The dollar traded mostly higher on Tuesday. US May 20-city home prices posted the largest year-over-year gain since August 2006, but July consumer confidence fell to a 5-month low. The S&P 500 declined 1.17 to 1,113.84. The euro rose to a 2-month high versus the yen after data showed German consumer sentiment will rise in August. The yen fell against the dollar. The Canadian dollar declined on falling US consumer sentiment. The AUD/USD was unable to break the 0.9050 resistance.

The GBP/USD rose for a fourth consecutive day and broke the 1.50 resistance, having been supported by stronger-than-expected UK economic growth. Britain's GDP grew 1.1% q/q in Q2 2010, its fastest pace in four years, after a 0.3% q/q increase in Q1. The GBP/USD is overbought and may need to consolidate gains. However, the outlook is positive as long as the short-run uptrend is not broken. There are resistance in the 1.57 area and support from the uptrend in the 1.53 area.

Financial and Economic News and Comments

US & Canada

The S&P/Case-Shiller 20-city composite home price index increased a seasonally adjusted 0.5% m/m in May, a second consecutive month-on-month gain, after an upwardly revised 0.6% m/m advance in April, according to S&P/Case-Shiller housing data. The 20-city composite HPI rose a non-seasonally adjusted 1.3% m/m, following April's upwardly revised 0.9% m/m rise. 20-city home prices rose 4.6% y/y in May, a fourth straight year-on-year gain and the biggest since August 2006, after a 3.8% y/y April increase.

The Conference Board US consumer confidence index fell to a lower-than-expected 50.4 in July from an upwardly revised 54.3 in June, suggesting US consumer sentiment slumped for a second consecutive month to the lowest level since February, a Conference Board report showed, compared with July 2009's 47.4 level. The present situation index declined to 26.1 in July from an upwardly revised 26.8 in June. The expectations index decreased to 66.6 from June's upwardly revised 72.7.

The Richmond Fed manufacturing index declined slightly less than expected to 16 in July from 23 in June, indicating manufacturing activity in the central Atlantic region grew for a sixth straight month but at a slower pace, according to the Federal Reserve Bank of Richmond's latest survey.

Europe

Euro-area M3 unexpectedly increased 0.2% y/y in June after a revised 0.1% y/y decline in May, data from the European Central Bank showed. The M3 3-month average was at 0.0% y/y in the April - June period after a revised 0.1% y/y decline in the March - May period.

The GfK German consumer sentiment index will increase to 3.9 in August, higher than expected, after an upwardly revised 3.6 in July, suggesting Germany's consumer confidence will rise next month following the good performance of the German football team in the World Cup, the warm summer weather and the upbeat news from the employment market, according to a GfK Group report. The economic expectations index surged to 36.8 in July, the highest level since October 2007, from 5.5 in June, and the income expectations index jumped to 29.1 from June's 8.2. The index of consumer propensity to buy declined to 27.9 in July from 30.4 a month earlier; however, remaining well above its long-term average.

Germany's import prices grew a slightly more-than-expected 0.9% m/m in June, a ninth straight month-onmonth advance, after a 0.6% m/m increase in May, data from the Federal Statistical Office showed. Import prices climbed 9.1% y/y, a sixth consecutive year-on-year rise and the most since November 2000, following May's 8.5% y/y advance. Meanwhile, export prices were up 0.4% m/m in June, an eighth successive monthon- month increase; they rose 3.9% y/y, a sixth straight year-on-year rise and the most since October 2000.

Asia-Pacific

Australia's economy will continue to grow in H2 2010. The Conference Board Australian LEI, a measure of future economic activity, rose 0.3% m/m to 115.7 in May after a 0.1% m/m increase in April, the Conference Board reported. The May LEI gain was led by increases in rural goods exports, the sales to inventories ratio, the yield spread, money supply, and gross operating surplus; however, share prices and building approvals fell. The coincident index, measuring current economic activity, was up 0.2% m/m to 115.1 in May, following a 0.1% m/m increase a month earlier.

  • Japan's corporate service prices fell 1.0% y/y in June, a 21st straight year-on-year fall, after a 0.8% y/y decrease in May, data from the Bank of Japan showed. Corporate service prices increase 0.1% m/m, the first month-on-month gain in three months, following May's 0.1% m/m decline.

    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
    Neutral
    Negative
    Positive
    Negative
    Neutral
    Neutral
    Negative

    Outlook
    Neutral
    Neutral
    Positive
    Neutral
    Positive
    Neutral
    Neutral

    Action
    None
    Long
    None
    None
    Long
    None
    None

    Current
    1.2999
    87.91
    1.5594
    1.0599
    1.0351
    0.9008
    114.28

    Start Position
    N/A
    87.75
    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
    85.75
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2550
    86.00
    1.5300
    1.0400
    1.0300
    0.8600
    107.50

    1.2150
    84.80
    1.5000
    1.0300
    1.0200
    0.8300
    106.00

    Resistance
    1.3050
    90.00
    1.5700
    1.0750
    1.0600
    0.9050
    115.00

    1.3250
    92.00
    1.6000
    1.1000
    1.0800
    0.9250
    120.00

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