• Home ::
• Technical ::
• Market View

• Send
• Print
• Add To
• Rss

Weekly Forex Market Commentary

This report has been deactivated

On Wednesday, odds are split whether the FOMC meeting will result in another rate cut

Wed, Oct 29 2008, 06:27 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The excesses of this unfinished decade are being rectified aggressively, and the pendulum is swinging hard from high-flying over-leveraged free for all trading to the other pole. The VIX has soared to record highs while rumors fuel panic. The high volatility permeated the FX markets as well, but not the panic of a bleak future that affects stocks. As the US financial system is shrinking, the need for dollars remains high, and this demand reversed a long-term downtrend for the US currency. Our economy might be in a shambles and the carry-trade dead, but the dollar, ironically, should remain strong. Enjoy it, with extreme care!

United States
The measures suggested or taken by Messrs. Bernanke, Paulson and Bush to inject life into the economy have yet to show any result – including a calmer market. President Bush is consider a second stimulus measure following the stimulus measure in February and the rescue plan passed 2 1/2 weeks ago, as those two are not doing much and the credit market remains frozen. There is little trust to lend money, the housing prices’ return to reality continues, and there is risk some pension funds and hedge funds will suffocate under the pressure of meeting margin calls on commodity positions turned sour. And let’s not forget the woes of the comatose US car makers.

We are probably see lower borrowing costs in the G7 possibly as early as this week, bit there is little hope we can avoid a sharp recession. The question is: with no leading investment banks left and few banks of investing significance, how will we exit (eventually) from these times of financial horror? I don’t know, but I hope that will happen with help from the real economy. Until then we have to cross swords with whatever comes our way, such as rumors of a possible default by Russia or of collapse of big Japanese, US or European institutional investors.

Mind my parting words: Do not confuse this recession with those you have already experienced in life time or even with the one that you read about in books – the Great Depression. This recession was closer to the one in 1873. This recession was triggered by unparalleled greed, excessive leverage, lack of expertise, fraud and intolerable disregard to checks and balances. This recession will have significant social impact for years and probably decades, and the financial world that we have known will be relegated to the history books. A new page is turning, but when it comes to FX, let’s hope it will not include the following: French President Nicolas Sarkozy recently said that the monetary system should be re-thought within fixed exchange rates. A Bretton-Woods II accord sounds farfetched at this time; but, should the irrational behavior continue, this thought might grasp some traction.

The dollar surged versus both the European and the commodity currencies last week, while panicky deleveraging of carry trades obliterated the dollar/yen.

In the background there was data that was bad even when it looked good, and it only confirmed the trembling foundation of the economy.

The Conference Board's index of Leading Economic Indicators unexpectedly rose by 0.3 percent in September, its first increase in five months. However, that’s only playing the stats; the August report showed a 0.9 percent decline that was revised from -0.5 percent. This means, the September reading is really -0.1 percent…

Purchases of existing homes jumped 5.5 percent to a 5.18 million annual pace in September, according to the National Association of Realtors. Sales rose 1.4 percent compared with a year earlier, the first yearly increase since November 2005. Foreclosures pushed the median price down 9 percent and desperation selling pushed sales higher.

The weekly claims for benefits rose by 15,000 to 478,000 and the previous week’s number was vaulted by 2,000, so the current number doesn’t look all that bad. Oh, well, that’s the norm, not the exception.

The Eurozone
The euro/dollar collapsed to a two-year low last week. Its three-month trip from 1.60 to 1.25 has been fascinating. As it stands now, any rally should provide better levels to sell. Europe will suffer more and longer than the US, and its socialist system will be burdened excessively by its own recession.

Germany PPI rose 0.3 percent in September and 8.3 percent on the year from -0.6 percent in August and 8.1 percent. Rising inflation while the economy is decelerating cannot be good.

And the economy is really hitting the skids.

The Eurozone PMI Manufacturing sank to 41.3 in October from 45.0 in September, and PMI Services fell to 46.9 from 48.4. On an individual basis, Germany’s PMI Manufacturing fell to 43.3 from 47.4 and PMI Services to 49.7 from 50.2, while France’s PMI Manufacturing fell to 40.8 from 43.0 and PMI Services to 48.8 from 50.1.

The Eurozone current account worsened to -7.9 billion euros in August from -1.1 billion euros in July.

The Eurozone industrial new orders contracted 1.2 percent in August from 1.0 percent in July and by 6.6 percent on the year from +1.6 percent.

Understandably, the French business confidence indicator fell to 88 in October from 92 in August. However, the consumer spending rose 0.6 percent after falling 0.3 percent in the month before.

Not surprisingly, Italy’s Business Confidence fell to 77.7 in October from 82.7 in September, while its Consumer Confidence only slipped to 102.2 from 102.8.

Elsewhere, Italy’s retail sales contracted 0.5 percent in August after expanding 0.6 percent in July, and fell 1.3 percent on the year.

Japan
The yen is a counter cyclical currency and bad economic times will make it flourish. It’s already surged to a decade high amid unforgiving deleveraging of carry trades and yen crosses.

The trade balance showed a surplus of 95.1 billion yen in September after contracting 327.6 billion yen the month before. The report was neutral on the dolar/yen.

The UK
With the UK experiencing a worse (in relative terms) housing crisis than us and with its economy close to ours, the pound has only one way to go – and that’s not toward that ridiculous 2.0000 mark.

The Bank of England’s Monetary Policy Committee minutes showed an unanimous vote for a coordinated 50 bps cut in its official rate two weeks ago following on plans to recapitalize the banking system. The release followed Bank Governor King’s warning that the UK is entering a recession with its banking system in its most fragile state since before the first world war.

Retail sales contracted 0.4 percent in September after rising by an unrealistic 1.1 percent in August. Expect further declines in the months to come, as people’s confidence in their monetary power will decline. Still, sales expanded 1.8 percent on the year, even though were a far cry from +3.3 percent in August.

The Rightmove House Prices rose 1.0 percent in October and fell 4.9 percent on the year after falling -1.0 percent in September and -3.3 percent on an annual basis.

The CBI industrial trends quarterly survey showed a decline to –60 from -40 in the second quarter. This reading surpasses the low of -47 reached in the fourth quarter 1990.

The pound took another big hit early Friday on news that the GDP shrank 0.5 percent in the third quarter, the first contraction in 16 years, confirming that the UK economy is deep into recession after being flat in the second quarter. Surely you need two consecutive negative quarters to confirm recession, but that shouldn’t be a problem. On the year, GDP slowed to 0.3 percent from 1.5 percent.

The Index of Services fell 0.3 percent in August from flat in July.

Canada
The Canadian dollar is a commodity currency and Canada is sending about 85% of its exports to the US. With the commodity prices plunging, including the falsely safety provider gold, and the US economy contracting, is there a doubt which way the loonie will go?

Dollar/Canada made an explosive rally to an over 3-year high on Tuesday despite the fact that the Bank of Canada cut its main interest rate by only 25 bps to 2.25 percent, the lowest since October 2004. The BoC inferred it will cut again to help its economy. The pair surged further on Wednesday and Friday.

Retail sales fell 0.3 percent in August, the first decline in six months, led by gasoline prices and new cars sales, after a 0.1 percent gain the month before. Excluding the automotive sector, retail sales fell 0.3 percent.

Switzerland
The dollar/Swiss franc rally last week as all the European currencies sank.

Australia
The Australian dollar broke from a comfortable but unsustainable triangle to collapse in line with the commodities. And if this was not a triangle, put a pennant, forget about fastening your seatbelts and make sure you grab our parachute!

Australian PPI rose 2 percent in the third quarter by almost twice as much as economists forecast as costs for energy, water and construction climbed after rising 1 percent in the second quarter. It was the biggest increase since the series began in 1998. The index climbed 5.6 percent from a year earlier.

This Week's Data and Events

United States
The US economic agenda will open on Monday with the release of the New Home Sales report for September. It’s hard to expect anything positive here.

The Conference Board’s Consumer Confidence report for October is due on Tuesday. I’d have to say we don’t feel all that confident.

On Wednesday, odds are split whether the FOMC meeting will result in another rate cut.

Also on Wednesday, be on the look out for the volatile Durable Goods Orders report for September.

Thursday will see the revision of the second quarter GDP.

The Personal Income/Spending reports for September, the Chicago PMI report for October, the University of Michigan survey for November and the PCE deflator report for September are all due on Friday.

The Eurozone
The Eurozone economic calendar will start on Monday with the release Germany’s IFO Business Climate report for October. This is a widely watched report and should show deterioration.

Germany’s GfK Consumer Confidence report for November and France’s Consumer confidence report for October are due on Tuesday.

Thursday will see the release of the German Retail sales report for September and of the Unemployment Rate report for October.

Also on Thursday there will be a wealth of regional data for October: Retail PMI, Business Climate Indicator, Consumer Confidence, Economic Sentiment Indicator and Industrial Confidence October.

The Eurozone Unemployment Rate for September is due on Friday.

Japan
The Japanese economic agenda will start on Tuesday with the release of the Industrial Production report for September.

On Thursday, look for the Unemployment Rate and Household Living Expenditure reports for September, the National CPI report for September, and the Tokyo CPI report for October.

On Friday, the BoJ should leave intact its target rate.

The Housing Starts report for September is due on Friday as well.

The UK
The UK economic calendar will start on Tuesday with the CBI reported balance for October.

The Nationwide house prices report for October is due on Thursday.

Friday will see the release of the GfK consumer confidence report for October.

Canada
Canada’s economic agenda is very light this week. It only encompasses the monthly GDP report for August, which is due on Friday.

Overview

Euro/dollar
Last week's range: 1.2498 – 1.3529 (Down)
Previous range: 1.3349 – 1. 3767 (Mixed)

Euro/dollar fell for the fourth consecutive week and reached a two-year low. My model went short and the medium-term bias remains bearish.

Immediate support is between 1.2490 and 1.2500. The next level is 1.2375. Below 1.2245, support comes at 1.2185. Distant support is at 1.1855.

Above 1.2730, resistance is seen at 1.2935. Only a break above 1.3260 would signal a sustained recovery of euro/dollar. Distant resistance is pegged at 1.3885.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Dollar/yen
Last week's range: 90.94 – 102.41 (Down)
Previous range: 99.27 – 103.06 (Mixed)

Dollar/yen collapsed to a ten-year low. My model went short last Tuesday (see my Daily report). The medium-term outlook remains bearish even after the pair already reached the target of a head-and-shoulders formation.

Good support is at 92.25. The next level is Friday’s low of 90.94. Further support levels are 88.40 and 84.97.

Immediate resistance is at 94.40. The next level is 95.75. Above 98.13, resistance looms at 100.50. Distant resistance is at 103.00.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.5269 – 1.7517 (Down)
Previous range: 1.6926 – 1.7630 (Mixed)

Sterling/dollar sank to a six-year low and my model went short.  It recovered most of its losses made on Friday, but the downside remains favored in the medium term.

Immediate support is at 1.5590. The next level is at 1.5269. Below 1.5106, distant support is seen at 1.4555.

Initial resistance is at 1.6040. Above 1.6285, distant resistance is now seen at 1.6800.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Dollar/Swiss franc
Last week's range: 1.1327 – 1.1748 (Up)
Previous range: 1.1240 – 1.1490 (Mixed)

Dollar/Swiss climbed to a one-year high and my model went promptly long last Monday. Again, the risk remains on the upside.

Good resistance is pegged at 1.1767. Above 1.1865, the next level comes at 1.2065. Distant resistance is at 1.2240.

Immediate support is at 1.1585. The next level is 1.1500. Below 1.1390, support is seen at 1.1130. Distant support is now pegged at 1.0800.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Dollar/Canada
Last week's range: 1.1746 – 1.2842 (Up)
Previous range: 1.1307 – 1.1996 (Up)

Dollar/Canada surged to a four-year high last week and my model remains long. The outlook remains bullish, but a pause is due.

Above 1.2842, resistance comes at 1.2970. The next level is 1.3135. Above 1.3330, distant resistance is perched at 1.3465.

Below 1.2625, support is seen at 1.2435. This is followed by 1.2200. Distant support now comes at 1.1785.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/yen
Last week's range: 113.84 – 138.55 (Down)
Previous range: 133.39 – 141.72 (Mixed)

Euro/yen remains weak after plunging to a 6 ½-year low in an unprecedented fashion. The medium-term outlook remains bearish, and my model went promptly short last Tuesday. The short term outlook is bearish.

Immediate support is now seen at 116.75. The next level is 113.84 from Friday’s low. Below 110.50, the next level is 106.40. Distant support is now seen at 99.16.

Initial resistance is at 122.20. Above 127.30 there is another cap at 129.70. The next level is 135.05. Distant resistance is now seen at 141.63.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Euro/sterling
Last week's range: 0.7694 – 0.8195 (Up)
Previous range: 0.7735 - 0.7965 (Down)

Euro/sterling closed only slightly higher after retreating in a dramatic fashion from a 12-year high. The initial outlook is slightly bullish, but the cross is in the advanced stages of an expanding triangle.

Above 0.8005, resistance now comes at 0.8069. Strong resistance follows at 0.8195. Further resistance is now seen is at 0.8220.

Initial support is at 0.7905. The next level is 0.7855. This is followed by 0.7800. Distant levels are at 0.7755 and 0.7694.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Published on  Wed, Oct 29 2008, 06:27 GMT

The US economic calendar is very light this week

Mon, Oct 20 2008, 08:01 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The financial crisis has only started and the wild gyrations in the stock markets may provide better levels to liquidate stocks. Hedge funds and pensions funds will probably face further distress. The outlook is extremely grim. But we focus on currencies, and this is and will remain the island of profitability for months and probably longer. The dollar should remain strong in the medium to long term, especially versus the European and the commodity currencies. But this week, the US currency could see some consolidation with a bearish tone.

United States
Dollar money-market rates fell after the European Central Bank, Bank of England and Swiss National Bank, plus the Bank of Japan, offered lenders unlimited dollars for the first time in a coordinated effort to thaw the frozen credit markets. Overnight money market conditions are improving slowly, but not in further out periods despite massive liquidity injections by central banks along with other steps to restore market conditions to a more normal state. After Lehman’s bankruptcy last month, no bank will rush to lend.

The dollar basically paused last week, as the FX market became a sideshow to the battered asset market. But EUR/CHF, which tracks pretty closely the US indices, got hurt. This lull is just a pause; the contraction of our life time is only gathering strength.

The US economic data is getting scarier by the day, and this means inflation will slow naturally. And I’m sure you’ve noticed the drop in energy prices, even though speculators keep gas pump prices still at ridiculously high prices.

Retail sales contracted 1.2 percent in September, nearly double the expectations, on top of a 0.4 percent decline the prior month. The weakness was accelerated by a 3.8 percent fall in auto sales. Ex-autos, sales fell 0.6 percent after falling 0.9 percent the prior month.

The producer price index fell 0.4 percent in September, as expected. The decline was helped by a 8.2 percent slide in natural gas prices, while gasoline prices fell by only 0.5 percent. The core PPI, however, surged by 0.4 percent, which confirms that food prices really surged again.

The consumer price index was unchanged in September after a 0.1 percent drop in August, while the core CPI rose 0.1 percent. CPI slowed to +4.9 percent on the year from 5.4 percent in August, and the core rate increased 2.5 percent, the same as in the prior month.

The TIC data showed a net overall capital outflow of $0.4 billion in August after a $33.6 billion outflow in July.

Initial jobless claims fell 16,000 to 461,000 in the week that ended Oct. 11 after the Gulf Coast hurricanes subsided.

Industrial production fell 2.8 percent in September, the most since December 1974, after a revised 1 percent decrease in August. Capacity utilization fell to 76.4 percent from 78.7 percent the prior month.

Confirming the deterioration in the factory sector, the Empire State Manufacturing Index collapsed to -24.6 in October from -7.4 in September.

Adding to the pile of bad news, the Philly Fed showed a manufacturing collapse to 37.5 in October from a +3.8 in September. This is the worst report since 1990.

Housing starts fell more than expected by 6.3 percent to 817,000 in September from August's downwardly revised 872,000. Building permits shrank 8.3 percent to 786,000 pace, the lowest level since November 1981, from 857,000.

The preliminary University of Michigan sentiment index tanked to 57.5 in October from 70.3 in September. The lowest level was registered in June at 56.4.Well, what can one expect?

Business inventories rose 0.3 percent in August from July’s +1.1 percent and sales fell 1.8 percent from +0.1 percent.

The budget deficit hit a record $455 billion in fiscal 2008 amid high war spending, bank failures and unemployment-related benefits.

As widely expected, economic activity weakened in September as businesses revised capital investments, consumers cut spending and the general outlook slowed, the Beige Book said.

The Eurozone
The euro/dollar consolidated last week, but the downtrend remains in place.

German investor confidence worsened to -63 in October, the second low ever, from -41.1 in September, according to the ZEW Center for European Economic Research. In the same vein, the Eurozone ZEW survey of economic sentiment fell to -62.7 in October from -40.9.

Eurozone industrial production expanded +1.1 percent in August after contracting 0.3 percent in July, but fell 0.7 percent on the year on top of the previous decline of -1.7 percent.

The French business sentiment worsened to 87 September from 94 in August.

The Eurozone CPI rose 0.2 percent in September after declining 0.1 percent in August. On an annual basis, it remained at +3.6 percent and the core CPI at +1.9 percent.

The German CPI fell 0.1 percent in September, the same as in August, and was unchanged at +2.9 percent on the year.

Also, the French CPI slipped 0.1 percent in September from flat in August. On a yearly basis, it slipped to +3.0 percent from +3.1 percent.

Moreover, Italy’s CPI fell 0.3 percent in September, the same as in August.

Finally, the Eurozone trade deficit came in at 6.1 billion euros in August from July’s revised to a record high of 6.7 billion euros. Exports fell 0.7 percent and imports by 1 percent.

Japan
Dollar/yen edged higher in an inside range as the liquidation of carry trades paused.

Producer prices slowed to 6.8 percent in September from a year earlier from a 7.2 percent increase in August.

The Japanese domestic CGPI fell 0.4 percent in September from -0.1 percent in August and slipped to +6.8 percent on the year from +7.2 percent y/y.

Surprisingly, the consumer confidence rose to 31.8 in September from 30.5 in August.

The current-account surplus narrowed 52.5 percent to 988.8 billion in August, as imports climbed 20.2 percent and exports rose only 0.9 percent.

The industrial production was confirmed at -3.5 percent in August from +1.4 percent in July, and remained at -6.9 percent on the year.

The final machine tool orders was revised to -20.1 percent in September from the initial -20.7 percent.

Elsewhere, the tertiary index fell 1.4 percent in August.

The UK
The pound consolidated in an inside range, but sits near the low of the downtrend.

PPI output fell 0.3 percent in September and expanded 8.5 percent on the year after contracting -0.6 percent in August and rising 9.7 percent y/y on the year. The core PPI output slipped to 5.4 percent from +5.6 percent on a yearly basis. Meanwhile, PPI input slipped to 24.5 percent from 28.8 percent on an annual basis.

The UK CPI slipped to 0.5 percent September from 0.6 percent in August, but rose to +5.2 percent on a yearly basis from +4.8 percent. Along these lines, the retail price index rose to 218.4 in September from 217.2.

As the UK housing sector remains under pressure, DCLG UK house prices declined 3.4 percent August on a yearly basis from -0.3 percent in July.

The claimant count rate edged up to 2.9 percent in September from 2.8 percent in August.

Canada
The Canadian dollar paused last week after collapsing a week earlier. With the Bank of Canada expected to cut rates on Tuesday, the selling pressure should continue. But more sideways trading is likely. Switzerland

The dollar/Swiss franc consolidated last week near the top of its recent uptrend.

Australia
The Australian dollar made a weak recovery within an inside range, but the specter of long liquidation of carry trades continues.

The leading index declined 0.1 percent to 259.2 points in August, according to Westpac Banking and the Melbourne Institute.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar is very light this week.

It will start on Monday with the release of the leading indicators report for September.

Friday will see the release of the existing home sales.

The Eurozone
The Eurozone economic agenda will start with the release of the German Producer Prices report for September.

Friday will see the release of the Eurozone PMI manufacturing and services reports for October, and also of the Italian consumer and business confidence indices for October.

Japan
The Japanese agenda will start on Tuesday with the release of the Industry Activity Index.

Thursday will see the release of the trade balance.

The UK
The UK economic agenda will open on Tuesday with the release of the CBI industrial trends for October

The Bank of England’s minutes are due on Wednesday.

The retail sales report for September is due on Thursday.

Friday will see the release of the third quarter GDP and of the index of services report for August.

Canada
On Tuesday, the Bank of Canada is expected to cut rates by a minimum of 25 basis points.

The retail sales report for August is due on Wednesday.

Friday will see the release of the CPI report for September.

Overview

Euro/dollar
Last week's range: 1.3349 – 1. 3767 (Mixed)
Previous range: 1.3261 – 1.3784 (Down)

Euro/dollar traded mostly sideways in an inside range after falling to a 1 ½-year low the previous week. My model went long but only the medium-term bias remains bearish. The short term is bullish.

Above 1.3515, resistance is seen at 1.3620. This is followed by 1.3705, 1.3785 and1.3845. Above 1.3935, resistance is pegged at 1.4200.

Immediate support is at 1.3400. The next level is 1.3350. Below 1.3261, support remains at 1.3040 and 1.2935. Distant support is at 1.2490.

NEAR-TERM:Mixed with upside risk
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/yen
Last week's range: 99.27 – 103.06 (Mixed)
Previous range: 97.92 – 105.39 (Down)

Dollar/yen made an inconclusive recovery after branding a seven-month low a week before. My model went long. The medium-term outlook is still bearish, as the pair remains in a head-and-shoulders formation. The short term is slightly bullish.

Immediate resistance is at 102.30 from a 50-point pivot, which targets 101.80 and 102.80. Above 103.00, distant resistance is at 103.40 from another 50-point pivot, which targets 102.90 and 103.90.

Good support is at 101.25 from another 50-point pivot, which targets 100.75 and 101.75. The next level is 100.25 from a 50-point pivot, which targets 99.75 and 100.75. This is followed by 99.25 from another 50-point pivot, which targets 98.75 and 99.75. The next level is 98.25 from a 50-point pivot, which targets 97.75 and 98.75. Distant support follows at 97.30 from another 50-point pivot, which targets 96.80 and 97.80.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.6926 – 1.7630 (Mixed)
Previous range: 1.6790 – 1.7719 (Down)

Sterling/dollar made a mild recovery after kneeling to a near-five year low a week before, but my model went long.  The downside remains favored in the medium term, but there still is upside risk in the short term. 

Initial resistance is at 1.7380. Above the strong level at 1.7500, distant resistance is now seen at 1.7765.

Immediate support is at 1.7230. The next levels are 1.7140, 1.7020, 1.6920 and 1.6790. Below 1.6710, support now comes at 1.6540 from a pivot low. Distant support is seen at 1.6075.

NEAR-TERM:Mixed
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.1240 – 1.1490 (Mixed)
Previous range: 1.1130 –1.1489 (Mixed)

Dollar/Swiss made little progress last week after climbing to an eight-month high the previous week but my model went short. Again, the risk remains on the upside, but a pause is due.

Immediate support is at 1.1283. The next level is 1.1220. Below 1.1140, support is seen at 1.1055. Distant support comes 1.0800.

Good resistance is pegged at 1.1445. Above 1.1490, the next level remains at 1.1605 from a pivot high. This is followed by 1.1767. Distant resistance is at 1.1865.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/Canada
Last week's range: 1.1307 – 1.1996 (Up)
Previous range: 1.0815 – 1.2119 (Up)

Dollar/Canada consolidated after surging to an over three-year high last week, and my model remains long. The outlook remains bullish, but a pause is due.

Below 1.1755, support is seen at 1.1700 and 1.1655. This is followed by 1.1520. Below 1.1440, distant support now comes at 1.1280.

Initial resistance remains at 1.1890. The next level is 1.2119. Above 1.2225, resistance follows at 1.2495.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/yen
Last week's range: 133.39 – 141.72 (Mixed)
Previous range: 132.25 – 145.28 (Down)

Euro/yen made a choppy consolidation last week after collapsing to an over three-year low the week before. The medium-term outlook remains bearish, but my model went long. The short term outlook is only slightly bullish.

Good resistance remains at 137.70. The next level is 139.70. This is followed by 141.85. Distant resistance is now seen at 147.30.

Immediate support is now seen at 135.15. The next levels are 134.10 and 132.25. Below 129.97, distant support is now at 124.20.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Euro/sterling
Last week's range: 0.7735 - 0.7965 (Down)
Previous range: 0.7702- 0.8069 (Up)

Euro/sterling fell in an inside range and remains under pressure. The initial outlook is slightly bullish.

Above 0.7795, resistance now comes at 0.7857. Strong resistance follows at 0.7945 and 0.7982. Distant resistance is now seen is at 0.8069.

Initial support is at 0.7735. The next level is 0.7700. This is followed by 0.7702. Distant levels are at 0.7640 and 0.7573.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Published on  Mon, Oct 20 2008, 08:01 GMT

Canada's agenda is light this week

Mon, Oct 13 2008, 12:19 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The crisis affecting the financial markets, especially in the US, is unprecedented. The house of cards built over many years on unreasonably cheep money, financial fraud, power abuse and lack of competent regulation has been blown away. The force of gravity always works, even if it takes longer than normal to assert itself. Those responsible for this historical disaster will remain largely unpunished and most of them will actually be rewarded. And so it goes. With the appetite for risk annihilated, the European and the commodity currencies were sold in panic against the Japanese yen. Baring a significant recovery of the battered stock markets, this pattern will continue in the medium term. But in the short term, the opposite should be true.

United States
Governments and central banks have attacked the financial monster threatening our livelihood from all sides, sometimes better and sometimes worse. But everyone that is able is now up in arms. The Main Street has been typically slow to catch on, but the tidal waves will be coming. Only the optimists now hope for a standard recession. The equity markets have nearly doubled the losses required to enter a bear phase and all during the past week.

On Tuesday, the Federal Reserve set up the Commercial Paper Facility Fund, a special-purpose facility to buy commercial paper, in another attempt to thaw the frozen credit markets. The minutes from the FOMC September 16 meeting hinted at the potential for an interest rate cut, consistent with remarks made by Fed Chairman Bernanke earlier in the day. A day later, six central banks cut rates by 50 basis points in a coordinated move, while the Bank of Japan kibitzed. The Fed cut the Fed Funds to 1.5 percent and the discount rate to 1.75 percent, the ECB to 3.75 percent, the BoE to 4.5 percent, the BoC to 2.50 percent, the SNB to Libor range 2-3 percent, and the Riksbank to 4.25 percent. Even China cut 27 basis points from the 1-year deposit rate to 3.87 percent and the Reserve requirement by 50 bps to 17 percent.

With the G7 coming with statements even more vague than those of the US presidential contestants, the European Central and the Governments of the Eurozone on Sunday pledged readiness to take proper action in a concerted and coordinated manner to improve liquidity in longer term maturities.

In the US, the Treasury Department is considering buying stock in banks in effect, partially nationalizing the industry.

But in the short term, all eyes will be the ability of Morgan Stanley to survive for two days to Tuesday. Mitsubishi was pressing for more favorable terms after the former top investment bank lost nearly half its market value last week.

The currency markets trade at exceptional levels of volatility, with ranges that would have been laughable only weeks ago, and there is no reason to expect a change. The carry trade is dead, and the liquidation of long-term positions has been aggressive.

What FX and all the other markets need is a catalyst to bring divergent interests together. But where do you find one when you need it?

On the plus side, while liquidity in FX remains sub-par, our industry doesn’t suffer from a bear market or silly regulation. In fact, currencies should emerge one of the asset victors from this crisis.

Based on contracts signed in June, the National Association of Realtors Pending Home Sales Index rose 7.4 percent in August to 93.4 from an upwardly revised index of 87.0 in July. On an annual basis, the August report rose 8.8 percent to the highest level since June 2007.

As I expected, the trade deficit narrowed 3.5 percent to $59.1 billion in August as oil prices fell from July’s revised deficit to $61.3 billion from an initially reported $62.2 billion. Imports decreased 2.4 percent and exports declined 2 percent

Initial jobless claims declined by 20,000 to 478,000 in the week that ended October 4, from a revised 498,000 the prior week.

The Eurozone
The euro/dollar collapsed to a 1 ½-year low last week amid general dollar strength and long liquidation.

Yet, the regional data were unexpectedly solid. But who cares about that in a crisis?

The volatile German factory orders surged 3.6 percent in August after contracting 1.7 percent in July, but fell -7.6 percent from -0.7 percent a month earlier.

The final Eurozone GDP for second quarter was confirmed at -0.2 percent on the quarter and to +1.4 percent on the year.

The German industrial production unexpectedly surged 3.4 percent in August after contracting 1.6 in July and this pushed the annual increase up by 1.7 percent from +0.1 percent.

The French industrial production contracted by a less than expected 0.4 percent in August and -2.6 percent on the year, from +1.4 percent in July and -2.0 percent, respectively.

Meanwhile, Italy’s industrial production rose 1.4 percent in August but fell 5.3 percent on the year after falling 1.1 percent in July and -3.2 percent on the year.

German trade balance declined to 10.6 billion euros in August from 13.8 billion euros in July, as imports fell 2.5 percent and exports 0.5 percent.

France trade deficit expanded to 5.4 billion euros in August from 4.8 billion euros in July.

Japan
Heavy sales of carry trades sent the dollar/Japanese yen reeling down to a seven-month low last week. A volatility reading as high as over 40% really surprised.

The Bank of Japan left policy rates unchanged at 0.5 percent, as expected.

The data didn’t carry much weight early in the week. The leading index fell to 89.3 in August from 91.4 and the coincident index to 100.7 from 103.5.

But the week orders for machinery hurt the yen on Thursday. They declined 14.5 percent in August.

The UK
The high-yielding pound sank aggressively for the second week and nailed a near-five year low, as the dollar took no prisoners. Long-term long cable positions were unceremoniously squeezed our last week.

The UK economic data highlighted the weakness of the pound.

Industrial production contracted by a more than expected 0.4 percent in August and -2.3 percent on the year from –0.4 percent in July and –1.9 percent. The overall industrial production fell by 0.6 percent and 2.3 percent from a year earlier, the biggest decline since 2005.

HBOS house prices contracted 1.3 percent in September on top of -1.8 percent in August, and -12.4 percent on the year from 10.9 percent.

The trade deficit was flat at 8.2 billion pounds in August after the July report was revised from -7.7 billion pounds.

Canada
The Canadian dollar was creamed last week, along with most commodities. Dollar/Canada surged to an over three-year high and if the trend continues, which it should, we will afford to go skiing in Canada once again!

Employment increased by 107,000 in September, but the unemployment rate was unchanged at 6.1 percent because the increase in employment was matched by a similar rise in labor force participation.

The trade surplus increased to $5.8 billion in August from $4.2 billion in July. The trade surplus with the United States expanded to $8.6 billion from $8.4 billion in July.

Switzerland
The dollar/Swiss franc climber to a new high for the uptrend, but lacked the drama of the other majors. Sales of euro/Swiss, in line with the stock markets, directed its traffic.

Switzerland’s unemployment rate remained unchanged at 2.4 percent in September.

Australia
The Australian dollar fell of bed and hit a near 5 ½-year low. The high yielding currency was tossed by both former carry trade and commodity owners. That economy will take longer to suffer because of the Chinese demand for commodities, but will suffer.

The Reserve Bank of Australia cut its benchmark interest rate by one percentage point, the most since a recession in 1992, to bring it down to 6 percent, the lowest since November 2006. Reserve Bank Governor Stevens said that the unusually large cut was appropriate in order to reduce in costs to borrowers. The Aussie has tumbled approximately 26 percent since hitting a 25-year high of 98.49 cents on July 16.

Not surprisingly, consumer confidence tumbled 11 points to 82 points in October, the most in more than two years, according to a Westpac Banking Corp. and Melbourne Institute survey.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic agenda will open on Wednesday with the release of the PPI report and retail sales reports for September, and of the Empire State manufacturing Survey for October.

Thursday will see the release of the industrial production and capacity utilization reports for September, the CPI report for September, and of the Philly Fed Survey and Homebuilders' survey NAHB for October

The housing starts report for September and the University of Michigan survey for October are due on Friday.

The Eurozone
The Eurozone calendar will open on Tuesday with the release of Germany’s ZEW current situation report for October and the regional industrial production report for August.

Wednesday will see the release of Germany’s CPI report for October

Japan
The Japanese agenda will start on Wednesday with the release of the current account balance for August and of the industrial production report for September.

The tertiary industrial activity report for August is due on Thursday.

The UK
The UK economic agenda will stat on Monday with the release of the PPI input/output report for September.

Tuesday will see the release of the RICS House Price Balance for September, DCLG house prices report for August, and BRC retail sales and CPI reports for September.

The unemployment report for August is due on Wednesday.

Canada
Canada’s agenda is light this week. It only features the survey of manufacturing shipments report for August. This is due on Thursday.

Overview

Euro/dollar
Last week's range: 1.3261 – 1.3784 (Down)
Previous range: 1.3705 – 1.4565 (Down)

Euro/dollar fell to a 1 ½-year low last week amid general dollar strength despite struggling higher between Tuesday and Thursday. My model remains short, but only the medium-term bias remains bearish.

Initial resistance is seen at 1.3620. This is followed by 1.3705, 1.3785 and1.3845. Above 1.3935, resistance is pegged at 1.4200.

Immediate support is at 1.3550. The next level is 1.3460. Below 1.3261, support comes at 1.3040 and 1.2935. Distant support is at 1.2490.

NEAR-TERM:Mixed with upside risk
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/yen
Last week's range: 97.92 – 105.39 (Down)
Previous range: 103.54 – 106.96 (Down)

Dollar/yen succumbed to a seven-month low below parity under the weight of heavy sales of carry trades. My model remains short. The medium-term outlook is bearish after the pair confirmed a head-and-shoulders formation.

Good support is at 100.25 from a 50-point pivot, which targets 99.75 and 100.75. The next level is 99.25 from another 50-point pivot, which targets 98.75 and 99.75. The next level is 98.25 from a 50-point pivot, which targets 97.75 and 98.75. Distant support follows at 97.30 from another 50-point pivot, which targets 96.80 and 97.80.

Immediate resistance is at 101.25 from another 50-point pivot, which targets 100.75 and 101.75. The next level is 102.30 from a 50-point pivot, which targets 101.80 and 102.80. Above 103.00, distant resistance is at 103.40 from another 50-point pivot, which targets 102.90 and 103.90.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.6790 – 1.7719 (Down)
Previous range: 1.7551 – 1.8366 (Down)

Sterling/dollar fell to a near-five year low and my model remains short.  The downside remains favored in the medium term, but there is upside risk in the short term. 

Initial resistance is at 1.7180. Good resistance follows at 1.7230 from a Fibonacci retracement level. Above the strong level at 1.7500, distant resistance is now seen at 1.7765.

Immediate support is at 1.7095. The next levels are 1.7020, 1.6920 and 1.6790. Below 1.6710, support now comes at 1.6540 from a pivot low. Distant support is seen at 1.6075.

NEAR-TERM:Mixed
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.1130 –1.1489 (Mixed)
Previous range: 1.0818 – 1.1412 (Up)

Dollar/Swiss rallied to an eight-month high last week and my model remains long since the previous Tuesday. Once again, the risk remains on the upside, but a pause is due.

Immediate support is at 1.1240. The next level is 1.1220. Below 1.1140, support is seen at 1.1055. Distant support comes 1.0800.

Good resistance is pegged at 1.1360. The next levels are 1.1412 and 1.1605 from a pivot high. This is followed by 1.1767. Distant resistance is at 1.1865.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/Canada
Last week's range: 1.0815 – 1.2119 (Up)
Previous range: 1.0335 – 1.0843 (Up)

Dollar/Canada soared to an over three-year high last week, and my model remains long. The initial outlook is bullish, but a pause is due.

Immediate support is at 1.1655. This is followed by 1.1520. Below 1.1440, distant support now comes at 1.1280.

Initial resistance is at 1.1890. The next level is 1.2119. Above 1.2225, resistance follows at 1.2495.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/yen
Last week's range: 132.25 – 145.28 (Down)
Previous range: 144.04 – 155.33 (Down)

Euro/yen collapsed to an over three-year low, and this weakness was expected. The medium-term outlook remains bearish, and my model remains short. The short term outlook is bullish.

Good resistance level is now at 137.70. The next level is 139.70. This is followed by 141.85. Distant resistance is now seen at 147.30.

Immediate support is now seen at 136.35. The next levels are 135.15, 134.10 and 132.25. Below 129.97, distant support is now at 124.20.

NEAR-TERM: Bullish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Euro/sterling
Last week's range: 0.7702- 0.8069 (Up)
Previous range: 0.7754 – 0.8024 (Down)

Euro/sterling reversed from a seven-month low to a one month high and then gave back half of these gains on Friday. The initial outlook is slightly bullish.

Above 0.7945, resistance now comes at 0.7980. Strong resistance follows at 0.8025 and 0.8083. Distant resistance is now perched is at 0.8187.

Initial support is at 0.7885. The next level is 0.7840. This is followed by 0.7780. Distant levels are at 0.7700 and 0.7640.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Published on  Mon, Oct 13 2008, 12:19 GMT

The US economic agenda is unusually thin this week

Mon, Oct 6 2008, 12:39 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The demand for funding out of Europe and ongoing liquidation of yen crosses pushed the dollar sharply higher versus the European currencies last week. While profit taking should be seen this week, the outlook for the currency remains strong. The risk to it is the equity markets, which have fallen sharply and should sink further, despite the no short-selling rule for financial stocks.

United States
All in not well on our financial body. The organs seem to be in satisfactory condition, but the blood is not really circulating. The rapid changes of fortunes among the top firms did not bring a solution to the crisis, but created a short-term period of grace. But it’s grace under fire. The Federal Reserve's lending surged by a record $285 billion last week, and discount window borrowings rose $10.2 billion to $49.5 billion, as the financial crisis has been worsening.

The dollar exploded higher against the European currencies, initially after the House of Representatives unexpectedly failed to ratify the Bush administration's $700 billion TARP to rescue banks, and then on expectations that the House will actually pass the TARP by the end of the week. But it edged slightly lower on Friday after the House of Representatives (finally) approved the $700 billion TARP in a 263-171 vote. The revised plan is expected to thaw the frozen credit markets, but the traders doubt it will fail to prevent an economic recession.

We are not alone in this historical crisis. The European banking system is also under fire.

The acceleration of the downturn in Europe and the lack of liquidity underpinned demand for dollars. French President Sarkozy said the France is basically in recession. The fallout from the failed initial $700 billion bailout for Wall Street accelerated the financial crisis, which spilled over Europe (B&B in the UK, Fortis in Benelux, and West LB in Germany). Germany struggled to rescue lender Hypo Real Estate, and Ireland promised to guarantee all bank deposits. But the 300 billion euros Euro-TARP proposed by France was promptly torpedoed by Germany. EU governments to breach deficit limits, saying the financial crisis was so severe they could waive their usual strict application of budget rules.

It was the first time the EU appeared ready to invoke a 2005 clause that allows countries to bend the rules laid down in the Stability and Growth Pact if they fall victim to exceptional events outside their control.

Another week, another big name gone from the US financial roster– this time, Wachovia was initially morphed into Citigroup, just to switch out on Friday and merge with Wells Fargo, outside the realm of the FDIC. But the high-stake drama continues; Citigroup won a court order late on Saturday blocking Wells Fargo from buying Wachovia Corp until the court rules otherwise.

Surprisingly, the US jobless data, horrible as it was, only mattered for about 60 pips of nervous trading. It’s gotten so bad that this key report was put on the back burner, as in “what did you expect?” While the number might have been skewed by the tropical storms down south, don’t hope for an improvement – the opposite will happen. Payrolls fell by a more than expected 159,000 in September after a, upwardly revised 73,000 decline (from –84,000) in August and downwardly revised –67,000 from –60,000 in July. The jobless rate remained at 6.1 percent but only because it surged 0.4 percent a month earlier.

Initial jobless claims increased 1,000 to 497,000 in the week that ended September 27 from an upwardly revised (as nearly 100% of the times) 496,000 (initially 493,000) the prior week. What happened to the “exceptionally” high number from the previous week? Haven’t the tropical storms passed already? Let’s not kid ourselves, the total number of people collecting benefits is the highest since 2003.

For all it’s worth, the ADP's decline of 8,000 in private employment in September from 37,000 the month before was modest.

Consumer spending was flat in August from a revised +0.1 percent in July. Personal income rose by 0.5 percent after a revised 0.6 percent drop, the personal savings rate fell to 1 percent from 1.9 percent in July, while the disposable income fell by 0.9 percent after -.8 percent.

The Conference Board's confidence index increased to 59.8 September, a third consecutive increase, from 58.5 in August. That’s nice but irrelevant, since the survey was taken before the most recent financial meltdown.

In the same vein, the Chicago Purchasing Management index fell to 56.7 in September from 57.9 the prior month.

The ISM manufacturing index collapsed to 43.5 in September from 49.9 in August. This is a recessionary level as the credit crunch is strangulating the economy. Looking into details, new orders fell to 38.8 from 48.3, production to 40.8 from 52.1, and employment to 41.8 from 49.7.

Construction spending was flat in August after falling 1.4 percent in July.

Factory goods orders contracted 4 percent in August, as orders for motor vehicles succumbed 10.6 percent, the most since December 2002.

Elsewhere, the S&P/Case-Shiller 20 city index fell 0.9 percent in July and 16.3 percent on the year.

The Eurozone
The euro suffered colossal losses, as long liquidation has been taking its toll. The money markets in the Eurozone remain basically frozen, and the 3-month euro interbank rates climbing to a record high. The financial crisis spread further in Europe last week, and Fortis was rescued by a 11.2 billion euros package from the governments of Belgium, the Netherlands and Luxembourg. The troubles are piling high and fast.

The Eurozone PPI contracted 0.5 percent in August after expanding 1.3 percent in July, and decreased to 8.5 percent on the year from 9.2 percent. On this milieu, ECB head Trichet sounded confusing (sort of standard for central banks heads): risks for future growth to the downside, but no cutting of borrowing costs. With the Eurozone economy weakening, this talk is euro bearish.

The Eurozone services confidence index was flat in September 0 from 3 in August, the consumer confidence was stable at –19, the industrial confidence worsened to -12 from –10, the business climate indicator to -0.79 from -0.33, and the economic confidence to 87.7 from 88.8.

Meanwhile, the Eurozone retail PMI fell to 46.2 in September from 47.7 in August.

But the Eurozone PMI services managed to edge up to 48.4 in September from 48.2 in August. On an individual basis, the German PMI rose to 50.2 from 49.3, while the French PMI slipped to 50.1 from 50.4.

The Eurozone retail sales rose 0.3 percent in August but contracted 1.8 percent on the year. That monthly strength won’t last, as the regional economy is going down the drain.

German unemployment fell by 29,000 to 3.18 million in September after falling 40,000 in August. The ILO jobless rate was 7.2 percent, down from 7.3 percent in July. It is 7.3 percent in France it and 4 percent in Japan.

German retail sales expanded 3.1 percent in August after contracting an upwardly revised -1.0 percent in July. That number is too exotic, so it should be reversed next month. On the year, sales sank 3.0 percent from 0.6 percent previously.

The Eurozone unemployment rate climbed up to 7.5 percent in August from 7.4 percent in July, economic slowdown is spreading.

The final Eurozone PMI came in at 45.0 in September from 45.3 previously. On an individual basis, the German report fell to 47.4 from 48.1 and the French PMI to 43.0 from 43.6.

The EurozoneCPI probably peaked in July at a record 4.1 percent annual basis, after the August and September preliminary reports came in at 3.8 percent and then 3.6 percent, respectively.

