• Euro: No Bias Equals No Action
• British Pound Faces BoE Rate Decision

Will the G8 Meeting Impact the US Dollar?

With the stock and bond markets closed for Independence Day in the US, the foreign exchange market was extraordinarily quiet. The dollar has fluctuated within a tight range against the Euro and Japanese Yen as the non-committal nature of the Federal Reserve and the European Bank leave little direction for the US dollar, let alone the EUR/USD. The economic calendar next week is also very light. The only pieces of data worth watching are pending home sales, the trade balance and the preliminary release of Consumer Confidence by the University of Michigan. Most of these numbers should be weak, but the impact on the US dollar could be minimal. The only thing that can have a meaningful impact on the dollar is the G8 meeting in Japan which will be held from July 7 to July 9. Last month was the finance ministers meeting, which proved to be a non-event for the US dollar. However going into that meeting, there was a lot of speculation about the possibility of currency intervention and a major change to the language relating to currencies in the communiqué. Inflation is a problem that central banks around the world are struggling with and the part of the reason why inflation has gotten to current levels is US dollar weakness. Official opposition to further dollar weakness by the G8 would trigger a major turn in the US dollar, one that could take USD/JPY towards 110 and the EUR/USD below 1.55. G8 meetings have in the past been huge market movers for the US dollar. However this time around, there has been barely any speculation for a similar move. Part of this could be because it is still early. Any official statement will not be released until next Wednesday. China has already been unusually vocal about wanting to see the dollar stabilize and with oil prices hitting a new record high on Thursday, inflation has worsened. However no central bank governors are expected to attend the meeting in Hokkaido. In the past decade, all of the meetings that have affected the FX markets have been attended by central bank governors. Therefore like the Finance Ministers meeting last month, the upcoming G8 meeting attended by world leaders could end up being a nonevent for the US dollar.

Euro: No Bias Equals No Action

The Euro has weakened modestly against the US dollar following a surprising drop in German factory orders. For the sixth month in a row, factory orders have been negative, which comes in sharp contrast with the stronger manufacturing PMI report released earlier this week. According to Goldman Sachs, European Banks may have to raise as much as EU90 billion euros to restore their balance sheets. On Thursday, ECB President Trichet had his chance to engineer a new trend in the Euro. The market was looking for hawkish comments and if he delivered them, the EUR/USD would be on its way to a new record high. Unfortunately Trichet gave currency traders little to work with by introducing two new buzz words - “no bias.” This proved to be the biggest disappointment for Euro bulls and unless Trichet reverses his stance, no bias could lead to no action in the EUR/USD this summer. Since the beginning of the second quarter, the EUR/USD has been trapped within a 1.53 to 1.60 trading range and that range will probably remain intact until Labor Day. Like the US, the Eurozone economic calendar barely has any market moving data. German industrial production and the trade balance reports are the only numbers worth watching. First quarter GDP is also due for release, but these are final numbers, which means that they should not be very market moving. Meanwhile Switzerland will be releasing their unemployment numbers which are expected to trend lower.

British Pound Faces Bank of England Rate Decision

The currency pair with the most market moving data next week is the British pound. The Bank of England has an interest rate decision scheduled while the UK will release their industrial production and trade balance reports. Given the repeated disappointments in the PMI numbers, we now understand why the BoE has been reluctant to raise interest rates. Mervyn King and his colleagues are expected to leave rates interest rates unchanged once again at 5 percent - the last time they altered rates was in April when they eased by 25bp. If rates are not changed, the BoE will not release any comments or statements, which means that Thursday’s rate decision could be a non-event. In the week ahead, unless industrial production is surprisingly strong, the British pound should underperform the US dollar and Euro.

Australian, New Zealand and Canadian Dollars Edge Higher

The Australian, New Zealand and Canadian dollars edged higher today as the US dollar retraced its gains. Canadian IVEY PMI came out 69.6, much stronger than the market expected. The employment component of the report actually dropped from 59.3 to 58.2, which suggests that the Canadian employment numbers next week should be weak. Australia will also be releasing their labor market report. Given the drop in the employment component of service and manufacturing sector PMI, a larger number of Australians may have dropped off of June payrolls. New Zealand only has their Business PMI index due for release - which we expect to be bearish for the Kiwi.

Japan: Busy Economic Calendar

In contrast to the US, Japan has a very busy economic calendar next week with the Eco Watchers survey, machine orders, trade balance, corporate goods price index, consumer confidence and industrial production due for release. This could lead to some yen driven price action, which is something that we haven’t seen in a while. Keep an eye on US equities however since risk or no risk is still the primary driver for Japanese Yen crosses.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

As we noted yesterday, “The next ’significant’ move should be back to 1.57 (at least). As such, lighten up on longs at this point.”

