The dollar traded lower against most major currencies on Wednesday. The dollar index fell to 83.86, below its 84-handle support and 5% below its June 8 high. The easing dollar is reducing debt deflation risks and supporting risky assets. The oversold S&P 500 surged 32.21 to 1,060.27 on short covering and better retailsale prospects. International Council of Shopping Centers said US retail sales grew at the fastest pace since 2006. The euro traded modestly higher despite an unexpected decline in German manufacturing orders. The European Union will release the results of the stress test of 91 European banks at the end of July. The test will examine whether the banks can withstand a contracting economy and modestly falling bond values. The GBP/USD oscillated near the 1.52 resistance for a fifth day without being able to penetrate it. The Australian and Canadian dollars were boosted by gains in stocks and commodities despite the weaker-than-expected Canadian Ivey PMI and Australian construction.

  • The USD/JPY reversed earlier losses after finding support at the 87-handle. The Japanese economy has shown signs of slowing. The government's proposal to raise consumption taxes will likely further weaken the economy and hurt the governing party in this weekend's upper house election. The USD/JPY is in a clearly defined downtrend; however, being oversold and above the strong 86.50-area support. We buy the pair with stop at 85.75.
  • Financial and Economic News and Comments

    US & Canada The MBA US market composite index, a measure of mortgage loan application volume, rose a seasonally adjusted 6.7% for the week ending July 2 after an 8.8% advance a week earlier, the Mortgage Bankers Association reported. The refinance index was up 9.2% w/w, the highest since the week ending May 15, 2009. The purchase index, down eight of the last nine weeks, declined 2.0% w/w.

  • The Canadian Ivey PMI unexpectedly declined to 58.9 in June from 62.7 in May, indicating growth in purchases in Canada's public and private sectors slowed for the first time in six months, according to data from the Richard Ivey School of Business and the Purchasing Management Association of Canada. The employment index fell to 53.6 in June, the first fall in four months, from 58.1 the prior month. Prices increased at a slower pace in June, with the prices index slipping to 58.3 from May's 59.2.
  • Europe

    • Eurozone seasonally adjusted GDP rose an unrevised 0.2% q/q in Q1 2010, a third consecutive quarterly rise, after a 0.1% q/q increase in Q4 2009, led by gains in exports and government spending, final Q1 GDP data from Eurostat showed. The Q1 GDP grew an unrevised 0.6% y/y, the first year-on-year gain since Q3 2008, following a 2.1% y/y Q4 contraction. Exports rose a downwardly revised 2.1% q/q (vs. preliminarily reported 2.5% q/q) in Q1, a third successive quarterly rise, after an upwardly revised 1.8% q/q advance in Q4. Government spending increased a downwardly revised 0.2% q/q (vs. preliminarily reported 0.6% q/q), following Q4's downwardly revised 0.2% q/q decline. Business investment fell a revised 1.2% q/q (vs. preliminarily reported -1.1% q/q) in Q1, an eighth straight quarterly slide, after a revised 1.2% q/q fall in Q4. Household consumption expenditure slipped an unrevised 0.1% q/q, following a 0.2% q/q Q4 increase.

    • Germany's seasonally adjusted manufacturing orders unexpectedly fell 0.5% m/m in May, the first fall in five months, after an upwardly revised 3.2% m/m increase in April, according to data from the Federal Ministry of Economics and Technology. May manufacturing orders rose as forecast 24.8% y/y nsa, a seventh straight year-on-year rise, following an upwardly revised 30.1% y/y April gain.
    • UK shop price inflation eased to 1.5% y/y in June, the slowest annual rate since March, from 1.8% y/y in May, the BRC-Nielsen shop price index released by the British Retail Consortium showed. Food inflation slowed to 1.7% y/y in June from 2.2% y/y a month earlier; non-food inflation eased to 1.4% y/y from May's 1.6% y/y.

    Asia-Pacific The Australian Industry Group/Housing Industry Association performance of construction index declined to 46.4 in June from 53.2 in May, indicating Australia's construction sector contracted for the first time in four months, according to an AiG/HIA report. The activity index increased to 49.4 in June from 48.5 a month earlier, signaling construction activity contracted for a second consecutive month but at a slightly slower pace. The new orders index fell to 45.7 from May's 52.7, suggesting new orders contracted for the first time in three months to the lowest level since December 2009. The employment index dropped to 44.1 in June from 56.3 in May, indicating construction employment contracted for the first time in four months to the same level in August 2009.

    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
    Negative
    Neutral
    Negative
    Negative

    Outlook
    Neutral
    Neutral
    Positive
    Positive
    Positive
    Negative
    Neutral

    Action
    Short
    Buy
    None
    None
    Long
    None
    None

    Current
    1.2630
    87.75
    1.5173
    1.0522
    1.0472
    0.8633
    110.86

    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
    85.75
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2150
    86.50
    1.4800
    1.0500
    1.0400
    0.8300
    107.50

    1.1900
    85.00
    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
    Negative
    Neutral
    Negative
    Negative

    Outlook
    Neutral
    Neutral
    Positive
    Positive
    Positive
    Negative
    Neutral

    Action
    Short
    Buy
    None
    None
    Long
    None
    None

    Current
    1.2630
    87.75
    1.5173
    1.0522
    1.0472
    0.8633
    110.86

    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
    85.75
    N/A
    N/A
    1.0075
    N/A
    N/A

    Support
    1.2150
    86.50
    1.4800
    1.0500
    1.0400
    0.8300
    107.50

    1.1900
    85.00
    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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