Along the same lines, French PPI fell 0.5 percent in August from 0.7 percent in July, and slipped to 6.9 percent from 7.7 percent on a yearly basis.

Also, Italian PPI fell 0.2 percent in August from 0.8 percent previously and to 8.2 percent from 8.7 percent on the year.

Japan
The dollar/Japanese yen remains the odd major pair out, and its lack of direction should continue. Yen crosses should help with direction.

Japanese retail trade rose to +0.7 percent in August from +0.1 percent in July, but slowed to 0.7 percent on a yearly basis from 2.0 percent.

That was the exception to the rule, as the rest of the economic data was atrocious.

Industrial production contracted 3.5 percent in August, the fastest pace in at least five years, after expanding 1.3 percent in July, while the unemployment rate rose to a two-year high of 4.2 percent from 4.0 percent previously and household spending contracted 4 percent, the most since September 2006, after -0.5 percent previously.

Housing starts for 53.6 percent in August on the year from 19.0 percent previously.

Construction orders contracted 0.3 percent in August on an annual basis from +42.3 percent in July.

The index of small business confidence slipped to 40.2 in September from 41.4 previously.

On this milieu, the Tankan index of confidence among big makers of cars and electronics fell to -3 in the third quarter from 5 in the second quarter. This is the first time that pessimists outnumbered optimists since 2003.

The UK
The pound sank as well under the weight of the credit crunch, housing problems and slowing economy. But it fared better than the euro.

The Bank of England’s measure of mortgage approvals fell to a new record low of 32,000 in August from 33,000 in July, and this is 75 percent below their peak. The crisis continues, as expected.

Not exactly unexpectedly, the net balance of lenders reporting a decline in the availability of secured credit to households was 39 percent in the three months to September. This was slightly better than the 47 percent fall reported in the three months to June.

Also, the Nationwide House prices contracted 1.7 percent in Septemberon top of -1.9 percent in August. On a yearly basis they fell 12.4 percent from -10.5 percent.

The current account deficit widened to 11 billion pounds, the largest in three quarters.

The manufacturing PMI fell to 41 in September from 45.3 the previous month, the lowest since the report began in January 1992, services PMI contacted to 46 in September, the lowest since the gauge began in 1996, from 49.2 in August, and the PMI construction fell to 38.8 in September from 40.5 in August.

The gross domestic product was unrevised at flat in the second quarter but was revised upward to 1.5 percent on a yearly basis from the previous estimate of 1.4 percent. In addition, services grew 0.2 percent from the first quarter, the weakest pace since 1995.

To make a long story short, the UK is probably already in its first recession since 1991, so the BoE must cut interest rates.

Canada
The Canadian dollar closed the week at a near 14-month low, amid widespread liquidation of both commodities and carry trades. Any recovery should be temporary.

Canada’s economy grew a mammoth 0.7 percent in July, due to a surge in crude oil and natural gas production from June’s + 0.1 percent.

Switzerland
The dollar/Swiss franc rallied sharply last week but not as much as dollar/euro.

The Swiss PMI fell to 47.8 in September from 52.5 in August.

Australia
The Australian dollar closed the week at a near 14-month low as well, as the liquidation of both commodities and carry trades continues. Any recovery should be only temporary.

Australian manufacturing improved 0.2 points to 47.2 in September from August, when it gained 0.1 points, according to the Australian Industry Group and PricewaterhouseCoopers. But it remains below the key 50 mark.

Surging exports of coal and iron ore boosted Australia's trade balance from a deficit of A$697 million in July to the second-biggest surplus on record A$1.36 billion in August.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic agenda is unusually thin this week.

It will feature only the trade balance for August and this is due on Friday. The deficit will probably improve because of the decline in oil process during that period.

The Eurozone
The Eurozone economic agenda will start on Tuesday with the release of the German factory orders report for August.

Wednesday will see the revision of the Eurozone GDP for the second quarter and of the German industrial production report for August.

The German trade balance for August is due on Thursday.

Friday will see the release of the French and Italian industrial production reports for August.

Japan
The Bank of Japan will leave rates unchanged on Monday.

The economic agenda only features the machinery orders report for August on Thursday.

The UK
The UK economic agenda will open on Tuesday with the release of the industrial production report for August.

The UK economy is slipping fast, and on Thursday, the Bank of England is likely to cut rates by 25 basis points to 4.75 percent.

Also on Thursday there will be the trade balance for August.

Canada
The Canadian economic agenda will open on Monday with the release of the Ivey Purchasing Managers report for September.

The housing mortgage report for September is due on Wednesday.

On Friday, be on the lookout for the release of the unemployment report for September, and of the trade and new housing price reports for August.

Overview

Euro/dollar
Last week's range: 1.3705 – 1.4565 (Down)
Previous range: 1.4438 – 1.4865 (Up)

Euro/dollar collapsed to a 14-month low last week, falling every day of the week. My model turned short last Monday, and the bias remains downward.

Immediate support is at 1.3615. Below 1.3465, support is at 1.3350. Distant support is at 1.3250.

Initial resistance is seen at 1.3705. This is followed by 1.3845. The next level is 1.3935. Above 1.4200, resistance is still pegged at 1.4385. Distant resistance is at 1.4600.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/yen
Last week's range: 103.54 – 106.96 (Down)
Previous range: 105.04 – 107.46 (Down)

Dollar/yen edged fell to a 4 ½-month low. My model is now short, but it vacillates. The medium-term outlook is mixed, after the pair failed to trigger a head-and-shoulders formation below 103.50.

Good support is at 104.50 by a 50-point pivot, which targets 104.00 and 105.00. The next level is 103.40 from another 50-point pivot, which targets 102.90 and 103.90.

Immediate resistance is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. The next level is 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant resistance follows at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.7551 – 1.8366 (Down)
Previous range: 1.8264 – 1.8668 (Up)

Sterling/dollar fell to a three-week low and my model went short early last Monday.  The downside remains favored in the medium term, but the recovery on Friday suggests an early bounce. 

Immediate support is at 1.7600. Below 1.7550, strong support now comes at 1.7448 from a pivot low. Distant support comes at 1.7200.

Initial resistance is at 1.7840. Good resistance follows at 1.7950 from a Fibonacci retracement level. Above the strong level at 1.8060, further resistance is at 1.8200. Distant resistance is now seen at 1.8668.

NEAR-TERM:Mixed
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.0818 – 1.1412 (Up)
Previous range: 1.0698 – 1.1060 (Down)

Dollar/Swiss rallied to a three-week high and my model went long last Tuesday. The risk remains on the upside, but a pause is due.

Good resistance is pegged at 1.1412. The next level is 1.1605 from a pivot high. This is followed by 1.1767. Distant resistance is at 1.1865.

Immediate support is at 1.1290. The next level is 1.1220. Below 1.1140, support is seen at 1.1055. Distant support comes 1.0800.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/Canada
Last week's range: 1.0335 – 1.0843 (Up)
Previous range: 1.0299 – 1.0514 (Down)

Dollar/Canada exploded to an over 14-month high last week, and my model promptly went long early last Monday. The initial outlook is bullish, but a pause is due.

Initial resistance is at 1.0890. The next level is 1.1025. Above 1.1135, resistance follows at 1.1235.

Immediate support is at 1.0775. This is followed by 1.0635. Below 1.0570, distant support now comes at 1.0465.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/yen
Last week's range: 144.04 – 155.33 (Down)
Previous range: 153.49 – 156.83 (Mixed)

Euro/yen collapsed to a 28-month low. The medium-term outlook remains bearish, and my model turned short early last Monday.

Immediate support is now seen at 143.60. Below 141.43, distant support is now at 140.30.

Good resistance level is perched at 145.30. The next levels are 147.05 and 148.90. This is followed by 150.40. Distant resistance is now seen at 152.00.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Euro/sterling
Last week's range: 0.7754 – 0.8024 (Down)
Previous range: 0.7884 – 0.7980 (Mixed)

Euro/sterling collapsed to a 6 ½-month low last week and touched the bottom of a declining channel. My model went short last Tuesday. The initial outlook is bearish.

Initial support is at 0.7720. This is followed by 0.7680. Distant level remains at 0.7640.

Immediate resistance is at 0.7705. Above 0.7805, resistance now comes at 0.7850. Strong resistance follows at 0.7890, 0.7920 and 0.7965. Distant resistance is now perched is at 0.8024.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Published on  Mon, Oct 6 2008, 12:39 GMT

The dollar/Japanese yen slipped weakly amid cross trading

Mon, Sep 29 2008, 13:11 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

With the US financial world topsy turvy and with its jewels up for sale at fire prices all eyes on Monday will be on the US Congress and its political games in ratifying the Treasury's Troubled Asset Relief Program (TARP). This is not the time for games and details are very important. The money market is broken and on this milieu, currencies took a back seat to other asset classes. The dollar is lacking much direction, but given the illiquid trading conditions and the ratification of the TARP, its bias is up.

United States
It's the worst of times, it's the best of times… Another week, another failure – last week that meant Wa Mu finally disappeared under the weight of its misguided investments in mortgages. It was seized by the Fed and sold to JP Morgan for $1.9 billion. While the doom continues for most of the US financial sector, JP Morgan is now the second-largest bank in the United States after Bank of America after also getting Bear Stearns at fire sale prices.

As evidence that the risk of financial meltdown was greater than we all had feared, Goldman Sachs and Morgan Stanley, the last big investment banks on Wall Street, were turned into regulated banks literally overnight, faster than you can press CTRL-ALT-DLT? This “commercialization” of the IBs means less risk taking, less profit, but does it bring more financial equality or less risk? Not really. And the liquidity in FX dried up in the past two weeks.

Weekends have become more frightening than horror movies, and we all just hope we’ve seen the last of it. But this is only human hope and doesn’t get too far. The Treasury’s plan to extricate the cancerous mortgage assets from banks’ books is still unclear and the Congress needs to decide and approve the vital details – as if it had expertise in doing that. The Treasury plan is inflationary and gold and oil were bought at an unprecedented pace early last week.

Recession, which at one point looked like it might skirt us, is now closer than ever, and looks deep and morbid. But enough with this unbridled optimism.

We need the TARP badly, but we need a good plan.

The US economic data provided little reason for optimism and the Federal Reserve will have to cut rates soon and probably by 50 basis points.

Durable goods orders 2008 fell 4.5 percent in August after rising 0.8 percent in July and 1.4 percent in June. Ex-transportation, orders fell 3.0 percent from +0.1 percent, while ex-defense they sank 5.0 percent after +1.9 percent.

New home sales collapsed 11.5 percent to 460,000 rate in August after a revised 520,000 in July and 500,000 in June.

And existing home sales fell 2.2 percent to 4.91 million rate in August from July's 5.02 million rate. The median price fell 9.5 percent to $203,100 on the year.

OFHEO home prices contracted 0.6 percent in July and 5.3 percent on the year.

The GDP was revised down to an annual rate of 2.8 percent in the second quarter from a preliminary estimate of 3.3 percent. Let's worry about the next three quarters, I'd say.

It came to no surprise that that the University of Michigan final index of household sentiment declined to 70.3 in September from an initial reading of 73.1.

The initial claims for unemployment benefits rose 32,000 to 493,000 in the week ending September 20 from the previous week's revised figure of 461,000. The reading was worsened by the tropical storms.

The Eurozone
The euro made little progress as the market got confused.

Business confidence dropped in Germany, France and Italy in September, adding to concern the Eurozone economy is sinking into recession.

The Ifo institute survey of German business confidence fell in September to its lowest level since May 2005. The business climate index fell to 92.9 from 94.8 in August; the expectations sub-index fell to 86.5, its worst reading since February 1993, from 87.0, and the current situation to 99.8 from 103.2.

Also, French business confidence indicator fell to 92 in September from 97 in August and Italian business confidence to 82.7 in September from 83.5 previously.

In addition, the Eurozone composite index of manufacturing and service PMI contracted to 47, the lowest since November 2001, from 48.2 in August.

On the plus side, Italian retail sales expanded 0.6 percent in July after contracting 0.4 percent previously.

The German import price index fell 0.8 percent in August after rising 0.6 percent in July, but remained at +9.3 percent on the year.

The French consumer confidence indicator improved to -44 in September from -47 in July and -46 in June.

The French GDP was confirmed to have contracted 0.3 percent in the second quarter, reversing the 0.4 percent growth in the previous two quarters.

Household consumption expenditure fell 0.1 percent, same as in the first quarter.

Japan
The dollar/Japanese yen slipped weakly amid cross trading.

The trade balance fell into deficit of f 324 billion yen in September on an annual basis amid high commodity prices. Imports grew 17.3 percent and exports edged up 0.3 percent. Exports to the United States fell by a record 21.8 percent in August.

Japan's CPI slipped 0.1 percent in August after rising 0.4 percent in July and 0.7 percent in June. The core rose 0.1 percent. On the year, the CPI slowed to 2.1 percent from 2.3 percent and the core slowed to 2.1 percent from 2.3 percent. The Tokyo CPI was flat in September, with the core up 0.2 percent. On the year, it rose 1.4 percent and the core to 1.7 percent.

The UK
The pound ended higher, but well off its highs. More information is needed.

The UK housing sector remains in dire straits and there is little reason to expect an expeditious solution. In the latest report, prices fell 1 percent in September, for a fourth consecutive month, and 3.3 percent on the year, according to a report by Rightmove.

The CBI retail sales survey improved to -27 in September.

Canada
The Canadian dollar strengthened last Monday and then it stalled. More information is needed here.

Retail sales rose a less-than-anticipated 0.1 percent in July after an upwardly revised 0.6 percent gain the month before.

CPI came in at -0.2 percent in August after rising +0.3 percent in July. But the core CPI rose 0.3 percent from 0.1 percent.

Switzerland
The dollar/Swiss franc trimmed its losses last week and the market needs new impetus.

The Swiss KOF Swiss Leading Indicator slipped to 0.62 in September from a downwardly revised 0.68.

Australia
The Australian dollar closed the week little changed and the cross was surprisingly quiet, given the rise in adversity for risk.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic agenda will open on Monday with the release of the personal income and spending reports for August.

The Chicago PMI and the Conference Board's consumer confidence reports for September are due on Tuesday.

Wednesday will see the release of the construction spending report for August and the ISM manufacturing report for September.

The factory goods orders for August are due on Thursday.

The first Friday of the month means the release of the nonfarm payrolls and of the unemployment rate for September. Given the current situation expect a bad number and an extra volatile day of trading.

The Eurozone
The Eurozone agenda will start on Monday with the release of the regional retail PMI report, business climate indicator, consumer confidence, economic sentiment indicator and industrial confidence reports for September.

Germany's retail sales report for August and of the unemployment rate report for September are due on Tuesday.

The Eurozone PMI Manufacturing report for October and the unemployment rate for August are due on Wednesday.

On Thursday, the ECB will leave rates unchanged at 4.25 percent. The Eurozone PPI report for August is due on Thursday as well.

Friday will see the release of the Eurozone PMI Services report for September and of the retail sales report for August.

Japan
Japan's agenda will start on Monday with the retail trade report for August.

Tuesday will see the release of significant batch of Japanese data for August: unemployment rate, household living expenditure, industrial production and housing starts.

The Tankan large manufacturing Index for the third quarter is due on Wednesday.

The UK
The UK economic agenda will begin on Tuesday with the release of the GfK consumer confidence report for September, and of the revision of the second quarter GDP report and of the business investment for the second quarter.

The PMI Manufacturing for September is due on Wednesday.

The Nationwide house prices report for September is due on Thursday and the PMI Services report for September on Friday.

Canada
Canada's calendar is very light this week. It only included the monthly GDP report for July.

Overview

Euro/dollar
Last week's range: 1.4438 – 1.4865 (Up)
Previous range: 1.4075 – 1.4539 (Up)

Euro/dollar hit a five-week high last Monday before returning most of the gains. It’s basically stuck and needs more information before the next move. My model remains long, but the bias is down.

Immediate support is at 1.4486. The next level is 1.4438. Below 1.4370, support is at 1.4255. Distant support is at 1.4153.

Initial resistance is seen at 1.4600. The next level is 1.4685. Above 1.4735, resistance is still seen at 1.4810. This is followed by 1.4910. Distant resistance is at 1.5015.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 105.04 – 107.46 (Down)
Previous range: 103.56 – 108.01 (Up)

Dollar/yen edged lower in an inside range, as the yen was a passive ingredient for cross trading. My model remains long. The medium-term outlook is mixed.

Immediate resistance is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. The next level is 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Above 108.80, look for a test of the 50-point pivot at 109.15, which targets 109.65 and 108.65.

Good support is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. This is followed at 104.50 by a 50-point pivot, which targets 104.00 and 105.00. The next level is 103.40 from another 50-point pivot, which targets 102.90 and 103.90.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.8264 – 1.8668 (Up)
Previous range: 1.7733 – 1.8386 (Up)

Just like the euro/dollar, cable reached a five-week high, as expected, before surrendering most of the gains. It remains in a downtrend after failing to stay above the median of that channel. My model remains long but the downside is favored first.

Initial support is at 1.8250. Below this level, strong support now comes at 1.8110. This is followed by 1.7917. Distant support comes at 1.7776.

Initial resistance is at 1.8355. Good resistance follows at 1.8475 and 1.8515. Above the strong level at 1.8668, further resistance is at 1.8750. Distant resistance is now seen at 1.8865.

NEAR-TERM:Mixed to slightly bearish
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.0698 – 1.1060 (Down)
Previous range: 1.0901 – 1.1305 (Down)

Dollar/Swiss recovered most of its losses after sinking to a seven-week low last Monday. My model is short, but the risk is on the upside.

Initial resistance now comes at 1.0973. The next level is 1.1055. This is followed by 1.1185 and 1.1279. Above 1.1417 there is a pivot high at 1.1605.

Immediate support is at 1.0890. Below 1.0790, support is now pegged at 1.0698. Distant support moved down to 1.0555.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0299 – 1.0514 (Down)
Previous range: 1.0570 – 1.0782 (Down)

Dollar/Canada remained soft after falling to a seven-month low, but the support at 1.0299 was incredibly strong. My model remains short, but the initial outlook is slightly bullish.

Initial resistance is at 1.0400. The next levels are 1.0470 and 1.0550. Above 1.0645, resistance is at 1.0821 from a new pivot high.

Immediate support is at 1.0299. This is followed by 1.0265. Below 1.0180, distant support remains at 0.9974.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 153.49 – 156.83 (Mixed)
Previous range: 147.07 – 155.54 (Up)

Euro/yen had an uncharacteristically quiet behavior and closed the week unchanged. The medium-term outlook is mixed, and my model remains long.

Good resistance level remains at 156.80. The next level is 158.50. This is followed by 159.90. Distant resistance is still seen at 161.15.

Immediate support is now seen at 153.50. Below 152.30, distant support is now at 147.07.

NEAR-TERM: Mixed
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Euro/sterling
Last week's range: 0.7884 – 0.7980 (Mixed)
Previous range: 0.7848 – 0.8009 (Down)

Euro/sterling traded in a tight range and closed little changed, as its components traded in sync last week. The initial outlook is mixed.

Initial support is at 0.7900. This is followed by 0.7848, 0.7814 and 0.7794. Below 0.7766, distant level is at 0.7640.

Above 0.7960, resistance remains at 0.8010. Strong resistance is still seen at 0.8038. The cross then sees resistance at 0.8093 and at 0.8077 from a pivot high. Distant resistance remains is at 0.8262.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Mon, Sep 29 2008, 13:11 GMT

The euro reversed early losses to close the week higher in aggressive trading

Tue, Sep 23 2008, 12:23 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The dollar encountered unprecedented lack of liquidity last week (as only cable was affected in 1992/1993 and dollar/yen in 1998) as FX took a secondary position behind classic assets. The government didn’t save the day, but the year and probably the decade with an unprecedented operation to remove toxic assets from banks’ books and allow them to live and fight another day. There were other complex measures, but the bottom line is that we can re-start living our lives and FX will return to normality in early October. The dollar is facing divergent trading, probably strong against the yen and slightly weak versus the European currencies. The worst may probably truly be behind us. Hat tip to Mr. Paulson and Mr. Bernanke!

United States
Twenty years from now you will remember where you were on the week of September 15, 2008. The data were mostly bad last week, but the market was looking at the Lehman bankruptcy, the BoA’s swift scoop of Merrill Lynch, and the AIG’s woes. AIG was saved in the eleventh hour by a special government loan and this smart move stave off a colossal financial disaster.

The European Central Bank and the Bank of England joined the Fed in providing liquidity, with the ECB pumping $100 billion and the BoE $36 billion. Then on Thursday, the Federal Reserve added liquidity to central banks around the world. But, commercial banks still don’t lend money to each other on fear that the other one will go under.

The Federal Reserve left interest rates unchanged at 2.0 percent before bailing out AIG and its accompanying statement showed it was in no hurry to cut rates in the near-term despite the recent turmoil in financial markets.

But starting late on Thursday there was talk of unprecedented government intervention and the stocks flew higher into the end of the week. What the government intends to do and the Congress should quickly approve, is move quickly to shore up toxic assets from banks’ books and reassure big (and normal) investors that they can still keep capital in money markets accounts. This is the biggest expansion of federal power over the financial system since the Great Depression. Is it a perfect plan? Probably not and it will us cost nearly a trillion dollars; but it’s the best damn plan this country has come up in a really long time (maybe ever?) to stop the US financial world melt down. The banks should soon have room to breathe and the government will probably make a pretty buck on the current toxic positions in the long run.

Industrial production fell by a worse than expected 1.1percent in August after (somehow) rising a downwardly revised 0.1 percent in July. Capacity utilization fell 78.7 from 79.7.

Moreover, the New York Empire State manufacturing index fell -7.41 in September from +2.77 in August.The recovery didn’t last long, did it?

The CPI inflation remained high, despite edging lower on the month. Consumer prices slipped 0.1 percent in August thanks toa 4.2 percent decline in gasoline prices, but a 0.5 percent increase in clothing prices pushed core prices up 0.2 percent, still below July’s +0.3 percent. On a yearly basis, the CPI came in at 5.4 percent, down from the 17-year high of 5.6 percent in July; the core CPI was unchanged at 2.5 percent. Given the burst of the commodity bubble and lower consumption, inflation will decline significantly this year and beyond.

Housing starts fell 6.2 percent to an annual rate of 895,000 in August from the downwardly revised July estimate of 954,000 (from the originally reported 965,000). Interestingly, in the Northeast and the Midwest, housing starts fell by 14.5 percent and 13.6 percent, respectively while starts in the West increased by 10.8 percent. Building permits dropped 8.9 percent to an 854,000 pace.

The TIC net overall capital outflow came in at $74.8 billion July; net long-term inflow came in $6.1 billion from $53.4 billion in June and the net outflow was $8.2 billion from $36.6 billion inflow.

The Philly Fed survey was not bad at all, bouncing to +3.8 in September from –12.7 in August (and expectations for a reading of –10). This was the first positive report since November 2007! But the market was focusing on other bigger things on Thursday.

The weekly claims for unemployment benefits rose 10,000 to 455,000 last week. That’s nothing; it will get gruesome by early next year.

The Eurozone
The euro reversed early losses to close the week higher in aggressive trading. The regional data were not bad, but that’s not the reason why the currency gained.

The key German ZEW index came in a better than expected at -41.1 in September from -55.5 in August. It’s still bad.

Eurozone labor costs declined to +2.7 percent in the second quarter from an upwardly revised +3.5 percent in the previous quarter.

The Eurozone CPI fell by 0.1 percent in August, while core CPI rose to 1.9 percent from 1.7 percent, while Germany’s CPI came in at -0.3 percent on the month and 3.1 on the year, the same as in July.

The Eurozone trade balance worsened to -2.3 billion euros in July from -0.1 billion euros the previous month.

The Eurozone construction output rose 0.1 percent in July from -0.6 percent in June.

Elsewhere, Italy’s CPI came in flat August and +4.2 percent on a yearly basis, the same as the previous month.

The French current account deficit improved to -3.8 billion euros in July from -4.3 billion euros.

Japan
The dollar/Japanese yen recovered from a four-month low to close this crazy week higher. This may continue this week.

Japanese consumer confidence fell to a new record low of 30.1in August from 31.4 in July.

Machine tools orders sank 13.9 percent in August on the year on top of –14.2 percent in July.

The UK
The pound reversed early losses to close higher last week. This recovery may continue this week.

UK CPI edged up to 4.7 percent in August from 4.4 percent the previous month.

Meanwhile, the DCLG house prices fell 0.3 percent in July on a yearly basis, after expanding 0.6 percent the previous month.

The claimant count rate rose to 2.8 percent in August from 2.7 percent previously, with the ILO unemployment rate up 5.5 percent in July from 5.4 percent previously.

Retail sales expanded 1.2 percent in August and 3.3 percent on the year. That’s nice, but who cares? It should be reversed next month.

Canada
The Canadian dollar reversed early losses to close the week on a strong note. Additional strength is likely this week.

Looking to avoid contagion from the US, Canadian Prime Minister Harper said that his economy remains solid despite global troubles because of a strong household sector, government sector, and financial institutions.

However, foreign investors reduced their holdings in Canadian securities in July for the first time since November 2007 for a net divestment of C$5.59 billion.

Manufacturing sales rose 2.7 percent in July, a fourth consecutive monthly increase, from 2.1 percent in June.

Switzerland
The dollar/Swiss franc failed on the upside and turned sharply lower. But it ended the week off its lows. We need more direction.

Australia
The Australian dollar reversed from a 13-month low to close the week higher. More strength is likely.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economy will start on Wednesday with the release of the existing home sales for August. Well, it’s too early for a bottom.

Thursday will see the release of the new home sales report for August and of the durable goods orders report for August.

The revision of the second quarter GDP is due on Friday.

The University of Michigan report for September is due as well.

The Eurozone
The Eurozone economic agenda will start on Tuesday with the release of the Eurozone PMI services and manufacturing, the French consumer spending report for July and of the Italian consumer confidence index for September.

On Wednesday, be on the lookout for the crucial IFO survey of German Business Climate for September.

The French business survey for August is due on Wednesday as well.

The German GfK consumer confidence report for October follows on Thursday.

Friday will see the release of the French consumer confidence report for August and of the revision of the second quarter GDP.

Japan
The Japanese economic agenda will begin on Monday with the release of the all industry activity report for July.

Thursday will see the release of the trade balance report for August.

Inflation reports are due on Friday.

The UK
The UK economic calendar will start on Monday with the release of the Rightmove house price survey for September.

Thursday will see the release of the Nationwide House Prices report for September.

Canada
The Canadian economic agenda will start on Monday with the retail sales report for July.

Tuesday will see the release of the inflation report for August.

Overview

Euro/dollar
Last week's range: 1.4075 – 1.4539 (Up)
Previous range: 1.3882 – 1.4428 (Down)

Euro/dollar reversed aggressive losses to close higher last week after coining a near 2 ½-year low the week before. My model is long on profit taking and more sustained recovery should be under way, as I mentioned in the previous report.

Initial resistance is seen at 1.4545. Above 1.4625, resistance is still seen at 1.4810. This is followed by 1.4910. Distant resistance is at 1.5015.

Immediate support is at 1.4375. The next level is 1.4290. Below 1.4180, support is at 1.4075. Further support still comes at 1.4010. Distant support is at 1.3883.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Mixed
LONG-TERM: Mixed

Dollar/yen
Last week's range: 103.56 – 108.01 (Up)
Previous range: 106.07 – 109.07 (Down)

Dollar/yen surged from a near four-month low to close higher, as the yen remains an ingredient for crosses. My model went long. The medium-term outlook is mixed, but the short-term outlook is bullish.

Immediate resistance is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Above 108.80, look for a test of the 50-point pivot at 109.15, which targets 109.65 and 108.65. Distant resistance is at 110.35 from a 50-point pivot, which targets 109.85 and 110.85.

Initial support is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. The next level is 105.60 from a 50-point pivot that targets 105.10 and 106.10. This is followed at 104.50 by a 50-point pivot, which targets 104.00 and 105.00. The next level is 103.40 from another 50-point pivot, which targets 102.90 and 103.90.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.7733 – 1.8386 (Up)
Previous range: 1.7448 – 1.7975 (Up)

Sterling/dollar recovered aggressively late last week from sharp losses. My model remains long and the upside is again favored in the short term.

Good resistance is at 1.8386. Above the strong level at 1.8470, further resistance is at 1.8505. Distant resistance is now seen at 1.8750.

Below 1.8235, strong support now comes at 1.8110. This is followed by 1.7917. Distant support comes at 1.7776.

NEAR-TERM:Bullish
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.0901 – 1.1305 (Down)
Previous range: 1.1129 – 1.1417 (Up

Dollar/Swiss fell sharply, more than I expected, after reaching a near nine-month high the week before. The late recovery took the edge off the decline, but the initial bias is lower once again.

Immediate support is at 1.0980. Below 1.0885, support is still pegged at 1.0844. This is followed by 1.0715. Distant support moved down to 1.0555.

Initial resistance now comes at 1.1100. The next level is 1.1200. This is followed by 1.1360. Above 1.1417 there is a pivot high at 1.1605.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0570 – 1.0782 (Down)
Previous range: 1.0551 – 1.0821 (Mixed)

Dollar/Canada reversed early gains to fall sharply late last week. That’s one week after nailing a 13-month high. My model remains short, and the outlook remains slightly negative.

Support now comes first at 1.0412. This is followed by 1.0350 and 1.0230 (crucial trendline support). Below 1.0180, distant support is now at 0.9974.

Initial resistance is at 1.0550. Above 1.0645, resistance is at 1.0821 from a new pivot high. Distant resistance remains at 1.0867 from another pivot high.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 147.07 – 155.54 (Up)
Previous range: 147.55 – 156.99 (Down)

Euro/yen surged from an over two-year low to close the week significantly higher. The medium-term outlook is positive, and my model remains long.

Initial resistance level is at 156.80. The next level is 158.50. This is followed by 159.90. Distant resistance is still seen at 161.15.

Immediate support is now seen at 154.45. The next level is 153.70. Below 152.30, distant support is now at 147.07.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Euro/sterling
Last week's range: 0.7848 – 0.8009 (Down)
Previous range: 0.7921 – 0.8077 (Down)

Euro/sterling fell further last week after forming a bearish reversal two weeks earlier. The initial bias is slightly negative.

Initial support is at 0.7848. Below 0.7814, support is seen at 0.7794. Below 0.7766, distant level is now at 0.7640.

Above 0.7960, resistance is at 0.8010. Strong resistance is still seen at 0.8038. The cross then sees resistance at 0.8093 and at 0.8077 from a pivot high. Distant resistance remains is at 0.8262.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Tue, Sep 23 2008, 12:23 GMT

The US economic calendar will open on Monday with the release of the industrial production

Mon, Sep 15 2008, 06:23 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

Volatility increased last week amid waves of financial turmoil. The problems of Fannie Mae and Freddie Mac seem to be in a distant past, even though it’s been only days since they were bailed out by the government, as the world shifted its focus in the sinking fortunes of Lehman Brothers, Merrill Lynch and AIG. And other big names are being mentioned more and more frequently in the same vein. With commodities under pressure, the oil probed the psychological $100/barrel barrier despite tropical storms threatening the Gulf Coast oil business. But the dollar rallied too much, too fast, and this week should see it on the losing side of the game.

United States
The dollar seemed to have no break in its rally for most last week, and sliding commodities accelerated its rally. Neither hurricanes in the Gulf of Mexico, nor trash talk from Iran could help the oil prices, as margin calls took most of the spec out of it. But the currency recovered too much too fast, and on Friday it sank aggressively. That continued in the Far East today. With the oil prices bouncing from $100/barrel, commodities should bounce here as well. The uptrend of the dollar is clearly threatened after plans to rescue Lehman failed, the Bank of America is about to buy Merrill Lynch, and AIG is facing a forced restructuring.

The knee jerk reaction to sell dollars after the Treasury announced details of how it would utilize the powers recently granted by Congress to take over Fannie Mae and Freddie Mac the previous weekend was short lived. If you remember, after Bear Stearns collapsed and the Fed and the Treasury stepped in, the dollar bottomed.

But its recovery from record low prices (versus some currencies) cannot continue without a pause. Starting late Thursday the US currency started and aggressive decline and this downmove should persist, at least against the European and the commodity currencies.

The economic data was mixed at best, with the key elements of weakness unchanged.

The trade deficit widened a much more than expected $62.2 billion in July, the largest since March 2007, because of oil prices, from an upwardly revised estimate of $58.84 billion in June (initially $56.8 billion). Imports surged 3.9 percent and exports increased 3.3 percent. The worsening in the trade deficit was due to the higher cost of imported oil, as the non-oil trade deficit actually shrank to an 8-year low. Looking forward, the deficit will improve.

Not surprisingly, the trade gap with China widened 16.1 percent to $24.9 billion, ahead of last year's record pace.

First-time jobless claims “fell” to 445,000 in the week ended September 6 from an upwardly (as almost always) revised 451,000 the prior week from the initial reading of 444,000. Perhaps one could say the claims fell upwards???

Retail sales fell 0.3 percent in August and sales in July were revised down to -0.5 percent (from -0.1 percent), the worst in five months. These were horrible reports, reflecting the rising unemployment and the declining consumer confidence in this country. On a yearly basis they expanded 1.6 percent. Excluding autos, retail sales fell 0.7 percent from the prior month but rose 5.5 percent on the year.

The dollar benefited only briefly on Friday from news that the preliminary Reuters/University of Michigan Survey of consumer sentiment index rose to 73.1 in September from August's final reading of 63.0. The market had priced in a reading of only 64.0. The index bottomed back in June.

The PPI contracted by a bigger-than-expected 0.9 percent in August, the most since October 2006, because a big decline in energy costs, after expanding a 1.2 percent in July. A bit of a wash on a month-to-month basis, but the increases in May and June remain well in place at +1.4 percent and 1.8 percent). The core PPI rose 0.2 percent after burgeoning 0.7 percent in July.

Business inventories rose 1.1 percent in July and 6.4 percent on the year, while sales rose 0.5 percent and 8.8 percent from the prior year.

Pending home sales fell by a more than expected 3.2 percent in July after an upwardly revised 5.8 percent increase in June, according to the National Association of Realtors.

Along the same lines, foreclosure filings rose to a record in August, as one in 416 households got a default notice, were warned of a pending auction or foreclosed on last month, according to RealtyTrac.

The Eurozone
The euro just bottomed at a near 2 ½-year low early Thursday after falling aggressively for most of the past seven weeks and its surge on Friday should continue this week. Concern about inflation in the region should fuel this recovery.

The regional data was not that exciting – not that it was expected to be.

Germany's manufacturing turnover in real terms declined a working-day adjusted fell 2.1 percent in July compared with the revised 0.3 percent fall in June, and 0.8 percent on a yearly basis after a revised 1.4 percent rise in June.

Germany’s trade surplus narrowed more than expected in July to 13.9 billion euros from the record 19.9 billion euros in June. Exports fell 1.7 percent, while imports rose 7.4 percent due to energy prices, the largest increase in six years. No biggie, oil came down after that, and so did the euro. The surplus will increase in the months to come.

The euro attempted to bounce on Tuesday in part on talk of Pfizer’s takeover of Bayer, which could translate in substantial flow, but that didn’t go far.

France's trade deficit narrowed to 4.83 billion euros in July from a record 5.36 billion euros in June.

The European Commission cut its growth estimate for the euro area to 1.3 percent this year from 1.7 percent and predicted a recession for the German economy.

But the French industrial production rose by a more than expected 1.2 percent in July to reverse June’s revised 0.6 percent contraction.

The Bank of France business sentiment increased to 94 in August from 92 in July, while the French CPI was flat in August after contracting 0.2 percent a month earlier.

The Eurozone industrial production contracted 0.3 percent in July on top of -0.2 percent in June, while the regional employment for came in at 0.2 percent in the second quarter from 0.3 percent in the previous quarter.

Italian industrial production contracted 1.1 percent in July on top of -0.2 percent in June.

Japan
The Japanese yen remained only an ingredient for crosses and last week it generally alternated up and down days. Dollar/yen is lacking much direction hard is hard to imagine a change this week.

The current-account surplus narrowed 17.3 percent to 1.53 trillion yen in July from a year earlier for a fifth month of declines.

Machine tool orders contracted 14.2 percent in August on a yearly basis on top of -8.9 percent in July. Meanwhile, machinery orders fell 3.9 percent in July from June, when they contracted 2.6 percent.

The second quarter GDP was revised down but less than expected to 0.7 percent from the preliminary figure of a 0.6 percent decrease. On an annualized basis, the GDP contracted 3.0 percent.

Still, the industrial output was revised upward to +1.3 percent in July from +0.9 percent.

The preliminary leading index rose to 91.6 in July from 91.3 and the coincident index to 103.3 from 101.6.

The UK
The pound finally started to show signs of life late last week and being so oversold it should see more recovery this week.

The economic data was not all that encouraging.

Producer prices unexpectedly dropped 0.6 percent in August (2% on a seasonally adjusted basis), the first decline since October 2006, because oil and raw material costs fell and economic growth stalled. Core producer prices fell 0.1 percent. On an annual basis, the output price index slowed to 9.7 percent from 10.3 percent in July.

The industrial production contracted 0.4 percent in July and 1.9 percent on the year from -0.2 percent and -1.6 percent in June. Meanwhile manufacturing production fell 0.2 percent and -1.4 percent on a yearly basis from -0.5 percent and -1.3 percent. It’s a little worse than these numbers show it – production rose only in February this year, and that was the only expansion since October 2007! As a reminder, cable peaked in November of last year.

The GDP is expected to have contracted 0.2 percent in the June to August period and 0.1 percent in the three months through July, according to the National Institute for Economic and Social Research. This was the first decline since Niesr started its calculation in April 1996.

Trade deficit narrowed to 7.7 billion pounds in July from a revised 8.0 billion pounds (initially -7.7 billion pounds) in June. The deficit would have narrowed more if not for the 2.2 percent rise in exports because of high oil prices at the time.

On the plus side (gingerly said) housing market improved slightly -81.0 percent in August from -83.1 in July, according to t the Royal Institute of Chartered Surveyors. The index has been edging higher each month since hitting a record low of -94.9 in April.

Also, overall retail sales in Great Britain expanded 1.4 percent in August on a yearly basis following contracting 1.7 percent in July, according to the British Retail Consortium.

Canada
The Canadian dollar reversed Thursday’s losses in a big way. It is likely to recover more this week.

Canada's trade surplus for July weakened to C$4.9 billion from a downwardly revised C$5.6 billion (initially C$5.76) in June.

Housing starts rose by a more than expected 13 percent to a seasonally adjusted annualized rate of 211,000 units in August from 186,500 units in July.

But prices for new homes advanced just 0.1 percent in July for the sixth straight month, and 2.7 percent on the year, down from 3.5 percent in June.

There was no reaction to news that building permits unexpectedly rose 1.8 percent in July on projects to build multi-family dwellings after falling 5.3 percent the month before.

Switzerland
The dollar/Swiss franc struggled higher for most of last week, but the decline on Friday puts any new strength in doubt. In fact, more weakness is likely here.

Swiss unemployment rate edged up to 2.4 percent in August from 2.3 percent in July.

Australia
The Australian dollar apparently bottomed with the crude oil just above the $100/brl mark. The local economy is not facing the predicament of the New Zealand economy and should recover more this week.

Business confidence index rose 2 points to -7 in August, while home-loan approvals declined 0.2 percent in July from June, when they contracted a revised 3.7 percent.

Also, consumer confidence rose 7 percent to 92.2 points in September, according to a Westpac Banking Corp. and Melbourne Institute survey.

The number of people employed rose 14,600 in August, and the jobless rate fell to 4.1 percent from 4.3 percent.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will open on Monday with the release of the industrial production and capacity utilization report for August and the Empire State Manufacturing Survey September. Pay attention to the first one.

On Tuesday, the FOMC will leave rates unchanged – there is nothing it can be done with the Fed Funds rate at this point.

The CPI for August is due on Tuesday as well.

The housing starts report for August and current account report for the first quarter are due on Wednesday.

Beside the weekly jobless report, Thursday will see the release of the leading indicators report for August and of the Philly Fed survey for September. These two reports could be interesting.

The Eurozone
The Eurozone economic calendar will start on Tuesday with the important German ZEW Current Situation report for September.

The Eurozone trade balance for July is due on Wednesday

The German producer prices for August are due on Friday.

Japan
On Wednesday, the Bank of Japan will leave intact its target rate, as there is little reason to shake the waters this year.

The Tertiary industry activity report for July is due on Thursday.

The UK
The UK economic calendar is opening on Tuesday with the inflation report for August and the DCLG house prices report for July; the first should be up and the second down, as it’s been the case for quite some time.

The unemployment report for August is due on Wednesday.

The CBI industrial trends for September are due on Wednesday as well.

Thursday will see the release of the retail sales report for August, and this is a really important number to gauge consumer confidence.

Canada
The Canadian economic calendar is light this week. It only features the manufacturing shipments for July on Tuesday and the leading indicators report for August, and this is due on Thursday.

Overview

Euro/dollar
Last week's range: 1.3882 – 1.4428 (Down)
Previous range: 1.4198 – 1.4722 (Down)

Euro/dollar recovered part of last week’s losses after sinking to a near 2 ½-year low, and my model is long on profit taking. A more sustained recovery should be under way.

Above 1.4480, resistance is seen at 1.4545. Above 1.4625, resistance is at 1.4810. This is followed by 1.4910. Distant resistance is at 1.5015.

Immediate support is at 1.4330. Below 1.4180, support is at 1.4110. Further support comes at 1.4010. Distant support is at 1.3883.

NEAR-TERM:Bullish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 106.07 – 109.07 (Down)
Previous range: 105.53 – 108.41 (Mixed)

Dollar/yen made little progress last week, as the yen was only a cross ingredient. This translated into very choppy trading, with the pair alternating up and down days. My model is short again. The medium-term outlook is mixed.

Initial support is at 105.10. This followed at 104.50 by a 50-point pivot, which targets 104.00 and 105.00. The next level is 103.40 from another 50-point pivot, which targets 102.90 and 103.90. Distant support is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80.

Immediate resistance is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. The next resistance moved down to 106.75 from a 50-point pivot, which targets 106.25 and 107.25. Distant resistance is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.7448 – 1.7975 (Up)
Previous range: 1.7538 – 1.8153 (Down)

Sterling/dollar recovered aggressively on Friday from a new near 2 ½-year low a day earlier to close higher last week after seven straight weeks of losses. My model went long and the upside is favored in the short term. 

Good resistance is at 1.8120. Above the strong level at 1.8190, further resistance looms at 1.8280. Distant resistance is at 1.8470 and 1.8505.

Below 1.7965, strong support is at 1.7780. This is followed by 1.7672. A pivot low is at 1.7448.

NEAR-TERM:Bullish
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.1129 – 1.1417 (Up)
Previous range: 1.0950 – 1.1189 (Up)

Dollar/Swiss advanced for nine consecutive weeks to reach a near nine-month high. It fell, however, sharply enough on Friday to turn my model short, and early Monday saw furious sales. The initial bias is lower.

Immediate support is at 1.1060. Below 1.1010, support is pegged at 1.0885. This is followed by 1.0844. Distant support is at 1.0715.

Initial resistance comes at 1.1200. This is followed by 1.1360. Above 1.1417 there is a pivot high at 1.1605.

NEAR-TERM: Bearish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0551 – 1.0821 (Mixed)
Previous range: 1.0544 – 1.0778 (Mixed)

Dollar/Canada coined a new 13-month high before giving up all of its gains on Friday. My model went short, but the outlook remains mixed.

Support now comes first at 1.0550. This is followed by 1.0515 and 1.0470. Below 1.0412, distant support is at 1.0300, but this level should not be seen anytime soon.