EUR/USD

As we noted yesterday, “The next ’significant’ move should be back to 1.57 (at least). As such, lighten up on longs at this point.” The downward move is unfolding but we continue to believe that it is corrective in nature. As such our bias remains to the long side.

STRATEGY: Bullish, against 1.5303 (but lighten up), target is above 1.6018

USD/JPY

The USDJPY reversed at 106.75, near the 50% of 108.41-104.99. It is possible that the USDJPY will accelerate lower in a 3rd of a 3rd wave so a bearish bias is warranted against 106.75. A push through there would probably lead to a test of the 61.8% at 107.10 (also former congestion). As is evident from the chart above, there are a number of counts that are valid right now, so price action in the next few days should resolve things.

STRATEGY: Bearish, against 106.75, target TBD

GBP/USD

A C wave (of either a triangle or flat) is underway. If a triangle, wave C likely continues until 2.02 (March 27 top). If a flat, wave C will continue through 2.04. The pair has tested 2.00 today so expect a sizeable reaction (lower). 1.9800 should provide support. In overnight trade 1.9800 appears to have held well and continues to be short term support for sterling. This is the confluence of the 50% of 1.9583-2.0006 and 6/27 low.

STRATEGY: Bullish, against 1.9583, target 1 at 2.0175, target 2 TBD

USD/CHF

The USDCHF is probably on its way to a new low. The advance from .9647 is in 3 waves and therefore corrective. 3 wave movements are eventually completely retraced. A bearish bias is warranted against 1.0493. Near term, a push through 1.0227 is likely. Look for resistance near 1.0266.

USD/CAD

This is a close up view of wave E of the triangle (which is larger wave B within an A-B-C from .9055). With the advance from 1.0047 taking an impulsive look, probability is high that the wave E low is in place. Waves 1 and 2 of the breakout wave appear complete. The rally should accelerate now. Overnight the loonie continued to weaken approaching the 1.0300 figure.

STRATEGY: Bullish, against .1.0047, target above 1.0324

AUD/USD

The rally from .9511 is an impulse, indicating that the AUDUSD trend remains up. A small correction should play out over the next few days. Look for support near .9581 and .9563. A bullish bias is warranted against .9511.

STRATEGY: Get bullish near .9570, against .9511, target above .9667

NZD/USD

Bigger picture, the NZDUSD is expected to advance to the 50% of .7921-.7445 at .7683 and perhaps even the 61.8%-78.6% at .7740-.7920. A rally to there would fill the 6/4 gap. The up-down sequence from .7445 is probably waves A and B. Wave C is considered underway as long as price is above .7530.

STRATEGY: Bullish, against .7530, target TBD

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

Swiss franc finally beaten as dollar starts to recover.

The dollar rallied on Thursday after payroll data suggested the U.S. job market and economy are not as dire as many investors had feared, while the European Central Bank president struck a less aggressive tone on prospects for interest rate hikes.

Demand for the greenback started to rise after the U.S. jobs report for June landed largely as forecast and nowhere close to a scenario feared by investors.

The following technical analysis gives us a detailed lookout on what is expected to happen to USD/CHF.

The buying point is at 1.0255; based on a break of a downtrend line.

• Fibonacci 61.8% is the take profit at 1.0346
• Fibonacci 23.6% is the stop loss at 1.0205

The selling point is at 1.0190; based on a break of a strong support level.

• Previous support is the take profit at 1.0118
• Fibonacci 50% is the stop loss at 1.0303

To strengthen our analysis; we use many other indicators, starting with MACD (Moving Averages convergence divergence); we notice the divergences on MACD. In order to find the power of the market, we use RSI (Relative Strength Index).With RSI; we can determine that the market is in a bullish direction.

The ROC (Rate of Change) is very important to understand the demand of the market and as we see on the graph it is clear uptrend. The Stochastic oscillator crosses %D line and breaks 20% level upwards.

* The following analysis is for information only; Finotec is not responsible for any decisions or misinterpretations based on the given text.

Finotec Group Inc.
http://www.finotec.com/

Disclaimer: FINOTEC Tradings Market Commentaries are provided for informational purposes only. The information contained within these reports is gathered from reputable news sources and not intended as investment advice. FINOTEC Trading assumes no responsibility or liability from gains or losses incurred by the information herein.

A busy week comes to a calm end today, after all what happened all around the globe from the states to Europe and Japan, today markets seems to be peaceful and tranquil, as the Americans are enjoying their independence day holiday.

Today markets are supposed to stay calm, as investors will not likely to take any serious actions with such low volume and narrow ranges, and we might see some preparations for next week, profit taking might not be a valid theory as well to-day, as most investors have already done that yesterday.

Dear reader, sit and relax today, we’ve all been through a lot, and I think we need a day to relax, so god bless America, let’s enjoy the 4th of July holiday.

