• The dollar was higher against the euro on Friday but lower versus other major currencies. US GDP rose at a 2.4% annualized pace in Q2 2010. While Q1 GDP was revised higher, estimates back to 2007 were revised lower. The S&P 500 increased 0.07 to 1,101.60. The euro fell from yesterday's nearly 3-month high. Sterling traded at $1.5689 today, compared with $1.5612 yesterday. The Swiss franc gained for a third consecutive day against the euro and hit the highest level in a week. The Canadian and Australian dollars advanced against the greenback. The Reserve Bank of Australia is expected to maintain its key interest rate at 4.50% next week.
  • The USD/JPY fell for a third straight day on carry-trade unwinding and weak Japanese economic data. Japan's industrial production unexpectedly fell, jobless rate increased and consumer prices declined in annual terms for a 16th successive month. The pair fell to the lowest level since November 2009. If the 86-area support is broken, the USD/JPY will probably fall to the lower trading band in the 85 area.


Financial and Economic News and Comments

US & Canada

  • US GDP grew at a 2.4% annualized rate in Q2 2010, a fourth consecutive quarterly expansion and marginally less than forecast, after an upwardly revised 3.7% annualized pace in Q1 (previously reported 2.7%), according to the advance GDP estimate released by the Commerce Department. Q2 GDP rose 3.2% y/y. The largest positive contributors to Q2 GDP growth were business investment in equipment and software, personal consumption, and inventories, while the weakest component was net exports. Consumer spending increased at a 1.6% annualized pace in Q2 after a downwardly revised 1.9% annualized rate in Q1. The GDP price index advanced at a 1.8% annualized pace, following Q1's downwardly revised 1.0% annualized rate.


  • The US employment cost index increased as forecast a seasonally adjusted 0.5% q/q in Q2 2010 after a 0.6% q/q advance in Q1, according to data from the Labor Department. ECI growth quickened to 1.8% y/y nsa from Q1's 1.7% y/y.
  • The Thomson Reuters/University of Michigan final consumer sentiment index declined to a better-thanexpected 67.8 (vs. preliminarily reported 66.5) in July from 76.0 in June, indicating US consumer confidence fell to the lowest level since November 2009, the latest Thomson Reuters/University of Michigan surveys of consumers showed, compared with July 2009's 66.0. The current economic conditions index decreased to 76.5 (vs. preliminarily reported 75.5) in July from 85.6 a month earlier. The consumer expectations index declined to 62.3 (vs. preliminarily reported 60.6) from June's 69.8.
  • The Chicago business barometer unexpectedly increased to 62.3 in July from 59.1 in June, indicating US business activity expanded beyond the 50 growth level for a 10th straight month and at a faster pace, according to the Chicago Report by Kingsbury International, Ltd. and the Institute for Supply Management - Chicago, Inc.
  • Canada's GDP increased 0.1% m/m to a seasonally adjusted C$1.23 trillion ($1.19 trillion) annual rate in May, the eighth gain in nine months, after stalling in April, figures from Statistics Canada showed. May GDP rose 3.8% y/y.



  • The eurozone consumer-price inflation rate accelerated to 1.7% y/y in July, the fastest since November 2008, from 1.4% y/y in June, according to a flash CPI estimate released by Eurostat. However, monthly CPI fell 0.4% m/m in July, the first month-on-month fall since January.


  • Eurozone unemployment was up a seasonally adjusted 6,000 m/m to 15.771 million in June, the sixth increase in seven months, a separate report from Eurostat showed. The seasonally adjusted unemployment rate held as expected at 10.0% for a fourth consecutive month in June, the highest since August 1998, compared with June 2009's 9.5%.
  • TGerman retail sales, adjusted for calendar and seasonal variations, fell a more-than-expected 0.9% m/m in June, the third fall in four months, after an upwardly revised 3.0% m/m May gain that was the most since January 2008, according to data from the Federal Statistical Office. Retail sales rose 3.1% y/y, following May's revised 0.7% y/y decrease.
  • The KOF Swiss economic barometer was at 2.23 in July, unchanged from a downwardly revised 2.23 in June and halting its upswing since May 2009, the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research reported, asserting that Switzerland's year-on-year economic growth rate will likely remain correspondingly positive throughout the next few months.
  • The GfK NOP UK consumer confidence index declined to a slightly lower-than-expected -22 in July from -19 in June, indicating UK consumer sentiment slumped for a fifth consecutive month to an 11-month low, according to data from GfK NOP. Consumer sentiment about prospects for the UK economy in the next 12 months continued its decline, with the expectations gauge falling to -25 in July from -12 a month earlier.


  • The seasonally adjusted Nomura/JMMA manufacturing PMI declined to 52.8 in July from 53.9 in June, indicating the Japanese manufacturing sector expanded above the 50 growth level for a 13th straight month but at the slowest pace in four months, a PMI report released by Markit Economics showed.
  • The seasonally adjusted Nomura/JMMA manufacturing PMI declined to 52.8 in July from 53.9 in June, indicating the Japanese manufacturing sector expanded above the 50 growth level for a 13th straight month but at the slowest pace in four months, a PMI report released by Markit Economics showed.
  • Japan's core consumer prices, which exclude fresh food, slipped 1.0% y/y in June, a 16th successive year-onyear decline but easing from a 1.2% y/y decrease in May, according to CPI data from the Statistics Bureau. The CPI excluding food and energy fell 1.5% y/y, following May's record 1.6% y/y drop. Tokyo's core CPI, a leading indicator for nationwide price trends, slid 1.3% y/y in July, matching June's year-on-year decline.
  • Japanese industrial production unexpectedly fell 1.5% m/m sa in June, the first fall in four months and the most in more than a year, after a 0.1% m/m increase in May, preliminary June IP data from the Ministry of Economy, Trade and Industry showed, with the IP index declining to 94.7 from May's 96.1. June IP rose 17.0% y/y nsa, a seventh straight year-on-year rise but smaller than a 20.4% y/y May gain.


  • The Japanese seasonally adjusted unemployment rate unexpectedly rose to 5.3% in June, a fourth consecutive monthly rise and a 7-month high, from 5.2% in May, according to data from the Statistics Bureau. The economy added 40,000 jobs from a month earlier, the first monthly gain in five months. The job-toapplicant ratio, a leading indicator of employment trends, increased to 0.52 in June, the highest level since March 2009, meaning there were 52 positions for every 100 candidates, compared with May's 0.50.
  • Japanese household spending unexpectedly increased 0.5% y/y in June, the first gain in three months, after a 0.7% y/y decline in May, a separate report from the Statistics Bureau showed.
  • Australia's private sector credit increased a slightly less-than-expected 0.2% m/m in June after a 0.5% m/m advance in May, data from the Reserve Bank of Australia showed. Private sector credit rose 2.8% y/y, following May's 2.7% y/y rise.

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 Positive Negative Outlook Neutral Neutral Neutral Neutral Positive Neutral Neutral Action None Long None None Long None None Current 1.3030 86.38 1.5689 1.0414 1.0280 0.9044 112.56 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 1.2950 86.00 1.5300 1.0400 1.0300 0.8750 107.50 1.2550 84.80 1.5000 1.0300 1.0200 0.8600 106.00 Resistance 1.3250 90.00 1.5700 1.0750 1.0600 0.9050 115.00 1.3500 92.00 1.6000 1.1000 1.0800 0.9250 120.00

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