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European and US summary

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USD Edges Higher, Oil Retreats

Wed, Sep 10 2008, 23:14 GMT
by Korman Tam

Forexnews.com

9/10/2008 3:30 PM: EUR/$..1.4040 $/JPY..107.71 GBP/$..1.7558 $/CHF..1.1336 AUD/$..0.8037 $/CAD..1.0690

USD Edges Higher, Oil Retreats

The dollar touched a fresh 11-month high against the euro just above the 1.40-level and held steady near 2 ½-year highs versus the pound at 1.7540. The greenback continues to remain favored amid burgeoning fears of rapidly deteriorating economic fundamentals, which consequently sent crude oil to an intra-day low at $101.43 per barrel. Also propping the dollar higher was the announcement from Lehman Brothers to sell off parts of its business to shore up its balance sheet, thereby tempering market jitters in the interim.

Traders will look ahead to US economic reports slated for release Thursday morning, consisting of the July trade deficit, weekly jobless claims and the August Federal Budget. Consensus estimates expect the trade deficit to edge higher to $58 billion in July, versus a $56.77 billion deficit from the previous month. Weekly jobless claims are seen little changed at 440k versus 444k from the prior week. Meanwhile, the Federal Budget is forecasted to shrink to $106.2 billion for August, compared with $117.0 billion a month earlier.

 
Euro Dips to New Lows

The euro’s woes extended into the Wednesday session, slumping to a new 13-month low versus the yen at 150.18 and a fresh 11-month low against the dollar at 1.4014. Comments from Eurozone officials reinforced lingering fears of further deterioration in economic fundamentals, with Luxembourg Prime Minister Juncker warning that he “can see risks of technical recession” given the Q2 growth figures, reflecting two consecutive quarters of negative GDP. He added that inflation might have reached its peak in July while the slowdown will likely be more drawn out than initially anticipated.

ECB President Trichet expects to have “a gradual recovery over the coming years after the present depressed episode”. He added that the “fall of oil prices from their peak in July will help to strengthen disposable income”, suggesting the Eurozone economy may be nearing a bottom. Trichet also anticipates that the current interest rate stance will contribute to a return to price stability during 2010.

EURUSD holds steady around 1.4040, with support starting at 1.40, backed by 1.3970 and 1.3940. Additional floors will emerge at 1.39, backed by 1.3850 and 1.38. Meanwhile, gains will target interim resistance at 1.4060, followed by 1.41 and 1.4130. Subsequent ceilings are seen at 1.4165, backed by 1.42 and 1.4250.

Published on  Wed, Sep 10 2008, 23:16 GMT