- The dollar and yen gained on Tuesday as risk aversion rose and US stocks fell. The S&P 500 dropped 22.58 points to 998.04. US economic data indicate the US economy is recovering. US pending home sales rose more than expected in July and manufacturing expanded in August. Chinese and Australian manufacturing PMI numbers were also strong. However, stocks are overbought, requiring a correction. The euro, at critical support from the long-term uptrend, fell on increased risk aversion. Eurozone economic figures were mixed with the unemployment rate climbing to a 10-year-high 9.5% and the manufacturing PMI rising more than expected. Sterling fell, pressured by the weaker-than-expected UK manufacturing PMI and outstanding loans to companies and individuals falling at a record pace. The Canadian dollar declined as crude oil and commodity prices fell. We are buying the USD/CHF with stop at 1.0475.
- The AUD/USD fell as stocks and commodity prices dropped. The pair was also pressured by today's less hawkish-than-expected Reserve Bank of Australia statement. The RBA maintained its key interest rate at 3.00%, as forecast; however, not giving any timetable for rate hikes as some speculators had expected. The AUD/USD has been strongly correlated with the stock and commodity markets. We expect further consolidations in those markets. The pair has recently formed a triple-top. We have been long from 0.6601 with stop at 0.8070. If the 0.82-area support is broken, the AUD/USD may test the 0.79 support.
Financial and Economic News and Comments
US & Canada
- The dollar index gained 0.56 points to 78.74 and tentatively broke the downtrend, indicating further gains. Highly correlated with risk aversion and equity markets, the index peaked when equities bottomed in March. US equities are at important resistance and quite overbought. If the stock market continues its decline, the dollar index will likely test the 81-area resistance.
The ISM US manufacturing index rose more than expected to 52.9 in August from 48.9 in July, indicating US manufacturing expanded for the first time since January 2008, data from the Institute for Supply Management showed. All of the index's key components improved in August. The new orders index jumped to 64.9, the highest level since December 2004, from July's 55.3. The production index rose to 61.9, also the highest since 2004, from 57.9. The employment index improved to 46.4 from 45.6. The prices paid index climbed to 65.0 in August, the highest level in a year, from 55.0 in July.
- US pending home sales rose a much more-than-expected 3.2% m/m in July, a sixth consecutive gain, after a 3.6% m/m advance in June, data from the National Association of Realtors showed, marking the longest consecutive stretch of gains since records began in 2001. July pending home sales jumped 12.0% y/y. The figures indicate the US housing market is recovering.
- US construction spending unexpectedly declined 0.2% m/m in July to a seasonally adjusted $958.0 billion annual rate from June's revised $959.5 billion, according to figures from the Commerce Department. July construction spending fell 10.5% y/y.
- The eurozone manufacturing PMI was upwardly revised to 48.2 for August, an 14-month high, above a previously reported 47.9 and July's 46.3, while the German manufacturing PMI for August was upwardly revised to 49.2, the highest in a year, above a previously reported 49.0 and July's 45.7, according to final August manufacturing PMI data by Markit Economics. The August PMI figures show eurozone and German manufacturing industries are moving near a 50 mark that would indicate expansion.
- The eurozone seasonally-adjusted unemployment rate rose to 9.5% in July, as forecast and the highest rate since May 1999, from 9.4% in June, according to data released by Eurostat. The number of persons unemployed climbed 167,000 in July.
- Germany's unemployment unexpectedly declined 1,000 to 3.46 million in August on an adjusted basis after falling a revised 5,000 in July, figures from the Federal Statistical Office showed. The seasonally adjusted unemployment rate was unchanged at 8.3% in August.
- Germany's retail sales increased 0.7% m/m in July, the fist gain in three months, after a revised 1.3% m/m fall in June, according to data from the Federal Statistical Office. July retail sales declined 1.0% y/y, following June's revised 2.0% y/y decrease.
- The UK manufacturing PMI unexpectedly declined to 49.7 in August from a downwardly revised expansionlevel 50.2 in July, indicating UK manufacturing contracted last month, according to PMI data by the Chartered Institute of Purchasing and Supply and Markit Economics.
- Switzerland's GDP declined a less-than-expected 0.3% q/q in Q2 2009, after a revised 0.9% q/q fall in Q1, the largest drop since 1991, according to GDP data released by the State Secretariat for Economic Affairs. The economy shrank a less-than-expected 2.0% y/y, following Q1's revised 2.2% y/y contraction.
- Switzerland's SVME PMI rose more than expected to 50.2 in August from 44.3 in July, indicating Switzerland's manufacturing expanded last month, according to a survey from the Swiss Association of Purchasing and Materials Management and Credit Suisse.
- The Industry Group-PricewaterhouseCoopers performance of manufacturing index for Australia rose to 51.7 in August from 44.5 in July, indicating Australia's manufacturing expanded last month and rose to the highest level since March 2008, the AiG and PwC reported. The production index rose to 53.0 in August, its highest level since December 2007, from 42.8 in July, while the new orders index jumped to 60.3, its highest level since July 2007, from July's 47.9. However, employment pressures remained in August, with the employment index declining to 40.5 from July's 41.3.
- Australia's current account deficit widened more than expected to A$13.347 billion ($11 billion) in Q2 2009, the most in a year, from a revised A$6.346 billion in Q1, according to figures from the Australian Bureau of Statistics (ABS).
- Australia's building approvals rose for a second month in July, rising a much more-than-expected 7.7% m/m, after an upwardly revised 9.9% m/m gain in June, data from the ABS showed. July building approvals declined a less-than-expected 3.9% y/y.
- The Reserve Bank of Australia left the overnight cash rate target unchanged for a fifth month at a record-low 3.00%, as forecast. RBA Governor Stevens said the present accommodative setting of monetary policy remains appropriate for the time being.
- The Chinese PMI increased to a seasonally adjusted 54.0 in August from 53.3 in July, indicating China's manufacturing expanded at the fastest rate in 16 months, the Federation of Logistics and Purchasing said. The output index climbed to 57.9 in August from 57.3 in July. The new orders index rose to 56.3 from 55.5. The new export order index held steady at 52.1. The employment index advanced to 51.4 from 50.8.
EUR/USD USD/JPY GBP/USD
USD/CHF USD/CAD AUD/USD EUR/JPY Primary Trend Positive Negative Positive
Negative Negative Positive Neutral Secondary Trend Neutral Neutral Neutral
Neutral Neutral Neutral Neutral Outlook Negative Negative Negative
Positive Positive Negative Negative Action Sell None None
Buy None Buy None Current 1.4224 92.92 1.6160
1.0650 1.1030 0.8260 132.20 Start Position 1.4142 N/A N/A
N/A N/A 0.6601 N/A Objective N/A N/A N/A
N/A N/A N/A N/A Stop 1.4530 N/A N/A
N/A N/A 0.8070 N/A Support 1.4200 92.00 1.6150
1.0550 1.0750 0.8200 132.00 1.4000 90.00 1.6000 1.0200
1.0500 0.7900 127.00 Resistance 1.4400 94.50 1.6500 1.1000
1.1100 0.8500 139.00 1.4500
97.50 1.7000 1.1300 1.1300 0.8700