Daily FX Report

USD fell against the EUR in a volatile session

Wed, Jul 2 2008, 07:58 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG


Good morning and welcome to the Varengold Daily FX Report. The first rays of the sun are beaming on the skyline of Hamburg and promise a beautiful day.

Market review

On Tuesday, the USD fell against the EUR in a volatile session, as investors debated the outlook for the US economy, while anticipating a rate hike from the European central bank. The Institute for Supply Management said in June that its index of national factory activity rose from 49.2 to 50.2 in May, after four straight months of contraction. The climb of the ISM index should ease some of the concerns about the US economy’s outlook. Additionally, US stocks retraced earlier losses after General Motors reported stronger-than-expected sales in June, and a rise in US factory activity. In spite of positive US economic signs, the EUR/USD was up 0.6% at 1.5805. Investors will closely watch June’s US private sector job numbers and May’s factory orders, due later today, to get more information about the pace of economic growth.

In Europe, some data from June showed that Euro zone manufacturing activity reduced for the first time in three years. However, analysts expect that the data will not prevent the ECB from raising its interest rates by a quarter percentage point to 4.25% on Thursday.

In Australia, May retail sales rose 0.7%, above forecasts for a 0.2% increase. The AUD/USD jumped to approximately 0.9580 after the report came out, and then dipped 0.2% after separate data showed that May’s building approvals plunged 6.5%, with forecasts for a 3.9% drop.

A survey of leading Japanese exporters in the car and electronic industries showed that they expect the JPY to strengthen versus the USD this fiscal year. For example, the automakers set an internal USD/JPY exchange rate of 100.55 in June, much stronger than an internal rate of 109.49 set in the March survey.

EUR/GBP

In a short term view, the EUR/GBP has been trading in a cushy decreasing trend channel. The currency rebounded after touching the upper line of the channel. In spite of the break trough of the support level at 0.7890 at the beginning of July, the EUR traded back in the channel. The new rebound might be a sign that the pair could continue the zigzag movement.

Chart 1

USD/CHF

Since the end of April, the USD/CHF has been trading in a horizontal direction. The width of the channel has had narrowed since the end of May. At the moment, the currency has stopped its decrease at the support level of 1.0141. If the pair does not cross this line in the next few days, there might be a chance for a recovery phase to the next resistance at 1.0497.

Chart 2


Published on  Wed, Jul 2 2008, 08:26 GMT

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