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Forex − Sterling lost 8.61% in August vs Dollar

Mon, Sep 1 2008, 09:20 GMT
by Peter Rosentreich

ACM - Advanced Currency Markets

Forex News and Events:

The Dollar rallied against a currency basket on Friday, posting its best monthly gain in 16 years, boosted by a batch of data showing a far more stable growth path for the United States than the rest of the world.

US consumer spending slowed in July, but this was more than offset by a report showing business activity in the US Midwest expanded at a more robust rate than expected, helping a new round of Dollar buying. Separate data showing US consumer confidence rose to a 5-month high in August adding to Dollar optimism.

EurUsd was down 0.22% at 1.4673, off 5.68% for the month of August, its largest monthly loss since its launch in 1999. UsdJpy was down 0.99% at 108.34, but was up 0.66% in August. GbpUsd last traded down 0.42% at 1.8214, posting an 8.61% drop last month. UsdChf rose 0.23% to 1.1013. UsdCad rose 0.98% to 1.0617 after data showed the Canadian economy grew 0.3% vs 0.7% expectation in Q2.

Sterling was in the major casualties in the currency market this month, down 8.61% versus the Dollar, its biggest drop since it crashed out of the Exchange Rate Mechanism in 1992. The Australian Dollar fell 8.75% in August, its worst month since February 1989 on expectations of narrowing interest rate differentials between the United States and Australia. It last traded down 0.73% at 0.8565.

Investors expect sentiment on the US Dollar to remain bullish in the coming week. But some market participants could try to square positions by selling into any Dollar strength ahead of next Friday's August US employment report and central bank policy decisions in the euro zone and the UK.

Today's Key Issues (time in GMT):

00:00 USD Market Holiday
00:00 CAD Market Holiday
06:00 EUR July Retail sales -1.5% vs -1.4% (mom)
06:00 EUR July Retail sales 0% vs -3.9% (yoy)
07:30 CHF August PMI 52.5 vs 54.1
08:00 EUR August Euro-zone Markit Mfg PMI 47.5 vs 47.4
08:30 GBP July BoE consumer credit £0.8b vs £0.87b
08:30 GBP August CIPS/Markit Mfg PMI 44 vs 44.3
08:30 GBP July Mortgage approvals 35k vs 36k
08:30 GBP July Mortgage Lending £3b vs £3.1b

The Risk Today:

EurUsd Market dropped as low as 1.4571 last week, new initial support. Further weakness will put the focus on strong support 1.4366 22nd January low. On the upside, only a return over 1.5000 and 1.5500 will release actual pressure and put key initial resistance 1.6000 into focus. Still a break up there would open the way to Trendline resistance 1.6200.

GbpUsd Cable hit 1.8006 today low, lower than Friday’s low 1.8130. Today move broke 1.8091 June 2006 support. This may open the way down to 1.7936 19th April high. Strong support holds 1.7251 3rd April low. On the upside, initial resistance holds 1.8795 last 2-weeks high. Former support 1.9363 holds also strong resistance. Key level holds 2.0100 resistance.

UsdJpy Last 6-weeks recovery pushed the market up to 110.67 high 3-weeks ago. Further advance would open the way toward 111.92 early January high. On the downside, last week return below 108.59 and 108.14 supports placed market near the 6-month lower trendline support. Further pressure toward 107.50 level and may open the way toward 105 pivot, 102.73 support and 100 pivot point. Initial support holds 107.62 Today low.

UsdChf Dollar rose higher against Chf and hit 1.1087 6-months last week. Initial resistance holds 1.1107 13th February high. Strong resistance holds 1.1593 December 2007 high. On the downside, initial support holds 1.0863. Only renewed weakness below 1.0500 and 1.0375 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.

Resistance and Support:

Published on  Mon, Sep 1 2008, 09:26 GMT