• The dollar rose in NY trading Wednesday, supported by risk aversion following reports that China’s government may take steps to curb excess capacity and overinvestment in certain sectors. Since the beginning of the financial crisis, good news had pressured the dollar while bad news had supported it. However, today’s reports on gains in both durable goods orders and new-home sales did not seem to pressure the dollar. The dollar index was up 0.5%, again testing the resistance from the 6-month old downtrend. A penetration of this downtrend will change the dollar’s near-term outlook. US stocks were little changed; the S&P 500 was up 0.12 points to 1,028.12. The yen was little changed versus the greenback. The euro was unable to hold on to gains incurred after German business sentiment rose to the highest level since September 2008. Sterling fell for a sixth day. We took a nice profit on our long GBP/USD that we entered at 1.4845. The Canadian dollar fell on concerns over the commodity-market outlook.
  • The AUD/USD fell for a second day after worries about the Chinese economic expansion. The pair is dependent on the Chinese economic outlook as China is a major export destination for Australian goods. The AUD/USD has traded sideway after failing to break the important 0.85 resistance. If the 0.82 support is broken, the pair will turn more bearish and may penetrate the 0.80 support.
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    Financial and Economic News and Comments

    US & Canada

    • US durable goods orders rose a more-than-expected 4.9% m/m to a seasonally adjusted $168.43 billion in July after an upwardly revised 1.3% m/m decline in June, according to data from the Commerce Department. Transportation-related durables jumped 18.4% m/m in July, the largest gain since September 2006, while orders for commercial planes surged 107.2% m/m and motor vehicle orders advanced 0.9% m/m. Excluding the transportation sector, durable goods orders increased 0.8% m/m in July after an upwardly revised 2.5% m/m gain in June. Durable goods orders fell 20.4% y/y in July and also fell 20.4% y/y excluding transportation. Shipments of non-defense capital goods excluding aircraft, used in calculating GDP, increased 0.5% m/m in July after an upwardly revised 1.3% m/m gain in June.

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    • US new-home sales posted a fourth straight gain in July, rising a much more-than-expected 9.6% m/m to a seasonally adjusted 433,000 annual rate, the highest since September 2008, after a revised 9.1% increase to a 395,000 annual rate in June, figures from the Commerce Department showed. July new-home sales fell 13.4% y/y. Sales increased in the Northeast, South, and West, but declined in the Midwest. The median price of a new home was $210,100 in July, down 11.5% y/y. The average price of a new home was $269,200, down 10.8% y/y. At the current sales pace, the supply of unsold new homes declined to 7.5 months in July, the lowest level since April 2007, from 8.5 in June. The decline in the months’ supply was mostly due to the faster pace of sales and a continued fall in the inventory of unsold new homes. Inventories fell to 271,000 in July, the lowest since March 1993. Overall, the July figures indicate the US housing market is recovering from its slump.

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    Europe

    • Germany’s import prices declined 0.9% m/m in July after a 0.4% m/m increase in June, the Federal Statistical Office reported. July import prices fell 12.6% y/y, the largest year-on-year fall since February 1987, following June’s 11.3% y/y decrease.
    • The Ifo German business climate index rose more than expected to 90.5 in August from an upwardly revised 87.4 in July, indicating Germany’s business confidence climbed for a fifth consecutive month and to the highest level since September 2008, data from the Ifo Institute showed. The current conditions index increased to 86.1 in August from an upwardly revised 84.4 in July, while the business expectations index advanced to 95.0 from 90.4.

    Asia-Pacific

    • Japan’s exports fell 36.5% y/y in July, a tenth consecutive year-on-year fall, deepening June’s 35.7% y/y decrease, while imports dropped 40.8% y/y, a ninth straight year-on-year drop, following June’s 41.9% y/y slide, figures from the Finance Ministry showed. The trade surplus widened to ¥380.234 billion ($4 billion) in July from ¥81.917 billion in July 2008. On a seasonally adjusted basis, exports declined 1.3% m/m in July, the first drop in two months, while imports increased 3.0% m/m. The seasonally adjusted trade balance narrowed to ¥194.526 billion in July from ¥374.148 billion in June.

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    • Japan’s corporate service prices fell as forecast 3.4% y/y in July, a tenth straight year-on-year drop and the largest since records began in January 1985, following a 3.2% y/y decline in June, data from the Bank of Japan showed.
    • Japanese small business confidence improved to 41.8 in August from 41.1 in July, Shoko Chukin Bank reported. A reading below 50 suggests pessimists outnumber optimists.
    • Australia’s seasonally adjusted construction work done declined a less-than-expected 0.1% q/q to A$35.0313 billion ($29.3 billion) in Q2 2009 after a revised 2.2% q/q decrease in Q1, according to figures from the Australian Bureau of Statistics.
    • The Bank of Thailand left the one-day bond repurchase rate unchanged at 1.25%, the lowest level since July 2004, for a third consecutive meeting, amid signs of an economic recovery.

    FX Strategy Update

     

    EUR/USD

    USD/JPYGBP/USDUSD/CHFUSD/CAD

    AUD/USD

    EUR/JPY
    Primary TrendPositive

    Negative

    PositiveNegativeNegativePositive

    Neutral

    Secondary TrendNeutralNeutral

    Neutral

    NeutralNeutralNeutralNeutral
    OutlookNegativeNegativeNegative

    Positive

    PositiveNegativeNegative
    ActionSellNoneProfit Taken

    Buy

    NoneBuyNone
    Current1.424894.211.6240

    1.0611

    1.09730.8280134.24
    Start Position1.4142N/A1.4845

    1.0649

    N/A0.6601N/A
    ObjectiveN/AN/AN/A

    N/A

    N/AN/AN/A
    Stop1.4530N/A1.6170

    1.0540

    N/A0.8070N/A
    Support1.420094.001.6200

    1.0600

    1.07500.8200132.00
    1.400091.501.60001.0200

    1.0600

    0.8000127.00
    Resistance1.440097.501.70001.1000

    1.1100

    0.8500139.00
    1.4500

    99.50

    1.75001.13001.13000.8700

    145.00