Initial resistance moved up to the area between 1.0695 and 1.0705. Above 1.0821 from a new pivot high, distant resistance is at 1.0867 from another pivot high.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish L
ONG-TERM: Mixed

Euro/yen
Last week's range: 147.55 – 156.99 (Down)
Previous range: 150.64 – 159.34 (Down)

Euro/yen fell last week to an over two-year low, but then rallied sharply since last Thursday to recover 38.2% of the losses encountered since late August. The medium-term outlook is negative, but the short term looks positive on profit taking and my model is long.

Initial resistance level is at 153.40. The next level is 154.20. This is followed by 155.55 and 155.95. The next level is 158.50. Distant, but very important, resistance is seen at 161.15.

Immediate support is now seen at 152.20. The next level is 151.25. Below 150.64, distant support is at 147.55.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Euro/sterling
Last week's range: 0.7921 – 0.8077 (Down)
Previous range: 0.8055- 0.8187 (Mixed)

Euro/sterling fell sharply last week after forming a bearish reversal the previous week. The initial bias is mixed.

Above 0.8017, strong resistance is seen at 0.8038. The cross then sees resistance at 0.8093 and at 0.8077 from a pivot high. Distant resistance remains is at 0.8262.

Initial support is at 0.7945. The next levels are 0.7894 and 0.7878. Below 0.7814, distant support is seen at 0.7794.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Mon, Sep 15 2008, 06:23 GMT

The US economic calendar will start on Thursday with the release of the trade balance report for July

Mon, Sep 8 2008, 06:05 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The dollar rallied big across the board and the surge started in a sneaky way during the Labor Day holiday. This upmove reflects mainly liquidation of long-term short dollar positions. The burst of the commodity bubble helped, but let’s not get carried away while a barrel of oil still costs more than $100. Only dollar/yen collapsed because of ongoing long liquidation of yen crosses, including carry trades. But mind you, only the dollar and the yen can rally while their economies suffer. So, hold long dollar/Europe and dollar/antipodeans with ginger care. Just in case it wasn’t crystal clear before, the horrible US jobless data told us that we are in a practically (if not technically) we are in a recession.

United States
The burst of the commodity bubble is far from over while the oil price is still floating in the stratosphere above $100 per gallon, but natural gas is starting to get reacquainted with the gravity force, and many other commodities are following suit. Metals should be next. A commodity fund already folded, and there is more where this one came from. Plus, pension funds (among other large players) got greedy and dipped into the commodity well as well. There is much more exposure, and a stampede to the exit doors is pending. We have already seen a couple of fire sales, but there should be more. The experience with the 1999 unabated love for dot.coms was not enough, so in the past several years we replaced them with mortgage and commodity investments. Easy come, easy (or should I say hard?) go. FX guys blame the strength of the buck on commodity weakness and vice versa. But all in all the equity market is not all that excited and sees blood in the economic street. I’ve said that in this forum and I’ll say that again: the worst is yet to come. The high yielding currencies will suffer the most, and the low yielding yen the last.

Late Friday, as if the crazy markets hadn’t been enough, talk of that the Treasury Department was close to finalizing a plan to help shore up mortgage giants Fannie Mae and Freddie Macvaulted the dollar against the low yielding yen and Swiss franc, and tripped it against the pound, euro and commodity currencies. This pattern should continue early this week, as it was confirmed that the government’s Federal Housing Finance Agency seized control of Fannie Mae and Freddie Mac, which have nearly half the U.S. home-loan market.

Looking into the details, the Treasury will receive $1 billion of senior preferred stock, with warrants representing ownership stakes of 79.9 percent of Fannie and Freddie. The government will receive annual interest of 10 percent on its stake. Fannie and Freddie eventually will have to reduce their holdings of mortgages and securities backed by home loans.

Now, back to recession.

The unemployment rate surged to 6.1 percent in August, its highest since December 2003, from July's 5.7 percent, as employers are facing the recessionary reality and cut payrolls for an eighth straight month. Non-farm payrolls contracted 84,000 jobs in August, July's job losses were revised up to -60,000 and June's to -100,000 from a previously reported -51,000 in each month. That’s reality, that’s the start of it!

The weekly jobless claims rose by a more than expected 15,000 to 444,000 in the week ended August 30 from an upwardly revised 429,000 (from 425,000) in the prior week. Well, sure.

For all it’s worth, companies cut 33,000 jobs in August and the July report was revised lower to a gain of 1,000 from 9,000, according to ADP Employer Services.

Meanwhile, Challenger layoffs fell 14 percent to 88,736 in August.

There was no reaction to news the manufacturing ISM slipped to 49.9 in August from 50.0 in July.

But the Institute for Supply Management's index of non-manufacturing businesses unexpectedly increased to 50.6 in August from 49.5 in July. Of course, 50 is the dividing line between growth and contraction.

Construction spending fell 0.6 percent in July and the June report was revised upward to +0.3 percent.

Factory goods orders expanded by a more-than-expected 1.3 percent in July and the June increase was revised upward to a 2.1 percent gain from 1.7 percent. Orders have risen for five consecutive months.

Productivity was revised to a much stronger annual rate of 4.3 percent in the second quarter from the 2.2 percent gain that the department previously reported and from the first quarter's 2.6 percent increase. That’s typical in an economic downturn, as companies boost output while cutting jobs.

The Eurozone
The euro fell aggressively for the second time in five weeks but reached significant support on Friday. Only a close below 1.4193 would signal a decline without a pause. More importantly in the medium term is the fact that the Eurozone economy is fading quickly and later than the US economy, so euro/dollar should remain under overall pressure.

German retail sales volumes fell by 1.5 percent in July after -1.4 percent in June.

German factory orders unexpectedly fell 1.7 percent in July after contracting a revised 2.9 percent (from -2.6 percent). Orders slid 0.7 percent from a year earlier on top of -6.1 percent (revised down from -6.0 percent).

Adding to the overwhelming flood of evidence of the downturn in the Eurozone, German industrial production plunged 1.8 percent in July, due to a drop in demand for investment goods, from June, when it rose a downwardly revised 0.1 percent. On a yearly basis, production fell 0.6 percent.

The French unemployment rate stayed at 7.6 percent in the second quarter while its economy contracted.

Italy Retailer's Confidence General rose to 106.5 in August from 98.4 in July, while the Services Survey rose to 7 from –8.

The Eurozone data were mixed last week.

The GDP remained unrevised at a 0.2 percent decline in the second quarter. On a yearly basis, the economy slowed to 1.4 percent from the 1.5 percent initial estimate. Government spending rose 0.5 percent from a 0.3 percent gain in the previous quarter, while exports fell 0.4 percent.

The retail sales contracted 0.4 percent in July after an additional 0.9 percent fall in June.

The producer prices rose 1.1 percent in July from +1 percent in June. On an annual basis, producer prices soared to a 26-year high of 9.0 percent in July from June’s +8.0 percent. July’s figure was broadly in line with the consensus expectation of 9.1 percent. The core PPI rose to 4.3 percent, its highest rate since September 1995, from 4.0 percent.

The PMI edged up to 47.6 in August from July's 47.4 report. The French PMI came in at 45.8 and the German PMI came it at 49.7. Meanwhile, the services PMI edged up unexpectedly to 48.5 in August from 48.2 in July. Germany’s PMI rose to 51.4 from 50.6, while France’s PMI fell to 48.0 from 48.5.

On this milieu, the European Central Bank kept interest rates at a seven-year high of 4.25 percent to fight inflation, but ECB President Trichet acknowledged the risk of a recession.

Japan
The Japanese yen moved counter from the European and antipodean currencies on severe liquidation of carry trades. The opposite moves should continue.

The UK
The pound remains under pressure, as the high yielding European currency suffers from the same problems as the U.S.: housing problem, credit crunch, economic downturn and high inflation. Except for brief bounces, the selling pressure should continue.

As universally expected, the Bank of England kept the benchmark interest rate unchanged at 5 percent because the fastest inflation in over a decade outweighed the risk of economic downturn.

The number of new mortgage approvals for house purchase fell to 33,000 in July, the lowest figure since 1999.

But the CIPS manufacturing PMI rose to 45.9 in August from 44.1 in July. This is the fourth month the report remained below the 50 boom/bust level. Still, services PMI unexpectedly jumped to 49.2 August from 47.4 in July, but obviously remained below the 50 percent mark.

Consumer confidence held at 52 in August, the same as in July, which was the lowest since the survey began in May 2004, according to Nationwide Building Society.

House prices declined 1.8 percent in August and 12.7 percent from a year earlier, according to Halifax. No news here, the housing sector remains a mess.

Canada
The Canadian dollar continued to lack much direction last week.

The Bank of Canada left its key interest rate unchanged at 3.0 percent, as expected, and rates should remain flat for this year and probably longer. The decline in commodity prices will slow inflation, while the Canadian economy has been hit hurt by the slowdown in the US economy.

Employers added 15,200 to the payrolls on a full-time basis August after cutting 55,000 jobs in July, the biggest monthly job loss since 1991. But the unemployment rate in August remained unchanged at 6.1 percent.

The PMI Ivey index fell to 51.5 in August, missing expectations for a reading of 63.0, from 65.5 in July.

Switzerland
The dollar/Swiss franc rallied on Monday and Friday on general dollar strength. The Swissy should catch up with the rest of the European currencies.

The Swiss GDP unexpectedly rose 0.4 percent in the second quarter from 0.3 percent in the first quarter. The Swiss PMI declined to 52.5 in August from 54.1 in July, but remained above the 50 mark.

Australia
The Australian dollar fell aggressively for the second time in the past seven weeks, and with commodity positions being pared sharply, expect further weakness.

Gross domestic product slowed to 0.3 percent in the second quarter from a revised 0.7 percentin the first quarter.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will start on Thursday with the release of the trade balance report for July.

Friday will be important in terms of economic reports, as all eyes will be on inflation and consumer confidence in the face of the economic downturn. It features the PPI and the retail sales reports for August, and the University of Michigan survey report for September.

The Eurozone
The Eurozone economic agenda will start on Tuesday with the German trade balance for July.

Wednesday with the release of the French industrial production report for July and with the revision of Italy’s the second quarter GDP. The data should not help the euro.

Friday will see the release of the French Bank of France Business Sentiment report for August, the French CPI report for August, and the Eurozone and Italian industrial production reports for July.

Japan
Japan’s economic calendar will start on Wednesday with the release of the current account balance report for July.

The machinery orders report for July is due on Thursday.

Friday will see the revision of the second quarter GDP and of the industrial production report for August.

The UK
The UK housing and consumption numbers will remain in focus.

The economic calendar will start on Monday with the release of the PPI input/output reports for August. Inflation is a major concern while the economy is deteriorating, so the BoE will carefully watch this report. So will we.

Tuesday will see the release of a batch of important data: the industrial production report for July, and the RICS House Price Balance and the BRC retail sales reports for August. We know where the housing sector is, but what about the consumer confidence? The selling pressure on cable should continue.

Canada
Canada’s economic calendar will begin on Wednesday with the release of the Labor Productivity report for the first quarter.

The trade report and the new housing price report for July are due on Thursday.

Friday will witness the release of the industrial capacity for the first quarter.

Overview

Euro/dollar
Last week's range: 1.4198 – 1.4722 (Down)
Previous range: 1.4572 – 1.4811 (Mixed)

Euro/dollar collapsed to an 11-month low, but my model went long on profit taking (after going short on September 1). It must close below 1.4198 to signal a decline without a pause, but this is unlikely.

Initial resistance is at 1.4385. Above 1.4450, resistance is at 1.4625. This is followed by 1.4910. Distant resistance is at 1.5015.

Immediate support is at 1.4271. Below 1.4198, support is at 1.4085. Further support comes at 1.3835. Distant support is at 1.3695.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 105.53 – 108.41 (Mixed)
Previous range: 108.43 – 110.29 (Down)

Dollar/yen fell to a six-week low late Thursday and early Friday, but then reversed to limit weekly losses. It then rallied early Monday. The yen remains the favorite in crosses against the European currencies in the medium term, but not in the short term, as my model went long. The medium-term outlook is mixed to slightly bearish.

Above 108.70, resistance follows at 109.15 from another 50-point pivot, which targets 109.65 and 108.65. Distant resistance is at 110.35 from a 50-point pivot, which targets 109.85 and 110.85.

Initial support is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Strong support follows at 106.75 from a 50-point pivot, which targets 106.25 and 107.25. The next level is 105.60 from another 50-point pivot, which targets 105.10 and 106.10. A pivot low is at 103.78.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.7538 – 1.8153 (Down)
Previous range: 1.8174 – 1.8589 (Down)

Sterling/dollar fell to a near 2 ½-year low last week and reached the targets of a long-term bearish flag and of a head-and-shoulders pattern in the 1.7650 area. But it rallied early Monday and my model just went long (profit taking on the short opened on August 22). Except for brief recoveries, the downside remains open in the medium term.

Initial resistance is at 1.7930. Above the strong line at 1.8000, further resistance looms at 1.8100. Distant resistance is at 1.8190.

Immediate support is at 1.7717. Below 1.7672, a pivot low is at 1.7538. Further supports are at 1.7444 and 1.7267.

NEAR-TERM:Mixed to slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM:Bearish

Dollar/Swiss franc
Last week's range: 1.0950 – 1.1189 (Up)
Previous range: 1.0884 – 1.1086 (Mixed)

Dollar/Swiss climbed to the highest levels since the start of the year and my model is long. The Swissy should catch up with the rest of the European lot, so the upside of the pair is more limited.

Initial resistance comes at 1.1260. Above 1.1360 there is a pivot high at 1.1605.

Below 1.1154, support is pegged at 1.1090. This is followed by 1.1010. Below 1.0935, support is at 1.0844. Distant support is at 1.0740.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0544 – 1.0778 (Mixed)
Previous range: 1.0412 – 1.0644 (Mixed)

Dollar/Canada hit a 13-month high before giving up all of its gains. The outlook remains mixed.

Support comes first at 1.0550. This is followed by 1.0515 and 1.0470. Below 1.0412, distant support is at 1.0300, but this level should not be seen anytime soon.

Above 1.0620, resistance remains at 1.0700. Above 1.0778 from a new pivot high, resistance looms at 1.0805. Distant resistance is at 1.0867 from another pivot high.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 150.64 – 159.34 (Down)
Previous range: 159.22 – 162.86 (Down)

Euro/yen fell last week to a 13-month low, but then rallied sharply early Monday. The medium-term outlook is negative, but the short term looks positive on profit taking and my model went long (after selling on August 28).

Initial resistance level is at 156.85. This is followed by 158.26 and 158.70. The next level is 160.05. Distant resistance is seen at 162.00.

Immediate support is now seen at 154.50. The next level is 153.70. Below 150.64, distant support is at 147.55.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Euro/sterling
Last week's range: 0.8055- 0.8187 (Mixed)
Previous range: 0.7940 – 0.8060 (Up)

Euro/sterling closed the week little changed after falling from the highest level in nearly 12 years. The bearish engulfing pattern formed on Thursday was followed by a slide on Friday. The initial risk is lower.

Initial support is at 0.8022. The next level is at 0.7990. Below 0.7970, distant support is seen at 0.7938.

Immediate resistance is at 0.8085. Above 0.8137, the cross now has resistance at 0.8187. Further caps remain perched at 0.8230 and 0.8262.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Mon, Sep 8 2008, 06:05 GMT

The US markets are closed on Monday for the Labor Day holiday

Wed, Sep 3 2008, 07:12 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency made little overall progress during the past week, but retained its previous gains. It was the last week of official vacation and few traders were looking to cut new paths. Commodities are at a crossroads and the logical direction for the oil remains up in the medium term, while the credit crunch is worsening by the day. It is more of a question of which economy is going to melt faster, the one in the US or that in the Eurozone economy, and until the answer to this question becomes more apparent, sideways trading is likely. But the dollar seems to be biased higher.

United States
The dollar held its own, but in a very unexciting fashion. It performed well only against the pound and otherwise it only consolidated. The US data was not that bad, thus encouraging some people to think we can skirt the recession. But this is overoptimistic.

The dollar made only a feeble and brief bounce in thin trading on Monday on news the exiting home sales rose a less than expected 3.1 percent in July to a 5.00 million rate, as prices contracted 7.1 percent on an annual basis.

Thus, that failed to help earlier losses triggered by the Chicago FED, whose national activity index worsened to -0.67 in July from -0.59 in June. The index has been negative since August 2007.

The Conference Board's confidence index rose more than expected to 56.9 in August from 51.9 in July.

New-home sales improved 2.4 percent to a 515,000 annual pace in July from a 17-year low that was downwardly revised to a 503,000 rate in June. The number of unsold homes on the market fell 5.2 percent to a 416,000 pace, the most since November 1963. On a yearly basis, new home sales contracted 35.3 percent.

But house prices declined 15.9 percent in June, according to the S&P/Case-Shiller index. This was the fourth straight month of declines, but the pace was slower than expected.

Durable goods orders unexpectedly increased 1.3 percent in July and the June’s reading was revised upward to 1.3 percent as well. Excluding transportation equipment, orders expanded 0.7 percent after a 2.4 percent increase a month earlier. Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, increased 2.6 percent, the most since April.

The dollar spiked up briefly on Thursday on news that the second quarter GDP was revised upward to 3.3 percent annual rate due to higher consumer spending and net exports from the initial 1.9 percent rate.

Initial jobless claims for unemployment benefits decreased by 10,000 to 425,000 in the week ended Aug. 23, from an upwardly revised 435,000 (432,000) the prior week.

The dollar benefited on Friday from strong data.

The Chicago PMI surged to 57.9 in August from 50.1 in July and the University of Michigan consumer sentiment came in at 63 in August from 61.2 in July.

But personal income fell by 0.7 percent, spending by 0.4 percent and disposable income by 1.7 percent in July.

Finally, the PCE deflator increased by 0.6 percent on the month and by 4.5 percent on the year.

The Eurozone
The euro only consolidated despite stacking data showing the accelerating weakness of the Eurozone economy.

The euro collapsed on Tuesday on news that German business climate index, fell to a three-year low in August, which suggest the German economy is very close to a recession. The Ifo institute's business climate index fell to 94.8 from 97.5 in July. The sub-index of business expectations fell to 87, the lowest since February 1993, while the sub-index of current conditions eased to 103.2 from 105.7.

Along the same lines, German consumer confidence fell to a fresh five-year low of 1.5 in September from a downwardly revised reading of 1.9 in August, according to GfK.

Italian consumer confidence bounced back to 99.5 in August from a 15-year low of 95.8 last month.

The final reading of the second quarter German GDP remained 0.5 percent after expanding 1.3 percent in the first quarter. The last time the German economy recorded a decrease was in the third quarter of 2004.

German unemployment fell by a more than expected 40,000 to 3.2 million in August, after falling 20,000 in July. The unemployment rate fell to 7.6 percent, the lowest since May 1992. While labor is a lagging indicator, the ECB is likely concerned about renewed inflation.

The Eurozone retail sales PMI increased to 47.7 in August from 46 in July, but remained for the third month below 50, the dividing line between growth and contraction. On an individual basis, the German retail sales index fell to 44.1 from 46.4 but the French index rose to 53.7 from 51.3.

French housing starts declined 11.8 percent in the three-month period to July, slower than -28.2 percent in the three-month to June. Housing permits fell 16.6 percent after a 15.3 percent decline seen during three-month period to June.

Elsewhere, Italian PPI fell to 0.5 percent in July from +0.8 percent in June, but edged up to 8.3 percent on a yearly basis from 8.2 percent in June.

Japan
The Japanese yen traded mostly below 110.00, which was well defended later in the week, and above 108.00 amid soft weakening data and a resigning PM. The next prime minister might lead to more government spending. Key is in the euro/yen.

The jobless rate fell to 4 percent in July, but the ratio of jobs available to each applicant fell for a sixth month to 0.89, the lowest since October 2004. And the household spending fell 0.5 percent in July from a year earlier, a fifth monthly decline.

Retail sales were flat again in July but rose 1.9 percent from a year earlier.

The industrial output, which fell in the first half of this year, rose 0.9 percent in July.

The Nomura/JMMA Japan PMI slipped to 46.9 in August from 47.0 in July. In June the index hit the lowest in more than six years at 46.5. A reading below 50 points point to a contraction, of course.

The CPI slipped to 0.4 percent in July from 0.7 percent in June, and the core CPI rose to 0.5 percent from 0.4 percent. It rose 2.3 percent in July on an annual basis from 2.0 percent in June, while core inflation rose to 2.4 percent from 1.9 percent.

The Tokyo CPI contracted 0.1 percent in August from +0.2 percent in July, with the core CPI at -0.1 percent from +0.3 percent. On an annual basis, it slipped to 1.5 percent from 1.6 percent.

The UK
The pound remains the weakest link of the European currencies. Expect no quick fix, as piling negative data suggest that the UK is nearing recession.

House prices declined 10.5 percent in August, the biggest drop since the final quarter of 1990, according to the Nationwide Building Society.

The number of mortgages approved in the UK for house purchases rose to 22,448 in July from 22,369 in June, according to the British Bankers' Association. However, mortgage approvals contracted 65 percent on an annual basis.

Meanwhile, the Confederation of British Industry said that a gauge of retail sales fell to –46, a 25-year low in August, from -36 the previous month.

Canada
The Canadian dollar did nothing despite fluctuating oil prices.

The GDP expanded only 0.3 percent in the second quarter after contracting 0.8 percent in the previous quarter.

Canada's current account surplus surged to C$6.76 billion in the second quarter due to high prices for energy exports from C$4.46 billion in the first quarter.

Switzerland
The dollar/Swiss franc struggled higher amid overall dollar strength.

The Swiss employment increased 2.4 percent in the second quarter from the previous year.

Australia
The Australian dollar remained under pressure as well.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US markets are closed on Monday for the Labor Day holiday.

The economic calendar will start on Tuesday with the release of the ISM manufacturing index for August and of the construction report for July. Keep your eyes on the former.

Wednesday will see the release of the ADP employment report, which has only been able to create confusion ahead of the release of the government’s labor data, and the factory goods orders.

The Fed's Beige Book report is due on Wednesday as well.

The ISM non-manufacturing index for August is due on Thursday and this is another report you should watch carefully.

It’s the first Friday of the month and this means the release of the non-farm payrolls and of the jobless rate reports for August. Volatility is going to spike for a few minutes, as the market overreacts to the data. Good luck!

The Eurozone
The Eurozone economic calendar will begin on Monday with the release of the regional PMI Manufacturing report and of the German retail sales.

The regional PPI report is due on Tuesday.

The Eurozone PMI Services and retail sales reports will be released on Wednesday.

On Thursday, the ECB will leave its rates unchanged.

The same day, be on the lookout for the German industrial production report.

Japan
The Japanese economic calendar doesn’t have any significant reports scheduled this week.

The UK
The UK economic calendar will open on Tuesday with the release of the PMI Construction and of the Nationwide Consumer Confidence reports.

The PMI Services report is due on Wednesday.

On Thursday, the Bank of England will leave its rates unchanged.

Canada
On Wednesday, the Bank of Canada should leave its rate unchanged at 3 percent.

The unemployment rate and the Ivey Purchasing Managers Index reports are due on Friday.

Overview

Euro/dollar
Last week's range: 1.4572 – 1.4811 (Mixed)
Previous range: 1.4631 – 1.4910 (Up)

Euro/dollar closed the week little changed after trimming losses from a 6 ½-month low. My model went short. The decline should continue. Key level is at 1.4700 from the 50% retracement of the uptrend between August 2007 and July 2008.

Immediate support is at 1.4557. Further supports remain at 1.4505 and 1.4440. Distant support is at 1.4265.

Initial resistance is at 1.4616. Above 1.4725, resistance is at 1.4780 from the 0.786% retracement of the upmove between February and July. This is followed by 1.4845, 1.4902 and 1.4950. The next levels remain at 1.5015 and 1.5065. Distant resistance is at 1.5110.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 108.43 – 110.29 (Down)
Previous range: 108.14 – 110.57 (Mixed))

Dollar/yen consolidated in an inside range around the 50% retracement of the downtrend between June 2007 and March 2008 at 109.95. The medium-term outlook is mixed and my model is short.

Strong support is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Distant support follows at 106.54.

Immediate resistance is at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Next strong resistance is at 110.35 from a 50-point pivot, which targets 109.85 and 110.85. Distant resistance is at 111.60 from another 50-point pivot, which targets 112.10 and 111.10.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.8174 – 1.8589 (Down)
Previous range: 1.8505 – 1.8796 (Down)

Sterling/dollar fell for the sixth consecutive week and reached a new over two-year low last week. It is important to notice that it broke the 38.2% Fibonacci retracement level of the uptrend between June 2001 and November 2007 at 1.8306. The pound is on track for reaching the targets of a long-term bearish flag and of a head-and-shoulders pattern in the 1.7650 area.

Immediate support is at 1.7850. Further supports are at 1.7800 and 1.7717. Distant support is now pegged at 1.7563.

Initial resistance is at 1.7910 from the 0.786% retracement of the upmove between November 2005 and November 2007. The next level is 1.7965. Above 1.8100, further resistance looms at 1.8190. Distant resistance is in the 1.8320 area.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

Dollar/Swiss franc
Last week's range: 1.0884 – 1.1086 (Mixed)
Previous range: 1.0844 – 1.1040 (Up)

Dollar/Swiss has been alternating up and down days for nearly two weeks but still managed to coin a 6 ½-month high. It is overbought in the medium term, but hold long positions until a bearish reversal is confirmed.

Initial resistance comes at 1.1046. Two pivot highs are pegged at 1.1086 and 1.1106. Next level is 1.1184. Distant resistance is at 1.1360.

Initial support is pegged at 1.0950. This is followed by 1.0885. Below 1.0844, support remains at 1.0725. Distant support is at 1.0620.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0412 – 1.0644 (Mixed)
Previous range: 1.0423 – 1.0669 (Down)

Dollar/Canada is lacking much direction and this is obvious from the relatively tight range last week, despite the aggressive swerves in the oil price.

Initial resistance is at 1.0700. Above 1.0730 from a pivot high, resistance looms at 1.0805. Distant resistance is at 1.0867 from another pivot high.

Support comes first at 1.0644. The next level is 1.0610. This is followed by 1.0530. Distant support is at 1.0412, but this level should not be seen anytime soon.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 159.22 – 162.86 (Down)
Previous range: 160.19 – 163.09 (Up)

Euro/yen fell last week for the fifth of the past six weeks and reached a five-month low. The medium term outlook is negative.

Immediate support is now seen at 157.12. The next level is 155.65. Distant support is at 154.03.

Initial resistance level is at 158.26. This is followed by 158.70. The next level is 160.05. Distant resistance is seen at 162.00.

NEAR-TERM: Bearish
MEDIUM-TERM: Bearish
LONG-TERM: Mixed

Euro/sterling
Last week's range: 0.7940 – 0.8060 (Up)
Previous range: 0.7871 - 0.7989 (Up)

Euro/sterling rallied for the third consecutive week. The close above the pivot at 0.8099 warrants more strength.

Above 0.8162, the cross has resistance at 0.8185. Further caps are perched at 0.8230 and 0.8262.

Initial support is at 0.8099. The next level is at 0.8033. Below 0.7970, distant support is seen at 0.7938.

NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Wed, Sep 3 2008, 07:12 GMT

The US economic calendar will start on Monday with the release of the existing home sales report for July

Mon, Aug 25 2008, 06:59 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency consolidated during the past week and the same should happen during the last week of August and ahead of the Labor Day holiday. The geopolitical pressures have (officially) alleviated, but all eyes should remain on commodities. The dollar remains overbought in the short term, but any corrective decline this week should be brief and shallow. This is because most of the market missed buying dollars on July 22 and is waiting for the second chance.

United States
The US financial woes are very far from being solved, and they go well beyond Fannie Mae and Freddie Mac. Consolidation/bankruptcy among large name in the industry should continue, and in addition to that we have to gauge the ongoing impact of the housing sector crisis on US employment and consumer confidence. It all sounds horrible, but the rest of the world is only starting to experience this weakness. Events that only months ago would have propelled the oil prices, the Russian destruction of Georgia and the tropical storm in the Gulf, are now ignored. The oil price is going down on long liquidation and this means the dollar should strengthen further in the medium term. And the trigger for the second wave of buying can be pulled at any time.

Housing starts melted away another 11.0 percent to an annual rate of 965,000 units in July from the upwardly revised June estimate of 1.084 million units. On an annual basis, they contracted 29.6 percent. Building permits tumbled 17.7 percent to an annual rate of 937,000; on annual basis the damage was 32.4 percent. The horror show must go on!

The National Association of Homebuilders/Wells Fargo sentiment index remained unchanged at 16 in August. Readings under 50 mean the conditions are poor.

Producer price index jumped 1.2 percent in July following an unrevised 1.8 percent increase in June. On an annual basis, PPI expanded 9.8 percent. The core producer price index rose 0.7 percent in July after edging up 0.2 percent in each of the two previous months.

Claims for initial unemployment benefits decreased to 432,000 from the previous week's downwardly revised figure of 445,000. What is highly unusual is that the previous week’s number was revised down from 450,000 because the revisions are nearly 100 percent revised upward – that means they do that only 99 percent!

The Conference Board’s leading economic indicators fell 0.7 percent in July after being in unchanged in June. Recession? Of course.

Philly Fed Factory Index improved to-12.7 in August from –16.3 in July. No good news here, the last time we had a positive report was back in November.

The Eurozone
The euro/dollar made only a weak retracement last week on profit taking, as evidence of economic weakness in the Eurozone is piling up. There is no decoupling, or if you wish, an economic re-coupling.

The French index of manufacturing confidence declined to 92 in July, the lowest since May 2003, from 95 in June.

German investor confidence improved to - 55.5 in August from - 63.9 in July, the lowest since the survey began in 1991, according to the ZEW Center. Nice, but that is still a very weak number.

Along the same lines, the ZEW economic sentiment for the Eurozone rose 8 points to -55.7 in August. Still a bad number, I’m afraid.

German producer-price inflation rose 2 percent in July and accelerated to 8.9 percent on the year, the fastest pace since October 1981.

The Eurozone trade came in at -0.1 billion euros in June from -4.6 billion euros (revised from -3.9 billion euros) in May.

The Eurozone construction output contracted 0.6 percent in June and 2.4 percent on a yearly basis.

The Eurozone services PMI dipped to 48.2 in August from 48.3 in July, while the manufacturing PMI edged up to 47.5 from 47.4 in July. Both numbers suggest that the Eurozone will slip into technical recession in the third quarter. The German index fell to 50.3 from 52.2, the lowest in five years, and the French index was unchanged at 47.0.

The Eurozone current account deficit came in at -1.0 billion euros in June, while the regional industrial new orders contracted 0.3 percent during the same period.

Japan
Dollar/yen made a failed attempt to correct lower last week, but the uptrend remains intact. But expect choppy trading during the last week of official vacation.

The final leading index for June came in at 91.3, up from 91.2, while the final coincident index slipped to 101.6 from 101.7.

There was no reaction to news that all industry activity index fell 0.9 percent in June, as expected.

The merchandise trade balance in Japan contracted 86.6 percent to 91.1 billion yen in July on a yearly basis from the revised 121.9 billion yen surplus in June. The trade balance with the United States fell 19 percent on the year. Imports jumped 18.2 percent from a year earlier, while exports rose 8.1 percent.

The final machine tool orders report fell 3.6 percent in July after another 3.5 percent fall in June. On an annual basis, orders contracted 8.9 percent in July and 2.7 percent in June.

The UK
Sterling/dollar consolidated in an inside range last week, but remains just above the low price of the sharp decline. There aren’t too many spots of light in the local economy, so any recovery of cable should be temporary.

The UK second quarter GDP was revised downward to unchanged from 0.2 percent, while the annual growth was only 1.4 percent, the weakest since 1992. Given the weakness seen in the past several months that’s hardly a surprise.

The house prices fell 2.3 percent in August and 4.8 percent on the year, the weakest reading since 2002, according to Rightmove. No surprise here, the housing sector remains in trouble.

CBI industrial trends survey worsened to -13 in August from -8 in July.

Minutes from the Bank of England’s MPC meeting on August 7th emphasized a shift in the MPC outlook. The policy makers split three ways, with one arguing for higher rates to fight inflation, another voting for a cut to fight recession, and the others wanting to keep the benchmark rate at 5 percent.

UK business investment fell 1.9 percent in the second quarter.

Retail sales unexpectedly expanded 0.8 percent in July after contracting a downwardly revised 4.3 percent the month before (-3.9 percent initially), which was the biggest decline since at least 1986.

Canada
Dollar/Canada fell for the second week despite the fact that the commodities declined as well. And strong economic data only painted half of the picture.

Wholesale sales rose 2 percent to C$45.2 billion in June, the fastest pace in 16 months, and the May's gain revised down to 1.5 percent from the initially reported 1.6 percent.

Meanwhile, Consumer Price Index rose 3.4 percent in July on an annual basis from 3.1 percent in June. The core CPI rate rose 1.5 per cent in July for the fourth consecutive month.

Retail sales rose 0.5 percent in June, the fourth consecutive month of gains, after a downwardly revised 0.3 percent gain the month before. It wasn’t a good number, as excluding high gasoline prices, retail sales would have contacted 0.4 percent.

The index of leading economic indicators was unchanged for a second straight month in July.

Switzerland
The dollar/Swiss franc failed to hold above the rising channel line last week, some profit taking on long positions is likely – but only on a temporary basis.

Switzerland June retail sales expanded only 0.7 percent on a yearly basis.

Australia
The Australian dollar consolidated in an inside range last week after sinking sharply for a month. The RBA is set to cut rates in early September and the economy is slowly faltering. Use the commodity prices for guidance, but remember that Australia doesn’t have oil to export.

The leading index edged up 0.1 percent in June, according to Westpac.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will start on Monday with the release of the existing home sales report for July. It’s hard to expect a good number, so it should carry no weight.

Tuesday will see the release of the new home sales report for July and of the Conference Board’s consumer confidence report for August. The latter one might move the market.

The volatile durable goods orders report for July is due on Wednesday.

Thursday will see the revision of the second quarter GDP.

Friday before the long weekend we will face an avalanche of significant data: personal income and spending reports for July, the Chicago PMI report for August, the University of Michigan survey for September, and the core PCE deflator report for July.

The Eurozone
The Eurozone economic agenda will begin on Tuesday with the release of the German IFO Business Climate Economic report for August and of the revision of the German second quarter GDP. Only a modest improvement is likely in the IFO report.

Italy’s Consumer Confidence Index report for August is due on Wednesday.

Thursday will be a busy day for the Eurozone. Be on the lookout for Germany’s unemployment rate for August, and the Eurozone Retail PMI, Business Climate Indicator, Consumer Confidence, Economic Sentiment Indicator, and Industrial Confidence reports for August.

The Eurozone unemployment rate report for July is due on Friday.

Japan
The Japanese economic data for July will be released as a large batch on Friday: it includes the unemployment rate, household living expenditure, industrial production, retail trade, housing starts and national CPI.

The Tokyo CPI report for August is due on Friday as well.

The UK
The UK markets are closed on Monday.

The agenda will start on Thursday with the release of the Nationwide house prices and of the CBI distributive trades survey reports for August.

The GfK NOP consumer confidence report for August is due on Friday.

Canada
Canada’s economic agenda only features the monthly GDP for June.

Overview

Euro/dollar
Last week's range: 1.4631 – 1.4910 (Up)
Previous range: 1.4660 – 1.5083 (Down)

Euro/dollar recovered from a six-month low after nearly reaching the target of a double top in the 1.4600 area. My model reversed its short position since July 22, but the risk is on the downside. Again, after a brief bounce, the decline should resume.

Initial support is now seen at 1.4700. The next level is 1.4631. Below the target at 1.4600, further supports remain at 1.4505 and 1.4440. Distant support is at 1.4265.

Immediate resistance comes at 1.4800. This is followed by 1.4845, 1.4902 and 1.4950. The next levels remain at 1.5015, 1.5065 and 1.5110. Distant resistance is at 1.5320.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 108.14 – 110.57 (Mixed)
Previous range: 108.38 – 110.30 (Up)

Dollar/yen faked an aggressive decline and a double top on Thursday, but its rally on Friday called the bluff. The medium-term outlook is bullish and my model is long. The Gann pivot at 110.35 still ruled last week and will continue to do so at least early this week.

Immediate resistance remains at 110.35 from a 50-point pivot, which targets 109.85 and 110.85. The next key level remains 111.60 from another 50-point pivot, which targets 112.10 and 111.10. Distant resistance is at 112.90 from yet another 50-point pivot, which targets 113.40 and 112.40.

Support remains at 109.85. Further strong support is at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Distant support follows at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.8505 – 1.8796 (Down)
Previous range: 1.8514 – 1.9256 (Down)

Sterling/dollar failed its attempt to recover and closed on a very bearish tone last week. Again, cable formed a long-term head-and-shoulders pattern that targets the 1.7550 area. The medium term outlook remains negative.

Immediate support is at 1.8405. Further supports are at 1.8330 and 1.8190. Distant support is now pegged at 1.8190.

Initial resistance now comes at 1.8480. The next likely caps are 1.8620 and 1.8700. Above 1.8786, further resistance comes at 1.8867. Distant resistance remains in the 1.9100 area.

NEAR-TERM:Bearish
MEDIUM-TERM: Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0844 – 1.1040 (Up)
Previous range: 1.0743 – 1.1008 (Up)

Dollar/Swiss has alternated up and down days last week and reached a six-month high. My model reversed its long position since July 22, but the risk is on the upside. Again, after a brief pullback, the upmove should resume.

Immediate resistance is at 1.1040. Above it, key resistance remains at 1.1185. Distant resistance moved up to 1.1360.

Initial support is pegged at 1.0910. Below 1.0855, support remains at 1.0725. Distant support is at 1.0620.

NEAR-TERM: Bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0423 – 1.0669 (Down)
Previous range: 1.0564 – 1.0730 (Down)

Dollar/Canada fell for the second week but only gave back half of the gains made two weeks earlier. My model remains short. The market turned up on Friday, but only mildly so, but the next move is unclear even though the commodity prices are falling.

Immediate resistance is now seen at 1.0530. Above 1.0575, the next level is 1.0615. Distant resistance is 1.0730.

Initial support comes at 1.0423. Below 1.0385, support is now seen at 1.0280. Distant support comes at 1.0170.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 160.19 – 163.09 (Up)
Previous range: 161.41 – 165.68 (Down)

Euro/yen reversed aggressively from a 3 1/2-month low late last week and my model reversed its short position. Hold small long positions with a tight stop.

Immediate support is now seen at 162.20. The next levels are 161.35 and 160.85. Distant support remains at 158.63.

Strong resistance is at 162.95. The next level is 164.30. Above 165.05, distant resistance is seen at 167.30.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7871 - 0.7989 (Up)
Previous range: 0.7794 – 0.7993 (Up)

Euro/sterling rallied last week but got stuck in an inside range. The cross barely remained in a slightly declining channel. My model turned long, so stay long.

Immediate resistance is seen at the nearby level of 0.8015. Above the pivot highs at 0.8022 and 0.8034, further resistance follows at 0.8055. Distant resistance is at 0.8141.

Initial support is at 0.7966. The next supports come at 0.7930 and 0.7900. The next level is 0.7870. Distant support is at 0.7794.

NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Aug 25 2008, 06:59 GMT

Tuesday will see the more important data on the housing starts and the PPI reports for July

Mon, Aug 18 2008, 08:03 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency marched higher during the past week in a stampede and even the yen fell prey, despite benefiting intermittently from liquidation of carry trades. The Eurozone, UK and Japanese economies having lagging the US economy is starting their decline and this places the dollar in a position of relative strength. Unless the commodities slow down their descent, the dollar seems primed for more gains.

United States
The dollar recovered more of its unwarranted losses since last year amid confirmation that economic decoupling is not really possible at this cyclical point. The Eurozone and Japanese GDPs contracted in the second quarter, while our fell only back in the fourth quarter of 2007. Commodity prices are still coming down as historically excessive spec is being reversed. Massive long positions are surely still in play, but many wanna-be’s are out. The US data showed interesting pockets of strength, albeit not enough to tell us that the economy is doing well. But this shows the resilience of the economy in the face of the unprecedented financial and credit hits. The worst is yet to come, but that doesn’t mean the dollar has to remain weak. It will see weakness again, but that will be slowed by those who missed the last sharp upmove.

The trade deficit unexpectedly narrowed 4.1 percent to $56.8 billion in June as strong exports overcame record imports of petroleum from a downwardly revised $59.2 billion in May. Exports increased 4 percent, the biggest percentage jump since February 2004, while imports rose 1.8 percent. What was impressive was that the deficit improved while oil prices were still surging. It should improve further because of the subsequent oil price decline.

Retail sales edged down 0.1 percent in July after an upwardly revised 0.3 percent increase in June. On a yearly basis, sales expanded 2.6 percent, down from +3.4 percent a month earlier. Ex-autos, retail sales increased by a respectable 0.4 percent in July.

The consumer price index climbed 0.8 percent, twice as much as anticipated, while the core CPI increased 0.3 percent for a second month.

The import price index slowed to 1.7 percent in July from rising a revised 2.9 percent in June. On a yearly basis, the index rose 21.6 percent, the biggest jump since the report was started in 1982. Ex- petroleum, prices rose 0.9 percent last month from June and 8 percent from last year. Meanwhile, export prices accelerated to 1.4 percent in July from 1.0 percent in June.

Business inventories expanded by a larger-than-expected 0.7 percent in June after a 0.4 percent increase in May. Sales climbed 1.7 percent following a 1.1 percent rise.

The housing sector is far, probably at least one year away, from bottoming.

Existing home sales fell to a 10-year low in the second quarter and the median price for a single-family house dropped 7.6 percent.

Along the same lines, home prices fell 15.8 percent in May, the most since at least 2001, according to S&P/Case-Shiller.

The Federal Reserve Bank of New York's general economic index rose to 2.8 in August, the highest level since January, from minus 4.9 in July. A reading of zero is the dividing mark between growth and contraction. The measure of employment improved to -4.5 from -6.3, signaling fewer firings. Nice, but not that meaningful.

Industrial production slipped to 0.2 percent in July from a downwardly revised 0.4 percent increase in June (from a previously reported +0.5 percent). Capacity utilization edged up to 79.9 percent in July from 79.8 percent.

The University of Michigan preliminary index of consumer sentiment increased to 61.7 in August from 61.2 in July. The index of consumer expectations for six months from now improved to 56.8, the highest since March, from 53.5. That’s nice – but not convincing.

The number of first-time applications decreased by 10,000 to 450,000 in the week ended August 9, from an upwardly revised 460,000 the prior week (from a previously reported 455,000).

The Eurozone
The euro/dollar suffered the fifth week of losses and a wave of weak economic data was not helpful at all. The pair should see more losses in the medium term, but in the short term it should consolidate.

French industrial production unexpectedly declined 0.4 percent in June from May, when it dropped a mammoth 2.9 percent (worse than initially reported –2.6 percent). On a yearly basis, output contracted 1.6 percent, enhancing expectations for an economic contraction. Insee expects the French economy to grow 0.2 percent in the second quarter before stagnating in the next three months.

The Eurozone industrial production was unchanged in June after falling a revised 1.8 percent in May. On a yearly basis, production contracted 0.5 percent on top of a 0.4 percent decline in May.

The Eurozone CPI rose to 4.1 percent in July, the highest since April 1992. This is more than double the European Central Bank's ceiling of 2 percent. But French consumer prices fell 0.3 percent in July and this helped them hold at an annual 4.0 percent.

The Eurozone GDP fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent. On a yearly basis, GDP slowed for a third straight quarter to 1.5 percent. Germany’s GDP came in at -0.5 percent and France’s at -0.3 percent.

Meanwhile, the Eurozone CPI fell 0.2 percent in July and held at 4 percent on the year.

