• The dollar rose on Wednesday after the FOMC maintained the federal funds rate at a record-low range of zero to 0.25% and left its $1.75 trillion bond-purchase program unchanged. The Fed also stated that “the pace of economic contraction is slowing” and “inflation will remain subdued for some time.” The OECD raised its economic forecast for its 30 member countries to a 4.1% contraction in 2009 and a 0.7% expansion in 2010. US durable goods orders unexpectedly jumped in May, adding to signs of an economic recovery. The S&P 500 was up 5.84 points to 900.94. The yen fell on a continued slump in Japan's exports. The Australian and Canadian dollars, little changed, are testing longer-term trends. The euro declined after the European Central Bank said it will lend banks €442 billion ($621 billion) for 12 months in an attempt to unlock eurozone credit markets. The Swiss franc fell against all major currencies after the Bank for International Settlements intervened on the Swiss National Bank's behalf when the EUR/CHF approached the 1.50 handle.

  • The GBP/USD fell on Wednesday. The pair rose to 1.66 overnight after the OECD said the UK economy will stabilize next year. However, the pair failed to penetrate the resistance after Bank of England Governor Mervyn King said a UK economic recovery will be slow and uncertain. This is the third time the pair was unable to break this resistance. The GBP/USD, like other dollar pairs, has stalled, currently testing resistance from its uptrend. If the uptrend is broken, the pair is likely to fall.


Financial and Economic News and Comments

US & Canada

  • US durable goods orders unexpectedly rose 1.8% m/m to a seasonally adjusted $163.92 billion in May after a downwardly revised 1.8% m/m increase in April, according to data from the Commerce Department. The rise in May durable goods orders was driven by three areas: civilian aircraft, industrial machinery, and computers/electronics, while the two weakest areas were motor vehicles/parts and fabricated metals. Excluding transportation, May durable goods orders unexpectedly advanced 1.1% m/m after April's downwardly revised 0.4% m/m increase. Orders for nondefense capital goods excluding aircraft, a proxy for future business investment, climbed 4.8% m/m, the most since September 2004, following April's 2.9% m/m drop. Shipments of those items, used in calculating GDP, increased 0.3% m/m after April's 2.7% m/m decline.


  • US new home sales unexpectedly declined 0.6% m/m to a seasonally adjusted annual 342,000 rate in May after an upwardly revised 2.7% m/m increase to an annual 344,000 rate in April, data from the Commerce Department showed. May new home sales dropped 32.8% y/y. New home sales rose in the Northeast, Midwest, and West but fell in the South. The median price for a new home was $221,600 in May, down 3.4% y/y but above April's $212,600. The average price of a new home was $274,300, down 8.0% y/y. At the current sales pace, the supply of unsold new homes fell to 10.2 months in May from April's revised 10.4 due to a continued decrease in the inventory of unsold new homes. Inventories fell to 292,000 in May, down from April's 299,000 and the lowest since 2001.
  • The Federal Open Market Committee voted 10-0 to maintain its federal funds rate at a record-low range of zero to 0.25% and kept the discount rate for commercial and investment banks unchanged at 0.50%, both in line with market expectations. The Fed highlighted new signs of economic stability, stating that “information received since the Federal Open Market Committee met in April suggests that the pace of economic contraction is slowing” and “conditions in financial markets have generally improved in recent months.” The fed said “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period” and reiterated plans for asset purchases with no changes to the program. Regarding inflation, the Fed said “substantial resource slack is likely to dampen cost pressures,” expecting “inflation will remain subdued for some time.”


  • The eurozone seasonally adjusted current account deficit narrowed to €5.9 billion in April from €7.0 billion in March, while the non-seasonally adjusted current account deficit widened to €9.2 billion from March's €4.0 billion, Eurostat reported.
  • UK retail sales declined for a second month in June after a brief bounce in April, with retailers expecting “sales to fall slightly faster in July,” according to the Confederation of British Industry's latest distributive trades survey. The resulting balance of -17% in June, same as in May, was the least negative reading since June 2008, the CBI said.
  • The OECD economy will contract 4.1% in 2009 and expand 0.7% in 2010, the Organisation for Economic Cooperation and Development said, raising its forecast for the OECD economy for the first time in two years amid an easing global recession.
  • The UK economy will contract 4.3% in 2009 and recover “only mildly” next year amid “a severe recession,” the OECD said, downgrading its previous UK GDP forecast.


  • Japan's exports fell a slightly more-than-expected 40.9% y/y in May, deepening April's 39.1% y/y decline, while imports dropped a slightly more-than-estimated 42.4% y/y, following April's 35.8% y/y slide, provisional May trade data from the Finance Ministry showed. The trade surplus narrowed 12.1% y/y to ¥299.8 billion ($3.1 billion) in May, while the adjusted trade balance was 222.4 billion.


  • Japan's corporate service price posted an eighth consecutive year-on-year decline in May, falling a more-thanexpected 3.0% y/y, after a 2.4% y/y slide in April, according to data from the Bank of Japan.

FX Strategy Update

Primary Trend Neutral Neutral Negative Neutral Neutral Neutral Neutral
Secondary Trend Positive Neutral Positive Negative Negative Positive Positive
Outlook Neutral Neutral Neutral Neutral Neutral Neutral Neutral
Action Sell Buy Buy None None Buy None
Current 1.3935 95.54 1.6424 1.0977 1.1535 0.7962 133.15
Start Position 1.3904 95.69 1.4845 N/A N/A 0.6601 N/A
Objective N/A N/A N/A N/A N/A N/A N/A
Stop 1.4235 93.40 1.5860 N/A N/A 0.7670 N/A
Support 1.3750 94.50 1.5900 1.0600 1.1000 0.7800 128.00
1.3550 91.00 1.5500 1.0400 1.0800 0.7500 125.00
Resistance 1.4000 99.50 1.6600 1.1000 1.1600 0.8200 139.00
1.4300 101.00 1.7000 1.1300 1.2000 0.8500 142.00