The dollar advanced against most of its counterparts on Monday. The S&P 500 declined 4.33 to 1,067.36 as worries about US economic growth overshadowed economic optimism. The USD/JPY fell and approached recent lows. The yen gained after Japanese Chief Cabinet Secretary Yoshito Sengoku said currency intervention was not discussed between Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa in their telephone conference today.

The GBP/USD fell on worries the austerity measures will reduce UK economic growth. The pair broke its uptrend; however, remaining above the important 1.55 support. If the support is broken, the GBP/USD will drop significantly. The AUD/USD pared earlier losses after neither of the major political parties was able to win an outright majority in Saturday's Australian election. The USD/CAD rose for a third consecutive day, supported by weakness in oil prices and economic growth concerns.
The EUR/USD fell after the latest European PMI data showed economic growth in Europe lost some momentum. On Friday European Central Bank Governing Council member Axel Weber stated that eurozone interest rates are still appropriate and the ECB should not withdraw its emergency measures this year. The EUR/USD fell for the last 9 out of 11 trading days and broke its uptrend. We expect further declines and a test of the 1.25-area support.


Financial and Economic News and Comments

US & Canada
The Chicago Fed national activity index increased to zero in July from a downwardly revised -0.70 in June, suggesting the national economy expanded at its historical trend rate of growth, a report released by the Federal Reserve Bank of Chicago showed, compared with July 2009's -0.07. The index' 3-month moving average slipped to -0.17 in July, a second consecutive monthly decline, from a downwardly revised -0.12 in the prior month, compared with July 2009's -1.32.

Eurozone consumer sentiment continued to improve in August, with the euro-area consumer confidence indicator increasing to -11.7 from July's -14.0, according to a flash August estimate released by the European Commission.
The eurozone composite PMI declined to a lower-than-expected 56.1 in August from 56.7 in July, indicating euro-area services and manufacturing industries grew for a 13th straight month but at a slightly slower pace, flash August PMI data from Markit Economics showed. The manufacturing PMI fell to 55.0 from July's 56.7, showing the manufacturing sector expanded for an 11th consecutive month but at the slowest rate in six months. The services PMI edged down to 55.6 in August from 55.8 in July, suggesting the services sector grew for a 12th successive month but at a fractionally slower pace.
The German composite PMI increased to 59.3 in August from 59.0 in July, showing Germany's services and manufacturing sectors expanded for a 13th straight month and at the fastest rate in four months, according to flash August PMI data from Markit Economics. The manufacturing PMI declined to a lower-than-expected 58.2 from July's 61.2, indicating the manufacturing sector grew for an 11th consecutive month but at the slowest pace in six months. The services PMI unexpectedly rose to 58.5 in August from 56.5 in July, suggesting the services sector expanded for a 13th straight month and at the highest level since August 2007.
Japan's supermarket sales declined 1.2% y/y in July, a 20th straight year-on-year slide, after a 1.4% y/y decrease in June, the Japan Chain Stores Association reported.

FX Strategy Update

Primary TrendNegativeNeutralNegativePositiveNegativeNeutralNegative
Secondary TrendPositiveNegativePositiveNegativeNeutralPositiveNegative
Start Position1.282385.35N/AN/A1.0247N/AN/A

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