The dollar traded mostly higher on Wednesday after Moody's Investors Service Inc. said it may downgrade Spain's Aaa credit rating. US economic data were mixed. ADP estimated US nonfarm private employment increased 13K in June, well below the consensus expected 60K, while the Chicago PMI showed US business activity expanded for nine straight months. The S&P 500 reversed its earlier gains and fell 10.53 to 1,030.71.

Despite the possible Spanish downgrade, the euro was boosted by indications the stress within the eurozone banking system may not be as intense as originally thought. The European Central Bank said it will lend the region's banks less money than forecast. The overbought pound was pressured by weakening UK consumer confidence and a recession warning by Bank of England policy maker Adam Posen. The UK economy is tentatively recovering and risks falling back into recession due to the austerity measures throughout Europe, Posen said. The Australian and Canadian dollars fell for a third consecutive day.

The USD/JPY fell for the sixth day out of seven and approached important support at the 88-handle. If this was broken, the pair would test the November 2009 low. However, the significant 88 support will possibly hold as the USD/JPY is oversold. A penetration of the short-term downtrend will improve the USD/JPY outlook. We buy the pair with a close stop at 87.40.

Financial and Economic News and Comments

US & Canada

US nonfarm private payrolls increased 13,000 in June, a fifth straight monthly gain, after an upwardly revised 57,000 advance (vs. previously reported 55,000 increase) in May, according to estimates by Automatic Data Processing, Inc. and Macroeconomic Advisers, LLC. However, over these five months the increases have averaged a modest 34,000, ADP said, adding that recent ADP data indicate that following steady improvement through April, private employment may have decelerated heading into the summer. The July 2 employment report from the Labor Department will possibly show overall job losses approximately 105,000 for June, with the unemployment rate increasing to 9.8% from May's 9.7%.

The Chicago business barometer slipped as forecast to 59.1 in June from 59.7 in May, indicating US business activity expanded beyond the 50 growth level for a ninth straight month but at a slightly slower pace, according to the Chicago Report by Kingsbury International, Ltd. and the Institute for Supply Management - Chicago, Inc. The new orders index declined to 59.1 in June from 62.7 a month earlier, suggesting growth in new orders softened slightly. However, the production index advanced to a robust 64.2 in June from 61.0 in May, showing production grew for a ninth successive month at the faster rate. The employment index increased to 54.2 from 49.2, indicating employment expanded in June after contracting in May. Prices rose at a slower rate in June, with the prices paid index declining to 61.9 from May's 64.0. Canada's GDP unexpectedly remained unchanged at a seasonally adjusted C$1.23 trillion ($1.16 trillion) annual rate in April after seven straight monthly gains, figures from Statistics Canada showed. The GDP grew 3.3% y/y, following March's 3.0% y/y growth.

Europe The eurozone consumer-price inflation rate slowed to 1.4% y/y in June from 1.6% y/y in May that was the fastest since December 2008, according to a flash June CPI estimate released by Eurostat. Germany's seasonally adjusted unemployment declined a less-than-expected 21,000 in June, a 12th straight monthly decrease, to 3.23 million, the lowest since December 2008, after a revised 41,000 drop in May, figures from the Federal Labor Agency showed, suggesting labor-market conditions continue to improve amid a strengthening German economy. The seasonally adjusted unemployment rate remained at 7.7%.

UK business investment rose 7.8% q/q (vs. preliminarily reported +6.0% q/q) in Q1 2010, the first gain since Q2 2008, after a revised 3.6% q/q decline in Q4 2009, according to final Q1 data from the Office for National Statistics. Business investment fell 7.7% y/y (vs. preliminarily reported -11.0% y/y), a seventh straight year-onyear fall but easing from a revised 23.0% y/y Q4 drop. The GfK NOP UK consumer confidence index slipped to -19 in June from -18 in May, indicating UK consumer sentiment declined for a fourth consecutive month to a 6-month low but improved from June 2009's -25.0 level, data from GfK NOP showed. Consumer sentiment about prospects for the UK economy in the next 12 months continued its decrease, with the expectations gauge falling to -12 in June from -8 the prior month.

The KOF Swiss economic barometer, continuing its upswing since May 2009, increased to a higher-thanexpected 2.25 in June from 2.16 in May, according to data from the Konjunkturforschungsstelle Swiss Institute for Business Cycle Research, suggesting Switzerland's year-on-year economic growth rate should be clearly positive.

Asia-Pacific

The seasonally adjusted Nomura/JMMA PMI declined to 53.9 in June from 54.7 in May, suggesting the Japanese manufacturing sector expanded above the 50 growth level for a 12th straight month but at a slightly slower pace, a PMI report released by Markit Economics showed.

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
Negative
Neutral
Neutral
Neutral
Neutral
Negative
Negative

Outlook
Negative
Positive
Positive
Positive
Positive
Negative
Negative

Action
Short
Buy
None
Long
Long
None
None

Current
1.2236
88.37
1.4944
1.0776
1.0631
0.8395
108.09

Start Position
1.4628
N/A
N/A
1.0869
1.0247
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
1.2680
87.40
N/A
1.0680
1.0075
N/A
N/A

Support
1.2150
88.00
1.4800
1.0750
1.0200
0.8300
107.50

1.1900
86.50
1.4450
1.0600
0.9900
0.8100
106.00

Resistance
1.2400
90.00
1.5200
1.1000
1.0750
0.8800
114.00

1.2550
92.00
1.5400
1.1100
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
Negative
Neutral
Neutral
Neutral
Neutral
Negative
Negative

Outlook
Negative
Positive
Positive
Positive
Positive
Negative
Negative

Action
Short
Buy
None
Long
Long
None
None

Current
1.2236
88.37
1.4944
1.0776
1.0631
0.8395
108.09

Start Position
1.4628
N/A
N/A
1.0869
1.0247
N/A
N/A

Objective
N/A
N/A
N/A
N/A
N/A
N/A
N/A

Stop
1.2680
87.40
N/A
1.0680
1.0075
N/A
N/A

Support
1.2150
88.00
1.4800
1.0750
1.0200
0.8300
107.50

1.1900
86.50
1.4450
1.0600
0.9900
0.8100
106.00

Resistance
1.2400
90.00
1.5200
1.1000
1.0750
0.8800
114.00

1.2550
92.00
1.5400
1.1100
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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