Japan
Dollar/yen was the wild card last week, rising, falling and then rising again, all in an aggressive fashion. The problem was, all three moves made sense… The rallied were in line with general dollar strength, while the slide was triggered by massive sales of yen crosses, carry trades or not. This means we must expect the choppy pattern to continue. And the stagflation problems affecting the US seem to seep into the Japanese shores as well.

PPI climbed 7.1 percent in July on a yearly basis after a revised 5.7 percent increase in June.

Japan industrial output was revised to -2.2 percent in June from –2.0 percent. This follows a 2.8 percent expansion in May.

Household's consumer confidence fell for the fourth consecutive month in July and reached 31.4 (from 32.6 in June). The current reading is the lowest since the Cabinet Office started measuring consumer confidence in June 1982.

Gross domestic product contracted 0.6 percent in the second quarter from the first quarter, when it grew 0.8 percent. An annual basis, it fell 2.4 percent after expanding a revised 3.2 percent in the first quarter.

The current-account surplus shrank 67.4 percent to 493.9 billion yen in June as exports fell and record oil prices pushed up the import bill. Exports fell 1.5 percent in June from a year earlier after a 4.2 percent gain in May, while imports climbed 17.8 percent, compared with 4 percent in May.

The tertiary index showed demand for services decreased 0.8 percent in June.

The UK
Sterling/dollar continued to get battered, and that makes the exchange rate of 2.0000 look like a distant nightmare, even though it happened only about one-month ago. Cable remains the weakest of the European currencies, so it will lead any additional weakness. The economic data is not helping and there is little on the horizon to offer help.

UK producer prices increased 0.4 percent in July on the month but expanded 10.2 percent from a year earlier, at the fastest pace since records began in 1986, from +10 percent in June. Raw material costs slowed to 30.1 percent from a year earlier from 30.8 percent in June. Imported materials rose a record 21.2 percent in the year, the statistics office said today. Input prices fell 0.6 percent from June.

Meanwhile, CPI remained unchanged in July but accelerated to 4.4 percent on a yearly basis, more than double the central bank's 2 percent target, from 3.8 percent in June.

The trade gap still widened to 7.7 billion pounds in June as the deficit with countries outside the European Union expanded to a record. Exports rose 4.2 percent and imports by 4.1 percent.

The Bank of England cut its forecast for UK economic growth to about 0.1 percent on a year-on-year basis in the first quarter of 2009 from the previous forecast of 1 percent. It also said the inflation rate will fall below the 2 percent target in two years if policy makers keep the benchmark interest rate at 5 percent.

Claims for jobless benefits climbed 20,100 to 864,700 in July, the biggest increase since December 1992, and the unemployment rate rose to 2.7 percent from 2.6 percent in June.

Canada
Dollar/Canada is in a tough spot. It reached a new high for the uptrend early last week and then made a choppy decline despite sizeable losses in the commodity prices and good local economic reports. Watch this one carefully.

The price of new homes in Canada climbed 0.1 percent in June after two months of unchanged prices and 3.5 percent on a yearly basis, the slowest pace in six years.

The trade surplus widened to C$5.76 billion in June from a downwardly revised C$5.22 billion in May. Exports and imports rose to records in June, gaining 3.1 percent and 2 percent respectively.

Factory sales rose 2.1 percent in June from May, more than double the expectations.

Switzerland
The dollar rallied versus the Swiss franc as well during the past week, but less than against the euro. This is probably because of the risk from Russia’s bloody attack on Georgia and of the Soviet-style threats against Poland.

Australia
The Australian dollar remains under pressure amide long liquidation of spec carry trades and commodities. The economy is showing increasing signs of weakness, but remains stronger than the one in New Zealand. This didn’t stop AUD/NZD from collapsing.

Australian consumer confidence jumped 9.1 percent from July to 86.2 points in August from a 16-year low, according to a Westpac Banking Corp. and Melbourne Institute survey. This is the sixth consecutive reading of less than 100, showing pessimists still outnumber optimists.

The currency fell early Thursday after a central bank official said the RBA is in a position to consider cutting interest rates.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will begin on Monday with the release of the Homebuilders' survey NAHB August – that’s not a market mover.

Tuesday will see the more important data on the housing starts and the PPI reports for July.

The leading indicators report for July and the Philly Fed survey for August are due on Thursday.

The Eurozone
The Eurozone economic calendar will start on Monday with the release of the French Business Sentiment report for July.

More important will be Germany’s ZEW Current Situation report for August and Producer Prices report for July. They are both due on Tuesday.

The Eurozone PMI Manufacturing and Services reports for August are due on Thursday.

Japan
The two-day BoJ meeting on Monday and Tuesday will leave rates unchanged – and very likely for the rest of the year.

All Industry Activity report for June is due on Wednesday.

Thursday will see the release of the trade balance report for July.

The UK
The UK economic agenda will begin on Wednesday with the release of the Bank of England’s MPC minutes for August and with the CBI Industrial trends report for August. They are both important at a time the pound is getting annihilated.

Thursday will see the release of the retail sales report for July and of the business investment report for the first quarter. The sales are crucial, given the funny previous two months reports (the former as a huge gain and the latter as an equally large decline).

The index of services report for June and of the GDP report for the second quarter are due on Friday.

Canada
The Canadian economic agenda will open on Wednesday with the release of the leading indicators report for July and retail sales report for June. They are both significant reports.

Thursday will see the release of the CPI July.

Overview

Euro/dollar
Last week's range: 1.4660 – 1.5083 (Down)
Previous range: 1.4999 – 1.5630 (Down)

Euro/dollar fell for the fifth straight week and closed below its rising trendline. The pair remains on track of a double top targeting the 1.4600 area. My model remains short since July 22. After a brief bounce, the decline should resume.

Immediate resistance is seen at 1.4755. This is followed by 1.4832 and 1.4950. The next levels remain at 1.5015, 1.5065 and 1.5110. Distant resistance is at 1.5320.

Initial support is now seen at 1.4640. Below the target at 1.4600, support now comes at 1.4505 and 1.4440. Distant support moved down to 1.4265.

NEAR-TERM:Bearish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 108.38 – 110.30 (Up)
Previous range: 107.46 – 110.37 (Up)

Despite aggressive choppy trading, dollar/yen still climbed to a new high for the year and my model is long. The Gann pivot at 110.35 still ruled and will continue to do the same at least early this week.

Immediate resistance is now at 110.35 from my 50-point pivot, which targets 109.85 and 110.85.. The next key level remains 111.60 from another 50-point pivot, which targets 112.10 and 111.10. Distant resistance is at 112.90 from yet another 50-point pivot, which targets 113.40 and 112.40.

Strong support is now pegged at 109.85. Further strong support is at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Distant support follows at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.8514 – 1.9256 (Down)
Previous range: 1.9147 – 1.9762 (Down)

Sterling/dollar fell for the fourth straight week and reached the lowest levels since July 2006.It is now confirmed that GBP/USD formed a long-term head-and-shoulders pattern that targets the 1.7550 area. While the medium term outlook remains negative, the failure to hold below the declining channel line suggests a pause for the time being.

Below the immediate support at 1.8624, there is a pivot low at 1.8514. Further supports are seen at 1.8480 and 1.8405. Distant support is now pegged at 1.8190.

Initial resistance now comes at 1.8700. Above 1.8786, further resistance comes at 1.8867. Distant resistance is now seen in the 1.9100 area.

NEAR-TERM:Bearish
MEDIUM-TERM: Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0743 – 1.1008 (Up)
Previous range: 1.0435 – 1.0838 (Up)

Dollar/Swiss rallied for the fifth consecutive week, but the bulk of the upmove occurred on Thursday. My model remains long. After a brief pullback, the upmove should resume.

Initial support is pegged at 1.0890. Below 1.0855, support is now seen at 1.0725. Distant support is at 1.0620.

Immediate resistance is at 1.1008. Above 1.1055, key resistance comes at 1.1185. Distant resistance moved up to 1.1360.

NEAR-TERM: Bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0564 – 1.0730 (Down)
Previous range: 1.0262 – 1.0696 (Up)

Dollar/Canada fell from a new one-year high. The choppy decline turned my model short on Friday. But be careful, as the commodity prices are falling.

Initial support comes at 1.0560. Below 1.0545, support is still seen at 1.0470. Distant support is now pegged at 1.0380.

Immediate resistance is now seen at 1.0635. Above 1.0710, the next levels remain 1.0805 and 1.0885. Distant resistance is 1.1040.

NEAR-TERM: Bearish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 161.41 – 165.68 (Down)
Previous range: 165.33 – 169.47 (Down)

Euro/yen fell further to a three-month low last week and my model remains short. The cross reached the target of a double top formation at 161.45. Again, hold on to short positions until a bullish reversal is confirmed.

Immediate support is now seen at 161.40. The next levels are 160.85 and 160.05. Distant support is now seen at 158.63.

Strong resistance is at 163.00. The next level is 164.30. Above 165.05, distant resistance is seen at 167.30.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7794 – 0.7993 (Up)
Previous range: 0.7811 – 0.7945 (Down)

Again, euro/sterling gave back most of its early gains and remained in a slightly declining channel. My model remains short.

Initial support is at 0.7845. The next supports come at 0.7795 and 0.7766. Distant support is at 0.7670.

Immediate resistance is now seen at 0.7900. Above the pivot high at 0.7945, distant resistance is at 0.8022.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Aug 18 2008, 08:03 GMT

Thursday will see the release of the CPI report for July

Mon, Aug 11 2008, 12:42 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency exploded higher last week and this confirms it put in a significant bottom. The US economy is in recession and the housing sector is in disarray, but the rest of the world is only starting to get the contagion and it will be ugly. Commodities have started to be liquidated and I believe there are more positions to be closed. The dollar has much more to go and I suspect any weakness would provide opportunities to buy it on the cheap.

United States
The dollar surged primarily versus the commodity and European currencies, but then managed to spread its might against the yen as well. ECB President Trichet inadvertently accelerated the move by flip-flopping through his statement before finally suggesting concern about weakening Eurozone growth. That was enough to trigger a disproportionate response, which reflected long-held imbalances in the prices of commodities and the dollar. The dollar has been oversold and the commodities overbought for months, but the trigger to reinstall common sense was pulled only recently.

Europe and the rest of the world has lagged the US financial problems but cannot skirt them; de-coupling in the economy and financial sectors cannot exist in the small world of today, so look for all the other currencies to drop further against the dollar.

The US data was mixed, but frankly irrelevant, as we are in a recession.

The Federal Reserve kept its benchmark interest rate at 2 percent as widely expected, as it has little room to maneuver while as inflation accelerates and the economy slows down.

Personal income rose by 0.1 percent in June, the lowest rate since April 2007, after rising 1.8 percent in May. But consumer spending rose 0.6 percent in June after gaining 0.8 percent in May.

The core PCE price index rose 0.3 percent in June, above economists' consensus forecast for a 0.2 percent rise.

Factory goods orders unexpectedly rose by a greater-than-expected 1.7 percent in June and the May report was revised upwards to +0.9 percent from +0.6 percent advance. June's increase was the largest since December.

The services ISM rose a tad more than expected to 49.5 in July from 48.2 in June; but a reading below 50 still indicates contraction.

The number of Americans filing first- time claims for unemployment benefits rose by 7,000 to 455,000 in the week ended August 2 to the highest level since March 2002 from 448,000 the prior week. No kidding!

The National Association of Realtors said its Pending Home Sales Index rose 5.3 percent to 89.0 in June from a downwardly revised 84.5 in May. This was the highest reading for the index since October, when it was at 89.8.

Worker productivity rose at a 2.2 percent annual rate in the second quarter because employers cut jobs from a 2.6 percent gain in the prior quarter. Labor costs rose 1.3 percent.

The Eurozone
The euro/dollar made a massive decline last week and clearly peaked. The European Central Bank kept interest rates at a seven-year high of 4.25 percent, as widely expected, to fight inflation despite mounting evidence of an economic slump mounts. But ECB President Trichet killed the euro with statements highlighting economic weakness.

News that the Eurozone producer prices declined to 0.9 percent in June from 1.2 percent increase in the prior month didn’t help the euro early last week. On a yearly basis, inflation rose to 8 percent, the most since the series began in 1990, from +7.1 percent in May.

The Eurozone service PMI fell to 48.3 in July from 49.1 in June and held below the 50 line in the sand. On an individual basis, Germany’s fell to 53.1 from 53.3 (not so bad), but France’s edged up to 47.5 from 47.0 (but still bad).

The Eurozone retail sales contracted 0.6 percent in June and the May figures were revised downward to +0.5 percent from 1.2 percent. On a yearly basis, sales contracted 3.1 percent.

The euro fell further on Wednesday on news that German manufacturing orders fell 2.9 percent in June and the May decline was revised to 1.4 percent from -0.9 percent. On a yearly basis, orders contracted 6.1 percent.

The euro recovered only briefly on Thursday following good German data.

German industrial production increased 0.2 percent n June, the first gain in four months, after contracting a whopping 1.8 percent in May (but better than the initial –2.4 percent originally reported). On a yearly basis, industrial production rose 1.7 percent.

German trade surplus increased to 19.7 billion euros in June as exports rose at the fastest pace in nearly two years from a downwardly revised 14.3 billion euros recorded in May (from 14.4 billion euros).

France's trade deficit expanded to a record 5.6 billion euros in June because of the oil prices from a revised 4.7 billion euros in May.

Elsewhere, Italian industrial production recovered 0.1 percent in June from 1.4 percent decline the previous month. On a yearly basis, it contracted 1.8 percent on top of another decrease of 2 percent in May.

Italy’s preliminary GDP unexpectedly contracted 0.3 percent in the second quarter on a quarterly basis, while the annual pace was flat. This is the first of the European countries to publish the GDP data, and is the harbinger of things to come.

Japan
Dollar/yen took its time, about five months, to break above 108.60, but was finally successful last week. It reached its highest levels since January 2 and should gain further, but a reduced pace.

The initial demand for the yen ignored the assessment of the Japanese economy. It strengthened because local investors exited carry trades and foreign equities to bring the money home.

The coincident index fell to 101.7 in June from 103.3 a month earlier and the leading index fell to 101.7 from 103.3. These weak reports suggest the possibility the economy has entered a recession.

The yen edged higher early Thursday on news that orders for machinery fell by a less than expected 2.6 percent from May, when they climbed 10.4 percent.

The UK
Sterling/dollar came under intense selling pressure last week, as it melted for six consecutive days. It now fell to the lowest levels since November 2006. The historical aberration of 2 bucks for a pound is finally over.

The Chartered Institute of Purchasing and Supply's construction PMI fell to 36.7 in July to the weakest reading since the survey began in 1997 from 38.8 in June. Of course, a report below 50 signals contraction.

The pound sank further on Tuesday on news the services PMI contracted 47.4 in July, according to the Chartered Institute of Purchasing and Supply, while factory production unexpectedly fell 0.5 percent in June for a fourth consecutive contraction. Industrial production fell 0.2 percent after –0.9 percent!

Consumer confidence fell 11 points to 51 in July, the largest drop since the survey began in May 2004, according to Nationwide Building Society.

The British economy expanded only 0.1 percent in the quarter through July, the slowest pace in three years, the National Institute of Economic and Social Research said.

Adding to the pile of evidence about the weakness of the housing sector, house prices declined fell 1.7 percent in July and 8.8 percent on a yearly basis, the steepest decline since the survey began in 1983.

The Bank of England kept the main interest rate unchanged at 5 percent as expected amid accelerating inflation.

Canada
Dollar/Canada surged to a one-year high last week amid long liquidation of commodity positions. More strength is in the store.

And the economic weakness is not helping.

The Ivey purchasing managers' index showed Canadian business and government spending fell to 65.5 in July from 69.6 the month before.

Building permits fell by a steeper-than-expected 5.3 percent in June after an unexpected rise in May.

Canadian employers unexpectedly cut 55,200 jobs in July after a drop of 5,000 the month before. The jobless rate fell to 6.1 percent from 6.2 percent as 74,100 people left the labor force.

But the consumer confidence increased to 81 in July from 79.6 in June.

Switzerland
Dollar/Swiss franc surged to a 5 ½-month high last week and should gain further in the medium term.

The local data carried little weight.

The Swiss PMI slipped to 54.1 in July from54.9 in June (and from 63.2 last July).

Unemployment remained unchanged at 2.3 percent in July as expected.

Australia
The Australian dollar collapsed during the third week of decline to coin a 6 ½-month low amid aggressive liquidation of carry trades and commodity positions. The weakness should persist, but at a reduced pace.

The RBA left rates unchanged on Tuesday but clearly signaled intent to cut them at their next meeting on September 2. Japanese retail accounts and others have been aggressively exiting their large long positions in the commodity currencies.

Home-loan approvals fell 3.7 percent in June to a four-year low from May, when they dropped a revised 6.9 percent.

The number of Australian people employed rose 10,900 in July after climbing a revised 22,200 in June. The jobless rate held at 4.3 percent.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic agenda will open on Tuesday with the release of the trade balance report for June. What’s there to say? Worse on oil for two more reports and then a little better for the same reason. Old news, no one cares.

The retail sales report for July is due on Wednesday – this report is important as spending of the tax rebate is over.

Thursday will see the release of the CPI report for July. This report is key as well.

Industrial production and capacity utilization report for July, and the Empire State manufacturing and University of Michigan surveys for August are due on Friday.

The Eurozone
The Eurozone calendar will start on Monday with the release of the French industrial production report for June.

The French CPI report for July is due on Tuesday.

Wednesday will see the release of the Eurozone industrial production report for June.

The French business sentiment for July and Germany CPI report for August are due on Thursday.

The final Eurozone HICP report for July is due on Thursday as well.

The Eurozone, German and French GDP reports for the second quarter are due on Friday.

Japan
The Japanese economic agenda will start on Tuesday with the release of the industrial production and consumer confidence reports for July.

The current account balance for June and the GDP for the second quarter are due on Wednesday.

Thursday will see the release of the Tertiary industrial activity report for June.

The UK
The UK economic calendar will begin on Monday wit the release of the trade balance report for June and the PPI report for July.

Tuesday will see the release of the DCLG house prices report for June and of the CPI report for July.

The ILO unemployment report for June is due on Wednesday.

Canada
The Canadian economic agenda will start on Monday with the release of the new housing price report for June.

The trade report for June is due on Tuesday.

Canada survey manufacturing shipments report for June is due on Friday

Overview

Euro/dollar
Last week's range: 1.4999 – 1.5630 (Down)
Previous range: 1.5517 – 1.5768 (Down)

Euro/dollar fell for the fourth consecutive week but that was a collapsing decline, reaching a 5 ½-month low. The close below 1.5316 confirmed a double top targeting the 1.4600 area. My model remains short since July 22.

Initial support is at 1.4910. Below 1.4860, support now comes at 1.4735. Distant support is now pegged to the 1.4600 area.

Immediate resistance is seen at 1.5000. The next levels are 1.5065 and 1.5110. Above 1.5200, resistance comes at 1.5255, 1.5305 and 1.5395. Distant resistance is at 1.5550.

NEAR-TERM:Bearish
MEDIUM-TERM:Bearish
LONG-TERM: Mixed

Dollar/yen
Last week's range: 107.46 – 110.37 (Up)
Previous range: 107.29 – 108.38 (Mixed)

Dollar/yen surged to an eight-month high and my model remains long. The Gann pivot at 110.35 ruled and this will give you direction this week as well.

Strong support is now pegged at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Strong support follows at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Distant support is at 106.75 from a 50-point pivot, which targets 106.25 and 107.25.

So, immediate resistance is now at 110.35 from my 50-point pivot, which targets 109.85 and 110.85. The next key level is 111.60 from another 50-point pivot, which targets 112.10 and 111.10. Distant resistance is at 112.90 from yet another 50-point pivot, which targets 113.40 and 112.40.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.9147 – 1.9762 (Down)
Previous range: 1.9728 – 1.9968 (Down)

Sterling/dollar fell for the third consecutive week and the intense pressure burst the bottom of a triangle and took it to the lowest levels since November 2006.It is targeting the bottom of its channel declining since November 2007, which is at 1.8940. Perhaps we can also say that GBP/USD formed a long-term head-and-shoulders pattern that targets the 1.7550 area.

Below the strong support at 1.9095, further supports are seen at 1.8940, 1.8900 and 1.8865. Distant support is now pegged at 1.8620.

Initial resistance now comes at 1.9210. Above1.9270, further resistance comes at 1.9325 and 1.9420. Distant resistance is now seen at 1.9590.

NEAR-TERM:Bearish
MEDIUM-TERM: Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0435 – 1.0838 (Up)
Previous range: 1.0319 – 1.0522 (Up)

Dollar/Swiss rallied for the fourth consecutive week, but that was extremely aggressive and reached a 5 ½-month high. My model remains long. All eyes are on the channel line at 1.0935.

Immediate resistance is at 1.0875. Above 1.0905, key resistance comes at 1.0935. This is followed by 1.1055. Distant resistance now comes at 1.1185.

Initial support is pegged at 1.0745. Below 1.0620, support is now seen at 1.0505. Distant support now comes at 1.0425.

NEAR-TERM: Bullish
MEDIUM-TERM:Bullish
LONG-TERM: Mixed

Dollar/Canada
Last week's range: 1.0262 – 1.0696 (Up)
Previous range: 1.0174 – 1.0300 (Up)

Dollar/Canada rallied for the third consecutive week but it was explosive and reached a one-year high. It closed up in 13 of the past 14 days and last week’s daily ranges were significant. My model remains long.

Immediate resistance is now seen at 1.0710. The next levels are 1.0805 and 1.0885. Distant resistance is 1.1040.

Initial support comes at 1.0600. Below 1.0545, support is seen at 1.0470. Distant support is now pegged at 1.0380.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Euro/yen
Last week's range: 165.33 – 169.47 (Down)
Previous range: 167.01 – 169.72 (Down)

Euro/yen fell to a two-month low and my model remains short. The cross alleviated its overbought condition. The close below 165.90 signals a double top formation that targets 161.45. Again, hold on to short positions until a bullish reversal is confirmed.

Immediate support is now seen at 163.50. The next levels are 163.00 and 162.75. These are followed by 161.45. Distant support is now seen at 158.63.

Initial resistance is at 164.85. The next levels are 165.95 and 166.80. Above 167.70, distant resistance is seen at 169.47.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7811 – 0.7945 (Down)
Previous range: 0.7846 – 0.7942 (Mixed)

Euro/sterling reversed early gains and slumped to a 3 ½-month low. My model remains short.

Initial support is at 0.7795. The next support comes at 0.7766. Distant support is at 0.7670.

Immediate resistance is now seen at 0.7835. The next levels are 0.7870 and 0.7890. Above the pivot high at 0.7945, distant resistance is at 0.8022.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Aug 11 2008, 12:42 GMT

The US economic calendar is light this week

Mon, Aug 4 2008, 06:11 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency rallied further last week versus the European and commodity currencies as the market is starting to understand that economic and financial problems from the US are spreading hard and fast outside our country. Talk of decoupling is not a real option in today’s small world and the rest of the world has fewer tools than the US to deal these types of imbalance. The dollar should see strength this week as well.

United States
The dollar paid little attention to further evidence of the depth of our financial and economic sins and rallied further last week. PIMCO’s head Bill Gross, for instance, expected in $1 trillion losses before the financial crisis is over, and if he’s right, that means not even half is over. But who wants to listen?

Meanwhile, coordinated steps by the Federal Reserve, the European Central Bank and the Swiss National Bank to extend liquidity offers investment banks through January 2009 and introduce a new term auction facility also helped the dollar on Wednesday.

The economy expanded by a less than expected 1.9 percent in the second quarter. The number still looks exciting until you remember that it was boosted by the temporary stimulus of federal tax rebates. Excluding trade, the economy would have contracted by 0.5 percent. First-quarter figures were revised down to 0.9 percent from a prior estimate of 1 percent. The report also contained annual revisions that lowered the growth rate back to 2005 and showed the economy contracted 0.2 percent in the fourth quarter last year, compared with a previously reported 0.6 percent gain. So, if you let a few months pass by, you can say that the recession, if there was one, is already gone…sweet!

Consumer spending last quarter grew 1.5 percent from +0.9 percent gain in the previous quarter, but that was the smallest in 13 years. The price index declined to an annual rate of 1.1 percent, the smallest increase since 1998, from 2.6 percent in the first quarter.

The dollar rallied early on Friday following the US employment data for July. Non-farm payrolls fell “only” 51,000 versus expectations for -75,000, and previous readings were revised to less horrible levels; June was revised upward to -51,000 from -62,000 and May to -47,000 from -62,000.The market ignores the worsening unemployment rate to 5.7 percent from 5.5 percent.

Consumer confidence unexpectedly increased to 51.9 in July from an upwardly revised 51.0 in June (originally reported at 50.4). The dollar surged. It’s all warm and fuzzy, but the index remains near its bottom.

Just in case you needed more proof that the US housing remains in trouble - the S&P/Case-Shiller home-price index contracted 15.8 percent in May on a yearly basis, the biggest decline since records began in 2001, on top of a decrease of 15.2 percent in April. The index has fallen every month since January 2007.

President Bush signed a significant housing bill to provide mortgage relief for 400,000 struggling homeowners and help stabilize financial markets. The measure allows homeowners who cannot afford their mortgage payments to refinance into more affordable government-backed loans rather than to give up their homes.

ADP Employer Services said that companies in the US unexpectedly added an estimated 9,000 jobs in July after a revised decline of 77,000 for the prior month. There is a large divergence between the government and ADP reports. In the first half of the year, the Labor Department reported a monthly average decline in payrolls by 94,000, while the ADP estimate shows gains of nearly 11,000.

Initial jobless claims increased by 44,000 to 448,000 in the week ended July 26, from a revised 404,000 the prior week. The total number of people seeking unemployment benefits rose to the most since December 2003.

The Chicago PMI rose to 50.8 in July – insignificant report this time.

Construction spending fell 0.4 percent in June 2008 and 5.9 percent on a yearly basis.

The Eurozone
The euro/dollar tumbled further amid piling evidence the Eurozone economy is getting hurt hard and fast by the world slowdown. No contagion from the US, huh?

The euro was strong across the board on Monday despite weaker-than-expected German consumer confidence data; GfK consumer climate index fell to 2.1 points in August, its lowest level since June 2003, from 3.6 points in July. Investors continued to focus on the weakness of the US finance sector.

Consumer prices in five German states increased in July, led by surging energy costs, with prices in Bavaria rose 0.6 percent from June’s 0.3 percent. The annual inflation rate fell to 3.3 percent from 3.4 percent.

The Eurozone inflation rate rose to 4.1 percent in July on a yearly basis, the fastest pace since April 1992, from 4 percent in June. In the same vein, Italy's inflation rate rose 4.1 percent in July from 4 percent last month.

German unemployment, fell 20,000 to 3.25 million in July after falling 38,000 in June. The adjusted unemployment rate held at 7.8 percent, a 16-year low.

Meanwhile, the Eurozone unemployment rose to 7.3 percent in June.

Consumer confidence in France fell to a record low of -48 in July from -46 in June.

Moreover, French housing starts contracted 28.2 percent in three months to June from -21.6 percent during three months to May. Housing permits fell 15.3 percent.

The Eurozone confidence in the outlook for the economy fell 5.3 points to 89.5 in July amid record energy costs and the strength of the euro. In addition, the regional services confidence fell to 1 from 9 in June and industrial confidence to -8 from -5 in June.

The Eurozone manufacturing PMI slowed to 47.4 in July from 47.5 in June. On an individual basis, Germany’s report fell to 50.9 from 52.6. France’s fell to 47.1, andItaly’s fell to 45.3 from 46.9.

German machinery orders fell 5 percent in June on a yearly basis.

The euro suffered on Friday on news that the German retail sales contracted 1.4 percent June, almost three times more than the expectations, and that the May report was revised downward to 0.5 percent from 1.3 percent.

Japan
Dollar/yen was all over the place, but got nowhere last week.

Japan's unemployment rate rose to 4.1 percent in June, the highest since September 2006, from 4 percent. Household spending rose 1.5 percent in June after falling 0.9 percent in May, but fell 1.8 percent from a year earlier.

Meanwhile, retail sales rose 0.3 percent in June from a year earlier.

Industrial production fell 2 percent in June after expanding 2.8 percent in May. So, it’s a wash, or a more normal rate of growth on the average. But, if the market is right in its expectations and the GDP actually contracted an annualized 0.5 percent, that will be a very different ball game.

The Purchasing Managers Index (rose to a seasonally adjusted 47.0 in July from 46.5 in June, which was the lowest since February 2002. Still, the index remained below 50, suggesting a contraction, for the fifth straight month on falling output and new orders.

The UK
Sterling/dollar remained under selling pressure last week.

It slipped temporarily last Monday on news that Hometrack reported that house prices fell 1.2 percent in July. The report simply adds to the mountain of proof that the UK housing sector remains weak.

It sank aggressively on Tuesday on news the CBI Distributive Trends survey showed retail sales collapsing to -36 in July, lowest since the survey began in July 1983, from -9 in June.

UK mortgage approvals fell to 36,000 in June, the lowest since at least 1999, from 41,000 in May.

House prices declined 1.7 percent in July and 8.1 percent from a year earlier, the biggest decline since at least 1991, according to Nationwide Building Society.

GfK then said that an index of confidence fell 5 points to minus 39 in July, the lowest since the data began in 1974.

The pound was hurt on Friday by news that the Chartered Institute of Purchasing and Supply's index of manufacturing fell to 44.3 in July, the lowest since December 1998, from 45.9 in June. Obviously, the PMI extended its move below the 50 boom/bust level.

Canada
Dollar/Canada rallied further on concern about the negative impact of the US slowdown in demand for Canadian exports.

Canadian producer prices rose 1.3 percent in June from May, while the price of raw materials increased by 4.4 percent from May. Industrial prices rose 5.4 percent on a yearly basis while raw material prices rose 31.9 percent.

Meanwhile, the economy shrank 0.1 percent in May, the fourth decline in six months.

Switzerland
Dollar/Swiss franc made a choppy upmove last week.

The Swiss KOF leading index fell to 0.9 in July from June's downwardly revised 0.99 from 1.01.

Australia
The Australian dollar slumped hard last week, hitting a three-month low, and should remain under pressure. Chinese demand for commodities will continue, but spec appetite is

Australian Prime Minister Kevin Rudd said the nation's banks have a responsibility to lower borrowing costs and the Reserve Bank of Australia should cuts its benchmark interest rate early this week.

Retail sales contracted 1 percent years in June after expanding 0.9 percent in May – just a wash. But the trade balance turned to a surplus of A$411 million in from a revised deficit of A$253 million in May.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar is light this week.

It will start on Monday with the release of the personal income and spending, factory goods orders and core PCE prices reports for June.

Tuesday will see the release of non-manufacturing ISM index for July. This is important.

Also on Tuesday, the FOMC will leave rates unchanged at 2.00 percent.

The pending home sales report for June is due on Thursday.

The Eurozone
The Eurozone economic agenda will start on Monday with the release of the PPI report for June

The final Eurozone Services PMI report for July is due on Tuesday, along with the retail sales report for July.

The German factory orders for June are due on Wednesday.

The German and French trade balances for June are due on Thursday.

The German and Italian industrial production reports for June are due on Thursday as well.

Also on Thursday, the ECB will leave its interest rates at 4.25 percent. Fine, but let’s make sure we listen to what Trichet will have to say after.

Japan
The Japanese economic calendar will start on Tuesday with the release of the coincident and leading indices for June.

The machinery orders report for June is due on Tuesday.

The Cabinet Office will release its monthly Economic Report for August on Thursday. Expect a bit of doom and gloom.

The UK
The UK economic agenda will start with the release of the PMI construction index for July on Monday.

The industrial production June, the PMI Services and the consumer confidence index for July are due on Tuesday.

The BRC Shop Price Index for July is due on Wednesday.

On Thursday, the BoE will leave rates unchanged at 5.00 percent.

Canada
The Canadian economic calendar will start on Wednesday with the release of the Ivey Purchasing PMI for July.

The building permits report for June is due on Thursday.

Finally, be on the lookout for the release of the unemployment rate report for July is on Friday.

Overview

Euro/dollar
Last week's range: 1.5517 – 1.5768 (Down)
Previous range: 1.5629 – 1.5943 (Down)

Euro/dollar fell for the third consecutive week and is testing the 100-day moving average at 1.5559. A close below this confirm further weakness. My model is short.

Below 1.5517, support now comes at 1.5460. Below 1.5395, distant support remains at 1.5305.

Immediate resistance is seen at 1.5625. The next level is 1.5700. An in initial pivot high is at 1.5768. Distant pivot highs follow at 1.5943 and 1.6036.

NEAR-TERM:Bearish
MEDIUM-TERM:Mixed
LONG-TERM: Slightly bullish

Dollar/yen
Last week's range: 107.29 – 108.38 (Mixed)
Previous range: 106.06 – 108.01 (Up)

Dollar/yen encountered very choppy trading but slipped from a five-week high to close unchanged. The key level remains the 107.95 Gann pivot. My model remains long, but the upside bias needs reinforcement.

So, immediate resistance is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Distant resistance is at 109.15 from another 50-point pivot, which targets 109.65 and 108.65.

Strong support remains at 107.35. Strong support follows at 106.75 from a 50-point pivot, which targets 106.25 and 107.25. The next level is 105.60 from a 50-point pivot, which that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.9728 – 1.9968 (Down)
Previous range: 1.9818 – 2.0076 (Down)

Sterling/dollar fell for the second consecutive week. That ended in a down week but within an inside range. The pair must quit the alternating pattern before a new direction can emerge.  Monday should see some weakness. Be careful, the rising trendline support was tested twice late last week.

Immediate support is at 1.9693. Below 1.9650, further supports are seen at 1.9605 and 1.9560. Distant support is pegged at 1.9410.

Initial resistance now comes at 1.9780. Above 1.9840, further resistance comes at 1.9870 and 1.9925. Distant resistance is now seen at 2.0155.

NEAR-TERM:Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0319 – 1.0522 (Up)
Previous range: 1.0138 – 1.0406 (Up)

Dollar/Swiss rallied for the third consecutive week and closed above the top of the triangle. The strength turned the medium-term outlook positive and my model is long. But remember, the week of gains only meant one big rally on Tuesday and then there was choppy trading. Choppy trading should persist, but the bias is on the upside.

Above 1.0522, resistance comes at 1.0550. This is followed by 1.0622. Distant resistance now comes at 1.0723.

Initial support is pegged at 1.0440. Below 1.0400, support is now seen at 1.0330 and 1.0310. Distant support now comes at 1.0250.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0174 – 1.0300 (Up)
Previous range: 0.9992 – 1.0206 (Up)

Dollar/Canada rallied for the second consecutive week and broke above the top of a triangle. Only a close above 1.0300 would now signal a break higher, so the immediate risk is lower.

Immediate resistance is now seen at 1.0300. The next levels are 1.0325 and 1.0380. Distant resistance remains between 1.0470 and 1.0485.

Initial support comes at 1.0228. Below 1.0165, support is seen at 1.0110. Distant support remains pegged at 0.9974.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 167.01 – 169.72 (Down)
Previous range: 167.53 – 169.97 (Mixed)

Euro/yen fell sharply last week and my model promptly went short. The cross remains heavily overbought, still near a 26 1/2-year high. Hold on to short positions until a bullish reversal is confirmed. But remember that it’s pressing against a trendline rising since March.

Immediate support is now seen at 167.01. The next levels are 166.73, 165.85 and 165.33. Distant support is now seen at 165.15.

Initial resistance is at 168.00. The next level is at 168.90. Above 169.97, distant resistance is perched at 171.70.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7846 – 0.7942 (Mixed)
Previous range: 0.7841 - 0.7975 (Down)

Euro/sterling traded sideways last week after closed flat. My model remains short now, but sideways trading is likely.

Initial support remains at 0.7841. The next support comes at 0.7817 and 0.7766. Distant support is at 0.7670.

Immediate resistance is still seen at 0.7935. The next levels are 0.7975 and 0.8026. Above the pivot highs at 0.8033 and 0.8100, distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Aug 4 2008, 06:11 GMT

The French Consumer confidence index for July is due on Tuesday

Mon, Jul 28 2008, 06:24 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency ended the week higher, as soft data had already been priced in, and some decent data and earnings (read not as bad as expected) triggered profit taking on short positions. And a declining oil, which barely failed to reach $150/gallon, provided unwarranted optimism. The US economy is in a recession and there is no remedy on the horizon. The dollar should struggle higher for a little longer before the next big decline.

United States
The dollar posted some rare gains last week, mostly on short covering. The proposed bailout of Fannie Mae and Freddie Mac was supportive, though we don’t know how much the taxpayers will be stung. Some OK economic data, and less horrible for (some of the) banks also helped. But quite a few banks seem to be on the edge of the abyss and one wonders what can FDIC actually do. The unforgiving deflation of the ridiculously burgeoned housing bubble will continue and the debt-fattened people lost their heads (again). Reality bites, doesn’t it? And some realize that not affording things, well means just that.

The dollar surged on Tuesday in part because Treasury Secretary Paulson paid lip service for the currency and the Federal Reserve Bank of Philadelphia president said interest rates should be raised.

Home prices fell 4.8 percent in May on a yearly basis, according to the Office of Federal Housing Enterprise Oversight.

New home sales only edged down 0.6 percent to an annual rate of 530,000 in June from the upwardly revised May rate of 533,000.

Existing home sales fell by a more than expected 2.6 percent to an annual rate of 4.86 million units in June from a 4.99-million unit rate in May. The report suggests the housing market is not close to bottoming out.

But foreclosure filings more than doubled in the second quarter on a year basis!

Bank of America’s earnings were better than expected, but Wachovia reported a record quarterly loss of $8.9 billion, and cut the dividend and 6,350 job.

The leading economic indicator contracted 0.1 percent in June and the report for May was revised downward to –0.2 percent from +0.1 percent. The dollar slipped briefly.

The Federal Reserve's Beige Book confirmed that economic activity has slowed in the past month, as consumer spending was sluggish or slowing in nearly all of the Fed districts.

The final University of Michigan Consumer Sentiment for July came in at 61.2 from a preliminary 56.6. That’s also up from June’s 56.4.

Durable goods orders unexpectedly increased 0.8 percent in June from an upwardly revised 0.1 percent increase in May. Ex-orders for transportation equipment, orders expanded 2 percent, the most this year, after contracting 0.5 percent a month earlier. Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, climbed 1.4 percent after a 0.1 percent decrease in May.

Initial claims for state unemployment insurance benefits rose 34,000 to a seasonally adjusted 406,000 in the week ended July 19, from a revised 372,000 (initially 366,000) the prior week. The surge apparently reflected seasonal volatility typical at this time of year.

The Eurozone
The euro/dollar fell for the second consecutive week, but only surrendered 23.6% Fibonacci retracement level of the last leg of the uptrend since February. The regional economy is starting to crumble, while silly politicians still dream their “kingdom” will not be affected by the US economic slowdown. The euro should be much lower, but the time is not ripe yet.

The Ifo institute's German business confidence index collapsed 3.7 points to 97.5 in July, the most since the September 11, 2001, from June's revised reading of 101.2. The current situation sub-index slipped to 105 from 108.3 and the expectations index decreased to 90 from June's revised reading of 94.6.

Along the same lines, French business confidence fell to 98 in July, the weakest since May 2005, from 101 in June, amid record oil prices and a strong euro. Moreover, Italian business confidence fell to 83.5 in July, its lowest level in seven years, from a revised 86.7 in June. Elsewhere, Spanish unemployment rose 10.4 percent to the highest rate in 3 1/2 years in the second quarter and Belgian business confidence sank in July.

The Eurozone Purchasing Managers' Index for manufacturing declined to 47.5 in July from 49.2 in June, while services PMI fell to 48.3 from 49.1 in June.

Japan
Dollar/yen closed higher last week, but remained in a trading range. It would take a close above 108.45 to get things rolling higher.

The dollar/yen rally through Thursday was accelerated by news that Tokyo Marine, Japan's largest insurer, agreed to buy Philadelphia Consolidated Holding for $4.7 billion.

Japan's trade surplus shrank 89 percent to 138.6 billion yen in June from a year earlier. Imports surged 16.2 percent to a record because of the surging oil costs, while exports fell 1.7 percent for the first time since November 2003 because demand for cars and electronics slowed.

Annual CPI increased 2.0 percent in June, and the core CPI rose 1.9 percent. The Tokyo CPI rose 1.6 percent in July on year and the core rose just 0.1 percent.

The UK
While sterling/dollar closed the week lower, alternating days for nine days makes trading quite a challenge. Don’t see much reason for a clear direction yet. The pair should head lower, give the rapid weakening of its economy, but the rising channel remains in place.

UK house prices fell an annual 2 percent in July, the most since 2002, but prices increased in London by 0.3 percent from June.

Retail sales contracted 3.9 percent in June after expanding 3.6 percent in May. That's almost a perfect wash, and if you remember, I had cautioned at the time that the increase in June was a mistake.

The CBI Industrial Trends survey was poor. The book order balance swung from +1 in June to -8 in July. The export order book and domestic output expectations fell, though domestic price expectations rose sharply.

The GDP expanded only 0.2 percent in the second quarter, the slowest pace since 2001, amid shrinking manufacturing and construction and the financial woes. Gross domestic product expanded 1.6 percent from a year earlier, the least since 2005. This means the UK economy took another step to recession.

Canada
Dollar/Canada finally “broke” higher, but in fact remains in a trading range. Expect more of the same. And keep an eye on commodities.

Canadian retail sales rose by a less than expected 0.4 percent in May, as consumers paid more for gasoline and cut back on purchases of clothing from 0.6 percent in April.

The CPI came out on the high side of expectations, rising 0.7 percent in June and 3.1 percent on a yearly basis from 2.2 percent in May. But the core rate was flat at 1.5 percent.

Switzerland
Dollar/Swiss franc rallied to a one-month high and this should be exciting – but it’s not. The slowly declining channel remains in place.

Australia
The Australian dollar fell last week as the commodity prices took a breather, but the uptrend continues unabated. Only a close below 0.9450 would sound mildly bearish.

Consumer price index rose 1.5 percent from the first quarter, when it gained 1.3 percent. This lifted the year-over-year rate to 4.5 percent from 4.2 percent.

This Week's Data and Events

United States

D Date GMT Event Period UBS Previous Market

The US economic agenda will begin on Tuesday with the release of the Conference Board’s Consumer Confidence report for July.

The revision of the GDP and the Price Index reports for the first quarter are due on Thursday, along with the Chicago PMI index for July.

It’s the first Friday of the month, so be on the lookout for the release of the nonfarm payrolls and unemployment rate for July.

The ISM manufacturing PMI report for July and the construction spending report for June are due on Friday as well.

The Eurozone
The Eurozone economic calendar will start with the release of the German GfK Consumer Confidence index for August.

The French Consumer confidence index for July is due on Tuesday.

Wednesday will see the release of the German retail sales report for June.

The Eurozone Retail PMI, Business Climate Indicator, Consumer Confidence, Economic Sentiment Indicator and Industrial Confidence Indices for July are due on Wednesday as well.

The German unemployment rate report for July and the Eurozone unemployment rate report for June are due on Thursday, along with the regional HICP flash estimate report for July.

Japan
The Japanese economic agenda will open on Tuesday with the release of the unemployment rate, household spending and retail trade reports for June.

The industrial production report for June is due on Wednesday.

The housing starts report for June will be released on Thursday.

The UK
The UK calendar will start on Tuesday with the release of the CBI distributive trades survey July.

The Nationwide House Prices report for July is due on Wednesday.

The PMI Manufacturing index for July is due on Thursday.

Canada
The Canadian economic calendar only features the monthly GDP report for May.

Overview

Euro/dollar
Last week's range: 1.5629 – 1.5943 (Down)
Previous range: 1.5784 – 1.6036 (Down)

Euro/dollar headed lower last week and broke out of a medium-term bullish channel. It gave back half of the gains made between June 13 and July 15. The short-term outlook will remain bearish only a close below 1.5670.