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

EUR Retail Sales Surprise in June, Climb 1.2% in May

In the Euro-zone, retail sales surprised forecasts on the upside in May, increasing 1.2% on the month and turning positive in annual terms at 0.2%. With the Euro-zone economy losing its momentum however, the good result may prove temporary.

EUR Services PMI Contracts in June, Final Version Revised Lower to 49.1

Activity in the euro-zone sector contracted in June, falling to 49.1 from May’s 50.6. The final version was lower than the preliminary release from last Monday.

UK Services Falls to Lowest Level Since October 2001

In the UK, the services sector also contracted, for the second straight month, posting a 47.1 for its PMI, the weakest level since October 2001. The UK economy has hit the skids as a collapse in housing lending, stemming from the US sub-prime mortgage, has turned into a full blown slowdown and possible recession.

ECB Raises Rates to 4.25%, First Move in 13 Months

In the late part of the European session, the ECB delivered its announcement on interest rates raising the rate to a seven-year high of 4.25% in order to combat red-hot inflation. It’s the first move by policy members in 13 months. It comes despite signs, such as today’s services data, that the economy is cooling. The increase was signaled far in advance, and was not a surprise to the markets as annual consumer inflation hit 4% in the June preliminary release.

EUR/USD - Euro Plummets 200 Pips vs Dollar on Trichet Remarks

The surprise to the markets came in ECB President Trichet’s comments following the announcement. He signaled that the bank may have taken a one-and-done approach, and are not likely to start a series of increases. Those traders expecting a more hawkish stance on inflation were disappointed and the Euro-Dollar pair slid close to 200 pips prior to tomorrow’s 4th of July holiday.

EUR/JPY - Euro Falls to Yen as Euro Weakness Follows Trichet Conference

European stocks were negative to start their sessions but climbed into positive territory as anxiety about more ECB rate increases receded. The Euro-Yen pair succumbed to the Euro weakness however, stalling its recent rally, which was a recovery from its slide last week. From its intra-day high today, prior to Trichet’s conference, the pair fell around 150 pips by 2:30 PM EST.

GBP/USD - Pound Sinks Following Services Data

The Pound-Dollar slid 120 pips from its open as the Pound was pressured by its services report. At the NY open, the US release of nonfarm payroll data did not stop the Dollar’s momentum. The Pound is now 200 pips lower than its high for the week at the 2 to 1 level seen on Tuesday.

US Sheds Jobs for 6th Month, Payroll Change at -62K

In the US, the nonfarm payroll report showed the economy shedding 62K jobs, the 6th straight month of job losses. The fall was very close to the forecast perhaps a relief after a weak ADP jobs report earlier in the week. May’s figure, though, was revised down 13K. The unemployment rate remained at 5.5%. The job market seems poised to remain weak, which can lead to lower consumer spending and may keep the Fed from raising rates, despite higher inflation.

USD/JPY - Strength Propels Dollar to 106.90 vs Yen

US stocks digested the job news and turned slightly positive by the middle of NY trading. With Dollar strength dictating the market today, the Dollar-Yen pair rose to a new weekly high of 106.90, recovering some of its losses from the end of last week.

USD/CAD - Dollar Regains 1.02 Handle vs. Loonie

The Dollar also managed to pare yesterday’s losses against the Canadian Dollar. The US Dollar-Loonie pair had tested 1.01 yesterday, but jumped back above 1.02 today. The pair got caught up in general greenback strength, as some had feared a worse jobs report and a more hawkish ECB, which did not materialize. The gains also came despite a jump again by oil prices, which pulled back from a record near $146 per barrel.

Upcoming Releases

In upcoming releases, Germany will post its factory orders overnight, and the UK will release data on housing prices. Tomorrow, the US will be celebrating Independence Day, with national banks and stock markets closed for action. Canada ends the week with its Ivey PMI.

Hans Nilsson
Capital Market Services, L.L.C.
www.cmsfx.com

©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.

For the first time since 2007, the European Central Bank raised interest rates by 25bp to 4.25 percent.  However despite this move, the Euro dropped more than 200 pips when ECB President Trichet failed to signal to the markets that interest rates would be increased again this year.

Going into the ECB meeting, the Euro rose to a high of 1.5910, indicating that currency traders were clearly banking on hawkish comments. Instead, Trichet played down the prospect of more rate hikes by saying he has “no bias” more than 5 times in the question and answer session with reporters. For Euro bulls, having no bias is just as bad as not having raised interest rates today.  Despite strong retail sales, a sharp drop in the German unemployment rate and much stronger than expected producer prices, the ECB was surprisingly neutral.  For a staunch inflation fighter, it is quite uncharacteristic to have no bias especially on a day when oil prices hit a new record high.  German factory orders are due for release tomorrow.  A strong rebound is expected but that may not have much of an impact on the Euro.  We expect a bit more weakness before some stabilization in the EUR/USD.