Economics showed. The services PMI increased to 56.5 (vs. preliminarily reported 57.3) from June's 54.8, indicating the services sector grew for a 12th consecutive month and at the fastest pace since August 2007.

    The CIPS/Markit UK services PMI unexpectedly declined to 53.1 in July from 54.4 in June, indicating the UK service sector expanded for a 15th straight month but at the slowest pace since June 2009, according to data from the Chartered Institute of Purchasing and Supply and Markit Economics.

    UK house prices unexpectedly increased 0.6% m/m to £167,425 ($266,063) in July, the first gain in four months, after a 0.6% m/m decline in June, a Halifax report showed. July house prices rose 4.7% y/y, a ninth consecutive year-on-year rise. House prices grew 4.9% y/y in the three months through July, an eighth consecutive gain, following a 6.3% y/y advance in the three months through June.

      UK shop price inflation was unchanged at 1.5% y/y in July, according to the BRC-Nielsen shop price index released by the British Retail Consortium. Food inflation accelerated to 2.5% y/y in July from 1.7% y/y in June, but non-food inflation decelerated to 1.0% y/y from June's 1.4% y/y.

    Asia-Pacific

    The Australian Industry Group/Commonwealth Bank performance of services index fell to 46.6 in July from 48.8 in June, indicating Australia's services sector contracted for a third consecutive month and at a faster pace amid cautionary consumer spending and the waning influence of fiscal stimulus, the AiG and Commonwealth Bank of Australia reported. Contractions were notable in sales (44.4 in July vs. 49.4 in June) and supplier deliveries (46.6 vs. 49.5); both contracted for a third successive month and at a faster rate. New orders shrank for a third straight month in July, but the contraction rate was unchanged at 46.1. The employment index declined to 50.4 in July from 51.8 in June, suggesting employment expanded for a second consecutive month but at a slightly slower pace.

    Australia's trade surplus, expanding for three consecutive months, widened to a larger-than-anticipated A$3.54 billion ($3.25 billion) in June, the largest since records began in 1971, from an upwardly revised A$1.83 billion in May, figures from the Australian Bureau of Statistics (ABS) showed. Exports rose 7.0% m/m to A$26.7 billion in June, while imports were little changed at A$23.1 billion.

    Australian house prices increased 3.1% q/q in Q2 2010 after a downwardly revised 4.2% q/q advance in Q1, registering a fifth straight quarterly gain but the smallest since prices last declined in Q1 2009, according to a separate ABS report. House prices rose 18.4% y/y in Q2, following a downwardly revised 19.7% y/y Q1 rise.

    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
    Positive
    Negative
    Positive
    Negative
    Neutral
    Positive
    Negative

    Outlook
    Neutral
    Neutral
    Neutral
    Neutral
    Neutral
    Neutral
    Neutral

    Action
    None
    None
    None
    None
    Long
    None
    None

    Current
    1.3155
    86.28
    1.5890
    1.0530
    1.0178
    0.9173
    113.58

    Start Position
    N/A
    N/A
    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
    N/A
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2950
    85.50
    1.5300
    1.0300
    1.0100
    0.8900
    107.50

    1.2550
    84.80
    1.5000
    1.0100
    1.0000
    0.8750
    106.00

    Resistance
    1.3300
    90.00
    1.6000
    1.0750
    1.0600
    0.9250
    115.00

    1.3500
    92.00
    1.6200
    1.1000
    1.0800
    0.9400
    120.00

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