Last week's currency trading review

The Dollar fell broadly as the stock market rallied over 8% in 5 days of gains that reversed the bearish sentiment and safe haven flows dried up on renewed optimism. US data was strong with Retail Sales in June up 0.6% vs. 0.4% previously. Core CPI was +0.2% m/m as expected and the FOMC minutes focused less on deflation reports. June Building Permits jumped 3.6% to 0.56m vs. 0.52m previously. The Euro gained heavily against the USD and YEN but was outpaced by risk currencies such as the CAD and AUD. German ZEW Economic sentiment slumped in June to 39.5 vs. 44.8 previously. China GDP at 7.9% provided fresh buying momentum. Eurozone CPI fell to -0.1% y/y in June. The EUR/USD gained 0.88% closing at 1.4101, after opening the week at 1.3977.

The Japanese Yen was the weakest currency after heavy gains the previous two weeks were wound back aggressively with the equity rally. AUD/JPY and GBP/JPY were the largest gainers as traders choose these pairs to express risk appetite. The BOJ meeting went as expected with the Corporate Bond Program extended. The USD/JPY closed up 1.38% at 94.22 after opening the week at 92.92. The GBP improved risk appetite and better than expected Economic data helped support the GBP on dips but the pound finished little changed against the USD with an IMF report suggesting sluggish growth this year and the next weighing into the weeks close. June RICS House Price Balance improved to -18.1% vs. -43.8% previously and the June Claimant Count was down to 23.8k vs. 41.4k forecast. GBP/USD gained +0.18% closing at 1.6336 after opening at 1.6307. The AUD fell heavily on Monday when the 0.78-.8200 range was broken to the downside but the market reversed with US stocks and rallied for the rest of the week to finish above the Key 0.8000 level. Q2 Export Prices fell -20.6% as the AUD rallied to post the biggest quarterly decline since 1974. The AUD/USD closed up 1.07% at 0.8015 after opening at 0.7929.

The forex trading week preview

In the States; On Monday, June Leading indicators are forecast at 0.50% vs. 1.2% previously. On Tuesday, Fed Chief Bernanke give his semi-annual monetary report to congress. On Thursday, Weekly Jobless Claims forecast at 558k vs. 522k previously. Also released, June Existing Home Sales forecast at 2% vs. 2.4%. On Friday, University of Michigan forecast at 65 vs. 64.6 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Monday German PPI is forecast at 0.5% m/m vs. 0.0% previously. On Wednesday, New Industrial Orders are forecast at 1.9% vs. -1.0% previously. On Thursday, Current Account is forecast at -2.7B vs. -5.9B previously. On Friday, German IFO forecast at 86.6 vs. 85.9 previously. Also released, July PMI EU services forecast at 45.2 vs. 44.7 and Manufacturing at 43.4 vs. 42.6 previously. In the UK; On Wednesday, BOE minutes of the Interest rate decision. On Thursday June Retail Sales are forecast at 0.4% vs. -0.6% previously. On Friday, Q2 GDP forecast -0.3% vs. -2.4% Q/Q. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Tuesday, BOJ minutes are released and then on Friday we have the May All Industry Activity Index forecast at 0.9% vs. 2.6% previously. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; PPI Q2 at 2.9% vs. 4.0% previously y/y on Monday kicks off the week. On Tuesday RBA minutes from July meeting released. On Wednesday, Q2 CPI is forecast at 0.5% q/q and 1.50% y/y. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3749

1.3833

1.4130

1.4201

1.4267

USD/JPY

91.74

92.72

94.20

94.89

95.46

GBP/USD

1.5985

1.6222

1.6350

1.6546

1.6745

AUD/USD

0.7703

0.7814

0.8030

0.8155

0.8237

XAU/USD

905.00

918.00

938.00

948.00

965.00


Euro - 1.4130
Initial support at 1.3833 (Jul 8 low) followed by 1.3749 (Jun 16 low). Initial resistance is now located at 1.4201 (July 1 high) followed by 1.4267 (Jun 5 high)

Yen - 94.20
Initial support is located at 92.72 (Jul 14 low) followed by 91.74 (July 13 low). Initial resistance is now at 94.89 (Jul 8 high) followed by 95.46 (Jul 7 high).

Pound - 1.6350
Initial support at 1.6222 (July 14) followed by 1.5985 (Jun 8 low). Initial resistance is now at 1.6546 (Jul 1 high) followed by 1.6745 (June 30 high).

Australian Dollar - 0.8030
Initial support at 0.7814 (July 14 low) followed by the 0.7703 (July 13 low). Initial resistance is now at 0.8155 (June 30 high) followed by 0.8237 (Jun 11 high).

Gold - 938
Initial support at 918 (Jul 8 low) followed by 905 (July 8 low). Initial resistance is now at 948 (June 26 high) followed by 965 (Jun 10 high).