Below 1.5670, support comes at 1.5585. The next good level is at 1.5460. Below 1.5395, distant support is now seen at 1.5305.

Immediate resistance is seen at 1.5755. The next level is 1.5863. Pivot highs follow at 1.5943 and 1.6036. Above 1.6055, euro/dollar has distant resistance at 1.6135.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Mixed
LONG-TERM: Slightly bullish

Dollar/yen

Last week's range: 106.06 – 108.01 (Up)
Previous range: 103.78 – 107.10 (Up)

Dollar/yen reversed early losses and rallied hard to a one-month high of 108.01, roughly near the 107.95 Gann pivot. My model remains long, but the upside bias needs reinforcement.

So, immediate resistance is at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Distant resistance is at 109.15 from another 50-point pivot, which targets 109.65 and 108.65.

Strong support now comes at 107.35. Strong support follows at 106.75 from a 50-point pivot, which targets 106.25 and 107.25. The next level is 105.60 from a 50-point pivot, which that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.9818 – 2.0076 (Down)
Previous range: 1.9815 –2.0155 (Up)

Sterling/dollar has been alternating up and down days for nine consecutive days! That ended in a down week but within an inside range. The pair must quit the alternating pattern before a new direction can emerge.  Monday should see some weakness. Be careful, the rising trendline support was tested twice late last week.

Immediate support is at 1.9870. Below 1.9818, support is seen at 1.9770, 1.9710 and 1.9650. These levels are followed by 1.9605. Distant support remains at 1.9560.

Initial resistance now comes at 1.9968. Above 2.0040, further resistance comes at 2.0155. Distant resistance remains at 2.0395.

NEAR-TERM:Slightly bearish
MEDIUM-TERM: Slightly bullish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0138 – 1.0406 (Up)
Previous range: 1.0013 – 1.0259 (Up)

Dollar/Swiss closed higher for the second consecutive week. Once again, the medium-term outlook remains negative, but another burst higher is possible early in the week. Only a close above 1.0400 would signal an aggressive upmove.

Above 1.0400, resistance comes at 1.0450. This is followed by 1.0540. Distant resistance remains at 1.0622.

Initial support is at 1.0315. Below 1.0275, support is still seen at 1.0200 and 1.0140. Distant support now comes at 1.0013.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: .9992 – 1.0206 (Up)
Previous range: 0.9974 – 1.0141 (Mixed)

Dollar/Canada remains in a trading range despite rallying for four consecutive days and breaking above the tip of a triangle. Only a close above 1.0245 would signal significant strength.

So, immediate resistance is now seen at 1.0245. The next levels are 1.0300, 1.0325 and 1.0380. Distant resistance remains between 1.0470 and 1.0485.

Initial support comes at 1.0150. Below 1.0000, support is seen at 0.9974. Distant support remains pegged at 0.9910.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 167.53 – 169.97 (Mixed)
Previous range: 165.33 – 169.66 (Mixed)

Euro/yen climbed to a fresh 26 1/2-year high last week. The cross remains heavily overbought, but, once again, hold on to existing long positions until a bearish reversal is confirmed.

Initial resistance is still lodged at 170.00. The next level is at 170.55. Above 171.44, distant resistance is seen at 173.90.

Immediate support is now seen at 168.95. The next levels are 168.25, 167.70 and 166.80. Distant support remains at 165.55.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7841 - 0.7975 (Down)
Previous range: 0.7908 – 0.8022 (Down)

Euro/sterling fell last week after forming a bearish reversal a week earlier and broke the bottom of a triangle. My model remains short now, but sideways trading is likely.

Initial support comes at 0.7841. The next support comes at 0.7817 and 0.7766. Distant support is at 0.7670.

Immediate resistance is now seen at 0.7935. The next levels are 0.7975 and 0.8026. Above the pivot highs at 0.8033 and 0.8100, distant resistance remains at 0.8155.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jul 28 2008, 06:24 GMT

Thursday will host the release of the existing home sales report for June

Mon, Jul 21 2008, 08:42 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency finished the week on a decent note, after being able to either fully reverse or at least reduce earlier losses. A pullback in the oil price and the stock indices provided an island of peace. Washington worked hard to put on a façade of normalcy on the financial disaster that has been eating away wealth and threatened a worldwide depression. It worked last week. The dollar remains weak in the medium term, but if the oil drops below $125/gallon, perhaps it can mount a more sustainable recovery.

United States
It was a tad surprising that the oil price dropped so much so fast and the uninformed media got excited by the drop in price; of course, the way to think in percentages, and that decline measured less than 10%. Can any “expert” still say it with a straight face that speculation is nor rampant in this sector and that a few giant specs are actually dragging us in (at least) a recession?

The economy is worsening, and if we see any bounce, it will only be temporary – in an election year, you seem one needs window dressing. We were all happy that Citibank and a few other big names had less-horrible-than-expected earnings. But their disease is not gone and we van only hope it’s curable. In fact, Federal Reserve Chairman Bernanke signaled policy makers are unclear about the direction of interest rates because the risks to both growth and inflation have increased. Wait until jobs really start to dry up.

Inflation remains enormous, as one can see with the naked eye.

PPI surged 1.8 percent in June, the biggest gain since November and followed a 1.4 percent jump in May. This was the sixth month of an increase in inflation. Surprise! The core PPI apparently increased by only 0.2 percent.

In the same vein, CPI surged 1.1 percent in June, the most since September 2005, after a 0.6 percent gain the prior month. Core CPI climbed 0.3 percent. Inflation is obviously soaring on costs for fuel and food.

Retail sales were not so bad, all things considered. The headline number rose only 0.1 percent in June, as auto sales posted their biggest drop in more than two years, and the May report was revised downward to +0.8 percent from a 1.0 percent rise. Excluding autos, retail sales rose 0.8 percent. On a yearly basis, sales expanded 3.0 percent from 2.1 percent.

The New York Fed's "Empire State" general business conditions index improved to -4.92 in July from -8.68 in June. But remained in negative territory since January. The sub-index of prices paid rose to 77.89 in July from June's 66.28.

Business inventories rose by a less than expected 0.3 percent in May, while sales rose 0.8 percent.

Industrial production unexpectedly rose 0.5 percent in June after an unrevised 0.2 percent drop in May. Meanwhile, capacity utilization rose in June to 79.9 percent from 79.6 percent in May.

Net overall capital flows reversed sharply to show outflows of $2.5 billion in May, from an upwardly revised inflow of $61.6 billion (from $60.6 billion) in April, the Treasury Department said.

Housing starts rose 9.1 percent to a 1.066 million pace from a revised 977,000 rate in May. But don’t get excited. Excluding a change in New York City building codes, however, starts would have decreased by 4.0 percent! Building permits climbed to 1.091 million from 0.978 million.

The Philly Fed contracted for the eighth consecutive month, this time by 16.3 in the month of July. Any reason to expect the ninth month to be positive? No!

Initial jobless claims gained 18,000 to 366,000 in the week ended July 12 from the upwardly revised figure of 348,000 (originally 346,000).

The Eurozone
The euro/dollar spiked up to an all-time high but then promptly reversed gains. The pair remains in an uptrend for the time being. Let’s keep one thing straight: the Eurozone economy is in increasing trouble and the euro is strong only because the US problems are bigger that theirs!

The Eurozone industrial production contracted by a massive 1.9 percent in May, the biggest decline since December 1992, and this led the annual growth rate to decrease 0.6 percent. But this didn’t prevent euro/dollar from rallying on Monday.

The ZEW research institute's gauge of German economic sentiment fell to -63.9 in July from -52.4 in June, the lowest since the survey began, but this didn’t preclude euro/dollars to reach 1.6000.

Along the same lines, confidence among French manufacturers fell to 95 in June, the lowest since July 2003, from a revised 96 in May.

The final Eurozone CPI report for June confirms the headline inflation rate rose from 3.7 percent to a new record high of 4.0 percent.

German producer prices rose 6.7 percent in June from a year earlier, the most since March 1982, after rising an annual 6 percent in May.

The euro/dollar was capped on Friday by European Central Bank President Trichet, who said the Eurozone growth is likely to be weak in the second and third quarters.

The Eurozone trade balance recorded a deficit of 1.5 billion euros in May, after a downwardly-revised 1.4 billion euros surplus in April.

Japan
After marking time or four weeks, dollar/yen traded stupidly; it first collapsed and then surged +300 pips without an obvious reason. Oh, such is life in the exciting world of FX!

Fundamentally, Japan had nothing to offer.

Bank of Japan left interest rates on hold at 0.5 percent, but downgraded its growth forecasts, warning high energy costs will its economy.

The tertiary index decreased 0.2 percent.

The UK
Sterling/dollar made a sharp rally to a four-month high before giving nearly all of it up. That’s because fears of inflation conflicted with concern about the slowing economy. Well, it’s a mini-US after all, isn’t it?

The UK producer prices surged 2.1 percent in June, with the output prices up 0.9 percent and core output prices up 0.3 percent.

Also, consumer prices rose 0.7 percent in June and climbed 3.8 percent on a yearly basis. This exceeds the government's 3 percent upper limit for a second month and the highest reading since records began in 1997. The core CPI accelerated to 1.6 percent in June, the fastest pace since August 2007.

The RICS Housing Market Survey fell to -88 percent in June, near the record low of -94 percent reached in April, and below the trough reached in the 1990s housing market crash (-64 percent).

The labour report shows that employment is worsening. The claimant count in June rose by 15,500 rise, the biggest monthly rise since 1992, and May’s rise was revised upward by 5,000 to 14,300. The ILO unemployment rate is 5.2 percent.

The budget deficit widened to 9.2 billion pounds in June and rose to 24.4 billion pounds in the second quarter.

Canada
Dollar/Canada continued to consolidate last week.

The Bank of Canada left its key interest rate unchanged at 3 percent, the lowest since December 2005, as economic risks are balanced between inflation and the slowest growth since the country's last recession.

Canadian factory shipments rose 2.7 percent in May, the largest one-month gain since March 2007 and more than five times as much as expected. The surge owes to rising sales of petroleum and coal products. But the loonie showed little reaction.

Canada's dollar rose after a government report showed foreigners increased holdings of the nation's securities by a net C$10.7 billion in May.

The composite leading index was unchanged in June after increasing 0.2 percent in May and 0.1 percent in April, as weakness in housing and new orders for factory goods offset strong consumer spending. The housing index declined 1.1 percent after increasing 1.9 percent in April.

Switzerland
Dollar/Swiss franc surged from near parity, but the downtrend remains in place.

The Swiss ZEW fell to -76.9 in July from -63.8 in June.

Australia
The Australian dollar gave up gains after nailing another multi-decade high last week. Only of the commodity prices start declining from the stratosphere will the Aussie & Co start feeling the force of gravity.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will begin on Monday with the release of the Leading indicators report for June. That’s not typically a market mover, but the market is starved for any good news about the economy that a positive report might support the dollar briefly.

The Fed will release its Beige Book on Wednesday; low growth, high inflation? Sounds about right…

Thursday will host the release of the existing home sales report for June.

Friday will bring a host of more significant data. The new home sales report for June should be key, but keep in mind that the report may be inflated because a change in New York regulation.

The durable goods orders report for June and the final University of Michigan confidence Index for July are due on Friday as well.

The Eurozone
The Eurozone economic agenda will start on Tuesday with the release of the Italian consumer confidence index for July. This is irrelevant in itself, but the piling of weak data from non-core Eurozone members should increase discomfort with the overbought euro.

The French consumer spending report for June is due on Wednesday.

Thursday will be a busy day in the Eurozone. The core report is Germany’s IFO index of business confidence for July.

But also be on the look out for the Eurozone PMI manufacturing index and services index for July, the Eurozone current account report for May, the French business climate index for July, and the Italian business confidence index for July.

Date GMT Event Period UBS Previous Market

Japan
The Japanese economic calendar will open on Tuesday with the release of the all industry activity index for May; this is a yawner for FX.

The merchandise trade balance report for June is due on Thursday.

Friday will see the release of the Nationwide CPI report for June and of the Tokyo CPI report for July.

The UK
The UK calendar will start on Monday with the release of the Rightmove house prices report for July. The housing sector remains in trouble and it’s too early to expect a real improvement.

On Wednesday, look out for the release of the MPC minutes, the BBA loans for house purchases report for June, and the CBI industrial trends survey for the third quarter.

Thursday will see the release of the retail sales report for June.

Friday will see the release of the index of services report for May and of the second quarter GDP data.

Canada
Canada’s economic calendar will begin on Tuesday with the release of the retail sales report for May.

The CPI report for June is due on Wednesday.

Overview

Euro/dollar
Last week's range: 1.5784 – 1.6036 (Down)
Previous range: 1.5612 – 1.5946 (Up)

Euro/dollar spiked up to a new all-time high last Tuesday, but then it gave it all up. The medium term remains bullish, but the short-term outlook is cautiously bearish.

Below 1.5784, support remains at 1.5740. The next good level is at 1.5685. Below 1.5630, distant support is still seen at 1.5575.

Immediate resistance is seen at 1.5890. The next level is 1.5970. A pivot high follows at 1.6020. Above 1.6055, euro/dollar faces resistance at 1.6135. Distant resistance remains at 1.6250.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 103.78 – 107.10 (Up)
Previous range: 105.66 – 107.75 (Mixed)

Dollar/yen reversed from a seven-week low of 103.78 and rallied hard on Wednesday and Thursday. My model is long, but the pair is now facing resistance from a trendline.

Immediate resistance is at 107.10 from this line. Further resistance still comes at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Distant resistance is at 109.15 from another 50-point pivot, which targets 109.65 and 108.65.

Strong support now comes at 106.75 from a 50-point pivot, which targets 106.25 and 107.25. The next level is 105.60 from a 50-point pivot, which that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Sterling/dollar
Last week's range: 1.9815 –2.0155 (Up)
Previous range: 1.9650 – 1.9957 (Mixed)

Sterling/dollar fell from a four-month high of 2.0155 but remains just below the 2 mark. The pair is alternating up and down days and Monday should see some strength.

Initial resistance now comes at 2.0040. Above it, further resistance comes at 2.0155. Distant resistance remains at 2.0395.

Immediate support is at 1.9905. Below 1.9785, support is still seen at 1.9745 and 1.9710. These are followed by 1.9605. Distant support remains at 1.9560.

NEAR-TERM:Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0013 – 1.0259 (Up)
Previous range: 1.0138 – 1.0353 (Down)

Dollar/Swiss rallied from a three-month lowof 1.0013 with a bullish reversal on Wednesday. The medium term outlook remains negative, but another burst higher is possible early in the week. But only a close above 1.0245 would get me interested in the upside.

Above it, resistance remains at 1.0325, 1.0415 and 1.0450. This is followed by 1.0540. Distant resistance remains at 1.0622.

Initial support is at 1.0175. Below 1.0113, support is still seen at 1.0065 and .9996. The next big level is .9825. Distant support remains at .9642.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9974 – 1.0141 (Mixed)
Previous range: 1.0070 – 1.0233 (Down)

Dollar/Canada continues to lack direction as it approaches the tip of a triangle, and volatility comes and goes. Wait until it breaks out.

Immediate resistance is now seen at 1.0085. The next levels are 1.0130, 1.0180, 1.0200 and 1.0285. Above 1.0300, there is resistance at 1.0380. Distant resistance remains between 1.0470 and 1.0485.

Initial support comes at 1.0015. Below it, support is seen at 0.9974. Distant support remains pegged at 0.9910.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 165.33 – 169.66 (Mixed)
Previous range: 167.14 – 169.62 (Up)

Euro/yen climbed to a new 26 1/2-year high last week after a fake bearish reversal. The cross remains heavily overbought, but, once again, hold on to existing long positions until a bearish reversal is confirmed.

Initial resistance remains at 170.55. Above 171.44, distant resistance is seen at 173.90.

Immediate support is still seen at 168.15. The next levels are 167.70 and 166.80. Distant support follows at 165.55.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7908 – 0.8022 (Down)
Previous range: 0.7903 – 0.8019 (Up)

Euro/sterling fell last week to form a bearish reversal. The problem here is that it had formed two others since April, with very limited follow through. The cross remains in a re-drawn triangle. My model is short now, but further upmove should not be aggressive. In fact, the next immediate move should be down.

Initial support comes at 0.7900. Below the 0.7870 level, support comes at 0.7850, 0.7833 and 0.7817. Distant support is at 0.7766.

Immediate resistance is now seen at 0.7960. The next level is 0.8026. Above the pivot highs at 0.8033 and 0.8100, distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jul 21 2008, 08:42 GMT

The US economic calendar will start on Tuesday with the release offset of significant set of data

Mon, Jul 14 2008, 07:28 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

Geopolitical and systemic risk, along with the fundamental change in energy costs, pressured the dollar during the past week, but only the euro and the Australian dollar surged. Sunday brought some sort of solution to the problem, so the US currency has a good chance to make at least a minor recovery. But keep an eye on the shaky S&P 500.

United States
The dollar has been on the defensive during the past week amid a growing load of significant problems, but may now be on the rebound.

The US stocks have been under pressure amid deep concern about the stability of Fannie Mae and Freddie Mac. The dollar tanked last Monday to reflect the plunge of Freddie Mac and Fannie Mae on NYSE on concern these two leading mortgage-finance companies may need to raise more capital; Lehman Brothers analysts had said Fannie Mae will add $46 billion of capital and Freddie Mac $29 billion. The extension of both the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) calmed down the market only briefly.

The New York Times then reported on Friday that the government was considering taking over these GSEs if their funding problems worsen. But Treasury Secretary Paulson nixed the idea for the time being.

On Sunday, however, the Treasury and Federal Reserve produced sweeping steps to support Fannie Mae and Freddie Mac and attempt to avoid a potential meltdown in global financial markets. The Fed said both companies could access its discount window for emergency cash and the Treasury said that it would temporarily increase its line of credit to them, as well as purchase equity in them, if necessary.

The dollar had also hit by the deterioration of the Iran crisis. After that country’s extremist government attempted to display its defense capabilities by firing some missiles, Israel Air Force was reported to be practicing in Iraqi airspace in preparation for a potential strike on Iran. Great! That’s all we need when the economy is weakening by the day and the oil price is rising by (nearly) the hour! And should there be a lull in the Middle East, the Nigerian “rebels” will make sure the oil price cannot decline. It’s a win-win situation – but only for the long oil specs!

Crude oil fell on long liquidation on Monday and Tuesday after Iran expressed confidence in talks with western governments on the country's nuclear program and the dollar gained before a G8 meeting.

There was little impact from news that the index of pending home re-sales fell 4.7 percent in June following an upwardly revised 7.1 percent gain in April, according to the National Association of Realtors.

New applications filed for unemployment insurance fell by a seasonally adjusted 58,000 to 346,000 for the week ending July 5, from a three-month high of 404,000. That was a fluke; it will worsen again this week.

The trade deficit shrank unexpectedly to $59.8 billion in May from a slightly downwardly revised report of $60.5 billion for April. Don’t worry, it will widen for the following months. Exports rose 0.9 percent, while imports rose 0.3 percent to a record $217.3 billion.

There was no reaction to news that the University of Michigan Consumer Sentiment Index edged up to 56.6 in July from 56.4 in June.

The Eurozone
The euro/dollar surged to a 2 ½-month high and demand for euro crosses accelerated the upmove. It was a run away from the dollars, pounds and yen, but the regional economy is struggling. The pair should make at least a temporary pullback.

German industrial production contracted 2.4 percent in May, the most since February 1999, from April, when it declined an upwardly revised 0.2 percent (from -0.8 percent).

Output at French factories and utilities fell 2.6 percent in May, the biggest decline since October 2005.

Italian industrial production plunged 1.4 percent on the month in May, the sharpest decline in eight months, while the April’s report was revised downward to 0.4 percent from an original reading of +0.7 percent. The output fell 4.1 percent on a yearly basis from an upwardly revised 2.4 percent rise in April.

The German trade surplus narrowed to 14.4 billion euros in May from 18.8 billion euros in April. Meanwhile, the surplus in the current account narrowed to 7.5 billion euros from 15.5 billion euros in April.

France's trade deficit widened in May to a record 4.74 billion euros from a revised 3.74 billion euros in April.

The Eurozone GDP for the first quarter was revised down to 2.1 percent on a yearly basis from 2.2 percent. On a quarterly basis it was revised downward to 0.7 percent, but the previous quarter was revised upward to 0.7 percent.

Japan
Dollar/yen continued to be all over the place, but nowhere specific. The lack of direction should persist.

The Economy Watchers index fell to 29.5 in June from 32.1 in May. An index of conditions in two to three months slid to 32.1, the worst since September 2001, from 35.1.

Orders for Japanese machinery surged 10.4 percent in May from April when they climbed 5.5 percent.

Producer prices climbed 5.6 percent from a year earlier, after a revised 4.8 percent gain in May, while the current account surplus narrowed 5.9 percent in May from a year earlier.

Consumer sentiment index dropped to 32.6 in June, the worst in at least 26 years, from 33.9 in May.

The UK
Sterling/dollar made little progress last week, as cable remains the weakest of the European lot. It should now edge lower.

The pound fell sharply on Monday and Tuesday, and soft US data was in part to blame.

Manufacturing unexpectedly contracted 0.5 percent in May to the weakest in eight months, from flat in April (initially reported at +0.1 percent). The index of manufacturing production fell to 102.7, the lowest level since September.

Sales of services and manufactured goods fell to –2 in the second quarter, the lowest since 1992, from +17, according to the British Chambers of Commerce. Moreover, an index tracking factories fell to -3 from +12, the least since the end of 2001.

The DCLG House Price Index rose 3.7 percent in May on a yearly basis, but slipped from April’s +4.9 percent.

Still, house prices fell 2 percent in June, according to HBOS.

But the pound bounced on Wednesday and Friday despite soft data.

Mortgage rates on a home loan fixed for two years rose to 6.63 percent in June, the highest since February 2000.

Also, consumer confidence declined 6 points to 63, the lowest since the survey began in May 2004, according to the Nationwide Building Society.

The goods trade gap remained unchanged at 7.5 billion pounds in May.

The Bank of England kept the benchmark interest rate unchanged at 5 percent, as widely expected.

Canada
Dollar/Canada continued to consolidate last week.

The Canadian dollar rallied on Monday following news that a record number of company executives polled by the Bank of Canada believed Canada's inflation rate will exceed the top end of the central bank's 1 percent-to-3 percent target band over the next two years.

Building permits rose 1.1 percent in May led by construction projects for utility companies, hospitals and schools. The market showed little reaction.

Canada’s unemployment rate increased to 6.2 percent in June from 6.1 percent in May, while the net change in employment has declined by 5,000. On a yearly basis, employment increased 1.7 percent and created 290,000 jobs.

Switzerland
Dollar/Swiss franc resumed its pattern of alternating up and down weeks. It closed on a weekly basis at the lowest level in three months, but held above the previous week’s lows. If the Iran crisis expands, the pair should dig deeper. If not, there is some room on the upside.

Australia
The Australian dollar surged to a new all time-high amid stubbornly strong commodity prices, high yields and overall strong, if not perfect, economy.

Australian business confidence fell to - 9 points in June, the weakest result since the September 11, 2001, from - 4 in May, according to National Australia Bank.

Also, consumer confidence fell 6.7 percent to a 16-year low of 79 points in July, the sixth straight reading of less than 100.

Meanwhile, home-loan approvals dropped 7.9 percent in May, the most in eight years.

But employment added 29,800 jobs in June and the jobless rate fell to 4.2 percent from 4.3 percent.

This Week's Data and Events

United States
D Date GMT Event Period UBS Previous Market

The US economic calendar will start on Tuesday with the release offset of significant set of data. This includes the Empire State Manufacturing index for July, the PPI report for June, the retail sales report for June, and the business inventories report for May.

The CPI and the industrial production reports for June are due on Wednesday, along with the NAHB Housing Market Index for July and the Treasury International Capital Flows.

Also on Wednesday, Fed Chairman Bernanke will give the semi-annual Monetary Policy Testimony at the House of Representatives.

The housing starts and the building permits report for June and the Philly Fed survey for July are due on Thursday.

The Eurozone
The Eurozone economic agenda will open on Monday with the release of the regional industrial production report for May.

Tuesday will see the release of the ZEW Survey of German Economic Sentiment for July and of the French Business Sentiment index for June.

The final German and French CPI reports for July are due on Wednesday.

On Thursday, the ECB Governing council meeting will leave interest rates unchanged.

The Italian trade balance for May is due on Thursday as well.

The Eurozone trade balance for May, the German PPI report for June and the Italian industrial orders for May are due on Friday.

CAD Date GMT Event Period UBS Previous Market

Japan
The Japanese economic calendar is light this week.

On Tuesday, the Bank of Japan will leave its target rate unchanged at 0.50 percent.

The tertiary industry activity index for May is due on Tuesday as well.

Wednesday will see the release of the final Machine Tool Orders report for June.

The final Leading and Coincident Indices for May are due on Thursday.

The UK
The UK calendar will start on Monday with the release of the PPI report for June, the BRC Retail Sales report for June, and the RICS House Price report for June.

The CPI and retail price index reports for June are due on Tuesday.

Wednesday will see the release of the unemployment rate report for May.

Canada
On Tuesday, the Bank of Canada should leave its rates unchanged at 3.0 percent.

Wednesday will see the release of the Manufacturing Shipments report for May.

The Bank of Canada Monetary Policy Report is due on Thursday.

Friday will see the release of the leading indicators report for June.

Overview

Euro/dollar
Last week's range: 1.5612 – 1.5946 (Up)
Previous range: 1.5656 – 1.5908 (Down)

Euro/dollar rallied to a 2 ½-month high last week and my model went long. But early Sunday it turned south, and the short-term outlook is cautiously bearish.

Below 1.5860, support is now at 1.5740. The next good level is at 1.5685. Below 1.5630, distant support is 1.5575.

Immediate resistance is seen at 1.5970. A pivot high follows at 1.6020. Above 1.6055, euro/dollar faces resistance at 1.6135. Distant resistance remains at 1.6250.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 105.66 – 107.75 (Mixed)
Previous range: 105.00 – 106.92 (Mixed)

Dollar/yen traded between two Gann pivots at 105.60 and 107.95 last week. My model remains short, as it approaches the tip of a triangle. The outlook is mixed.

Strong support remains at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

Immediate resistance is 106.75 from a 50-point pivot, which targets 106.25 and 107.25. Distant resistance still comes at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.9650 – 1.9957 (Mixed)
Previous range: 1.9798 – 2.0005 (Down)

Two rallies on Wednesday and Friday helped sterling/dollar recoup losses and my model went long.  It probed the resistance from the trendline declining since November, but this held. The medium-term outlook remains mixed for this weak European currency, but in the short term it should decline.

Immediate support is at 1.9800. Below 1.9785, support is now seen at 1.9745 and 1.9710. These are followed by 1.9605. Distant support remains at 1.9560.

Initial resistance now comes at 1.9885. This is followed by 1.9917 and 1.9957. The next level is 2.0005. Above 2.0040, further resistance comes at 2.0145. Distant resistance still comes at 2.0395.

NEAR-TERM:Slightly bearish
MEDIUM-TERM: Slightly bullish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0138 – 1.0353 (Down)
Previous range: 1.0113 – 1.0283 (Up)

Dollar/Swiss tumbled on Friday primarily because the belligerent Iran. My model went short, but the support from the trendline rising since March 17 held, so the upside should now be probed. Only a close below 1.0113 would signal a more sustainable decline.

Immediate resistance is at 1.0215. Above 1.0325, resistance remains at 1.0415 and 1.0450. This is followed by 1.0540. Distant resistance remains at 1.0622.

In initial support is at 1.0135. Below 1.0113, support is seen at 1.0065 and .9996. The next big level is .9825. Distant support remains at .9642.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0070 – 1.0233 (Down)
Previous range: 1.0064 - 1.0239 (Up)

Dollar/Canada continues to lack direction as it approaches the tip of a triangle, but volatility is rising. Wait until it breaks out.

Initial support comes at 1.0050. Below 1.0015, support is seen at 0.9980. Distant support remains pegged at 0.9910.

Immediate resistance is now seen at 1.0130. The next levels are 1.0180, 1.0200 and 1.0285. Above 1.0300, there is resistance at 1.0380. Distant resistance remains between 1.0470 and 1.0485.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 167.14 – 169.62 (Up)
Previous range: 166.10 – 169.13 (Mixed)

Euro/yen climbed to a near 26 1/2-year high last week. The cross remains heavily overbought, but hold on to existing long positions until a bearish reversal is confirmed

Initial resistance comes at 170.55. Above 171.44, distant resistance is seen at 173.90.

Immediate support is at 168.15. The next levels are 167.70 and 166.80. Distant support follows at 165.55.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7903 – 0.8019 (Up)
Previous range: 0.7871 – 0.8001 (Mixed)

Euro/sterling broke the top of a triangle and reached a one-month high. My model is long, but further upmove should not be aggressive. In fact, the next immediate move should be down.

Initial support comes at 0.7985. Below the 0.7935 level, support comes at 0.7910, 0.7870 and 0.7817. Distant support is at 0.7766.

Immediate resistance is now seen at 0.8026. Above the pivot highs at 0.8033 and 0.8100, distant resistance remains at 0.8155.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jul 14 2008, 07:28 GMT

The US economic calendar is light this week

Mon, Jul 7 2008, 06:24 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The market remains divided about the next direction of the US currency, even though the weakness of the US economy clearly points south. But currency traders are looking forward, and the Eurozone and Japanese economies don’t look too hot either. With oil prices going up for a variety of real and fake reasons, the world economy is slowly getting chocked up. Expect violent moves in both directions, as directional confusion shouldn’t dissipate.

United States
The dollar managed to recover aggressively on Friday and thus to end the week higher, after sinking earlier last week. This shows the nervousness of the market, as the reasons for strength were simply not there. The US economy is slowly descending in what could be a depression and the rest of the G7 economies cannot be too far behind.

The ECB met the market expectations and tightened borrowing costs by a quarter percentage point to 4.25 percent, but then President Jean-Claude Trichet signaled the ECB wasn't planning another rate rise, also as expected. But the market was not about to vault euro/dollar to 1.6000 before the long weekend and the subsequent short covering of the US currency went out of hand.

Take a good look at the US economic data. It’s not suggesting anything good.

The Chicago PMI increased a more than expected 49.6 in June from 49.1 in May, but remained below the fifty mark, which is the border between growth and contraction. Close, but no cigar!

However, the manufacturing Institute for Supply Management index rose to 50.2 in June from 49.6 in May. This was the first reading above 50 since January. But a gauge of prices paid climbed to 91.5 from 87.

However, the ISM non-manufacturing index fell to 48.2 in June from 51.7 in May. A reading below 50 means contraction.

But construction spending fell 0.4 percent in May.

The ADP report on private sector employment fell by 79,000 jobs in June following a downwardly revised increase of 25,000 jobs in May.

Non-farm payrolls fell by 62,000 in June, roughly as expected, but the revisions of the previous two months were horrendous. In May there was a 62,000 drop that was worse than initially reported (-49,000), and April’s report was revised the same direction. The jobless rate unexpectedly remained at 5.5 percent after jumping in May by the most in two decades. The market was speculating that the previous report that showed a worsening to 5.5 percent from 5.0 percent was an error, so the June reading would show the correction. That wasn’t the case, which means the next months’ reports can show little or no change, as the bad report was already digested. Clever!

The jobless claims rose to 404,000 from the previous week's upwardly revised (as almost always) figure of 388,000 (from the 384,000 originally reported for the previous week).

Factory goods orders slowed to +0.6 percent in May from an upwardly revised +1.3 percent in April.

The Eurozone
The euro/dollar failed to reach 1.6000 and made a spectacular bearish reversal on Thursday in a classic case of “buy on the rumor, sell on the fact.” As mentioned above, the European Central Bank met the market expectations and hiked its refi rate by 25 basis points to 4.25 percent. Then ECB President Jean-Claude Trichet signaled that was a one-time event, also as widely expected. That was enough to trigger long liquidation in a thinning market. The euro looks bad here, but I doubt we are facing anything but sideways summer trading.

The euro/dollar had encountered early strength on Monday following news that inflation accelerated more than expected in June. The Eurozone inflation burgeoned to 4 percent from 3.7 percent in May, adding confidence to expectations that the ECB will tighten rates by 25 bps to 4.25% on Thursday.

Along the same lines, Italian inflation rose 4 percent in June on a yearly basis, the most since the index was created in January 1997, from 3.7 percent last month.

Germany's retail sales increased 1.3 percent in May, while April’s report was revised upward to -0.6 percent from a 1.7 percent decrease reported earlier. On the year, they increased 0.7 percent from a revised -0.2 percent in April.

The euro had rallied on Wednesday, on news that the Eurozone producer prices rose 1.2 percent in May from 0.9 percent in April and jumped a record 7.1 percent on the year from 6.2 percent. The move was fueled by a Die Zeit interview with ECB’s Trichet, who warned that inflation risks “exploding” if the ECB didn’t not act decisively. Which it sort of did a day later.

Germany's unemployment rate declined to 7.8 percent in June, the lowest since August 1992, from 7.9 percent in May. The number of people out of work fell 38,000 from May to 3.27 million.

Meanwhile, the Eurozone unemployment rate was flat in May at an upwardly revised level of 7.2 percent.

The European manufacturing PMI fell to 49.2 in July, a fifth month of contraction.

There was no reaction to news that German manufacturing orders unexpectedly declined 0.9 percent in May from April, when sales were revised upward to -1.7 percent from -1.8 percent. This was the sixth straight month of contraction. Orders fell 2 percent on a yearly basis.

Japan
Dollar/yen, oh, yes, dollar/yen. Failing the upside and then the downside. Luckily, we like technicals and they help us survive dollar/yen’s silly behavior.

The yen surged early on Monday on general dollar weakness and following news its credit rating was raised one level to Aa3 by Moody's Investors Service, due government efforts to curb spending and reduce debt.

Meanwhile, Japanese housing starts declined 6.5 percent in May on a yearly basis, and this is the eleventh consecutive month of contraction. But this is better than April’s reading of -8.7 percent. Construction orders plunged 25.2 percent year-on-year in May after -8.4 percent decline in the previous month.

The Tankan index of manufacturer sentiment fell to 5 points in the second quarter from 11 in the first quarter, a third quarterly decline, according to the Bank of Japan.

The UK
Cable retested the 2.0000 mark before retreating on Friday. The UK has US headaches and the European proximity adds a twist. The pound should remain the weakest of the European lot.

Sterling/dollar managed to pair early losses on Monday after mortgage approvals tumbled to the lowest level since the bank's series began in 1999. Banks approved only 42,000 mortgages in May, down from 58,000 in April, according to the Bank of England.

Consumer confidence dropped fell 5 points to minus 34 in June, the lowest since March 1990, according to GfK NOP, as house prices fell across the nation. The measure of confidence in the economic outlook dropped 6 points to -45, and for personal finances it fell 5 points to -9, GfK said.

Cable climbed up on Tuesday despite another set of poor UK data. House prices fell 6.3 percent in June, the biggest drop since November 1992, according to Nationwide Building Society, while manufacturing PMI fell to 45.8 in June, the least since 2001, according to the Chartered Institute of Purchasing and Supply.

Property prices fell 1 percent in June, according to Hometrack Ltd.'s housing index, led by a 1.3 percent drop in the London region.

Housing equity withdrawals totaled 5.04 billion pounds in the first quarter, and the Bank of England revised fourth quarter housing equity withdrawals to 7.4 billion pounds from 7.3 billion pounds.

The CIPS/Markit Purchasing Managers' Index for the construction sector fell to 38.3 in June from 43.9 in May.

Moreover, services PMI contracted to 47.1 in June, the most since October 2001, from 49.8 a month earlier, according to the Chartered Institute of Purchasing and Supply. Of course, a reading below 50 shows contraction.

A separate Bank of England survey showed banks plan to reduce the availability of credit to consumers and businesses this quarter.

Canada
Dollar/Canada continued to consolidate, as the prospects of lower exports to the US were countered by dangerously high commodity prices.

Canada's monthly gross domestic product expanded 0.4 percent in April, the first time in three months. But the first quarter GDP remains under water.

Meanwhile, the Ivey purchasing managers' index advanced to 69.6 in June from 62.5 in the prior month.

Switzerland
Dollar/Swiss franc, which initially sank to mimic the surging euro/dollar and to reflect renewed worries of the never-stable Middle East, recovered on Thursday. That’s nice, and the recovery could last for a few more days, but the downtrend remains in place.

Australia
The Australian dollar failed to suffer much last week, as its peachy economy, high interest rates and the wealth of commodities provide perfect support. Expect a choppy strength for as long as the appetite for risk doesn’t implode (read for as long as Iran plays ball, which seems to be, despite the childish rhetoric directed at local hot heads).

Australian manufacturing contracted 4.2 points to 47 in June from May, when it fell 1.5 points, according to Price Waterhouse Coopers and the Australian Industry Group.

Retail sales rose 0.7 percent in May from April, when they fell a revised 0.1 percent.

The trade deficit was A$965 million in May, while the April trade balance was revised from a deficit to a A$12 million surplus, the first surplus in six years.

But the home-building approvals fell 6.5 percent in May from April, when they rose a revised 5.4 percent.

Economic growth rate will slow as the highest borrowing costs in 12 years and record gasoline prices force households to cut spending, the Reserve Bank of Australia argued, and left its benchmark interest rate at 7.25 percent for a fourth month.

This Week's Data and Events

United States
The US economic calendar is light this week.

It will begin on Tuesday with the release of the Consumer Credit report for May. This is not a market mover. But the pending homes report could be.

Friday will see the release of the Trade Balance report for May. Expect another weak report.

The Preliminary University of Michigan survey for July is due as well.

The Eurozone
The Eurozone economic calendar will begin on Monday with the release of the German Industrial Production report for May.

Wednesday will see the release of the German Trade Balance report for May and of the revision of the first quarter regional GDP.

The French and Italian Industrial Production reports for are due on Thursday.

Japan
Japan’s economic calendar will begin on Tuesday with the release of the Economy Watchers Survey Current Conditions and Survey Expectations report for June. Expect no reaction.

Wednesday will see the release of the Machinery Orders report for May.

The Current Account Balance report for May and the Domestic Corporate Goods report for June are due on Thursday.

The UK
The UK economic calendar will start on Monday with the release of the Industrial Production report for June.

Tuesday will see the release of the DCLG house prices report for May. It should be soft.

The Nationwide Consumer Confidence report for June and the Trade balance report for May are due on Wednesday.

On Thursday, the Bank of England is likely to keep rates on hold at 5.0 percent.

Canada
The Canadian Unemployment rate for June will be released on Friday.

Overview

Euro/dollar
Last week's range: 1.5656 – 1.5908 (Down)
Previous range: 1.5469 – 1.5793 (Up)

Euro/dollar fell from a 2 ½-month high and closed lower last week, giving up a third of the rally between June 13 and July 3. My model went short. The market is on the verge here, after spearing the rising trendline in the non-market on Friday. Only a close below 1.5650 would encourage further weakness.

Below 1.5650, support is at 1.5605. The next good level is at 1.5685. Below 1.5630, further supports remain at 1.5575 and 1.5470. Distant support is at 1.5305.

Immediate resistance is at 1.5740. Above 1.5820, euro/dollar faces key resistance at 1.5905 and then at 1.6020. Distant resistance remains at 1.6250.

NEAR-TERM:Mixed with bearish risk
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 105.00 – 106.92 (Mixed)
Previous range: 105.86 – 108.42 (Down)

Jus because dollar/yen got unglued from the 107.95 Gann pivot and slipped, didn’t mean it found direction. My model remains short, though, as a double top targeting 105.75 remains in play. Immediate direction comes from the 50-point pivot at 106.75, which targets 106.25 and 107.25.

Below 106.25, support remains at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

Immediate resistance is seen at 107.25. Distant resistance still comes at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.9798 – 2.0005 (Down)
Previous range: 1.9587 – 1.9952 (Up)

Sterling/dollar fell from a 2 ½-month high and my model went short. It looks like a bearish reversal on the weekly chart, but I wouldn’t get too excited yet, as we need more information.  Just like the euro/dollar, cable pierced the rising trendline in extra-thin trading on Friday, but only a close below 1.9785 would encourage more sustained weakness.

Below 1.9785, support is now seen at 1.9745 and 1.9710. These are followed by 1.9605. Distant support remains at 1.9560.

Initial resistance now comes at 1.9885. The next levels are 1.9940 and 2.0005. Above 2.0040, further resistance comes at 2.0145. Distant resistance still comes at 2.0395.

NEAR-TERM:Mixed with downside risk
MEDIUM-TERM: Slightly bullish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0113 – 1.0283 (Up)
Previous range: 1.0166 – 1.0493 (Down)

Dollar/Swiss reversed from a 2 ½-month low on Friday and closed higher last week. My model went long, but the pair is only half way through the channel declining since May 8. A close above 1.0325, which is the former trendline rising since March 17, would encourage a more sustainable rally.

So, above 1.0325, resistance now comes at 1.0415 and 1.0450. This is followed by 1.0540. Distant resistance remains at 1.0622.

Initial support is at 1.0215. Below 1.0166, support is seen at 1.0113, 1.0065 and .9996. The next big level is .9825. Distant support remains at .9642.

NEAR-TERM: Mixed with upside risk
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0064 - 1.0239 (Up)
Previous range: 1.0049 – 1.0195 (Down)

Dollar/Canada is lacking any direction as it approaches the tip of a triangle. Wait until it breaks out.

Immediate resistance is now seen at 1.0239. The next level is 1.0285. Above 1.0301 there is resistance at 1.0380. Distant resistance remains between 1.0470 and 1.0485.

Initial support comes at 1.0155. Below 1.0050, support is seen at 1.0015. The next floor is at .9980. Distant support is now pegged at 0.9910.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 166.10 – 169.13 (Mixed)
Previous range: 166.80 – 169.45 (Mixed)

Euro/yen held below a near 26-year high and closed the second week on the verge of making a bearish reversal. The cross remains heavily overbought and the risk is on the downside is increasing. Again, sell it only on a confirmation.

Immediate support is at 167.20. The next level is at 166.80. This is followed by 165.55. The next level is at 164.95. Below 163.25, distant support remains at 161.45.

Initial resistance comes at 168.12. Above 168.86, there is resistance at 168.45 and 170.00. Distant resistance is seen at 171.55.

NEAR-TERM: Mixed with downside risk
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7871 – 0.8001 (Mixed)
Previous range: 0.7891 – 0.7951 (Mixed)

Euro/sterling traded in another tight range as it approached the tip of a triangle. More information is still needed.

Initial support remains at 0.7870. Below the strong 0.7330 level, support remains at 0.7817. Distant support is at 0.7766.

Immediate resistance is still seen at 0.7933. The next level is 0.7955. Above 0.7970, there are pivot highs at 0.8033 and 0.8100. Distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jul 7 2008, 06:24 GMT

The US economic calendar will begin on Monday with the release of the Chicago PMI report for June

Tue, Jul 1 2008, 05:56 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency looks to be in new trouble, as the equity indices plummet into recession and energy costs are out of control. The downside is favored this week, with the ECB expected to hike rates during a week shortened by the Independence Day on Friday, and the Fed may need to cut rates before hiking them.

United States
The Federal Reserve removed the odds of a rate hike to fight inflation, as the credit conditions worsen, unemployment rises and the DJIA spells it out that the economy is in recession. With the oil surging out of control, stocks crashing and consumer confidence dissipating, the dollar has no way to go but down. Surely, we can’t expect a one-way slide, but if the weakness seen late Thursday and Friday is any indication, the market likes the US currency down. Keep an eye on the carry trade – as of now, it’s toast!

The dollar plummeted on Tuesday on news the Conference Board's consumer confidence index collapsed to a 16-year low of 50.4 in June from un upwardly revised 58.1 (initially 57.2) in May. The expectations index fell to 41.0, from 47.3, the current conditions index to 64,5 from 74.2, and the gap between the number of respondents saying that jobs are hard to get relative to plentiful widened to 16.4 from 12.2.

