Dollar after yet another session of decline early on, managed to pare back all its...

... losses by close thanks to yet another bout of robust data outcomes. Personal Income came in higher than expected while spending followed suit. Also lending support was the rise in factory and durable goods orders which reinforces the view of the economy on a strong footing with the outlook very favorable. However personal consumption expenditure a key measure for the Fed to gauge inflationary pressures was a bit tame but this should not deter the Fed from keeping on its current rate hike stance. The attention shifts to Friday’s Payrolls with a robust outcome expected with directionless trading likely up till then.

· Euro has slipped back 1.22 and the pair remains in neutral territory for now due to the anticipation of U.S. data. Earlier data was on the strong side with the high unemployment rate inching a bit lower while the spike in oil prices led to an increase in producer’s inflation. The short positions in the Euro opened on fears of a rate cut from the ECB have been squared now and this has lent a fair bit of support to the Euro as current conditions warrant a on hold policy in the foreseeable future. Today’s Retail trade is eyed to gauge the level of improvement in consumer spending.


· Yen rallied impressively in the Asian session thanks to bullish comments on the economy from BoJ Gov. Fukui, strong performance on the Nikkei as the index hit its highest level in 15 months as well as business sentiment in small and mid size companies inching higher. However with the crucial postal reform bill on Friday having grave political ramifications and oil prices continuing to remain steady at such high levels, it posed a good opportunity to take profit on the Yen and it has gone back towards 112. For now strong Dollar bids persists on any break below 111.



· Pound’s discomfort above the 1.77 region led to it slipping back below that mark with mixed data leading to stiffened movements. Construction activity declined slightly more than expected but it remains above 50 mark indicating expansionary activity although the outlook is a bit mixed. CBI trades survey showed a slight improvement with retailers not affected by the London bombings, however the report had its inherent weaknesses and unlike the Euro-zone the U.K. economy is showing clear signs of a slowdown with the focus on tomorrow’s BoE meeting with rates likely to be reduced.


· Aussie could be stuck within narrow ranges as 0.77 is a pivot mark with substantial offers above it but at the same time continuous stream of positive data results are lending good support for now. With this morning’s Building approvals data increasing instead of an expected decline while the RBA kept rates on hold as expected and are likely to stay on this path for the rest of the year. The problem for the Aussie arises from the continuous reduction of its yield advantage over the Greenback with overseas investors especially from the U.S. and Japan and likely to shift their funds.

Economic Data Released

GMT Release Region Previous Actual Comment
05:00 July Small Biz Confidence Japan 48.4 48.8 Slight increase seen in confidence but conditions still remain mixed
08:30 July PMI Construction U.K. 55.8 54.7 Has declined against expectations but still around healthy levels.
12:30 June Personal Spending USA 0.0% 0.8% Spending has rebounded strongly as consumer confidence rises.
14:00 June Factory Orders USA 2.9% 1.0% Orders continue to show steady rise.
23:30 RBA Interest Rate Decision Australia 5.5% 5.5% Rates remain on hold and likely to do so for the rest of the year

Upcoming Economic Releases
GMT Release Region Previous Forecast Comment
08:00 July PMI Services Euro-zone 53.1 53.4 Services should inch higher on improvement in biz confidence
08:30 July PMI Services U.K. 55.8 55.3 Slight pick up on conditions due to weaker Pound not reflected in services yet
09:00 June Retail Trade m/m Euro-Zone 1.1% 0.1% Mixed economic conditions keep spending stiffened.
14:00 July ISM Non-Manufacturing USA 62.2 61.0 Services sector should stay around steady levels


Technical Analysis

EUR/USD – Yesterday’s low was 1.2186 and high was 1.2252.
The pair closed at 1.2192.
The pair is now in neutral territory and the momentum as well as the sentiment would shift in the Euro’s favour if it can break decisively past the pivot 1.23 mark. For now strong offers continue from 1.2250 laced up to 1.23 and should cap any gains for now. On the Downside decent support has moved up to the previous resistance in the 1.2120-35 region. A break below brings the strong support mark of 1.2040 into focus with decent bottom picking bid interest seen around 1.20. A decisive break below this mark could accelerate losses for the Euro and shift the momentum back in the dollars favour.
Key resistance is seen at 1.2255 followed by 1.2315 while support starts at 1.2120 followed by 1.2040.

USD/JPY – Yesterday’s low was 111.11 and high was 112.21.
The pair closed at 112.37.
The pair made an impressive rally breaking below the strong support seen around 111.45 however political uncertainties is keeping it a bit weak. Very strong Dollar bids remain on any break below 111 with the 111.45-112.25 region having mixed technical interest. Any foray above this region should continue to lead to selling interest with stiffened movements likely ahead of key events on Friday from both sides. Only a decisive break below 110.75 would shift the momentum back in the Yens favour and could lead to the upside for this pair, to be well protected for now.
Key Resistance is seen at 112.45 followed by 112.95 while support starts at 111.15 followed by 110.70.

GBP/USD – Yesterday’s low was 1.7678 and high was 1.7752.
The pair closed at 1.7712.
The pair has made an impressive rebound breaking key resistance levels, by going above 1.77 and sentiment has shifted to neutral. However offers persist within this region and only a break above 1.78 would shift the momentum in the Pounds favour. This pair is prone to exaggeratory movements with mild support having moved up to 1.7610-25 region with the break below this region likely to bring into focus the previous strong resistance mark of 1.7555 which now acts as strong support. A clear break below this mark would accelerate losses for the Pound and shift the momentum back in the Dollars favour.

Key Resistance is seen at 1.7745 followed by 1.7805 while support starts at 1.7610 followed by 1.7555.

AUD/USD – Yesterday’s low was 0.7599 and high was 0.7660.
The pair closed at 0.7657.
The Aussies is buoyed by strong data and remains well supported to stay above the 0.75 mark and for now has stabilized above 0.76. However, strong selling orders persist above 0.7650 and are lined all the way up to 0.77. Only a decisive break above this mark raises hopes of a fresh uptrend otherwise direction remains a bit mixed. On the Downside mild support has moved up to the 0.7555 mark with a break below to bring into focus strong support region of 0.7475-0.75 which has very strong buying interest for the Aussie.

Key Resistance is seen at 0.7665 followed by 0.7705 while support starts at 0.7575 followed by 0.7510.


Kunal Sharma
E-mail: kunal@easy-forex.com
www.easy-forex.com