Forex Focus July 21st to 25th.
Has the euro run out of steam?
Check our economic calendar for a full run-down of the economic releases and events for this week.
Last week saw the dollar fall to fresh lows against the euro before steadying against a background of falling oil prices, better than expected news out of the US financial sector and speculation that the Fed may raise rates as early as October (text with charts and forecast continues below video).
The text continues:
The week opened with the euroth-25th, which suggest that a US rate increase could happen sooner than many suspect. This news saw euro-dollar make a serious assault on our forecast support as it fell to 1.58. (chart 1) losing some of the gains it had made the previous week after the US government unveiled plans to put a firewall round mortgage giants Fannie Mae and Freddie Mac. The markets were initially steadied by the news and the euro fell close our forecast support of 1.5820. However, as Monday continued fears for the broader US financial sector grew and the euro picked up to cross the key 1.59 level. The euro rise continued into Tuesday and despite weaker than expected ZEW numbers out of both Germany and the Euro-zone, it went on to hit a new all-time of 1.6038. However, it failed to maintain momentum and after Ben Bernanke had outlined the numerous difficulties facing the US economy, the price of oil took a dive and the euro fell after retesting 1.60, a level it did not return to for the rest of the week. The dollar got more support when the biggest bank on the US West coast, Wells Fargo, announced better quarterly results than expected. Wednesday also saw US inflation numbers (CPI) come in higher than expected and the release of the minutes for the FOMC meeting for June 24
The euro struggled to find direction on Thursday as it was buffeted on all sides. It rose when the Financial Times revealed that sovereign wealth funds were cutting their dollar holdings but it halted after a smattering of contentious US data and the news of better than expected earnings from JPMorgan Chase. It wasn’t all good news for the US financial sector however, and Merrill Lynch waited until after the close of the US session to announce bigger than expected losses and an asset sale to raise $8bn. This news makes Merrill one of the biggest casualties of the current financial turmoil with losses of $19bn over the last four quarters. Friday saw Citigroup join Wells Fargo and JP Morgan by announcing better than expected quarterly results and after testing our forecast support once more euro/dollar closed the week at 1.5848.
Chart 1 EUR 14th-18th July
Sterling (chart 2) started the week by testing our forecast support before moving on to rise steadily against the greenback. Higher than expected inflation surveys (CPI and RPI) pushed the pound to a four-month high of 2.0153 which tested our forecast resistance. Sterling spent the rest of the week trading in a gentle down channel and closed the week at 1.9981.
Chart 2 GBP 14th to 18th July
Calendar
Here are the highlights of this week’s economic calendar. You can find an extensive list of the week’s economic releases and events in our economic calendar.
This week sees the release of important US housing data with Existing Home sales on Thursday and New Home Sales on Friday. You should also check the Richmond Manufacturing Index on Tuesday and further insight into the US manufacturing base can be gleaned from Durable Goods Orders on Friday. The widely respected University of Michigan Consumer Sentiment Index will release its revised numbers on Friday and is always worthy of note. US Treasury Secretary, Henry Paulson, will be speaking in New York on Tuesday about the economy and financial markets and what he says could have an influence on trading.
Thursday is the big day for the euro-zone, with the release of German Ifo data and the European Purchasing Managers numbers (PMI).
UK economic activity can be gauged with Thursday’s Retail Sales figures and Friday’s preliminary GDP numbers. The governor of the Bank of England, Mervyn King, will be testifying to Parliament about banking reform on Tuesday. Wednesday sees the release of the release of the Monetary Policy Committee meeting’s minutes for July 10th when they decided to hold rates at 5.00%.
Chart 3 Important Calendar Events
Forecast
Although last week saw dollar sentiment rise as oil prices fell, EUR still traded in a 1.60 – 1.58 range. We see EUR/USD finding support at 1.5710 and resistance at 1.6040.
GBP/USD should find support at 1.9805 and resistance at 2.0160.
JPY/USD should encounter support at 106.00 and test resistance at 108.50.
The euro struggled to find direction on Thursday as it was buffeted on all sides. It rose when the Financial Times revealed that sovereign wealth funds were cutting their dollar holdings but it halted after a smattering of contentious US data and the news of better than expected earnings from JPMorgan Chase. It wasn’t all good news for the US financial sector however, and Merrill Lynch waited until after the close of the US session to announce bigger than expected losses and an asset sale to raise $8bn. This news makes Merrill one of the biggest casualties of the current financial turmoil with losses of $19bn over the last four quarters. Friday saw Citigroup join Wells Fargo and JP Morgan by announcing better than expected quarterly results and after testing our forecast support once more euro/dollar closed the week at 1.5848.
Chart 1 EUR 14th-18th July
Sterling (chart 2) started the week by testing our forecast support before moving on to rise steadily against the greenback. Higher than expected inflation surveys (CPI and RPI) pushed the pound to a four-month high of 2.0153 which tested our forecast resistance. Sterling spent the rest of the week trading in a gentle down channel and closed the week at 1.9981.
Chart 2 GBP 14th to 18th July
Calendar
Here are the highlights of this week’s economic calendar. You can find an extensive list of the week’s economic releases and events in our economic calendar.
This week sees the release of important US housing data with Existing Home sales on Thursday and New Home Sales on Friday. You should also check the Richmond Manufacturing Index on Tuesday and further insight into the US manufacturing base can be gleaned from Durable Goods Orders on Friday. The widely respected University of Michigan Consumer Sentiment Index will release its revised numbers on Friday and is always worthy of note. US Treasury Secretary, Henry Paulson, will be speaking in New York on Tuesday about the economy and financial markets and what he says could have an influence on trading.
Thursday is the big day for the euro-zone, with the release of German Ifo data and the European Purchasing Managers numbers (PMI).
UK economic activity can be gauged with Thursday’s Retail Sales figures and Friday’s preliminary GDP numbers. The governor of the Bank of England, Mervyn King, will be testifying to Parliament about banking reform on Tuesday. Wednesday sees the release of the release of the Monetary Policy Committee meeting’s minutes for July 10th when they decided to hold rates at 5.00%.
Chart 3 Important Calendar Events
Forecast
Although last week saw dollar sentiment rise as oil prices fell, EUR still traded in a 1.60 – 1.58 range. We see EUR/USD finding support at 1.5710 and resistance at 1.6040.
GBP/USD should find support at 1.9805 and resistance at 2.0160.
JPY/USD should encounter support at 106.00 and test resistance at 108.50.
No comments:
Post a Comment