Durable goods orders were unchanged in May, following a 1.0 percent decline the month before, which confirms that the economy remains on the brink of recession. Orders would have contracted 0.6 percent last month without a 14.9 percent increase in orders for defense aircraft, after shrinking another 0.8 percent. Ex-transportation, orders fell 0.9 percent after expanding 1.9 percent.

New homes sales fell 2.5 percent in May to an annual rate of 512,000 units from 525,000 in April, which was revised down from 526,000.

Sales of existing homes edged up 2 percent to 4.99 million units in May, as median home prices continued to fall, according to the National Association of Realtors. This is only the second increase in sales in the past 10 months, but this is not the start of a sustained recovery.

The market exploded on Wednesday after the FOMC meeting; the combination of worries about inflation but no rate hike proved to be a hot mix for volatility, which surged for a few minutes. The dollar spiked wildly both ways, and when the dust settled, the US currency was lower. Its weakness accelerated on Thursday and Friday.

There was no reaction to news that the GDP was revised upward to 1.0 percent annual rate in the first quarter from 0.9 percent rate. Surely, officially there is no recession, but tell this to folks in street.

Initial claims for state unemployment insurance benefits were a seasonally adjusted 384,000 in the week ended June 21, matching the revised level in the prior week. As the Labor Department nearly always does, it jacked up the previous week’s reading from 381,000. Thus, the worsening figures in this country are not obvious!

Spending expanded 0.8 percent in May, the most since November, from 0.4 percent (originally reported 0.2 percent increase), while incomes grew 1.9 percent, the most since September 2005, from 0.3 percent. Disposable income surged 5.7 percent, the largest increase since May 1975, from 0.4 percent in April. Beautiful, but these good numbers are only a temporary boost, as credit indicators have deteriorated more than expected and the worm fuzzy feeling from the tax rebates will go away faster that the Northeast heat wave.

The dollar showed little reaction to news that the final University of Michigan Consumer Sentiment fell to 56.4 in June, the lowest level since may 1980, from 59.8 in May.

The Eurozone
The euro/dollar rallied broadly last week, but remained in an inside range. The upside is favored, with the ECB expected to hike rates.

Ifo institute’s German business climate index fell to 101.3 in June, the lowest since January 2006, from 103.5 in May. The sub-index of the current situation dropped to 108.3 from 110.1 while a measure of expectations fell to 94.7 from 97.2.

GfK’s measure of consumer confidence in Germany fell to 3.9 for July from a downwardly revised 4.7 (initially 4.9) reading for June.

French consumer sentiment fell to -46, the lowest since the Insee statistics office introduced the index in 1987. Meanwhile, Italian business confidence index fell to 87.1, the lowest since July 2005, and consumer confidence dropped to 87.1 June from 89.4 in May.

German import prices rose 2.4 percent in May, the most since September 1990, from April, when they climbed 0.9 percent.

The Eurozone services PMI unexpectedly contracted fell to 49.5 in June from May's 51.1, while the Eurozone manufacturing PMI fell to 49.1 from 50.6, its lowest level since May 2005.

The wealth of poor data will probably culminate in an economic contraction in Germany in the second quarter after expanding 1.5 percent in the first quarter, according to Deputy Economy Minister Otremba.

But the ECB forecasted that the regional economy will expand 1.8 percent this year and 1.5 percent in 2009 and inflation will average 3.4 percent this year and 2.4 percent next year.

On the plus side, French household consumption rose 2.0 percent in May, nearly three times stronger than the consensus expectations, from April’s revised -0.9 percent.

French manufacturers confidence was unchanged at 102 in June, the weakest level the weakest since December 2005. But household spending expanded 2 percent in May.

Italian consumer confidence slipped to 100 in June from 103.2 in May.

European Central Bank President Jean- Claude Trichet said he didn't signal a series of interest- rate increases, but rather one tightening.

The Eurozone industrial orders rose 2.5 percent in April and 11.7 percent on a yearly basis.

The Eurozone confidence index fell to 94.9 in June, the lowest since May 2005, from 97.6 the previous month.

Japan
Dollar/yen made a collapsing decline late last week as the carry trade got trashed. The weakness should continue.

The business survey index (BSI) of sentiment at large manufacturers fell to -15.1 in the second quarter from -12.9 in the first quarter. The sentiment index at large non-manufacturers fell to -15.3 from - 7.2 in the previous quarter, while that at big firms overall fell to -15.2 from -9.3 in the first quarter.

The trade surplus narrowed by 7.6 percent to 365.6 billion yen in May from a year earlier, as exports rose 3.7 percent and imports advanced 4.4 percent.

Japan's unemployment rate stayed at 4 percent in May, while the ratio of jobs for each applicant slid to 0.92.

Household spending slumped 3.2 percent in May, the most since September 2006.

Retail sales fell 0.2 percent in May on top of -0.1 percent in April. On an annual basis, sales rose 0.2 percent in May from 0.1 percent in April.

Japan CPI rose 0.8 percent in May and 1.3 percent on the year. Core consumer prices rose 1.5 percent from a year earlier after climbing 0.9 percent in April.

Tokyo CPI was up 0.3 percent in May and 1.5 percent on the year. Core inflation for Tokyo in June was up 1.3 percent on year from 0.9 percent in the previous month.

Industrial production rose 2.9 percent in May, following a 0.2 percent decline in April and a 3.4 percent fall in March.

The UK
The sterling/dollar surged aggressively last week and this strength should continue, albeit at a reduced pace.

But the UK housing horror story continued unabated – sort of the same as in the US.

House prices declined 1.2 percent in June, rose 0.1 percent on a yearly basis, according to Rightmove Plc.

Meanwhile, mortgage approvals fell 20 percent in May 56 percent from a year earlier, to the lowest since at least 1997, according to the British Bankers' Association.

The CBI's Distributive Trades Survey showed the reported sales balance improve to -9 in June from -14 in May.

The pound rose surged on Thursday following hawkish comments by Bank of England’s Monetary Policy Committee which kept open the possibility that interest rates may rise this year. Comments that the CPI letter was not intended to be dovish caught the attention.

The gross domestic product was revised downward to 0.3 percent in the first quarter, the least in three years, from 0.4 percent.

Canada
Dollar/Canada closed lower, but not much lower, as the support from surging energy prices was balanced by concern about slower exports to the recessionary US market.

The sharp rise in energy prices pushed up Canadian industrial product prices by 0.6 percent in May and raw materials by 3.1 percent. Excluding energy, both price indexes would have fallen.

Switzerland
Dollar/Swiss franc reversed early gains, but its subsequent weakness has yet to break new ground.

Australia
The Australian dollar ended the week higher, but not that much, as carry trades were hurt by the decline in appetite for risk. But AUD/USD closed down only twice in the past eleven days.

This Week's Data and Events

United States
The US economic calendar will begin on Monday with the release of the Chicago PMI report for June.

Tuesday will see the release of the ISM manufacturing PMI report for June and of the construction spending report for May.

The factory goods orders report for May is due on Wednesday.

The non-farm payrolls and the unemployment rate reports for June, key for FX, will be released on Thursday, as Friday is off for the Independence Day.

The non-manufacturing ISM report for June is due on Thursday as well.

The Eurozone
The Eurozone economic agenda will start on Monday with the release of Germany’s retail sales report for May.

Tuesday will see another important release from Germany, this time the unemployment rate report for June.

The Eurozone PMI Manufacturing report for June and the Eurozone unemployment rate report for May are due on Tuesday as well.

The Eurozone PPI report for May is due on Wednesday.

On Thursday, the ECB is widely expected to hike rates by 25 basis points to 4.25 percent.

The Eurozone services PMI for July and the retail sales report for May are due on Thursday as well.

The German factory orders for May will be released on Friday.

Japan
The Japanese economic calendar will start on Monday with the release of the housing starts report for May.

It will end on Tuesday with the release of the Tankan Large manufacturers’ index for the second quarter.

The UK
The UK economic calendar will begin on Monday with the release of the GfK consumer confidence report for June and of the Index of services report for April.

Tuesday will see the release of the Nationwide house prices and of the PMI manufacturing report for June.

The Halifax house price report for June is due on Thursday,

Canada
The Canadian economic calendar is light this week, featuring only the monthly GDP report for April on Monday.

Canada is closed on Tuesday for a holiday.

Overview

Euro/dollar
Last week's range: 1.5469 – 1.5793 (Up)
Previous range: 1.5347 – 1.5651 (Up)

The euro/dollar has been alternating up and down weeks for the past several weeks, but last week it bucked the trend. Only that these two bullish weeks remained in an inside range. The obvious thing would be to call it up, only that we are not any smarter now.

Immediate resistance is at 1.5842. Above 1.5930, euro/dollar sees additional resistance at 1.6020. Distant resistance moved up to at 1.6250.

Initial support is at 1.5720. The next good level is at 1.5685. Below 1.5630, further supports remain at 1.5575 and 1.5470. Distant support is at 1.5305.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Dollar/yen
Last week's range: 105.86 – 108.42 (Down)
Previous range: 107.13 – 108.58 (Down)

Dollar/yen finally got unglued from the 107.95 Gann pivot and sank aggressively since Thursday, closing below the trendline rising since March 17. My model remains short, which is good, as a double top targeting 105.75 unfolded.

Initial support is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. Distant support is at 104.50 from another 50-point pivot, which targets 104.00 and 105.00.

Immediate resistance is seen at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant resistance now comes at 107.95 from a 50-point pivot, which targets 107.45 and 108.45.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.9587 – 1.9952 (Up)
Previous range: 1.9460 – 1.9790 (Up)

Sterling/dollar rallied to a two-month high, rising the last four days of last week. My model remains long, which is good as the pair triggered a double bottom, which targets 2.0375.

Initial resistance now comes at 2.0010. Above 2.0040, further resistance comes at 2.0145. Distant resistance comes at 2.0395.

Immediate support is now seen at 1.9885. The next level is 1.9800. This is followed by 1.9710. Distant support now comes at 1.9560.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Mixed
LONG-TERM: Mixed

Dollar/Swiss franc
Last week's range: 1.0166 – 1.0493 (Down)
Previous range: 1.0306 – 1.0520 (Down)

Dollar/Swiss also chucked its pattern of alternating up and down weeks after eight long weeks, but the past two weeks were stuck in an inside range. The close below the trending line rising since March 17 encourages further sales, but only a weekly close below 1.0149 would give me bear comfort.

So, below 1.0149, support is now seen at .9996. The next big level is .9825. Distant support is at .9642.

Initial resistance now comes at 1.0230. Above 1.0295, resistance is at 1.0345 and 1.0390. This is followed by 1.0540. Distant resistance is now stacked at 1.0622.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0049 – 1.0195 (Down)

Previous range: 1.0103 – 1.0301 (Down)
Dollar/Canada fell last week and reached an over three-week low. My model remains short, and the risk remains on the downside. But the sharp recovery on Friday doesn’t leave this bearish outlook clean.

Initial support comes at 1.0050. Below it, support is seen at 1.0015. The next floor is at .9980. Distant support is now pegged at 0.9910.

Immediate resistance is now seen at 1.0145. The next levels are 1.0210 and 1.0285. Above 1.0301 there is resistance at 1.0380. Distant resistance remains between 1.0470 and 1.0485.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 166.80 – 169.45 (Mixed)
Previous range: 165.72 – 168.12 (Up)

Euro/yen slipped from a near 26-year high (shall we say a record high in lieu) early Thursday m but then posted two consecutive down days for the first time since early May. The cross remains heavily overbought and the risk is on the downside is in increasing, but sell it only on a confirmation.

Immediate support remains at 166.80. This is followed by 165.55. The next level is at 164.95. Below 163.25, distant support remains at 161.45.

Initial resistance comes at 168.12. Above 168.86, there is resistance at 168.45 and 170.00. Distant resistance is seen at 171.55.

NEAR-TERM: Mixed to slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7891 – 0.7951 (Mixed)
Previous range: 0.7849 – 0.7955 (Mixed)

Euro/sterling traded in a very tight range in an inside range and closed virtually unchanged. More information is needed.

Initial support remains at 0.7870. Below the strong 0.7330 level, support remains at 0.7817. Distant support is at 0.7766.

Immediate resistance is still seen at 0.7933. The next level is 0.7955. Above 0.7970, there are pivot highs at 0.8033 and 0.8100. Distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Tue, Jul 1 2008, 05:56 GMT

The US economic calendar will start on Tuesday with the release of the consumer confidence report for June

Mon, Jun 23 2008, 06:21 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency was hit last week, and the easy explanation is that the US economy is on pretty bad shape. The economy is going to get in much worse shape, but the correlation with the dollar is not all that high. The European currencies remain in a tight trading range, while dollar/yen is stubbornly high. The dollar should indeed weaken, but getting married to your position may be dangerous to your health.

United States
The dollar closed the week lower amid a very strong oil price and a very weak stock market. “Experts’” voices are starting to sound weaker about the silly notion that the US economy will recover in the second half of the year. If we get lucky, that we’ll happen in the second half of 2009 – of we are that lucky.

I’m not sure how many ways we can say stagflation, or how many times I can say without getting bored. But that’s what it is, even though it’s not the same as in the early 80s. But remember, the only way to get out of it is by accelerating the recession.

The US was basically bad last week.

The New York Fed's "Empire State" general business conditions index fell to minus 8.68 from minus 3.23 in May. The index was down in four of the past months – not so good, is it?

Foreign buying of U.S. financial assets rose by a net $115.1 billion in April to an 11-month high from $79.6 billion the previous month, the Treasury Department said.

There was little reaction to the US data on Tuesday.

The producer price index surged 1.4 percent in May following an unrevised 0.2 percent increase in April. The core PPI slowed to 0.2 percent in May from +0.4 percent in the previous month.

Housing starts fell 3.3 percent to a seasonally adjusted annual rate of 975,000 units in May from a downwardly revised rate of 1.008 million units in April. Housing starts contracted 32.1 percent on a yearly basis. Meanwhile, building permits fell 1.3 percent to 969,000.

Industrial production unexpectedly fell by 0.2 percent in May as output at utilities shrank, while capacity utilization fell to 79.4 percent, the lowest since September 2005, from 79.6 percent.

The current account deficit widened to $176.4 billion in the first quarter from a downwardly revised $167.2 billion in the fourth quarter.

Initial jobless claims fell 5,000 to 381,000 in the week ended June 14 from an upwardly revised 386,000 (initially 384,000) the prior week. So, no big real change. The total number of people collecting benefits dropped 76,000 to 3.06 million for the week ended June 7.

The Federal Reserve Bank of Philadelphia’s manufacturing index fell further to -17.1, a seventh month of contraction, from -15.6 in May.

Of less importance, the Conference Board's index of leading economic indicators climbed 0.1 percent, matching April's gain, the first back-to-back monthly increases in a year and a half.

The Eurozone
The euro/dollar made a half hearted recovery last week, but while this should continue, there is no momentum. The ECB should hike rates next week – but only once.

The Eurozone final inflation figures for May were revised upward to 3.7 percent, the highest since June 1992, from the original 3.6 percent, and from April’s 3.3 percent. Core inflation edged up to 1.7 percent from 1.6 percent.

The euro/dollar fell on Tuesday on news that the German ZEW index of investor and analyst expectations fell sharply to -52.4 in June from -41.4 in May. The current conditions index fell to +37.6 from +38.6.

German PPI slowed to 1 percent in May from 1.1 percent but rose 6 percent on a yearly basis from 5.2 percent. Excluding energy, producer prices have risen 2.9 percent.

Elsewhere, Italy's total trade deficit narrowed to 1 billion euros in April from 1.28 billion euros in the previous year. Exports rose 18.8 percent and imports climbed 17 percent.

Italy's unemployment rate unexpectedly rose to 6.5 percent in the first quarter from a revised 6.2 percent the previous quarter.

Japan
Dollar/yen made a weak pullback last week, and the risk is on the downside.

Japan's tertiary index rose in 1.8 percent April after being unchanged the previous month.

The UK
The sterling/dollar encountered very choppy waters last week, but ended way up – if within recent ranges.

Cable crashed on Tuesday after the open letter from the Governor to the Chancellor in response to UK rise in inflation to 3.3 percent in May was not as hawkish as expected. This eased concerns that the next move in UK interest rates will be up.

The CBI trends survey showed only a small decline in the prices expectations balance to +28 in June from +30 in May.

The pound then exploded higher on Thursday on news that UK retail sales surged a mammoth (and record) 3.5 percent in May, after falling 0.3 percent in April. On a yearly basis, sales ballooned 8.1 percent. The number is absurd, it will probably give it all up and more next month, but the damage was done.

As widely expected, Bank of England’s Monetary Policy Committee voted 8-1 to keep the benchmark rate at 5 percent, minutes of the June 5 decision showed.

Canada
Dollar/Canada fell last week – not that much given where the energy prices are.

Canada's index of leading economic indicators rose 0.2 percent in May, as expected. This was the first increase in four months. Seven of the index's 10 components rose.

Consumer prices rose 1 percent in May, the most since January 1991, and 2.2 percent from a year earlier, the fastest pace since January. The upmove was generated by surging energy prices. The Bank of Canada unexpectedly (but correctly) left its benchmark interest rate at 3 percent this month after energy costs as inflation rose.

Retail sales rose 0.6 percent in April on clothes and gasoline, after stalling in March (after the initially reported 0.1 percent advance). The report suggests domestic consumer demand continues to offset a slump in exports to the U.S., Canada's main market. Dollar/Canada spiked lower on the data and then registered a vicious recovery. Long live the fundamentals!

Switzerland
Dollar/Swiss franc slipped last week, but the pair remains in a trading range.

The Swiss National Bank left its three-month LIBOR target at 2.75 percent, the mid-point of the 2.25-3.25 percent band, as I expected. This confirms that the SNB will defer to the big-brother ECB’s likely rate hike in July. The next SNB meeting is in September.

Australia
The Australian dollar ended the week higher, but got stuck in an inside range.

The RBA’s minutes suggested the central bank will leave the benchmark rate at 7.25 percent this year, after four increases between August and March. The borrowing costs at a 12-year high will probably be enough to cool demand and curb inflation.

This Week's Data and Events

United States
The US economic calendar will start on Tuesday with the release of the consumer confidence  report for June.

On Wednesday, the FOMC will not result in a rate hike – the economy is not strong enough for a tightening of the borrowing costs.

The same day, be on the look out for the new home sales report for May and for the volatile durable goods orders report for May.

Thursday will see the existing home sales report for May, the real GDP report for the first quarter, and the price index report for the first quarter.

The core PCE deflator report for May, the personal spending and income reports for May, and the final University of Michigan survey for June are due on Friday.

The Eurozone
The Eurozone economic calendar will start on Monday at full blast. The headline report is Germany’s IFO business climate, current assessment and expectations reports for June. In addition, there will be the regional PMI Services and PMI Manufacturing reports for June.

Tuesday will be another busy day. It will feature Germany’s CPI report for June and the GfK consumer confidence report for July, the French business survey for June and consumer spending report for May, and the Italian consumer confidence index for June.

The French consumer confidence and the Italian business confidence reports for June are due on Thursday.

The final French GDP for the first quarter is due on Friday.

Japan
The Japanese economic calendar will open on Wednesday with the trade balance report for May.

Friday will see the CPI national report for May, the Tokyo CPI report for June, and the unemployment rate and the industrial production reports for May.

The UK
The UK calendar will begin on Wednesday with the release of the CBI distributive trades survey for June.

The final Business investment report for the first quarter is due on Thursday.

Friday will see the release of the final GDP and of the Balance of Payments current account report for the first quarter.

Canada
There are no economic events scheduled for release in Canada this week.

Overview

Euro/dollar

Last week's range: 1.5347 – 1.5651 (Up)
Previous range: 1.5305 – 1.5787 (Down)

The euro/dollar has been alternating up and down weeks for the past five weeks, and if this yo-yo pattern persists, this week should be bearish. It rallied on Monday and Friday, and as the pair is approaching the tip of a triangle, silly trading should persist.

Immediate resistance is at 1.5650. Above 1.5727, euro/dollar sees additional resistance at 1.5842. Distant resistance comes at 1.6020.

An in initial support is at 1.5565. The next good levels lie at 1.5510 and 1.5545.

Below the key 1.5380 level, further supports remain at 1.5305 and 1.5287.

NEAR-TERM:Mixed to slightly bullish
MEDIUM-TERM:Mixed
LONG-TERM: Bullish

Dollar/yen
Last week's range: 107.13 – 108.58 (Down)
Previous range: 104.44 – 108.39 (Up)

Dollar/yen was glued to the 107.95 Gann pivot and only on Friday weakened. My model went short, but it’s premature to call for a significant decline.

Initial support is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant support is at 105.60 from a 50-point pivot that targets 105.10 and 106.10.

Immediate resistance is seen at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Further resistance is pegged at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Above 109.93, distant resistance remains at 110.35 from another 50-point pivot.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.9460 – 1.9790 (Up)
Previous range: 1.9410 – 1.9801 (Down)

Sterling/dollar rallied on Thursday and Friday but remained stuck in an inside range. My model went long, but I expect only choppy trading.

Initial resistance now comes at 1.9800. Above 1.9850, further resistance comes at 1.9890 and 1.9940. Distant resistance comes at 2.0000 and 2.0040.

Immediate support is now seen at 1.9715. The next level is 1.9650. This is followed by 1.9595. Distant support now comes at 1.9410.

NEAR-TERM:Mixed
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0306 – 1.0520 (Down)
Previous range: 1.0149 – 1.0540 (Up)

Dollar/Swiss has been alternating up and down weeks for eight weeks by now, and if the lack of direction continues, this week should be an up week.

Initial resistance now comes at 1.0390. Above 1.0445, resistance is at 1.0495 and 1.0548. This is followed by 1.0622. Distant resistance is now perched at 1.0725.

Immediate support is now seen at 1.0306. Below 1.0200, a pivot comes at 1.0149. Distant support is at .9996.

NEAR-TERM: Mixed with upside risk
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0103 – 1.0301 (Down)
Previous range: 1.0152 – 1.0322 (Up)

Dollar/Canada fell last week and Friday was an exceptionally choppy day. My model went short, the risk remains on the downside.

Initial support comes at 1.0090. Below it, support is seen at 1.0015. The next floor is at .9980. Distant support is now pegged at 0.9910.

Immediate resistance is now seen at 1.0210. The next level is 1.0285. Above 1.0301 there is resistance at 1.0380. Distant resistance remains between 1.0470 and 1.0485. 1.0645.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 165.72 – 168.12 (Up)
Previous range: 164.98 – 167.14 (Up)

Euro/yen rallied for a sixth consecutive week and to an 11-month high. My system remains long. The risk is that only last Monday saw a rally and the last four days showed nothing but sideways trading. The cross is overbought and the risk is on the downside, but sell it only on a confirmation.

Initial resistance comes at 168.12. Above 168.86, there is resistance at 170.00. Distant resistance is seen at 171.55.

Immediate support is at 166.80. This is followed by 165.55. The next level is at 164.95. Below 163.25, distant support remains at 161.45.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7849 – 0.7955 (Mixed)
Previous range: 0.7870 – 0.8033 (Down)

Euro/sterling encountered choppy trading but when the dust settled it made no progress. My model is short, but more information is needed.

Initial support remains at 0.7870. Below the strong 0.733 level, support remains at 0.7817. Distant support is at 0.7766.

Immediate resistance is still seen at 0.7933. The next level is 0.7955. Above 0.7970, there are pivot highs at 0.8033 and 0.8100. Distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jun 23 2008, 06:21 GMT

The US economic calendar will start on Monday with the release of the Empire State manufacturing survey

Fri, Jun 20 2008, 06:58 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The US currency mounted an aggressive rally during the past week, as the prospect of higher rates in the US, premature as it may be, awakened thoughts that the dollar was severely oversold. And dreams that the G8 meeting will somehow prop up the ailing dollar triggered some significant buying. Don’t get fooled by the fluff – the US economy remains in trouble, inflation is rampant, and we all have less money to spend unless we stop eating and driving. The dollar remains in a large consolidation phase, especially versus the European currencies, so it should see some weakness initially before the next wave of strength.

United States
The dollar closed sharply higher, and that was unexpected at the time of writing of the report the previous week. What changed was talk of US higher rates and, more importantly, concerted hikes with our G7/8 central banks, and this supported the US currency. But the G7/8 central banks did not discuss FX, as they focused, as normal, on commodity prices' negative impact on economic growth. So, the dollar should decline here.

The data was not that bad overall last week, but we are in trouble deeper than we have ever been before. Lehman is on the edge of the abyss and rumor has it that it’s not the only one. And if you thought that Bear Stearns had it bad, you may be in for a big surprise.

Don't get tricked by the exciting reports or by the low inflation data. We eat food, not electronics, and we drive cars, not bikes! The good is going only until jobs start disappearing - that is, in addition to those in the financial sector. If that happens, we’ll see a lot of famous names disappearing. And then we may witness social unrest once high food prices start famine is poor countries or they destabilize governments that spend too much on subsidies.

The European currencies fell sharply last week, but I think the sell-off was only part of a consolidation phase. Only cable looks really soft.

The dollar extended its unexpected recovery on Monday on news that an index of existing homes sales rose 6.3 percent in April after a 1 percent drop in March, according to the National Association of Realtors. On a yearly basis, the index contracted 13.1 percent.

The trade deficit widened 7.8 percent to $60.9 billion in April, the highest level since March 2007, amid surging costs of energy. The March gap was revised down to $56.5 billion from a previously reported $58.2 billion. Imports grew 4.5 percent and exports climbed 3.3 percent.

The dollar augmented its gains after retail sales unexpectedly surged 1.0 percent in May and April’s report was revised upward to +0.4 percent from –0.2 percent. Could the Fed be right and had succeeded in propping up the economy? Ex-autos, sales rose 1.2 percent, the biggest rise in six months. Sounds tempting, but too good to be true…

Initial claims for state unemployment insurance benefits jumped to 384,000 in the week ended June 7 from an upwardly (surprise, surprise) revised 359,000 for the prior week (from 357,000).

Business inventories rose 0.5 percent in April following an upwardly revised 0.2 percent increase in March, and sales expanded 1.4 percent from +1.2 percent increase.

There was little reaction to news the CPI rose 0.6 percent in May, the most since November, after a 0.2 percent gain the prior month. On a yearly basis it reached 4.2 percent. The core CPI increased 0.2 percent.

The University of Michigan preliminary index of consumer sentiment fell by a more that expected to 56.7 in June from 59.8 in May.

The Eurozone
The euro/dollar sank sharply last week, but at the end of the day, it’s closing one week up and one week down. That would suggest gains this week.

The German trade surplus widened to 18.7 billion euros in April from 16.6 billion euros in March.

German wholesale prices rose 1.4 percent in May and 8.1 percent from a year earlier, the most since February 1982.

French industrial production rebounded 1.4 percent in April from a 1 percent drop in March.

Italian industrial production rose 0.7 percent in April and 8 percent on annual basis.

The euro/dollar got hurt since late Wednesday on news that Belgium’s InBev made a $46 billon bid for Anheuser-Busch.

The Eurozone industrial production expanded 0.9 percent in April from March’s -0.5 percent (initially –0.2 percent), and 3.9 percent on the year from 1.6 percent.

The Italian GDP was revised upward to 0.5 percent in the first quarter from 0.4 percent. The annual growth was revised to 0.3 percent from 0.2 percent.

French consumer prices rose 0.6 percent in May and climbed 3.7 percent on an annual, to the highest in over 12 years, from 3.4 percent in April. Meanwhile, household spending on manufactured goods fell 0.8 percent.

The Bank of France index of manufacturing confidence fell to 97 in May, the lowest level since July 2005, from a revised 100 in April. It also cut its GDP forecast for the second quarter to 0.2 percent from 0.3 percent.

Japan
Dollar/yen made an unexpected and aggressive rally last week and broke a significant trendline. But I feel it needs to pull back down before further strength is likely.

The local data was mixed, unexciting and carried no weight.

Japanese machine orders rose 5.5 percent in April after declining 8.3 percent in March and 12.3 percent in February.

Wholesale prices rose 4.7 percent in May, the fastest pace in 27 years, from 3.9 percent in April.

The current-account surplus narrowed 30 percent to 1.38 trillion yen in April from a year earlier.

Japan's first-quarter GDP was revised upward to 1 percent from 0.8 percent reported last month. The annualized rate came up at 4 percent from 3.3 percent estimated last month.

Consumer confidence index slipped to 33.9 in May from 35.2 in April

Japan revised industrial to output -0.2 percent in April from the initial –0.3 percent, and follows a 3.4 percent contraction in March.

The UK
The sterling/dollar fell sharply last week, but remained in a trading range.

The pound rallied on Monday on additional evidence of rampant inflation in the U.K., which implies higher rates. Producer prices rose 1.6 percent and input prices rose 3.8 percent in May, the highest rate from since comparable records began in 1986. On a yearly basis, prices rose 8.9 percent.

Retail sales increased 1.9 percent in May on an annual basis, according to the British Retail Consortium.

Factory production unexpectedly rose 0.1 percent in April after a 0.5 percent drop in March. On a yearly basis earlier, manufacturing rose 0.1 percent.

House sales fell to 17.4 in May, a 30-year low, from April's 18.5 in May, according to the Royal Institution of Chartered Surveyors. House prices fell to 92.9 percentage points in May from 94.7 percent the previous month, which was the most since the series began in 1978.

Unemployment rose by 9,000 to 819,300 in May amid staff cuts. But the claimant count rate stood unchanged at 2.5 percent in May.

Gross domestic product was revised down to +0.2 percent in the first quarter.

Meanwhile, the goods-trade deficit widened to 4.3 billion pounds in April from 3.8 billion pounds in March.

UK expectations of future inflation surged to a record high of 4.3 percent in May, a survey by the Bank of England showed.

Canada
Dollar/Canada rallied further last week, but the central bank didn’t cut rates and commodity prices didn’t fall either. So, only the exports to the US are suffering. Significant, at 75%, but maybe not for FX.

Canadian new-home starts rose a greater-than-expected 3.5 percent in May. But the local currency sank despite the data.

The trade surplus narrowed to C$5.11 billion in April, buy the March surplus was revised up to C$5.70 billion from an initial C$5.53 billion. Exports grew 0.8 percent and imports increased by 2.6 percent.

The Bank of Canada unexpectedly left its interest rates on hold at 3 percent, as G10 central banks have shifted their emphasis from the downside risks to economic growth to the upside risks to inflation.

Canadian capacity use sank to 79.8 percent in the first quarter, the slowest rate in 15 years, from 81.8 percent in the fourth quarter of last year. In the manufacturing sector, the rate fell to 77.2 percent from 80.3 percent in the previous quarter, as the auto and wood products industries were hurt by the US economic slowdown.

New home prices showed no change in April. On an annual basis, prices slowed to 5.2 percent in April, its weakest pace in 15 year.

Finally, labor productivity declined 0.3 percent in the first quarter due to a drop in manufacturing output, fewer working hours and bad weather, from 0.7 percent in the fourth quarter of last year. In the United States, productivity came in at +0.6 percent in the first quarter.

Switzerland
Dollar/Swiss franc had an outside week, but it’s trading one week up and one week down, and this week should see some weakness.

Australia
The Australian dollar ended the week sharply down, as the adversity for risk increased. But I think that it found support and should attempt to recover this week.

But let’s keep it in mind that the economy is no longer perfect.

Australia's economy unexpectedly lost 19,700 workers jobs in May, but the jobless rate held at 4.3 percent.

This Week's Data and Events

United States
The US economic calendar will start on Monday with the release of the Empire State manufacturing survey and the Homebuilders' survey report for June.

Tuesday will see the release of the PPI, Housing starts, and Industrial production and capacity utilization reports for May, and of the Current Account report for the first quarter. Busy day with market moving data.

The Leading indicators report for May and the Philly Fed Survey for June will be seen on Thursday.

The Eurozone
The Eurozone data is scarce this week.

Germany’s ZEW Expectations/Current Situation report for June is due on Tuesday and its Producer Prices report for May on Friday.

Japan
Japan’s economic calendar is light this week.

It consists of the Tertiary Industrial Activity report for April on Tuesday and of the All Industry Activity report for April on Thursday.

The UK
The UK economic calendar will begin on Tuesday with the release of the CPI report for May.

The Bank of England MPC minutes for June are due on Wednesday, the same day with the CBI Industrial Trends Survey total orders for June.

The Retail sales report for May will be released on Thursday.

Canada
Canada’s economic calendar will start on Wednesday with the release of the Leading Indicators report for May.

Thursday will see the release of the CPI report for May.

The Retail sales report for April is due on Friday.

Overview

Euro/dollar
Last week's range: 1.5305 – 1.5787 (Down)
Previous range: 1.5367 – 1.5776 (Up)

Following the tough US talk on inflation, the euro/dollar sank to a five-week low and closed at the lowest level since early March, which would suggest significant weakness in the future. The problem here is that the pair has been alternating up and down weeks for the past four weeks, and if he yo-yo pattern continues, this week should be bullish. The current level at 1.5380 is very important, and late buying on Friday saved it.

Immediate resistance is at 1.5458. Above 1.5510, euro/dollar sees additional resistance at 1.5586. Further resistance is then seen at 1.5727. Distant resistance comes at 1.5842.

Below the key 1.5380 level, support is now seen at 1.5305 and 1.5287. Strong support follows in the 1.5230 area from a massive trendline. If the line buckles on a closing basis, look out for possibly aggressive sales. The next level is 1.5150. Below 1.5043, euro/dollar now has distant support at 1.4778.

NEAR-TERM:Mixed to slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 104.44 – 108.39 (Up)
Previous range: 103.88 – 106.42 (Mixed)

Dollar/yen rallied to a four-month high and triggered a long-term bullish flag that targets 115.15. My model remains long, but let’s not get ahead of ourselves.

Above 108.60, resistance is at 109.15 from a 50-point pivot, which targets 109.65 and 108.65. Above 109.93, distant resistance is perched at 110.35 from another 50-point pivot, which targets 109.85 and 110.85. Very distant resistance looms at 111.60 from a 50-point pivot, which targets 112.10 and 111.10.

Initial support is seen at 107.95 from a 50-point pivot, which targets 107.45 and 108.45. Next strong level is at 106.75 from another 50-point pivot, which targets 106.25 and 107.25. Distant support is at 105.60 from a 50-point pivot that targets 105.10 and 106.10.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Mixed

Sterling/dollar
Last week's range: 1.9410 – 1.9801 (Down)
Previous range: 1.9462 – 1.9774 (Mixed)

Sterling/dollar sank to a four-week low and closed at a four-month low. My model went short, but cable remains in a trading range near the tip of a long-term descending triangle. A close below 1.9346 would suggest a slide for about 300 pips; if this level holds, the trading range remains in play.

Immediate support is still seen at 1.9410. The next level is 1.9346, which a big. This is followed by 1.9290. Below 1.9185, distant support now comes at 1.9107. This is very important.

Initial resistance now comes at 1.9494. Above 1.9560, there is further resistance at 1.9625. Additional caps are at 1.9710 and 1.9760. Distant resistance comes at 1.9800.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0149 – 1.0540
(Up) Previous range: 1.0187 – 1.0521 (Down)

Dollar/Swiss surged from a new 1 ½-month low to close higher last week. My model promptly turned long. But the pair has been alternating up and down weeks for SEVEN weeks, and if the lack of direction continues, this week should be the down week. Only a close above 1.0548 signals further strength, but the start of a massive bullish flag is less likely at this point.

Immediate support is now seen at 1.0375. This important level is followed by 1.0310. Below 1.0200, a pivot comes at 1.0149. Distant support is at .9996.

Initial resistance now comes at 1.0500. Key resistance is at 1.0548. This is followed by 1.0622. Above 1.0725, distant resistance is now perched at 1.0793.

NEAR-TERM: Mixed with upside risk
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0152 – 1.0322 (Up)
Previous range: 0.9929 – 1.0219 (Up)

Dollar/Canada rallied to a 2 ½-month high last week and closed above a resistance declining since January 22. My model remains long, but with the oil exploding higher, the risk is on the downside.

Immediate resistance is now seen at 1.0322. The next level is 1.0364. Above 1.0380, strong resistance is between 1.0470 and 1.0485. Distant resistance is at 1.0645.

Initial support comes at 1.0245. Below 1.0190, support is seen at 1.0150. The next floor is at 1.0090. Distant support is now pegged at 0.9980.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 164.98 – 167.14 (Up)
Previous range: 161.73 – 166.14 (Up)

Euro/yen rallied for a fifth consecutive week and to a six-month high and closed above a trendline declining since July. My system is long and the outlook is (still) bullish. Problem here is that the high price was put in place last Monday and after that the cross only traded sideways.

Initial resistance comes at 167.14. Above 167.64, there is a pivot high at next level is 167.64. Distant resistance is seen at 168.86.

Immediate support is at 165.40. This is followed by 164.25. The next level is at 163.40. Below 161.83, distant support remains at 160.30.

NEAR-TERM: Mixed to slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7870 – 0.8033 (Down)
Previous range: 0.7855 – 0.8008 (Up)

The overbought euro/sterling fell sharply last week and this could be construed as a bearish reversal in a possible second top. But the cross alternated up and down weeks for three weeks and this week could be an up week. Moreover, its decline failed to penetrate the trendline rising since last year and the bottom of a triangle. My model went short, but only a close below this line would confirm a significant decline.

Initial support is at 0.7870. Below the strong 0.733 level, support remains at 0.7817. Distant support is at 0.7766.

Immediate resistance is now seen at 0.7933. Above 0.7970, there are pivot highs at 0.8033 and 0.8100. Distant resistance remains at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed L
ONG-TERM: Bullish

Published on  Fri, Jun 20 2008, 06:58 GMT

Friday's CPI report for May is very important, given the newly stated inflation concern at the Fed

Mon, Jun 9 2008, 06:09 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

It was a very confusing week that saw hopes for a recovery in the dollar and an end in the spiraling energy prices smashed into smithereens. Bottom line: the US economy continues to weaken, the credit risk is rising again, and the Federal Reserve opted to focus on inflation rather that on the economy. This is a lethal cocktail for the dollar. And an Israel warning that it will attack Iraq to stop it from making nukes propelled the oil price to record levels and limit up.

United States
The dollar ended the week miserably lower versus the euro, franc and Aussie, but up against the loonie. That’s not what the market expected.

Federal Reserve Chairman Bernanke came out of the left field on Tuesday and boosted the US currency by saying that policy makers are “attentive” to the impact of the falling dollar. He also said that interest rates are well positioned to promote growth and stable prices, but that’s not really important to traders.

But in hindsight, that was only a pre-emptive move made by ECB President Trichet, who basically pledged to tighten borrowing costs as early as next month. The dollar then plunged.

There was also an economic trap.

Initial data was fairly supportive for the US currency.

The Institute for Supply Management's manufacturing index rose to 49.6 in May from 48.6 in April. That’s nice, but fifty is of course the dividing line between contraction and expansion, and the index was last above it back in January.

Meanwhile, the services Institute for Supply Management's index fell to 51.7 in May from 52 in April.

Factory goods orders accelerated by a more-than-expected 1.1 percent in April after an upwardly revised increase of 1.5 percent in March (from +1.3 percent).

Productivity was revised to a slightly faster-than-expected 2.6 percent annual rate in the first quarter from a previously estimated 2.2 percent rate.

But then, the unemployment data was released. The dollar succumbed on Friday on news that the jobless rate increased to 5.5 percent in May from 5 percent, in the biggest jump since February 1986. It could easily reach 6 percent by the end of the year. Non-farm payrolls fell by a less than expected 49,000, but the April contraction was revised to 28,000 from –20,000 and the March decline became –88,000 from –81,000. The number was apparently bumped by teenagers seeking summer jobs (one month early), but I don’t expect a massive improvement next month. The horror show is only starting.

The ADP index showed that companies added 40,000 jobs in May after an upwardly revised gain of 13,000 for the prior month. There goes its ability to forecast the real jobless report.

Initial jobless claims decreased by 18,000 to 357,000 in the week that ended May 31 after the previous week’s number was bumped up by 3,000 to 375,000. This way, the “improvement” looks better!

Elsewhere, construction spending contracted another 0.4 percent in April after an upwardly revised 0.6 percent drop the prior month.

The Eurozone
The euro/dollar aggressively reversed late last week from a three-week low after European Central Bank President Trichet signaled a possible rise in euro zone interest rates in July. All eyes will now be on 1.6000.

Economic fundamentals didn’t matter for this currency on steroids.

German manufacturing orders fell 1.8 percent in April and this is the fifth consecutive month if contraction. However, orders rose 15 percent in the year.

Industrial production in Germany unexpectedly declined 0.8 percent in April and the March report was revised to -0.8 percent from -0.5 percent.

There was no reaction to news that the European manufacturing PMI slipped to 50.6 in May from 50.7 in April.

The Eurozone GDP was revised upward to 0.8 percent in the first quarter from an earlier estimate of 0.7 percent.

Meanwhile, the Eurozone CPI fell to 3.3 percent in April from 3.6 percent on a yearly basis.

The Eurozone retail sales fell 0.6 percent in April and 2.9 percent on the year, amid surging fuel and food prices.

Eurozone services PMI slipped to 50.6 in May from 52 in April.

Japan
Dollar/yen ended oddly unchanged, and looks too expensive at these levels.

Japanese capital spending declined 4.9 percent on a yearly basis in the first quarter of 2008.

The UK
The sterling/dollar was only able to recover its losses and remained the weakest of the European currencies. But then the UK has US-style problems.

The pound got clobbered on Monday following another batch of weak data, which suggests the UK economy is approaching recession fast.

Manufacturing PMI fell to 50 in May, signaling no expansion, according to the Chartered Institute of Purchasing and Supply.

Another bit of information that highlighted the dire straits of the housing sector, mortgage approvals fell 58,000 in April, the lowest since 1999.

UK services PMI fell to 49.8 in May, for the first time in five years, and of course a reading below 50 means contraction.

Along the same lines, the Nationwide Building Society's consumer sentiment index fell 1 point to 69, the lowest since the survey started in May 2004.

The cost of an average home fell 2.4 percent in May to the lowest since September 2006, and 3.8 percent from a year earlier.

Canada
Dollar/Canada rallied aggressively last week on expectations that the Bank of Canada will cut rates this week to help the local economy, which contracted in the first quarter. The weakness in US consumption started to take its toll to our Northern neighbor’s exports.

Ivey PMI index rose to 62.5 in May from 57.6 in April.

The economy added 8,400 jobs in May because employers hired 40,600 part-time workers and fired 32,200 full-time staff. The unemployment rate was unchanged at 6.1 percent.

Canadian building permits surged 14.5 percent in April after falling 4.6 percent in March.

Switzerland
Dollar/Swiss franc plunged late last week in sympathy with the euro’s gains, and an Israel warning that it will bomb Iraq to stop it from making nukes propelled both the oil price and the Swissy.

The Swiss economy slowed to 0.3 percent in the first quarter from a downwardly revised 0.9 percent in the final quarter of last year (initially estimated at 1 percent).

Australia
The Australian dollar ended the week higher. That’s because it has the strongest economy among the commodity exporters, high yields and China still needs all of its minerals.

As universally expected, the RBA left its overnight cash rate target at a 12-year high of 7.25 percent to see whether the economy is slowing enough to dampen the fastest inflation since 1991.

The GDP grew rose 0.6 percent t in the first quarter, twice as fast as expected, but that was down from the fourth quarter, when it increased a revised 0.7 percent.

Retail sales fell 0.2 percent from March, when they climbed a revised 0.2 percent.

The trade deficit narrowed in April to A$957 million, the smallest gap in 14 months, from a revised A$2.55 billion in March.

