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Quiet in Europe but US the US stock opening could change things

Fri, Aug 10 2007, 10:52 GMT
by Johan Ditz Lemche

Saxo Bank

Not much action in Europe after the big moves seen yesterday and with lack of data and no news from Banks or ECB officials it is likely to continue with US stocks being the joker for a spark in vols

MAJOR HEADLINES – PREVIOUS SESSION

Data Bullets

• SW AMU Unemployment Rate July, out at 3.7% in line with exp.

• NO Retail Sales June, out at 4.7% vs 0.5% exp. YoY out at 11.9% vs 6.7% exp.

• UK Visible Trade Balance June, out at -£6266 vs -£6500 exp.

• CA Housing Starts July, out at 215.6K vs 223.5K exp.

• CA New Housing Price Index June, out at 0.7% vs 0.8% exp.

• US EIA Natural Gas Storage Change Aug 3, out at 42 vs 49 exp.

• JN Domestic CGPI July, out at 0.6% in line with exp. YoY out at 2.1% in line with exp.

• JN Industrial Production June, out at 1.3% vs 1.2% exp. YoY out at 1.1% vs 1.0% exp.

• JN Capacity Utilization June, out at 105.8 vs a prior reading of 105.0.

• JN Bankruptcies (YoY) July, out at 15.6% vs 6.7% exp.

• JN Consumer Confidence July, out at 44.6 vs 46.0 exp.

• JN Consumer Confidence July, out at 44.4 vs 46.0 exp.

THEMES TO WATCH – UPCOMING SESSION

The sub-prime story escalates!!!     

Carry trades took another big hit Thursday as risk aversion came back with BNP Paribas announcing that three funds were temporarily suspending and payouts. Also ECB conducted an operation to supply liquidity to the money market. This is the first time it was announced in advance that it intended to allot 100% of the bids that it received for on day funding. The result was an injection of 94.84B with bids from 49 banks. Adding pressure to this fact was Countrywide Financial in the US down 12% in after hours after what it stated to be "unprecedented disruptions". This put more pressure on risky assets and if this is to continue we would expect further unwinding next week which includes commodities as well. But it is a big data week from both the UK and US, so things may change as we get into next week, but more surprise from major banks would certainty take the significance out of any data coming out next week.

From the Technical side

From a technical perspective EURUSD and GBPUSD is close to having the technical picture changed from bullish to bearish. A daily close below 1.3595 in EURUSD would give scope for further downside acceleration and a test of 1.3450-13500 area. Same goes for Cable a daily close below 2.0160 would  target the 2.0010-20 area. For carry trades we look for daily close below 118.00 in USDJPY and 159.30 (200 day MA) in EURJPY would technically give scope for a more steep downside correction.  

FX Orderbook

Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

Published on  Fri, Aug 10 2007, 10:52 GMT