Last week's currency trading review

The Dollar lost ground against risk currencies as the jump in US Unemployment was shrugged off on Friday and stocks finished on a positive note. Some big moves were seen on Tuesday as the stock market took a dive and the Dollar benefited from safe haven flows. The rest of the week saw a return to USD weakness as equities recovered. August Unemployment Rate Jumped to 9.7% vs. 9.4% previously and the net change was -213K vs. -225k forecast. August Manufacturing PMI jumped above the expansionary 50 level to 52.9 vs. 48.9 previously. The Euro was hurt by cautious comments from ECB President Trichet on Thursday after the ECB held at 1.0%. Trichet commented that the EU faced a bumpy and uneven recovery and this was highlighted by the Unexpected fall in July retail Sales down -0.2% vs. +0.2% forecast. EUR/JPY buying on Friday helped the pair close at the 1.4300 figure with 1.4200 supporting on both Thursday and Friday. The EUR/USD fell -0.02% closing at 1.4299, after opening the week at 1.4302.

The Japanese Yen tested fresh multi-month lows on the back of the Tuesday US stock correction, trading at 92 Yen on the USD/JPY. The rest of the week saw a cautious recovery on crosses and improving risk sentiment saw the Yen finish on the back foot for the first time in 4 weeks. GBP/JPY found support 150, EUR/JPY at 131.50 and AUD/JPY at 76.50 Yen. The USD/JPY closed down -0.66% at 92.98 after opening the week at 93.59. The GBP finally gained some traction after falling from the 1.700 handle in August. Direction was taken from stocks and the pair rallied from weekly lows at 1.6110 to finish just under 1.6400. EUR/GBP continued to flirt with 0.8800 but finished under the level as the recent rally on the cross ran out of steam. GBP/USD gained +0.76% closing at 1.6391 after opening at 1.6267. The AUD was the strongest currency in the market breaking out the range seen over the past 2 months between 0.8150-0.8480. Strong data during the week allowed the pair to break higher on the back of Friday's non farm action. A break and close above 0.8500 leaves the Aussie in a bullish position especially with Gold flirting with $1000 an ounce. The AUD/USD closed up 1.11% at 0.8503 after opening at 0.8409.

The forex trading week preview

In the States; light data week with Thursday's Trade Balance the first key piece of data. July Trade Balance forecast at -26.8bn vs. -27b previously. Weekly Jobless claims forecast at 555k vs. 570k also released on Thursday. Crude Oil Inventories will be released on Thursday due to the labor holiday on Monday. On Friday, September University of Michigan forecast at 67.3 vs. 65.7 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Monday, German factory Orders are forecast at 2% vs. 4.5% previously. On Tuesday Industrial Production forecast at 1.6% vs. -0.1% previously. Finally on Friday, German August WPI is forecast at 0.0% vs. 0.5% previously. In the UK; big week for the GBP with the BOE on Thursday the highlight expected to hold at 0.5% but with attention turning to comments about the QE program. On Tuesday, July Industrial Production is forecast at 0.2% vs. 0.5% previously. Also released Manufacturing Production forecast at 0.3% vs. 0.4% previously. On Wednesday, July Trade Balance is forecast at -2000m vs. -2176m previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Tuesday, July Trade Balance forecast at 495b vs. 600b. On Thursday, Core Machinery Orders are forecast at -3.1% vs. 9.75 previously. On Friday Q2 GDP is forecast to be finalized at 0.9% unchanged from initial readings. We will provide our previews and reviews of these data releases in the daily summary.

In Australia; On Wednesday, July Retail Sales are forecast at 0.5% vs. -1.4% previously. On Thursday, RBNZ meet and are expected to hold at 2.5%. Also on Thursday, Australian August Employment Change forecast at -15k vs. 32k previously. 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

1.4046

1.4178

1.4325

1.4406

1.4447

USD/JPY

90.54

91.74

93.15

94.07

95.06

GBP/USD

1.6034

1.6114

1.6405

1.6413

1.6546

AUD/USD

0.8156

0.8239

0.8530

0.8694

0.8813

XAU/USD

939.00

944.00

992.00

997.00

1000.00


Euro - 1.4325
Initial support at 1.4178 (Sept 1 low) followed by 1.4046 (AUG 17 low). Initial resistance is now located at 1.4407 (Aug 27 high) followed by 1.4447 (Aug 5 high)

Yen - 93.15
Initial support is located at 91.74 (July 13 low) followed by 90.54 (February 13 low). Initial resistance is now at 94.07 (August 28 high) followed by 95.06 (Aug 14 high).

Pound - 1.6405
Initial support at 1.6114 (Sept 1 low) followed by 1.6034 (Jul 13 low). Initial resistance is now at 1.6381 (Aug 28 high) followed by 1.6546 (Aug 24 high).

Australian Dollar - 0.8530
Initial support at 0.8239 (AUG 27 low) followed by the 0.8156 (AUG 17 low). Initial resistance is now at 0.8694 (Aug 28 2008 high) followed by 0.8813 (AUG 22 2008 high).

Gold - 992
Initial support at 944 (Aug 31 low) followed by 939 (Aug 24 low). Initial resistance is now at 997 (Sept 3 high) followed by 1000 (Psychological Round Number).