This Week's Data and Events

United States
The US economic calendar will begin on Tuesday with the release of the trade balance report for April. It should show a worsening of the deficit.

Thursday will see the release of the retail sales report for May and of the manufacturing and trade inventories report for April.

Friday’s CPI report for May is very important, given the newly stated inflation concern at the Fed.

The final University of Michigan survey report for May is due on Friday as well.

The Eurozone
The Eurozone economic agenda will open on Monday with the release of Germany’s trade balance report for April.

The French and Italian industrial production reports for April are due on Tuesday, along with the final Italian first quarter GDP.

Wednesday will see the release of the French CPI report for May.

The Eurozone industrial production report for April is due on Thursday.

Finally, Friday will see the final CPI data for France and Italy, and the Bank of France Business Sentiment report for May.

Japan
Japan’s economic calendar will start on Tuesday with the release of the important machinery orders report for April.

On Wednesday, there will be the current account balance report for April and the final GDP reading for the first quarter.

The industrial production report for May will be seen on Friday.

The UK
The UK economic agenda will start on Monday with the release of the input/output PPI report for May.

Tuesday will see the release of the BRC retail sales report for May, RICS house price balance for May, DCLG house prices report for April and industrial production report for April. Fasten your seatbelt.

The trade balance and the unemployment reports for April are due on Wednesday.

On Thursday, the Bank of England will release its quarterly inflation report.

Canada
Canada’s economic calendar will begin on Tuesday with the release of the merchandise trade report for April.

The same day, the Bank of Canada is likely to cut rates by 25 basis points to 2.75 percent.

Wednesday will see the release of the new housing price report for April and the industrial capacity reading for the first quarter.

The manufacturing shipments survey for April is due on Friday.

Overview

Euro/dollar
Last week's range: 1.5367 – 1.5776 (Up)
Previous range: 1.5463 – 1.5817 (Down)

The euro/dollar’s weakness expired abruptly early Thursday and since then the pair surged with help from the tough talk from ECB. It closed above the resistance line declining since April 22 and the outlook is pretty bullish now. The market wants to see 1.6000 again.

Initial resistance is at 1.5817. Above it, euro/dollar retains additional resistance at 1.5930. Further resistance is then seen at 1.6020 and 1.6135.

Immediate support is now seen at 1.5740. Strong support follows at 1.5650. The next level is 1.5565. Below 1.5541, euro/dollar now has distant support at 1.5367.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 103.88 – 106.42 (Mixed)
Previous range: 103.13 – 105.73 (Up)

Dollar/yen rallied to a 3 1/2-month high by Thursday, with the Gann pivots helping all along. But it then collapsed on Friday and made a bearish reversal, and my model went short. Only a close below 104.50 would warrant further weakness.

So, support is seen at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. The next level comes at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.

Above 105.00, resistance is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. The next level is at 106.83. Distant resistance is perched at 107.92.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9462 – 1.9774 (Mixed)
Previous range: 1.9624 – 1.9964 (Down)

Sterling/dollar sank sharply through early Thursday and then rallied aggressively to recover these losses. My model is long but I expect mostly directionless trading.

Initial resistance now comes at 1.9745. Above the pivot high at 1.9850, there is further resistance at 1.9960. Distant resistance comes at 2.0025.

Immediate support is still seen at 1.9640. The next level is 1.9585. This is followed by 1.9462. Distant support remains at 1.9338.

NEAR-TERM:Mixed
MEDIUM-TERM:Mixed
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0187 – 1.0521 (Down)
Previous range: 1.0223 – 1.0527 (Up)

Intense sales since early Thursday sent dollar/Swiss to a 1 ½-month low. My model remains short.

Immediate support is now seen at 1.0135. This is followed by 1.0015. Support is then pegged at .9985. Distant support is at .9850.

Initial resistance now comes at 1.0250. This is followed by 1.0325. Above 1.0525, distant resistance comes at 1.0620.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9929 – 1.0219 (Up)
Previous range: 0.9825 -.9979 (Up)

Dollar/Canada rallied for six consecutive days to reach a five-week high. My model remains long, but with the oil exploding higher, the risk is on the downside.

Immediate resistance is now seen at 1.0270. The next level is 1.0325. Above 1.0380, strong resistance is at 1.0485.

Initial support comes at 1.0130. Below 1.0070, support is seen at 1.0010. Distant support is now pegged at 0.9820.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 161.73 – 166.14 (Up)
Previous range: 162.28 – 164.47 (Up)

Euro/yen reversed sharp losses to rally for a fourth consecutive week and to the highest levels since late December. My system is long and the outlook bullish.

Key resistance comes at 166.14. Above the pivot high at 166.66, the next level is 167.64. Distant resistance is seen at 168.86.

Immediate support is at 165.00. This is followed by 164.25. The next level is at 163.40. Below 161.83, distant support remains at 160.30.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7855 – 0.8008 (Up)
Previous range: 0.7833 – 0.7984 (Down)

Euro/sterling rallied the last three days of the week and closed above a resistance line declining since April 17. My model went long, but only another close above this line signals more strength.

Immediate resistance is now seen at 0.8034. Above 0.8100, distant resistance is then seen at 0.8155.

Initial support is at 0.7972. Below the strong 0.7974 level, support comes at 0.7817. Distant support is at 0.7766.

NEAR-TERM: Mixed with upside bias
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Mon, Jun 9 2008, 06:09 GMT

The factory goods orders report for April is due on Tuesday

Tue, Jun 3 2008, 06:28 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The financial markets got a little euphoric last week, as some of the US economic data suggested that recession has been avoided so far. Hope is nice, but doesn’t have a long shelf life. The economic growth remains under pressure, but the Fed will first hike rates to fight inflation, so the recession will be extended. The dollar looked pretty last week, but this rosy picture is unlikely to last.

United States
The dollar rallied last week against most of the major, and only cable held its own, despite the UK’s housing, economic and inflationary problems. A drop in oil prices was taken as the possible burst of the insane commodity bubble, but one should be very careful when jumping in front of a speeding train. Other commodities fell as well, but the our-of-control spec has not been leashed in. The CFTC is investigating US crude oil trading to determine whether the surge in prices to record levels is the result of manipulation or fraud. Earlier in the week, the NYMEX increased margins on futures by about 6.5 percent, not enough to plaster specs. The Conference Board's confidence index declined more than forecast to 57.2, the lowest level since October 1992, from an upwardly revised 62.8 in April (from a previously reported 62.3). The sub-index of present conditions fell to 74.4 in May from 81.9 in April, while the expectations sub-index for the next six months declined to 45.7 from 50.0.

New-home sales unexpectedly expanded 3.3 percent to an annual pace of 526,000 in April after readings for the prior month were revised down to a 509,000 rate (from 526,000), which was the lowest in 17 years. So, it was a wash, really. On an annual basis, it fell but fell 42 percent.

But the S&P/Case-Shiller home-price index contracted 14.4 percent in March on a yearly basis, following a 12.7 percent decline in the 12 months ended in February. The dollar rallied in Wednesday on news that the durable goods orders fell only 0.5 percent in April following a 0.3 percent drop in March. Ex- transportation, orders rose 2.5 percent, the biggest gain since July, after a previously reported 1.5 percent gain for March. Orders for non-defense capital goods excluding aircraft expanded 4.2 percent, the most this year.

The GDP was revised upward to 0.9 percent in the first quarter, as expected, from 0.6 percent because of lower demand for imports and a rise in investment in non-residential structures. The economy grew 0.6 percent in the fourth quarter of 2007. Consumer spending was left at a 1.0 percent increase for the first quarter.

Initial claims for state unemployment insurance benefits climbed to 372,000 in the week ended May 24 from an (as almost always) upwardly revised 368,000 for the prior week.

Consumer spending slowed to 0.2 percent in April from 0.4 percent in March as income gains weakened to 0.2 percent from a revised +0.4 percent increase in March. Disposable income also slowed to 0.2 percent from +0.3 percent the previous month.

The Chicago PMI rose in May to 49.1 from a seasonally adjusted 48.3 in April.

The final reading of the University of Michigan index of consumers’ confidence was revised up to 59.8 from 59.5 in May, but remained below from April's 62.6.

The Eurozone
The euro/dollar fell broadly last week, but is stuck in an inside range, so this weakness should not last much longer. The ECB won’t cut rates any time soon, given the inflation situation, while the Fed may hike rates for the same reason. The Eurozone inflation accelerated to 3.6 percent in May, matching a 16-year high, from 3.3 percent in April. French producer prices rose 0.7 percent in April from 0.6 percent in March; core PPI increased 0.3 percent. On an annual basis, the PPI rose 5.4 percent. Germany's seasonally adjusted jobless rate remained unchanged at 7.9 percent in May, but the number of jobless rose 4,000 versus expectations for a decline of 25,000.

Retail sales in Germany unexpectedly contracted 1.7 percent in April on top of 2.2 percent decline in March. On a yearly basis, sales fell 1 percent.

The Eurozone consumer confidence sank to –15 in May, a 32-month low, from -12 in April. Meanwhile, the economic sentiment index remained unchanged at 97.1 and the business climate indicator improved to 0.54 from April's revised 0.43. Confidence among French executives fell four points to 102 in May, the lowest in more than two years, from 106 in April. In addition, French housing starts fell 18.8 percent in April. In the same vein, the French consumer confidence index fell to -41 in May, the lowest level since the series began in 1987, from April's -38. Italy services confidence rises to 19 in May from 4 in April. GfK AG's measure of confidence among German shoppers declined to 4.9 in June from 5.6 in May. Meanwhile, Italian business confidence rose to 89.6 in May from 87.6 in April. The German GDP was confirmed to have grown 1.5 percent in the first quarter. German import prices rose 0.9 percent in April and 5.7 percent on a yearly basis, the same as in March. Meanwhile, the Eurozone unemployment remained at a record low of 7.1 percent in April.

Elsewhere, the Eurozone current account came in at a deficit of 7.8 billion euros in March from a revised surplus of 8.1 billion euros in February.

Japan
Dollar/yen rallied to a three-week high, but in the last five weeks it had only alternated up and down weeks, so this week should ease slightly. But the uptrend remains in place. The Japanese economy should expand less than initially expected, but this is still more than the US will. Japanese retail sales rose only 0.1 percent in April on a yearly basis, well below a revised 1.0 percent increase in March. Household spending fell 2.7 percent in April from a year earlier, the most since September 2006. The jobless rate rose to a seven-month high of 4 percent in April from 3.8 percent in March and industrial output fell 0.3 percent in April.

Housing starts contracted 8.7 percent in April on a yearly basis after another contraction of 15.6 percent in March. Core consumer prices rose 0.9 percent from a year earlier after surging 1.2 percent in March, the fastest rate since 1998. Meanwhile, core inflation in Tokyo accelerated to a decade high of 0.9 percent in May.

The UK
The sterling ahs made little progress against the dollar during the past week. The upside looks limited, unlike the UK economic problems. The housing sector remains in a tight place. Nationwide's house price index contracted 2.5 percent in May, the biggest decline since the survey began in 1991. On a yearly basis, it fell 4.4 percent. Still, mortgage approvals rose 9 percent in April but fell 39 percent from a year earlier, according to BBA. The CBI retail sales balance improved to -14 in May from -26 in April, and the pound drew support on Thursday. The pound fell on Friday on news that local consumer confidence fell to -29 in May, the lowest since November 1990, according to GfK NOP.

Canada
Dollar/Canada surged on Friday on news that the economy faltered early this year. Dollar/Canada surged on Friday on news that the Canadian GDP contracted 0.1 percent in the first quarter from 0.8 percent in the fourth quarter. Certainly, this small decline can easily be revised upward, but the damage from a strong currency and weakening US demand for Canadian exports is clearly taking their toll. This is the only G7 economy to have contracted so far.

Inflation remained in place, as industrial product prices rose 1.4 percent in April, while raw materials prices rose 5.1 percent.

Switzerland
Dollar/Swiss franc has alternated up and don weeks for five weeks. Last week’s gains preserved the uptrend, but the upside looks limited. The employment rate in the Switzerland increased at a faster pace of 2.8 percent in the first quarter on a yearly basis than expectations for 2.6 percent.

Australia
The Australian dollar made little progress last week, as the market is careful near the top while commodities at least look like turning lower.

This Week's Data and Events

United States
The US economic agenda will open on Monday with the release of the ISM manufacturing PMI report for May and of the construction spending report for April. Keep your eyes on the PMI report.

The factory goods orders report for April is due on Tuesday.

The non-farm productivity report for the first quarter will be seen on Wednesday.

It’s the first Friday of the month, so prepare for some volatile morning following the release of the nonfarm payrolls and unemployment rate for May. With the market vacillating between recession and lack of, this report should be very important for FX.

The Eurozone
The Eurozone economic agenda will begin on Monday with the release the manufacturing PMI report for May. Tuesday will see the release of the Eurozone GDP for the first quarter and of the PPI report for April.

The Eurozone services PMI report for May and the retail sales report for April are due on Wednesday. On Thursday, the ECB will leave its refi rate unchanged at 4.0 percent. The same day, be on the lookout for the German factory orders report for April. The week will end with the release of the German industrial production report for April.

Japan
Following the avalanche of data last Friday, the Japanese economic calendar doesn’t feature any significant reports this week.

The UK
The UK calendar will start on Monday with the release of the Halifax house report for May. A weak reading is likely. The manufacturing PMI report for May is due on Wednesday. On Thursday, the Bank of England will leave rates unchanged at 5.0 percent.

Canada
Canada’s economic calendar will start on Thursday with the release of the Ivey Purchasing Managers report for May. The unemployment rate for May is likely to have remained unchanged at 6.1 percent. The report is due on Friday.

Overview

Euro/dollar

Last week's range: 1.5463 – 1.5817 (Down)
Previous range: 1.5487 – 1.5811 (Up)

The euro/dollar sank last week to form a bearish engulfing pattern. My model went short. (Follow my daily reports for timing). Last time that happened, the pair fell for another week. The interim inversed head-and-shoulders is out, but I’m not sure how much more weakness we will see. Initial resistance is at 1.5643. Above 1.5817, euro/dollar retains additional resistance at 1.5930. Distant resistance is then seen at 1.6020 and 1.6135. Immediate support is now seen at 1.5463. The next level is 1.5415. Below 1.5287, euro/dollar now has distant support at 1.5225.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 103.13 – 105.73 (Up)
Previous range: 102.73 – 104.68 (Down)

Dollar/yen rallied to a three-month high late last week, but the Gann pivots were stubborn again, and I don’t expect much more strength. My model went long on Tuesday – quite timely. Immediate resistance is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. The next level is at 106.83. Distant resistance is perched at 107.92. Strong support is now seen at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. The next level comes at 103.40 from a 50-point pivot, which targets 102.90 and 103.90.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9624 – 1.9964 (Down)
Previous range: 1.9454 – 1.9850 (Up)

Sterling/dollar has alternated up and down days for the last seven days. My model remains long, but once again, I’m not sure that cable will rally much more. Initial resistance remains at 1.9850. Above 1.9880, there is further resistance at 1.9960. This is followed by 2.0025. Distant resistance comes at 2.0155. Immediate support is still seen at 1.9755. The next level is 1.9675. This is followed by 1.9585. Distant support is the pivot low at 1.9338.

NEAR-TERM:Mixed to slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0223 – 1.0527 (Up)
Previous range: 1.0235 – 1.0572 (Down)

Dollar/Swiss rallied last week but got stuck in an inside range. My model remains short though; given the break below the rising trendline, the outlook is negative. Immediate support is now seen at 1.0390. This is followed by 1.0335. The bottom of the rising channel looms at 1.0290. Support is then pegged at 1.0215. Distant support is at .9985. Initial resistance now comes at 1.0525. This is followed by 1.0622. Distant resistance remains at 1.0720.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9825 -.9979 (Up)
Previous range: 0.9820 – 1.0003 (Down)

A massive rally on Friday overturned losses on the week, but dollar/Canada was confined to an inside range. My model went long again, but I expected choppy trading. Immediate resistance is now seen at 0.9979. The next level is 1.0017. Above 1.0065, strong resistance is at 1.0170. Distant resistance is perched at 1.0325. Initial support is at 0.9874. Below 0.9756, support comes at 0.9670. Distant support is now pegged at 0.9490.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Euro/yen
Last week's range: 162.28 – 164.47 (Up)
Previous range: 161.46 – 163.86 (Up)

Euro/yen rallied for a third consecutive week, which matched my bias on the upside. My system went long, but I need more confirmation for further strength, as the cross has been prodding long-term resistance since Wednesday. Key resistance comes at 164.47. Above the pivot high at 164.96, distant resistance is seen at 166.66. Immediate support is at 163.10. This is followed by 162.35. The next level is at 161.30 and distant support is now seen at 160.30.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7833 – 0.7984 (Down)
Previous range: 0.7926 - .08034 (Mixed)

Euro/sterling fell last week following a doji in the previous week. My model is short, but only a close below 0.7855 signals another downmove. Below this level, support comes at 0.7817. Below the pivot low at 0.7766, distant support remains at 0.7670. Immediate resistance is now seen at 0.7894. This is followed by 0.7935, 0.7984 and 0.8035. Above 0.8100, distant resistance is then seen at 0.8155.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bullish

Published on  Tue, Jun 3 2008, 06:28 GMT

The US markets are closed on Monday for the Memorial Day

Wed, May 28 2008, 06:04 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

Dreams that the US economy will be able to skirt recession were doused last week, when the Federal Reserve practically acknowledged stagflation. The out of control oil price will only accelerate the misery. The dollar fell last week as optimism faded, and the selling pressure should continue.

United States
The Federal Reserve on Wednesday slashed its 2008 US economic growth forecast and signaled that mounting concerns over inflation would make further interest rate cuts unlikely. The dollar got hurt, and its pain should only increase. The oil price is surging, we are getting desensitized to that and what we will pay next time at the pump, and reasons of dubious significance abound. No, we haven’t sucked the oil fields dry, but spec at a variety of levels makes it look like that. The housing sector remains under pressure, as years of ridiculous excess are being unwound. There is no medium-term cure, and the long-term outlook is pretty bleak for the US economy.

The dollar should remain under pressure, as the ECB will not cut rates any time soon, while the BoE can’t afford to do it anymore. But I don’t expect a rapid meltdown of the US currency.

The index of leading economic indicators rose 0.1 percent in April, as expected. The report was rightfully ignored, although some read that the US economic weakness is bottoming.

PPI rose by only 0.2 percent in April after gasoline prices (at the time) sank, but core PPI increased by 0.4 percent, twice as in the previous month. OK, perhaps a fair “assumption” is that gasoline prices surged after that??

Elsewhere, the Chicago Fed said its National Activity Index contracted 1.17 in April from a downwardly revised -0.98 in March, originally reported at -0.78. The index has been negative since August, suggesting below-trend growth.

Sales of existing homes fell 1 percent to an annual rate of 4.89 million in April. We obviously haven’t seen the worst yet.

First-time claims for state unemployment fell by 9,000 to 365,000 from an upwardly revised 374,000 (from 371,000) for the prior week. Initial claims were the lowest since the week ended April 5.

The Eurozone
The euro/dollar rallied last week and there little to slow its advance. More strength is likely, and the uptrend looks in good shape.

There was no drag on the euro following news that the ZEW index of German investor and analyst expectations declined by a more than expected - 41.4 from - 40.7 in April.

German business confidence unexpectedly increased in May, according to Ifo institute. Its business climate index rose to 103.5 from 102.4 in April, the current business situation sub-index rose to 110.1 in May from 108.4 in April, while the expectations for future business sub-index rose to 97.3 from 96.7.

Along the same lines, Italian consumer confidence rose to 103.2 in May, its highest level since December 2007, from April's revised reading of 99.9.

Elsewhere, Italian retail sales declined 0.5 percent in March, more reversing an increase of 0.2 percent in February, and contacted 1.0 percent on a yearly basis after expanding 2.7 percent in February.

Finally, the Eurozone industrial new orders unexpectedly fell 1% in March from a revised growth of 0.2% in February, and 2.5% on a yearly basis, from 9.9% in February.

The Eurozone manufacturing PMI fell to a five-year low in May of 51.1 from 51.9 in April. The German manufacturing PMI slipped to 53.5 from 53.6 and the French one to 51.3 from 52.9 in April.

Meanwhile, the Eurozone services PMI fell from 52.0 to 50.6.

France reported that personal consumption in April fell 0.8 percent, while the March decline was revised upward to -1 percent from -1.7 percent.

Japan
Japanese accounts couldn’t make up their mind last week and dollar/yen closed only slightly lower. There is little reason to expect a departure from this consolidation.

Japan's trade surplus fell a more than expected 46.3 percent in April from a year earlier. Exports rose 4.0 percent and imports by 11.9 percent.

The tertiary index increased only 0.3 percent in March after declining a revised 1.6 percent in February. Meanwhile, all-industries index, which includes the tertiary activity index, rose 0.5 percent in March.

The Bank of Japan kept interest rates on hold at 0.5 percent, as universally expected, after reducing its growth estimate and giving up a two-year policy of seeking higher borrowing costs.

The UK
Unexpectedly strong economic data pushed the sterling/dollar higher and above the declining trendline. It looks great, but I think too great - the UK economy remains weak.

The Bank of England voted 8-1 to keep the benchmark interest rate at 5 percent in May, thus opting to fight inflation at the detriment of helping the sagging economy.

UK retail sales fell only 0.2 percent in April and March’s 0.4 percent contraction was revised upward to -0.2 percent. The annual growth rate in April came in at 4.2 percent.

The CBI trends survey showed a rise in the price expectations balance to +30 in May from +25 in April. This is another 13-year high and supports fears of inflation.

Finally, the UK GDP for he first quarter remained at 0.4 percent, which is the slowest pace since 2005.

Canada
Dollar/Canada sank last week amid surging oil and other commodities, but its weakness is overdone.

Heavy snowfall at the end of the Canadian winter dampened March retail sales, which edged up just 0.1 percent despite gains in the heavyweight auto sector, after contracting 0.7 percent in February.

Wholesale sales rose 0.6 percent in March following February's revised drop to 2.1 percent from 1.8 percent.

There was little reaction to news that the composite leading indicator climbed 0.1 percent in April as expected, after being flat in March.

Meanwhile, consumer prices rose 0.8 percent in April, the fastest in more than a year, and 1.7 percent from a year earlier. The monthly core inflation rate was 0.3 percent and the yearly rate advanced 1.5 percent from 1.3 percent in March.

International investors bought C$5.3 billion of Canadian securities, led by C$5.94 billion of stocks, the highest since May 2006. They also sold C$401 million of Canadian bonds and C$239 million of money-market paper.

Switzerland
Dollar/Swiss franc fell last week and technically remains weak.

Australia
The Australian dollar surged further, as the RBA is issuing more debt and reducing some taxes. Naturally, high commodity prices didn’t hurt a bit.

This Week's Data and Events

United States
The US markets are closed on Monday for the Memorial Day.

The economic agenda will open in force on Tuesday with the release of the Conference Board Consumer Confidence report for May and the New Home Sales report for April. Both reports are important and both are expected to be lousy.

Wednesday will see the release of the volatile Durable Goods Orders report for April.

The revision of the GDP report for the first quarter is due on Thursday.

Friday is chuck full of market-moving reports: the Personal Spending and Income report for April, the Chicago PMI report for May and the University of Michigan survey for June.

The Eurozone
The Eurozone economic calendar will begin on Tuesday with the release of the revision of the German GDP report for the first quarter, the German GfK Consumer Confidence report for June, the French Business Survey for May, and the Italian Business Confidence report for May.

Germany’s CPI and the French Consumer confidence reports for May are due on Wednesday.

Thursday will see the release of the German Unemployment report for May, and the Eurozone retail PMI, the Eurozone Business Climate Indicator, Consumer Confidence, Economic Sentiment Indicator and Industrial Confidence reports for May.

Germany’s Retail sales and the Eurozone Unemployment Rate reports for April are due on Friday. The first one is important.

Japan
The Japanese economic reports will be released in bulk on Friday: the CPI National report for April and of the Tokyo CPI report for May, the Unemployment Rate, the Household Living Expenditures, the Industrial Production, and the Housing Starts reports for April.

The UK
The UK markets are closed on Monday for a Bank holiday.

The economic calendar begins on Wednesday with the release of the Nationwide House Prices and the CBI distributive trades reports for May.

The GfK consumer confidence report for May is due on Friday.

Canada
There are no significant economic reports due for release in Canada this week.

Overview

Euro/dollar
Last week's range: 1.5487 – 1.5811 (Up)
Previous range: 1.5367 – 1.5600 (Up)

The euro/dollar rallied to a one-month high last week and recovered more than 61.8% of the decline between April 23 and May 8. An interim inversed head-and-shoulders worked fine and the pair should march higher. My model remains long.

Initial resistance is at 1.5811. Above 1.5865, euro/dollar faces additional resistance at 1.5930. Distant resistance is then seen at 1.6020 and 1.6135.

Immediate support is now seen at 1.5700. The next level is 1.5655. This is followed by 1.5610. Below 1.5570, euro/dollar now has distant support at 1.5460.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 102.73 – 104.68 (Down)
Previous range: 102.58 – 105.43 (Up)

Dollar/yen was all over the place, but nowhere clear, and was stuck in an inside range. The Gann pivots helped the survival. My model remains short, and this is a good strategy.

Sticky support is still seen at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. The next big level is 102.30 from another 50-point pivot, which targets 101.80 and 102.80. Distant support is at 101.25 from a 50-point pivot, which targets 100.75 and 101.75.

Immediate resistance is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Distant resistance remains at 105.60 from a 50-point pivot that targets 105.10 and 106.10.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9454 – 1.9850 (Up)
Previous range: 1.9365 – 1.9633 (Up)

Sterling/dollar surged to a three-week high and recovered over 38.2% of the downtrend since March. My model remains long, but I’m not sure that cable will rally much more.

Initial resistance now comes at 1.9850. Above 1.9880, there is further resistance at 1.9960. This is followed by 2.0025. Distant resistance comes at 2.0155.

Immediate support is now seen at 1.9755. The next level is 1.9675. This is followed by 1.9585. Distant support is the pivot low at 1.9338.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0235 – 1.0572 (Down)
Previous range: 1.0389 – 1.0600 (Mixed)

Dollar/Swiss has alternated up and down weeks for four weeks and ended at a one-month low after closing below the rising trendline. My model remains short and the outlook is only cautiously negative.

Immediate support is now seen at 1.0235. This is followed by 1.0020. The target of a double top is 1.0115. Support is then pegged at 1.0020. Distant support is at .9950.

Initial resistance now comes at 1.0335. A break above this level would signal a test of 1.0040. This is followed by 1.0545. Distant resistance now comes at 1.0622.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9820 – 1.0003 (Down)
Previous range: 0.9944 – 1.0108 (Down)

Dollar/Canada fell for the third consecutive week and the selling pressure should persist, but at a slower pace. Key support now comes at 0.9756 from the bottom of the Ichimoku cloud on a weekly basis.

Initial support is at 0.9820. Below 0.9756, support comes at 0.9670. Distant support is now pegged at 0.9490.

Immediate resistance is now seen at 0.9894. The next level is 0.9970. This is followed by 1.0017. Above 1.0065, strong resistance is at 1.0170. Distant resistance is perched at 1.0325.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Euro/yen
Last week's range: 161.46 – 163.86 (Up)
Previous range: 158.67 – 162.95 (Up)

Euro/yen broke higher from an inside range but didn’t impress on the upside. The bias remains on the upside, and my system went long.

Immediate support is at 162.00. This is followed by 161.25. The next level is at 160.10. Distant support is still in place at 158.63.

Initial resistance comes at 163.860. The next resistance is at 164.25. Above the pivot high at 164.96, distant resistance is seen at 166.66.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7926 - .08034 (Mixed)
Previous range: 0.7877 – 0.7987 (Up)

Euro/sterling climbed up to a one-month high, but closed the week unchanged. My model remains long, but we may be facing a doji, hence a bearish reversal.

Immediate resistance is still seen at 0.7987. This is followed by 0.8035. Above 0.8100, the next level is 0.8155. Distant resistance is then seen at 0.8270.

Immediate support remains at 0.7925. The next levels come at 0.7890 and 0.7845. Below the pivot low at 0.7766, distant support remains at 0.7670.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish

Published on  Wed, May 28 2008, 06:04 GMT

The US economic agenda will open on Monday

Mon, May 19 2008, 06:18 GMT
by Cornelius Luca

GFT

We have been treated to an appetizing array of strong US reports that seem to tell us that recession talk is for the wimps. But the cold fact is that consumer confidence is down, jobs are disappearing and the housing sector is a disaster.

The dollar fell last week and this seems to have been the end of its recovery. The dollar should encounter more weakness this week.

United States
The dollar sank aggressively and comprehensively on Friday, as a series of good economic reports failed to pull the wool over the eyes of traders. We are in a recession and this will get only worse as we go into the end of the year. Optimists about the new-found strength of the dollar should be disappointed. More weakness is in the store.

The dollar rallied early in the week following a better than expected retail sales report. They fell 0.2 percent in April following an unrevised 0.2 percent increase in March. But ex-auto sales, retail sales increased by 0.5 percent in April on top of a 0.4 percent increase in March.

CPI rose a smaller-than-expected 0.2 percent in April and the core CPI expanded only 0.1 percent. Energy prices were unchanged after a 1.9 percent rise in March, as gasoline prices dropped 2 percent but rose 15.9 percent on a yearly basis. Low inflation? You got to be joking!

Housing starts rose by a surprisingly strong 8.2 percent at a 1.032-million-unit annual rate in April from an upwardly revised 954,000-unit rate in March, while permits gained 4.9 percent to 978,000 from an upwardly revised 932,000 in March. The report boosted the dollar on Friday, but didn’t come close to fixing the housing sector. This is only a brief and insignificant recovery.

The preliminary University of Michigan Survey of consumer confidence fell to 59.5 in May, its lowest level since June 1980, from April’s 62.6.

Business inventories edged up 0.1 percent in March following a revised 0.5 percent increase in February. Meanwhile, the volatile sales jumped 1.0 percent in March after falling by 1.0 percent in the previous month.

The Philly Fed survey of manufacturing conditions improved to -15.6 in May from -24.9 in April. But that’s still six consecutive months in negative territory. The current employment index rose to -1.0 from -11.1.

Industrial production contracted 0.7 percent in April from a downwardly revised 0.2 percent gain in March. Capacity utilization fell to 79.7 percent, the lowest since September 2005, from 80.4 percent the prior month.

The New York Federal Reserve Bank’s "Empire State" manufacturing activity index fell in May to -3.23 from 0.63 in April. Adding insult to injury, the prices paid measure of inflation rose to 69.57, the highest since the start of the report in July 2001, from April’s 57.29. The weak report briefly hurt the dollar.

Initial claims for unemployment benefits rose 6,000 to 371,000.

Treasury International Capital (TIC) data for March 2008 showed that net foreign purchases of long-term securities were $80.4 billion. Of this, net purchases by foreign official institutions were $48.1 billion, and net purchases by private foreign investors were $32.1 billion.

The Eurozone
The euro/dollar marched higher last week and this confirms the end of its corrective decline. It should gain further.

Germany's GDP surged 1.5 percent in the first quarter, five times the rate of the fourth quarter, and French GDP rose by 0.6 percent. This helped the Eurozone GDP to increase 0.7 percent. At the other end, the US GDP edged up only 0.1 percent in that period.

Italian industrial production fell by 0.2 percent for the second consecutive month in March, and this brought the annual growth down from -0.7 percent to -2.5 percent. Overall, the German, French and Italian data suggest a decline in the Eurozone production.

Meanwhile, the Eurozone industrial production growth fell by 0.2 percent in March, following the weak reports from the regional economies. The annual growth rate slowed to 2.0 percent from 3.2 percent.

French current account deficit widened to 2.5 billion euros in March from 1 billion euros in February.

The Eurozone unexpectedly reported a trade deficit of 2.3 bln in March euros compared with a 1.6 billion euro surplus the month before.

Japan
Dollar/yen barely managed to hold on to some of the gains made earlier in the week. While the trading range should continue, the selling pressure should persist.

Japan's economy grew a more than expected Japan expanded 0.8 percent in the first quarter and 3.3 percent on an annual basis, but the fourth-quarter GDP was revised sharply down to 2.6 percent from 3.5 percent. A wash.

The current account surplus fell 12.3 percent in March from the same month a year earlier.

Machinery orders fell more than expected by 8.3 percent in March from February, when they contracted 12.7 percent.

The industrial production was revised downward to -3.4 percent in March from a 3.1 percent fall in a preliminary reading. The capacity utilization index fell 3.5 percent from a month earlier.

The UK
The sterling/dollar ended the week higher, but that requires significant effort, as it had to reverse from a new low for the downtrend.

Initially, it sank against the euro and dollar on Tuesday.

UK producer prices expanded 2.6 percent in April and 23.3 percent on the year to a record high. The report will stop the MPC from cut interest rates any faster.

Also, consumer prices rose 0.8 percent in April, the fastest pace since May 2001. This helped thee annual CPI to accelerate to 3 percent in April from 2.5 percent in March. The core annual inflation came in at 1.4 percent. Inflation has exceeded the central bank's 2 percent target for seven months.

The RICS house price balance fell by 15.7 points to -95.1 percent in March.

Meanwhile, house prices grew 5.2 percent in March from the previous year, according to DCLG.

The trade deficit narrowed to 4.0 billon pounds in March from 4.3 billon pounds in February.

The Bank of England’s May Inflation Report suggests that its MPC will not cut rates. The CPI forecast has been revised up sharply from February’s Report, while the forecast for GDP growth has been pulled down quite sharply to just 1 percent at the end of 2008 before recovering in 2009.

The claimant count measure of unemployment rose by a fairly hefty 7,200 to 806,300 in April, but down 82,300 on a yearly basis. The claimant count rate remained at 2.5 percent for the sixth consecutive month, while the jobless rate remained at 5.2 percent.

Canada
Dollar/Canada fell for the second week in a row, and the renewed strength of the commodity prices helped.

Canadian new-home prices rose 0.2 percent in March, and edged lower to +6.1 percent on a year-over-year basis, from 6.2 percent in February.

Manufacturing sales unexpectedly contracted 1.6 percent in March and the February expansion was revised down to 1.3 percent from 1.6 percent.

Switzerland
Dollar/Swiss franc ended barely higher, but well off its intraweek highs.

Australia
The Australian dollar surged on Friday in line with the oil price. After some corrective decline, the uptrend should resume.

This Week's Data and Events

United States
The US economic agenda will open on Monday with the release of the Leading indicators report for April – should not be a market mover.

On Tuesday, the PPI report for April will probably show that we don’t really have inflation, just like the CPI. Really!

US Fed releases minutes for the April 29-30 meeting on Wednesday.

Friday will see the release of the existing Home sales report for April.

The Eurozone
The Eurozone economic calendar will start in force on Tuesday with the release of Germany’s ZEW report for May and its PPI report for April. Both reports are very important, even though the ECB looks clear to keep rates on hold.

Equally important is the IFO German Business Climate report for May, which is due on Wednesday.

Much less important is the Italian Consumer confidence Index for May, on Thursday.

Friday will see the release of the Eurozone Services and Manufacturing PMI reports for May, the French consumer spending report for April, and the Italian GDP report for the first quarter.

Japan
Japan’s calendar will start on Tuesday with the release of the Tertiary index activity and of the Coincident and Leading indices reports for March.

The Trade Balance report for April and the All Industry activity report for March are due on Thursday.

The UK
The Bank of England MPC minutes for May are due on Wednesday.

Thursday will see the release of the Retail sales report for April and of the CBI industrial trends survey for May.

The GDP for the first quarter and the Index of services report for March are due on Friday.

Canada

The Canadian economic calendar report will start on Wednesday wit the release of the CPI and of the Leading indicators reports for April.

The Retail sales report for March is due on Thursday.

Overview

Euro/dollar
Last week's range: 1.5367 – 1.5600 (Up)
Previous range: 1.5287 – 1.5593 (Mixed)

The euro/dollar rallied to a two-week high and recovered 38.2% of the decline between April 23 and May 8. Its corrective decline is over and the pair should march higher. My model went long on Friday. Are we facing an interim inversed head-and-shoulders?

Initial resistance is at 1.5600. Above 1.5645, euro/dollar has additional resistance at 1.5685. Distant resistance is then seen at 1.5760 and 1.5820.

Immediate support is now seen at 1.5530. The next levels are 1.5460 and 1.5415. These are followed by 1.5287. Below 1.5230, euro/dollar still has distant support at 1.5150.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Mixed
LONG-TERM: Bullish

Dollar/yenLast week's range: 102.58 – 105.43 (Up)
Previous range: 102.62 – 105.61 (Down)

Dollar/yen ended only slightly higher and got stuck in an inside range. My model remains short, and this is a good strategy. Are we fading a double top? It’s a little early to tell.

Initial support is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. The next big level is 102.30 from another 50-point pivot, which targets 101.80 and 102.80. Distant support is at 101.25 from a 50-point pivot, which targets 100.75 and 101.75.

Immediate resistance is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Distant resistance remains at 105.60 from a 50-point pivot that targets 105.10 and 106.10.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9365 – 1.9633 (Up)
Previous range: 1.9459 – 1.9786 (Down)

Sterling/dollar rallied from a three-month low after failing to cut a new low for the downtrend. The hammer on Wednesday accurately predicted the recovery to Friday. My model went long.

Initial resistance remains at 1.9620. Above 1.9680, there is further resistance at 1.9760. This is followed by 1.9875. Distant resistance comes at 2.0025.

Immediate support is now seen at 1.9500. The next level is 1.9459. This is followed by 1.9400, 1.9363 and 1.9338. Distant support is at 1.9184.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0389 – 1.0600 (Mixed)
Previous range: 1.0389 – 1.0622 (Down)

Dollar/Swiss gave up gains made earlier in the week to end unchanged. The remained in an inside range. My model remains short.

Immediate support is now seen at 1.0430. This is followed by 1.0350 and 1.0300. Support is then still pegged at 1.0255. Below 1.0130, distant support is at 1.0020.

Initial resistance now comes at 1.0500. If this close level gives way, expect a test of 1.0550. This is followed by 1.0622. Distant resistance now comes at 1.0795.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Bullish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9944 – 1.0108 (Down)
Previous range: 1.0000 – 1.0201 (Down)

Dollar/Canada fell to a two-moth low after closing below the bottom of the Ichimoku cloud on Thursday. Still, expect more consolidation.

Initial support comes at 0.9945. Below 0.9865, distant support is pegged at 0.9745.

Immediate resistance is now seen at 1.0017. The next level is 1.0095. This is followed by 1.0175. Above 1.0250, strong resistance is at 1.0325. Distant resistance is perched at 1.0415.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Euro/yen
Last week's range: 158.67 – 162.95 (Up)
Previous range: 158.63 – 163.10 (Down)

Euro/yen rallied aggressively into early Thursday to erase all of the losses incurred the previous week, but remained in an inside range. The bias is on the upside, and my system remains barely short.

Initial resistance comes at 162.50. The next resistance is at 162.95. Above 163.30, resistance is seen at 164.20. The euro/yen retains distant resistance at 165.00.

Immediate support is at 161.85. This is followed by 161.00. The next level is at 160.10. Distant support is still in place at 158.63.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7877 – 0.7987 (Up)
Previous range: 0.7817 – 0.7941 (Up)

Euro/sterling climbed up for the second consecutive week to erase 61.8% of the losses incurred during the previous three weeks. My model remains long.

Immediate resistance is still seen at 0.7987. This is followed by 0.7935 and 0.8015. Above 0.8100, the next level is 0.8155. Distant resistance is then seen at 0.8270.

Immediate support is at 0.7925. The next levels come at 0.7890 and 0.7845. Below the pivot low at 0.7766, distant support remains at 0.7670.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish

Published on  Mon, May 19 2008, 06:18 GMT

The US economic agenda will start on Tuesday with the release of the important retail sales report for April

Mon, May 12 2008, 06:22 GMT
by Cornelius Luca

GFT

The dollar was all over the place last week as the euro correction ran out of steam and the appetite for risk fluctuated. Apparent weakness of the yen reversed, while weak fundamentals sapped the pound. Expect consolidation this week, with the euro seeing slightly more risk on the upside.

United States
The oil prices are burning holes in consumption and accelerate recession forces in the US and eventually in Europe and elsewhere. But the commodity currencies failed to take much advantage, with the high yielding New Zealand dollar succumbing to growing economic weakness. The pound, not a commodity currency, slumped further across the board. The dollar look like a teething bull early last week, but that didn’t last long. There is somewhat more risk for it on the downside.

The dollar sprang higher on Monday on news that the Institute for Supply Management's index of non- manufacturing businesses unexpectedly expanded to 52 in April from 49.6 the prior month.

Non-farm productivity rose to a higher-than-expected 2.2 percent annual pace in the first quarter because business reduced worker hours.

Meanwhile, the index of pending home re-sales fell 1 percent to 83 in March on top of 2.8 percent decline in February that was larger than previously reported, according to the National Association of Realtors.

Jobless claims declined by 18,000 to 365,000 from an upwardly revised reading of +3,000.

Finally, on a good note for the first quarter GDP, the trade deficit narrowed more than forecast to $58.2 billion in March from a revised $61.7 billion in February. Exports fell 1.7 percent and imports decreased 2.9 percent.

The Eurozone
The euro/dollar look poised for more thrashing last week. Only that is started to recover and with the long-term uptrend in good shape, a further rally is likely.

A mix of rising inflation and weakening economy kept the ECB officials tough on their anti-inflation positions.

The Eurozone PPI rose 0.7 percent in March, after rising by the same percentage in February, and accelerated to 5.7 percent on a yearly basis from 5.4 percent in February.

The Eurozone service PMI rose to 52 in April from 51.6 in March.

European retail sales declined 0.4 percent in March and contracted aggressively by 1.6 percent on the year, the most since at least 1995 and twice as much the expectations.

German manufacturing orders unexpectedly declined 0.6 percent in March, a fourth month of declines. They also contracted 5 percent in the year, the first annual decline since March 2005.

German industrial production fell 0.5 percent in March and slowed to 4.7 percent on the year.  

In addition, French industrial production contracted 0.8 percent in March after expanding a revised 0.5 percent in February.

German trade surplus narrowed to 16.7 billion euros in March from 16.9 billion euros. Meanwhile, the current account surplus widened to 17.2 billion euros in the month under review from previous month’s 16.1 billion euros.

The European Central Bank kept interest rates at 4 percent, as universally expected.

Japan
Dollar/yen failed its recovery melted away into the end of the week.

The few fundamentals available last week carried no weight. No surprise there.

The leading index fell to 20 percent in March from 54.5 the previous month, signaling growth will slow over the next two quarters. The index has been below 50 in nine of the past 12 months. Moreover, the coincident index fell to 33.3 percent in March from 70 in February.

The UK
The sterling/dollar continues to devalue under the weight of the housing problems. The Bank of England stepped closer to another rate cut following weak UK data, but held its rate unchanged at 5 percent on Thursday, as widely expected.

Adding to the woes of the housing sector, home repossession claims by mortgage lenders rose 16 percent on a yearly basis. This sent the pound further down and forced the government to pledge support to home owners struggling with their debts.

The UK PMI services index fell to 50.4 in April, the least since March 2003, from 52.1 in March.

Manufacturing output unexpectedly fell 0.5 percent in March to reverse a 0.4 percent gain in February. Industrial production fell 0.2 percent in the first quarter, twice as much as previously estimated.

Meanwhile, a consumers’ sentiment index fell 7 points to 70, the lowest since the survey began in May 2004, according to the Nationwide Building Society.

Canada
Dollar/Canada remains in a trading range despite failed attempts to break out.

Canada's unemployment rate rose to 6.1 percent in April from 6 percent the month before. Employers hired 19,200 new workers, the fourth straight monthly gain.

