The dollar fell on Tuesday on signs of a slowing US economy after data showed June US service industries expanded at the slowest rate in four months. The Globicus/qEcon Research US LEI declined in June, indicating the US economy is cooling significantly in H2 2010. The S&P 500 pared earlier gains and rose 5.48 to 1,028.06. The USD/JPY fell as Japan's May LEI declined for a second month. Unable to break the 1.52 resistance, the GBP/USD pared earlier gains.

Upbeat comments by the Reserve Bank of Australia supported the Australian dollar. The RBA maintained its key interest rate at 4.50%, as expected, and noted global economic growth, particularly in Asia, is likely to support demand for commodities and keep Australian economic growth above trend. The Canadian dollar rose even though Canada's building permits dropped the most since February 2009.

The EUR/USD rose to the highest level since May 21, supported by good demand for Spanish debt. The pair has tentatively broken the 1.26 area, which is the neckline from the inverted head-and-shoulder; thus, implying a rise to the 1.30-area resistance. We raised the stop on our short EUR/USD position slightly to 1.2725.

Financial and Economic News and Comments

US & Canada

The Globicus-qEcon Research US leading economic indexes' growth rates continued their sharp declines, suggesting US economic growth is seriously slowing in H2 2010. The overall leading economic index' growth rate, a measure of future economic growth, was at 1.5 in June, down sharply from an 11.8 high in November. The short leading index' growth rate dropped to -1.3 in June from 3.3 in May. The long leading index' growth rate was at 5.2 in June, down modestly from 5.7 a month earlier but considerably below September's 12.8 peak. Overall, the leading indexes indicate that US economic growth is faltering with the risk for a double-dip recession increasing. Meanwhile, the coincident index' growth rate, a measure of current economic growth, improved steadily and increased to 2.8 in May from 1.7 in April. The National Bureau of Economic Research's Business Cycle Dating Committee has still not determined the end of the latest recession. June 2009 was the trough of the great recession, according to the coincident index. US GDP rose at a 2.7% annualized rate in Q1 2010, a third consecutive quarterly gain but well below a 5.6% annualized pace in Q4 2009.

The ISM US non-manufacturing index declined to a lower-than-expected 53.8 in June from 55.4 in May, indicating US service industries expanded for a sixth consecutive month but at the slowest pace in four months amid a cooling economy, data from the Institute for Supply Management showed. The business activity index fell to 58.1 in June from 61.1 a month earlier, showing business activity grew for a seventh successive month but at a slower rate. The new orders index declined to 54.4 from May's 57.1, suggesting new orders expanded for a 10th straight month but at a slower pace. Employment contracted in June, with the employment index slipping to 49.7 from May's expansion-level 50.4. The supplier deliveries index was unchanged at 53.0. The prices paid index decreased to 53.8 in June from 60.6 in May, suggesting prices paid by non-manufacturing organizations for purchased materials and services rose for an 11th straight month but at a slower rate.

Canadian seasonally adjusted building permits fell a more-than-anticipated 10.8% m/m to C$5.98 billion ($5.66 billion in May, the fifth fall in seven months and the deepest since February 2009, after an upwardly revised 5.9% m/m increase in April, according to data from Statistics Canada. The May fall was led by a 18.3% m/m drop in non-residential permits to C$2.32 billion and a 5.3% m/m decline in residential permits to C$3.66 billion. May building permits rose 13.9% y/y, an eighth straight year-on-year gain.

Europe Switzerland's consumer prices fell for a second month in June, falling 0.4% m/m, after a 0.1% m/m May decline, CPI data from the Swiss Federal Statistical Office showed. The consumer-price inflation rate decelerated to 0.5% y/y from May's 1.1% y/y.

Asia-Pacific Australia's trade surplus swelled to a larger-than-expected A$1.65 billion ($1.40 billion) in May from an upwardly revised A$1.12 billion in April, according to figures from the Australian Bureau of Statistics. Exports, rising faster than imports, rose 6.0% m/m to A$24.7 billion in May. Imports increased 4.0% m/m to A$23.1 billion.

  • Japan's economic recovery is slowing. The Japanese leading economic indicators index, a measure of future economic activity, fell for a second month, to 98.7 in May, from 101.7 in April, preliminary May LEI data from the Cabinet Office showed. The coincident index, measuring current economic activity, slipped to 101.2, the first decline in 14 months, from April's 101.3.
  • 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
    Neutral
    Neutral
    Neutral
    Negative
    Negative

    Outlook
    Neutral
    Neutral
    Positive
    Positive
    Positive
    Negative
    Negative

    Action
    Short
    None
    None
    None
    Long
    None
    None

    Current
    1.2626
    87.53
    1.5149
    1.0589
    1.0589
    0.8531
    110.54

    Start Position
    1.4628
    N/A
    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
    1.2725
    N/A
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2150
    87.00
    1.4800
    1.0500
    1.0400
    0.8300
    107.50

    1.1900
    86.50
    1.4450
    1.0400
    1.0200
    0.8100
    106.00

    Resistance
    1.2680
    90.00
    1.5200
    1.0750
    1.0750
    0.8800
    113.00

    1.2950
    92.00
    1.5400
    1.1000
    1.1000
    0.9000
    120.00

     
    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
    Neutral
    Neutral
    Neutral
    Negative
    Negative

    Outlook
    Neutral
    Neutral
    Positive
    Positive
    Positive
    Negative
    Negative

    Action
    Short
    None
    None
    None
    Long
    None
    None

    Current
    1.2626
    87.53
    1.5149
    1.0589
    1.0589
    0.8531
    110.54

    Start Position
    1.4628
    N/A
    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
    1.2725
    N/A
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2150
    87.00
    1.4800
    1.0500
    1.0400
    0.8300
    107.50

    1.1900
    86.50
    1.4450
    1.0400
    1.0200
    0.8100
    106.00

    Resistance
    1.2680
    90.00
    1.5200
    1.0750
    1.0750
    0.8800
    113.00

    1.2950
    92.00
    1.5400
    1.1000
    1.1000
    0.9000
    120.00

    Expert Market Commentaries, charts and information are provided by Hans Nilsson of Globicus International, Inc., a registered third party CTA, are intended for educational purposes only and do not constitute trading recommendations.

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