The dollar rose against most of its key counterparts on Monday. Markets await the Federal Reserve's interestrate decision. The S&P 500 gained 6.15 to 1,127.79. The yen dropped from an almost 8-month high against the dollar. The EUR/USD fell from an almost 3-month high. Sterling traded at $1.5901 today after touching $1.5999 on August 6, its highest level since February 3. The Canadian dollar was little changed. The Australian dollar weakened to $0.9162 today from $0.9186 on Friday.
The EUR/USD fell on Monday, unable to penetrate the 1.33 resistance. The pair made a cycle low on June 7 at the height of the financial crisis. Easing concern about the crisis and relatively better European economic data have supported the pair. Although in a clearly defined uptrend, the EUR/USD is overbought and at strong resistance. We expect further consolidation. Supports are from the uptrend in the 1.31 area and in the 1.29 area. Resistances are in the 1.33 and 1.35 areas.
Financial and Economic News and Comments
US & Canada
The Federal Open Market Committee is expected to maintain the fed funds target at a range of 0 to 0.25% at its August 10 policy meeting. The Fed may consider additional stimulus to boost slowing US economic growth.
The Sentix eurozone investor sentiment index advanced to a higher-than-anticipated 8.22 in August from -1.28 in July, showing eurozone investor confidence climbed to the highest level since December 2007, a Sentix report showed. The current situation index jumped to 16.5 in August from 2.0 a month earlier and the expectations index increased to 0.25 from -4.5.
Germany's seasonally adjusted exports, rising faster than imports, grew 3.8% m/m to €86.5 billion ($114.4 billion) in June, the fourth gain in five months, after a downwardly revised 7.9% m/m advance in May, according to data from the Federal Statistical Office. Seasonally adjusted imports increased 1.9% m/m to €72.4 billion, the sixth rise in seven months, following May's downwardly revised 13.7% m/m growth. Exports gained 28.5% y/y in June while imports jumped 31.9% y/y; both posted their fifth consecutive year-on-year rises. The trade surplus widened to €14.1 billion in June from an upwardly revised €9.8 billion in May. The current-account surplus expanded to €12.9 billion from May's downwardly revised €1.8 billion
Japan's current-account surplus unexpectedly narrowed for a second month in June, shrinking 18.2% y/y to ¥1,047.1 billion ($12.2 billion), figures released by the Ministry of Finance showed, compared with ¥1,205.3 billion in May. The trade-balance surplus widened to ¥769.0 billion in June from ¥391.0 billion a month earlier. Exports advanced 29.2% y/y in June, slowing from a 33.8% y/y gain in May. Imports grew 29.6% y/y, following May's 37.8% y/y rise.
The Japanese current conditions index increased to a higher-than-expected 49.8 in July from 47.5 in June, indicating Japanese merchant confidence rose for the first time in three months, according to the Cabinet Office's latest economy watchers survey. The future conditions index declined to 46.6 from June's 48.3.
Australia's home-loan approvals fell a more-than-expected 3.9% m/m to 46,420 in June, the eighth fall in nine months, after an upwardly revised 3.0% m/m increase in May, figures from the Australian Bureau of Statistics showed. The total value of loans declined 1.9% m/m in June to A$20.71 billion ($18.98 billion). The value of lending for owner occupied housing slipped 1.0% m/m to A$13.39 billion in June and the value of lending for investment housing decreased 3.6% m/m to A$7.32 billion.
FX Strategy Update
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