The trade surplus widened to C$5.53 billion in March, the largest in 10 months, from a revised C$4.79 billion in February. That owes to rising energy exports jumped and declining imports of automotive products. Exports rose for a third month, gaining 1.6 percent. Imports fell 0.3 percent.

Switzerland
Dollar/Swiss franc reversed some of the gains last week and threatens to decline further.

Australia
The Australian dollar kept its own in times of risk adversity and ended the week close to the highs of the uptrend.

The RBA left interest rates unchanged at 7.25 percent, as high borrowing costs should slow the economy.

Australia's trade deficit narrowed to A$2.74 billion in March from a record A$3.26 billion in February.

Meanwhile, employment rose for a record 18th month in April, this time by 25,400. The jobless rate rose to 4.2 percent from 4.1 percent as more people looked for work.

This Week's Data and Events

United States
The US economic agenda will start on Tuesday with the release of the important retail sales report for April.

Wednesday will see the release of the CPI report for April. We all know we have significant inflation eating into our income, but let see if this reports recognizes it.

On Thursday, be on the lookout for the release of several market movers: the Empire State Manufacturing and the Philly Fed Surveys for May, and the industrial production and capacity Utilization reports for April.

Friday will witness the release of the Housing starts report for April and of the University of Michigan survey for May, both possibly significant readings.

The Eurozone
The Eurozone calendar will begin on Monday with the release of the release of the Italian Industrial Production report for March – not a market mover.

French and Italian CPI Reports for April are due on Wednesday; expect them to be high enough so that ECB officials can tell us once again why they will not cut rates.

The Eurozone Industrial Production report for March is due on Wednesday as well.

The German CPI report for April, along with the regional, German and French GDP reports for the first quarter are due on Thursday.

Japan
The Japanese economic will open on Wednesday with the release of the current account balance report for March.

The Machinery Orders report for March is due on Thursday.

Friday will see the release of the first quarter GDP and of the industrial production report for April.

The UK
The UK calendar is busy this week.

It will begin on Monday with the release of the trade balance report for March and of the PPI input reports for April.

Tuesday will see the release if the CPI report for April, of the BRC retail sales total sales report for April, the RICS House Price Balance report for April, and the

DCLG house prices report for March.

Finally, the claimant count report for April is due on Wednesday.

Canada
The Canadian economic calendar includes only the New Housing Price report for March on Monday and the survey of manufacturing shipments for March on Thursday.

Overview

Euro/dollar
Last week's range: 1.5287 – 1.5593 (Mixed)
Previous range: 1.5362 – 1.5690 (Down)

The euro/dollar closed mixed after recovering from an over two-month low. My model remains short since 1.5900. The pair is no longer overbought after dropping some 700 pips in less than three weeks. Is that the end of the downward correction? I wouldn’t be surprised.

Initial resistance is at 1.5545. Above 1.5600, euro/dollar retains additional resistance at 1.5685. Distant resistance is now seen at 1.5760.

Immediate support is now seen at 1.5415. This is followed by 1.5287. Below 1.5230, euro/dollar still has support at 1.5150. Distant support comes at 1.5040.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 102.62 – 105.61 (Down)
Previous range: 103.23 – 105.69 (Up)

Dollar/yen failed to dislodge the 105.60 Gann level and fell aggressively to a three-week low. My model went short, and this is a good strategy.

Initial support is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80. Distant support is at 101.25 from a 50-point pivot, which targets 100.75 and 101.75.

Immediate resistance is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. Next strong barrier looms at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Distant resistance remains at 105.60 from a 50-point pivot that targets 105.10 and 106.10.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9459 – 1.9786 (Down)
Previous range: 1.9624 – 1.9964 (Down)

Sterling/dollar sank to a 2 ½-month low, breaking the bottom of a triangle and my model remains short.

Immediate support is seen at 1.9459. This is followed by 1.9400, 1.9363 and 1.9338. Distant support is at 1.9184.

Initial resistance now comes at 1.9620. Above 1.9680, there is further resistance at 1.9760. This is followed by 1.9875. Distant resistance comes at 2.0025.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0389 – 1.0622 (Down)
Previous range: 1.0301 – 1.0608 (Up)

Dollar/Swiss failed to break convincingly above 1.0600 and turned lower to form a bearish reversal – a dark cloud cover. My model went short and I like it.

Immediate support is now seen at 1.0350. This is followed by 1.0300. Support is then still pegged at 1.0255. Below 1.0130, distant support is at 1.0020.

Initial resistance now comes at 1.0440. If this close level gives way, expect a test of 1.0550. This is followed by 1.0622. Distant resistance now comes at 1.0795.

NEAR-TERM: Slightly bearish
MEDIUM-TERM:Bullish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0000 – 1.0201 (Down)
Previous range: 1.0038 – 1.0242 (Up)

Dollar/Canada made fake breaks only to end lower last week - but still remained inside range. Expect more consolidation.

Initial support comes at 1.0000. The next level is 0.9945. Below 0.9865, distant support is pegged at 0.9745.

Immediate resistance is now seen at 1.0095. This is followed by 1.0175. Above 1.0250, strong resistance is at 1.0325. Distant resistance is perched at 1.0415.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 158.63 – 163.10 (Down)
Previous range: 160.62 – 163.88 (Down)

Euro/yen fell for three consecutive weeks and formed a bearish flag, which targets the 158.00 area. My system remains short. Stay cautiously short.

Immediate support is at 158.63. This is followed by 158.00. The next level is at 156.80. Distant support is still in place at 154.60.

Initial resistance comes at 159.90. The next resistance is at 160.60. Above 161.50, resistance is at 162.35. The euro/yen retains distant resistance at 165.00.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7817 – 0.7941 (Up)
Previous range: 0.7766 – 7946 (Down)

Euro/sterling rallied last week after falling for three consecutive weeks and there is a high risk that the uptrend resumes. My model went long on Friday.

Immediate resistance is still seen at 0.7980. This is followed by 0.7935 and 0.8015. Above 0.8100, the next level is 0.8155. Distant resistance is then seen at 0.8270.

Immediate support is at 0.7890. The next level comes at 0.7845. Below the pivot low at 0.7766, distant support remains at 0.7670.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bullish

Published on  Mon, May 12 2008, 06:22 GMT

The Productivity report for the first quarter is due on Wednesday

Mon, May 5 2008, 06:34 GMT
by Cornelius Luca

GFT

The dollar put on a good performance last week in line with the stock indices on liquidation of long-term short positions, and on relief that the worst of the credit crunch and of the financial crisis is over. That’s nice, only that the recession is in its budding stages. That on its own doesn’t mean the US currency has to decline, but expect more shocks, as consumer confidence/spending will only worsen. Watch out for some more short term strength for the dollar.

United States
We had some decent economic reports last week and the battered market embraced them in an over optimistic manner. The recession is only starting, so don’t get confused by the too-nice-to-be true GDP data. Consumers will guard their spending closer and closer and more famous stores will have to close down.

The Federal Reserve met the market expectations and cut its benchmark rate by 25-basis points to 2 percent and indicated it will pause after seven cuts since September. Maybe, it’s all data dependant. Only that lower short term borrowing costs will not really help.

The Conference Board's confidence index fell to 62.3 in April, a smaller decline than forecast, but the lowest since March 2003, from an upwardly revised 65.9 in March.

Manufacturing ISM better came in at a better than expected at 48.6 in April, and while the number still shows contraction, the dollar rallied further on Thursday.

Construction spending fell a more-than-expected 1.1 percent in March after an upwardly revised 0.4 percent increase in February.

Home prices contracted 12.7 percent in the year through February, according to Case-Shiller. The index has fallen every month since January 2007.

The economy expanded at a 0.6 percent annual pace in the first quarter, the same as in the previous quarter. An increase in inventories balanced a decline in consumer spending and business investment. The improvement in the trade deficit added 0.2 percent to growth, after a 1 percent boost the prior quarter.

The Chicago PMI rose to 48.3 in April from 48.2 in March.

Personal income rose 0.3 percent in March after +0.5 percent in February, spending expanded 0.4 percent after a 0.1 percent increase the prior month, and nominal disposable personal income slipped to 0.3 percent from 0.5 percent. Nominal personal consumption expenditures increased 0.4 percent.

The dollar surged further after the better than expected unemployment data. Nonfarm payrolls shrank by only 20,000 workers, following a revised 81,000 decline in March. The jobless rate fell to 5 percent from 5.1 percent in March.

Initial claims for jobless benefits increased 35,000 to a seasonally adjusted 380,000 in the week ended April 26 from a revised 345,000 (up from 342,000) the previous week.

Factory goods orders surged 1.4 percent in March. Hmmm! But that was only enough to balance February’s losses.

The Eurozone
The euro/dollar sank further, but it’s only relief selling, and if it goes to 1.5000, it’s still not that far. The ECB has no intention to cut rates yet, and this should put the brakes on the slide of the pair.

The economic data was all over, but nothing screams yey or ney.

Consumer prices in six German states unexpectedly declined in April, with prices in Bavaria down 0.2 percent. Prices also declined in Hesse, North Rhine-Westphalia, Baden-Wuerttemberg, Brandenburg and Saxony. Policy makers at the European Central Bank have suggested the refi rate of 4 percent may not be sufficient to limit European inflation, which reached a 16-year high of 3.6 percent in March, but these reports may alleviate the hawkish talk.

Italian business confidence indicator fell to 86.9 in April from March's revised reading of 88.8.

Unlike the Ifo and Zew reports, German consumer confidence improved to 5.9 in May significantly in April, raising the forecast for May from a revised 4.8 points in April (from 4.6), according to GfK.

French consumer confidence fell to minus 37 in from minus 36 in the prior month, the statistical office INSEE said.

Germany's number of jobless fell 94,000 in April to total 3.414 million. This helped the unadjusted jobless rate decline to 8.1 percent in April from 8.4 percent in March. The seasonally adjusted jobless rate remained unchanged at 7.9 percent in April.

The Eurozone CPI came in at 3.3 percent April, while the local business climate indicators fell to 0.4 in April from 0.8.

France's housing starts decreased 9.9 percent and housing permits fell 15.5 percent on the year in three months to March.

Italian consumer prices edged up 0.1 percent in April and 3.3 percent on an annual basis.

Retail sales in Germany unexpectedly declined an additional 0.1 percent n March from February, when they contracted 0.7 percent.

European manufacturing PMI slowed to 50.7 in April from 52 in March.

Japan
Dollar/yen marched higher last night and hit all kinds of technical levels. The upside looks limited.

Only a week after the world was looking for a possible rate hike in Japan, a cold shower was served. The Bank of Japan left rates unchanged at 0.5 percent, as universally expected. But it also cut its economic growth forecast to 1.5 percent in the year ending March 31 from an October estimate of 2.1 percent, and forecast inflation would accelerate in a report that omitted a reference to raising interest rates for the first time in two years.

Retail sales rose 0.5 percent in March and 1.1 percent from a year earlier.

The volatile industrial production fell sharply by 3.1 percent in March, nearly double the gains registered the previous month.

Seasonally adjusted unemployment slipped to 3.8 percent in March from 3.9 percent in February.

Meanwhile, household spending fell 1.6 percent in March from a year earlier.

The UK
The sterling/dollar encountered selling pressure, but remained within recent trading ranges.

The economic reports re-affirmed the status quo.

UK data continued to deteriorate with the April CBI distributive trades data falling 26 after last week’s weak industrial trends survey. Net lending also fell more than expected in March (to 6.9 bln vs. an expected 7.2 bln)

The housing sector’s woes continued, as expected. The average cost of a home in England and Wales contracted 0.6 percent in April the most since December 2004. Prices declined 0.9 percent on a yearly basis, according to Hometrack.

Along the same lines, house prices fell 1 percent in April from a year earlier, the first annual decline since 1996, according to Nationwide Building Society.

Canada
Dollar/Canada failed to make much progress despite a sharp rally in the second half of last week.

Canadian industrial product and raw materials prices rose 1.7 percent in March following a 0.2 percent increase in February.

The monthly GDP unexpectedly contracted 0.2 percent in February following a 0.6 percent increase in January. The decrease came as a surprise to economists, who had expected a 0.2 percent increase.

Switzerland
Dollar/Swiss franc continued its recovery from oversold levels. This upmove should slow down.

Australia
The Australian dollar failed to participate in the general rally last week and this suggests that any selling of commodities should not go that far.

This Week's Data and Events

United States
The US economic calendar will open on Monday with the release of the non-manufacturing ISM report for April.

The Productivity report for the first quarter is due on Wednesday.

Finally, Friday will see the release of the Trade Balance report for March.

The Eurozone
The Eurozone economic calendar will start on Tuesday with the release of the final PMI Services report for April and of the PPI report for March.

Wednesday will see the release of the German Factory Orders and the Eurozone Retail sales reports for March.

More important will be the German Trade Balance and Industrial Production reports for March, which are due on Thursday.

The same day, the ECB will leave its rates unchanged at 4.0 percent.

The French Industrial Production report for March ends the week on Friday.

Japan
The Japanese economic calendar is very light this week.

It only consists of the Coincident and Leading Indices for March, and these are not market movers.

The UK
The UK economic calendar will start on Tuesday with the release of the services PMI report for April.

The Nationwide Consumer Confidence report for April and the Industrial Production report for March are due on Wednesday.

The Bank of England will leave its rate unchanged at 5.0 percent on Thursday.

Canada
The Canadian economic calendar will start on Tuesday with the release of the Ivey Purchasing Managers report for April.

On Friday, be on the lookout for the release of the unemployment rate report for April and of the trade report for March.

Overview

Euro/dollar
Last week's range: 1.5362 – 1.5690 (Down)
Previous range: 1.5556 - 1.6020 (Down)

The euro/dollar fell for the second consecutive week and gave back 38.2 percent of the leg of the uptrend between February and April. My model remains short since 1.5900.

Immediate support is now seen at 1.5362. Below 1.5230, euro/dollar has support at 1.5150. Distant support comes at 1.5040.

Initial resistance is at 1.5485. The next level is 1.5540. Above 1.5600, euro/dollar has additional resistance at 1.5685. Distant resistance is now seen at 1.5760.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Slightly bearish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 103.23 – 105.69 (Up)
Previous range: 102.89 – 104.81 (Up)

Dollar/yen rallied for the third consecutive week to an over two-month high. It has already recovered half of the losses between the end of 2007 and March 17. My model is long, but the upmove should slow down.

Immediate resistance is at 105.60 from a 50-point pivot that targets 105.10 and 106.10. The next level is at 107.45. Above the 106.75 50-point pivot, which targets 106.25 and 107.25, distant resistance is at 107.95 from another 50-point pivot, which targets 107.45 and 108.45.

Initial support is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00. Strong support is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. Distant support is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9624 – 1.9964 (Down)
Previous range: 1.9677 - 2.0025 (Down)

Sterling/dollar fell for the second consecutive week, but remained within recent ranges. My model kept on alternating long and short positions and is short at the end of the week. The initial move should be up, though.

Immediate support is seen at 1.9690. This is followed by 1.9624. Below 1.9597, support is 1.9495. Distant support is at 1.9363.

Initial resistance now comes at 1.9760. Above 1.9885, there is a pivot high at 2.0046. This is followed by 2.0190. Distant resistance remains at 2.0275.

NEAR-TERM:Mixed
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 1.0301 – 1.0608 (Up)
Previous range: 0.9998 – 1.0430 (Up)

Dollar/Swiss rallied for the third consecutive week to erase nearly half of the losses registered between December and March. My model remains long.

Initial resistance now comes at 1.0623. This is followed by 1.0795. The next level is 1.0855. Distant resistance now comes at 1.1100.

Immediate support is now seen at 1.0465. This is followed by 1.0375. Support is then pegged at 1.0255. Below 1.0130, distant support is at 1.0020.

NEAR-TERM: Slightly bullish
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0038 – 1.0242 (Up)
Previous range: 1.0000 – 1.0214 (Up)

Dollar/Canada rallied for the second consecutive week, but remained within an inside range – and the tip of a suborn triangle. Expect more consolidation.

Immediate resistance is now seen at 1.0250. Above it, strong resistance is at 1.0325. Distant resistance is perched at 1.0415.

Initial support remains at 1.0100. The next levels are 1.0000 and 0.9945. Below 0.9865, distant support is pegged at 0.9745.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 160.62 – 163.88 (Down)
Previous range: 162.69 – 164.96 (Down)

Euro/yen fell to a two-week low and my system remains short. Stay cautiously short.

Immediate support is at 161.45. This is followed by 160.62. The next level is at 159.10. Distant support is still in place at 158.25.

Initial resistance comes at 163.30. The next resistance is at 164.96. Above 166.66, resistance is at 167.72. The euro/yen retains distant resistance at 168.95.

NEAR-TERM: Mixed
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7766 – 7946 (Down)
Previous range: 0.7852 – 0.8050 (Down)

Euro/sterling fell for the third consecutive week and gave up nearly 23.6 percent of the uptrend between July and April. My model is short but the pace of the downmove should decelerate.

Immediate support is at 0.7766. The next level comes at 0.7700. Below 0.7670, distant support remains at 0.7605.

Immediate resistance is now seen at 0.7980. This is followed by 0.7935 and 0.8015. Above 0.8100, the next level is 0.8155. Distant resistance is then seen at 0.8270.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Slightly bearish
LONG-TERM: Bullish

Published on  Mon, May 5 2008, 06:34 GMT

The FOMC on Wednesday should produce a rate cut of 25 basis points and no more

Mon, Apr 28 2008, 06:13 GMT
by Cornelius Luca

GFT

The dollar made some spectacular gains last week primarily on relief/hope that the worst of the subprime disaster is over. Maybe. But recession is looking us in the eye and while the dollar doesn’t do all that bad during these periods, it is premature to call the end of its long-term downtrend. This week could prove crucial for new-found strength of the dollar and weakness is likely early in the week.

United States
The equity markets look good here, and the dollar mounted a dramatic recovery against most of the European currencies and rallied versus the yen. But the rally was mostly against the overbought euro and stemmed from hopes the US financial system is on its way to recovery. These expectations were fueled by a Wall Street article saying that the Federal Reserve will make a final cut of 25 basis points before pausing. Watch for this week’s developments - this rate cut, the euro crosses, the oil price and the unemployment rate on Friday – for further cues.

Durable goods orders slipped 0.3 percent in March, but ex-transportation rose 1.5 percent. Non-defense capital goods orders excluding aircraft was revised up to -2.0 percent from -2.4 percent.

New home sales fell 8.5 percent to an annual rate of 526,000 units in March from the downwardly revised February rate of 575,000 units. Not quite a surprise, really.

Existing home sales contracted 2 percent to a 4.93 million-unit annual rate in March, according to the National Association of Realtors. Still surprised?

The University of Michigan final index of consumer sentiment was revised down to 62.6 from 63.2 in April, the weakest level since 1982, from 69.5 the prior month. Hmmm!

Initial claims for jobless benefits fell by 33,000 to a seasonally adjusted 342,000 in the week ended April 19 from an upwardly revised 375,000 (from 372,000) in the prior week.

The Eurozone
The euro/dollar suffered aggressive losses that surprised even though they had been expected for quite some time. There is some more room on the downside – but probably not much more. The pair should see some weakness early in the week.

The euro stabbed lower initially early Tuesday on adverse news out of the German banking sector. Duesseldorfer Hypothekenbank needed to be bailed out by a group of banks in the wake of the collapse of the US subprime market.

It then surged briefly to above 1.6000 before melting away.

The Eurozone services PMI rose to 51.8 in April from 51.6 in March. However, the manufacturing PMI fell to 50.8 from 52 in March. The composite index of services and manufacturing rose to 51.9 from 51.8.

Meanwhile, the Eurozone industrial orders rose 0.6 percent in February and 9.9 percent on a yearly basis.

The euro collapsed on Thursday following news the Ifo business climate index fell to 102.4 in April, the lowest since January 2006, from 104.8 in March. The current business situation sub-index declined to 108.4 in April from 111.5 in March, and the expectations for future business measure sank to 96.8 from 98.4.

The French manufacturers sentiment fell to a 16-month low of 106 in April from 108.

Only Italian consumer confidence rose to 99.8 in April from a 99.0 last month.

The Eurozone current account showed a surplus of 4.3 billion euros in February, down from 7.9 billion euros in January.

Japan
Dollar/yen only struggled higher last week in a technically bound move.

But most of the economic data passed without much reaction – as it should.

The only data was interest was released on Friday, when a high inflation report stirred hopes for a rate hike. A tad premature.

Consumer prices rose 1.2 percent in March, the fastest pace in a decade. Core prices rose 0.3 percent on a yearly basis. Tokyo's core prices rose 0.7 percent in April from a year earlier from 0.6 percent in March.

Before that, the Japanese Leading Index number was revised up to 54.5 percent in February from an initial reading of 50 percent and from 45.5 percent for January. The coincident index reading was revised up to 70 percent from 44.4 percent and from January's 20 percent, while the lagging index was revised down to 40 percent from 50 percent.

All-industries index fell 1.4 percent in February.

The trade surplus shrink 30.2 percent to 1.12 trillion yen from a year earlier, as imports rose 11.1 percent due to record oil prices and exports rose 2.3 percent.

The UK
The sterling/dollar ended the week lower, but it was the toughest kid on the (European) block. Initial strength is likely.

The pound fell sharply on Monday on news that the Bank of England offered to swap government bonds for mortgage securities to improve bank lending - the move had been discounted by the market.

The pound then surged on Friday despite news that GDP slowed to 0.4 percent the first quarter, the least since the first quarter of 2005, from 0.6 percent in the previous quarter. The BoE has cut its benchmark interest rate three times since December to 5 percent from a six-year high of 5.75 percent in July to avert a recession.

The housing contraction continued unabated. Mortgage approvals fell 18 percent to the lowest in more than a decade in March and 46 percent on a yearly basis.

UK retail sales declined 0.4 percent in March from February’s upwardly revised to 1.1 percent from 1 percent. The March decline was the largest since January 2007. On a yearly basis, retail sales rose 4.6 percent in March and February's growth was revised upward to 6.3 percent from 5.5 percent.

Canada
Dollar/Canada closed higher, but lacked much direction and oomph. It should now head lower as it approaches the tip of a triangle

The Bank of Canada met the market expectations and cut its benchmark rate by 50 basis points to 3 percent to stimulate its economy, now expanding at its slowest pace in 16 years. It also signaled more easing may be needed. The rate cut narrows Canada's biggest rate premium over the Federal Reserve's benchmark in four years. Traders expect another 25 bps from 2.25 percent on April 30.

Retail sales unexpectedly fell 0.7 percent in February, the first decline in five months, after gaining a downwardly revised 1.4 percent the month before. But on a yearly basis, retail sales expanded 5.7 percent.

Switzerland
Dollar/Swiss franc rallied last week, but future gains are not as clear.

Australia
The Australian dollar gave sharp gains to close the week flat.

It surged initially on Monday after the local PPI producers rose a record 1.9 percent in the first quarter from 0.6 percent in the fourth quarter.

In addition, the CPI increased 1.3 percent in the first quarter from 0.9 percent in the previous quarter. On a yearly basis, CPI rose 4.2 percent. The RBA will probably lift rates again in May to combat further inflationary expectations.

This Week's Data and Events

United States
The US economic agenda will start on Tuesday with the release of the Conference Board Consumer Confidence report for April.

The FOMC on Wednesday should produce a rate cut of 25 basis points and no more.

The preliminary GDP and the Employment Cost Index reports for the first quarter are due on Wednesday as well, along with the Chicago PMI report for April.

The Personal Income report for March, the ISM Manufacturing PMI report for April and the Construction Spending report for March are due on Thursday.

It’s the first Friday of the month, so don’t forget to fasten your seat belts ahead of the release of the Nonfarm Payrolls and unemployment Rate reports for April! You’ll need it.

The Factory Goods Orders report for March is also due on Friday.

The Eurozone
The Eurozone economic calendar will begin on Monday with the release of the Germany’s GfK Consumer Confidence report for May and of Italy’s Business Confidence report for April. We had two bad previous ones in Germany, so expect another disappointment.

Tuesday will see the release of the Eurozone Retail PMI report for April and of the French Consumer confidence report for April.

On Wednesday, all eyes will be on Germany’s Retail sales report for March and Unemployment report for April. Both reports are very important.

The Eurozone Industrial and Consumer Confidence report for April and Unemployment Rate report for March are due on Wednesday as well.

The regional manufacturing PMI for April is due on Friday.

Japan
The BoJ Rate Announcement for April is due on Wednesday – expect no change.

Wednesday will see the release of the Unemployment Rate, Household Living Expenditure, Industrial Production and Housing Starts reports for March.

The UK
The UK agenda will start on Tuesday with the CBI Distributive Trades report for April.

The Nationwide House Prices and GfK consumer confidence reports for April are due on Wednesday.

The PMI Manufacturing for April will be released on Thursday.

Canada
There will be no relevant economic reports due this week.

Overview

Euro/dollar
Last week's range: 1.5556 - 1.6020 (Down)
Previous range: 1.5672 – 1.5985 (Up)

The overbought euro/dollar made a collapsing decline last week after climbing briefly above 1.6000 to annihilate some knockout options. It gave back about a quarter of the gains made since January by the end of the week. But, have we seen the real peak? The weekly chart clearly displays a bearish engulfing pattern following a record high, but several weeks earlier we had been “treated” to an equally appetizing dark cloud cover and euro/dollar then surged to new record highs. My model remains short. Don’t leave your guard down, this pair may still bounce. My model is short, but its initial bias is up.

Initial resistance is at 1.5680. The next level is 1.5760. Above 1.5820, resistance remains at 1.5985. Distant resistance is seen at 1.6040.

Immediate support is now seen at 1.5600. The next level is 1.5556. Below the important level at 1.5480, euro/dollar has support at 1.5415. This is followed by 1.5340. Distant support comes at 1.5150.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 102.89 – 104.81 (Up)
Previous range: 100.31 – 104.64 (Up)

Dollar/yen marched higher to a two-month high but its rally decelerated late in the week. The risk on the upside looks limited. The two pivots at 103.40 and 104.50 really helped last week.

Immediate resistance is at 105.00. The next levels remain at 105.20 and 105.60 from a 50-point pivot that targets 105.10 and 106.10. Distant resistance is at 107.45.

Initial support is at 104.50 from a 50-point pivot, which targets 104.00 and 105.00.Strong support is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. The next level is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9677 - 2.0025 (Down)
Previous range: 1.9597 – 1.9998 (Up)

Cable closed the week lower, but Friday’s rally alleviated its losses – bottom line, the status quo continues, as the pair is approaching the tip of a medium term triangle. My model went long again and the initial move should be up.

Initial resistance now comes at 1.9915. Above 2.0000, there is a pivot high at 2.0046. This is followed by 2.0190. Distant resistance looms at 2.0275.

Immediate support is seen at 1.9815. This is followed by 1.9760. Below 1.9677, distant support is 1.9597.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 0.9998 – 1.0430 (Up)
Previous range: 0.9927 – 1.0283 (Up)

Dollar/Swiss rallied to a seven-week high of 1.0430 last week and my model remains long. However, choppy trading with only some upside bias is expected now.

Initial resistance now comes at 1.0430. This is followed by 1.0550. The next level is 1.0625. Distant resistance now comes at 1.0795.

Immediate support is now seen at 1.0260. This is followed by 1.0185. Support is then pegged at 1.0135. Below 1.0020, distant support is at 0.9642.

NEAR-TERM: Mixed with upside bias
MEDIUM-TERM:Slightly bullish
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0000 – 1.0214 (Up)
Previous range: 0.9989 – 1.0275 (Down)

Dollar/Canada closed higher last week, but fell is Asia. It still remains in a trading range, as it approached the tip of a triangle.

Initial support now comes at 1.0050. The next levels are 1.0000 and 0.9945. Below 0.9865, distant support is pegged at 0.9745.

Immediate resistance is now seen at 1.0150. Above 1.0250, strong resistance is at 1.0325. Distant resistance is perched at 1.0415.

NEAR-TERM: Mixed
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Euro/yen
Last week's range: 162.69 – 164.96 (Down)
Previous range: 158.26 – 164.66 (Up)

Euro/yen fell the last three days of the week from the highest levels of the year, but not all that much. Nevertheless, my system went short. Stay cautiously short.

Immediate support is at 162.68. This is followed by 161.85. The next level is at 161.10. Distant support is at 158.25.

Initial resistance is at 163.80. The next resistance is at 164.96. Above 166.66, resistance is at 167.72. The euro/yen retains distant resistance at 168.95.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7852 – 0.8050 (Down)
Previous range: 0.7876 – 0.8099 (Down)

Euro/sterling reversed early gains to close the week at a three-week low and my model remains short. That’s good, as the cross is overbought and formed bearish reversals for two weeks. Again, only a close below 0.7875 gives scope to a sustained pullback.

The next level remains at 0.7823. Below 0.7785, distant support remains at 0.7605.

Immediate resistance is now seen at 0.7935. This is followed by 0.8015. Above 0.8100, the next level is 0.8155. Distant resistance is then seen at 0.8270.

NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Mon, Apr 28 2008, 06:13 GMT

The US economic agenda will start on Tuesday with the release of the existing homes for March

Tue, Apr 22 2008, 06:55 GMT
by Cornelius Luca

GFT

Past Week's Data and Events

The dollar is trying to regain its footing amid (new) hopes the worst of the US financial disaster is over. That’s premature. The US currency is oversold and some significant retracement is likely. But buy it only on a confirmation.

United States
Bad earnings were ignored and the good ones loved (have you seen Google?) and there are budding hopes for the end of the financial nightmare. But the recession is under way, and the housing sector will be contacting longer. Meanwhile, jab the market with the bias on the upside.

Retail sales unexpectedly rose 0.2 percent in March from the upwardly revised decline of 0.3 percent in February. That was actually a bad number because excluding gas, the sales were unchanged.

PPI surged 1.1 percent in March a 0.3 percent increase in the prior month, as a result of crippling high fuel and food costs. The core PPI increased 0.2 percent.

Meanwhile, CPI rose 0.3 percent in March from a flat reading in February.Core prices rose 0.2 percent. Low inflation, huh? You gotta be joking!

Housing starts contracted 11.9 percent to an annual rate of 947,000 units in March, the slowest pace since March 1991. The February starts figure was revised upward to 1.075 million from the 1.065 million originally reported. Building permits fell 5.8 percent to an annual rate of 927,000, the slowest pace since April 1991, from the revised February rate of 984,000 units.

Industrial output unexpectedly rose 0.3 percent in March after a downwardly revised drop of 0.7 percent in February. Meanwhile, the capacity utilization rate edged up to 80.5 percent from 80.3 percent.

The New York Fed’s Empire index unexpectedly rose to 0.63 in April from March, when it contracted to a record 22.2.

Business inventories rose 0.6 percent in February from an upwardly revised January report of a +0.9 percent. But sales fell 1.1 percent, the biggest decline since January 2007.

Net overall capital flows rose to $64.1 billion in February from a revised $35.7 billion in January. Not bad, now it’s the time foreigners should load up on US assets.

The Federal Reserve Bank of Philadelphia's general economic index fell to -24.9 in April, the lowest since 2001, from -17.4 in March.

The Conference Board's index of leading economic indicators increased 0.1 percent in March, after falling 0.3 percent in February.

Initial applications for unemployment insurance increased by 17,000 to 372,000 in the week that ended April 12. The number of people seeking benefits rose to 2.98 million, the most since June 2004.

The Eurozone
The euro/dollar slipped from record highs, but the market failed to reach the 1.60 mark. It it fails, the pair will slide sharply. EU and ECB officials will need to lock horns, as the strong euro is obviously hurting the Eurozone economy.

The ZEW index of German investor and analyst expectations unexpectedly fell to minus 40.7 n April from minus 32 in March.

The German economy will expand less by 1.8 percent this year than was predicted six months ago (2.2 percent) because of the US subprime mortgage crisis, according to the leading economic institutes.

The Eurozone industrial production slowed to 0.3 percent in February from a downwardly revised 0.6 percent increase in January. On an annual basis, industrial production slowed to 3.1 percent from 3.3 percent in January.

France's business sentiment fell to 105 in March from 106 recorded in February.

The French consumer prices rose 3.5 percent in March from a rate of 3.2 percent in February on an annual basis.

European inflation rose to 3.6 percent in March, from 3.3 percent in February. The monthly inflation rate stood at 1 percentin March. Core inflation rose to 2 percenton an annual basis compared with 1.8 percentin February. From the prior month, the core consumer price index was up 1 percent.

Italian CPI rose 0.5 percent, at the same pace registered in the prior month. Annual inflation remained stable at 3.3 percent in March.

Italian total trade deficit narrowed to 408 million euro in February from 1.86 billion euro registered in the previous year.

Meanwhile, the Eurozone trade balance showed a surplus of 0.8 billion euros in February after a trade deficit of 11 billion euros in January.

Elsewhere, the Eurozone construction output slowed to 1.2 percent in February from 2.5 percent in January. On an annual basis, production rose 4.3 percent from a revised +3 percent in the prior month.

Japan
Dollar/yen rallied to a 1 ½-month high and still has upside risk while Japanese portfolio managers take advantage to buy on dips.Risk aversion will be the key through.

On the economic side, industrial production rose 1.6 percent in February, reversing an earlier estimate that showed output declined 1.2 percent. January output fell 0.5 percent, less than the 2.2 percent initially reported.

The UK
The sterling/dollar sank early last week amid ongoing weakness in the housing area, somewhat similar to that in the US. With the BoE minutes from April meeting reinforcing expectations for another rate cut, the pressure should continue, but at a reduced pace.

But the pound then made a dramatic recovery and may see some more strength early this week.

Producer prices rose 0.9 percent in March and 6.2 percent on a yearly basis from 5.9 percent in February.

The Royal Institution of Chartered Surveyors reported that the number of chartered surveyors reporting house price declines in March hit its highest level since the survey began in 1978.

Along the same lines, house price inflation slowed to 6.7 percent in February on an annual basis from 8 percent in January, according to the Department of Communities and Local Government (DCLG).

Unemployment fell 1,200 in March.The claimant count rate was unchanged at 2.5 percent in March. The unemployment rate as measured by International Labor Organization standards fell to 5.2 percent in the quarter through February from 5.3 percent.

Britain had a 10.2 billion-pound budget deficit in March, the largest for the month since records began in 1993, and widened from 7.1 billion pounds a year earlier

Canada
Dollar/Canada closed lower last week but remained in a trading range. More information is needed.

The CPI rose 0.4 percent in March, matching the increase reported for February. On a yearly basis, the CPI slowed to 1.4 percent in March from +1.8 percent the month before, and the core CPI by 1.3 percent from 1.5 percent in February. This leaves intact expectations that the Bank of Canada will cut rates by 50 basis points to 3.0 percent next week to alleviate the Canadian economy’s exposure to the recessionary US economy.

Canadian factory shipments rose 1.6 percent in February, twice the expectations.

Switzerland
Dollar/Swiss franc rallied to a five-week high but more information is needed for the low-yielding currency.

Swiss retail sales recorded an annual growth of 7.6 percent in real terms in February.

Australia
The Aussie/dollar struggled higher for the fourth consecutive week amid rising appetite for risk. But it held below its uptrend highs.

This Week's Data and Events

United States
The US economic agenda will start on Tuesday with the release of the existing homes for March.

Thursday will follow with the release of the new home sales-units report for March and of the durable goods orders report for April.

Friday will see the release of the University of Michigan report for April.

The Eurozone
The Eurozone economic calendar will start on Wednesday with the release of the regional manufacturing and services PMI reports for April, the Italian Consumer Confidence Report for April and the French Business Survey Report for April.

Thursday will see the release of Germany’s IFO Survey Report for April.

The less significant Italian Business Confidence Report for April is due on Thursday as well.

Germany’s GfK Consumer Confidence report for May is due on Friday.

Japan
The Japanese calendar will start on Monday with the release of the Tertiary Industry Activity report for February – not a market mover.

The Trade Balance report for March is due on Wednesday.

On Thursday, be on the lookout for the release of the All Industry Activity report for February.

Friday will see the release of the National CPI report for March and of the Tokyo CPI report for April.

The UK
The UK economic calendar will start on Monday with the release of the Nationwide House Prices report for April.

The report for retail sales for March is due on Thursday.

Friday will see the final reading of the UK GDP for the fourth quarter and of the Index of services report for February.

Canada
On Tuesday, the Bank of Canada will meet, and will probably cut interest rates (see above).

The retail sales report for February is due on Wednesday.

Overview

Euro/dollar
Last week's range: 1.5672 – 1.5985 (Up)
Previous range: 1.5628 – 1.5914 (Mixed)

The overbought euro/dollar made a new, if marginal, record high, and my model remains short. Again, bee careful, as this overbought pair should encounter more choppy trading. Its initial bias remains down.

Immediate support is still at 1.5740. Below 1.5625, euro/dollar has support at 1.5540. This is followed by 1.5340. Distant support comes at 1.5150.

Initial resistance is at 1.5853. The next level is 1.5955. Above it, resistance remains at 1.5985. Distant resistance is seen at 1.6040.

NEAR-TERM:Mixed
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 100.31 – 104.64 (Up)
Previous range: 100.03 – 102.84 (Mixed)

Dollar/yen surged to the highest level since the end of February and my system went long. The risk is now on the upside.

Immediate resistance is at 104.64. The next levels are at 105.20 and 105.50. Distant resistance is at 107.45.

Initial support is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. The next level is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80.

NEAR-TERM: Slightly bullish
MEDIUM-TERM: Slightly bullish
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9597 – 1.9998 (Up)
Previous range: 1.9651 – 1.9954 (Down)

Sterling/dollar rallied big on Thursday and closed above the resistance from its declining trendline. My model went long and for as long as 1.9853 holds, the upside is in good shape. But the initial move should be down.

Initial resistance now comes at 2.0000. There is a pivot high at 2.0046. This is followed by 2.0190. Distant resistance looms at 2.0275.

Immediate support is seen at 1.9920. This is followed by 1.9860. Below 1.9790, distant support is 1.9695.

NEAR-TERM:Slightly bullish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 0.9927 – 1.0283 (Up)
Previous range: 0.9889 – 1.0172 (Mixed)

Dollar/Swiss rallied to its highest level since March 12 and my model went long. Choppy trading with upside bias is expected again.

Initial resistance now comes at 1.0250. This is followed by 1.0283. The next level is 1.0375. Distant resistance now comes at 1.0450.

Immediate support is now seen at 1.0090. This is followed by 0.9965 and .9875. Support is then pegged at 0.9790. Distant support is at 0.9642.

NEAR-TERM: Mixed with upside bias
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 0.9989 – 1.0275 (Down)
Previous range: 1.0039 – 1.0249 (Up)

Dollar/Canada closed lower last week but remained in a trading range. Expect more consolidation.

Initial support now comes at 0.9990. The next level is 0.9945. Below 0.9865, distant support is pegged at 0.9745.

Immediate resistance is now seen at 1.0090. Above 1.0170, strong resistance is at 1.0250. Distant resistance is at 1.0325.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bearish

Euro/yen
Last week's range: 158.26 – 164.66 (Up)
Previous range: 158.81 – 161.70 (Mixed)

Euro/yen surged every day of last week, prompting my system to go long. Remain cautiously long.

Resistance is at 164.66. Above 166.66, resistance is at 167.72. The euro/yen has distant resistance at 168.95.

Immediate support is at 163.23. This is followed by 162.50. The next level is at 161.10. Distant support is at 158.25.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7876 – 0.8099 (Down)
Previous range: 0.7867 – 0.8037 (Up)

Euro/sterling fell from a new multi-year high and my model went short. Only a break below 0.7875 gives scope to a sustained pullback.

The next level is at 0.7823. Below 0.7785, distant support remains at 0.7605.

Immediate resistance is now seen at 0.7970. Above 0.8025, the next levels are 0.8080 and 0.8155. Distant resistance is then seen at 0.8270.

NEAR-TERM: Mixed
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Tue, Apr 22 2008, 06:55 GMT

The US economic agenda is chuck−full of significant data this week

Mon, Apr 14 2008, 06:33 GMT
by Cornelius Luca

GFT

The dollar made little progress during the past week, while the appetite for risk changed from day to day. Only the pound made a discernable move, sinking across the board amid UK housing prices and the tacit OK from the government. The dollar remains weak and there is little hope to look for a sustained recovery while the oil flies through the sky. The dollar should trade all over the place and focus should be on the pound and yen crosses.

United States
The oil is surging and the US equity markets are hurting. The fluctuation of the appetite for risk creates unpleasant waves of volatility. The revaluation of the yuan and Singapore dollar helped the yen rally as well, but its strength was short lived.

Elsewhere, the credit crunch continues and if you saw GE’s earnings you cannot avoid thinking big-time recession.

All these factors point to further choppy trading this week.

The University of Michigan preliminary index of consumers’ confidence fell to 63.2 in April from 69.5 in March. Well, expensive food and fuel prices when unemployment is rising will do that, don’t you agree?

Jobless claims fell 53,000 to 357,000 in the week ended April 5 from an upwardly revised (as nearly always) 410,000 (initially 407,000) in the previous week. This way, the numbers look better, don’t they?

The trade deficit widened 5.7 percent to $62.3 billion in February from an upwardly revised estimate of $59.0 billion for January. The market tried to sound surprised – not clear why.

The Eurozone
The euro/dollar nailed a new high last week but made little progress. With the ECB not cutting rates, it can only struggle higher.

German industrial production unexpectedly rose 0.4 percent in February from January, when it gained 1.4 percent.

The French trade deficit narrowed to 2.8 billion euros in February from 3.183 billion euros in January.

Meanwhile, the German trade surplus narrowed less than expected to 16.9 billion euros in February from 17.1 billion euros in January.

The final Eurozone GDP remained at +0.4 percent in the fourth quarter of 2007, down from 0.7 percent in the third quarter. On an annual basis, it slowed to 2.2 percent from 2.7 percent in the third quarter.

As universally expected, the European Central Bank kept interest rates at a six-year high of 4 percent to alleviate inflation, despite the economy-crippling strong euro.

Japan
Dollar/yen encountered alternating phases of volatile and contained trading but didn’t break much ground. The downside is favored.

The volatile machine orders contracted 12.7 percent in February as companies scaled back investment on concern about the US recession from January when they expanded 19.6 percent.

Meanwhile, current-account surplus widened 2.9 percent to 2.47 trillion yen in February from a year earlier. Export rose 9 percent from 8.4 percent in January, while Imports increased 12.5 percent from 9.1 percent.

The leading index increased sharply to 50 in February from 36.4 in January, the coincident index rose to 44.4 from 20 in the prior month, while the lagging index remained unchanged at 50.

The UK
The sterling/dollar was the exception to the rule and ended the week lower. More weakness is in store.

The pound fell sharply on Tuesday after UK house prices contracted 2.5 percent in March, the most since 1992, according to HBOS. The 1 percent decline in the first quarter f was the biggest quarterly loss since 1995.

Factory output unexpectedly rose 0.4 percent in February to the strongest level since 2001, after a 0.5 percent gain in January. Overall industrial production rose 0.3 percent.

The Bank of England’s Monetary Policy Committee met the market expectations and cut the benchmark interest rate by a quarter point to 5 percent.

Canada
Dollar/Canada struggled higher last week.

Canada's trade surplus unexpectedly jumped by 78 percent in February to C$4.94 billion from C$2.78 billion in January, the largest rise since June 2004 and the biggest surplus since May 2007. The gain was entirely in trade with the United States, with which the surplus jumped to C$8.10 billion from C$6.29 billion, the highest level since December 2006. Exports rose to C$39.32 billion from C$37.88 billion, while imports fell to C$34.39 billion from C$35.10 billion.

Switzerland
Dollar/Swiss franc encountered volatility last week but produced little direction.

Australia
The Aussie/dollar closed higher for a third consecutive week.

Australia's trade deficit widened to a record A$3.29 billion in February as floods and cyclones disrupted exports of coal and iron ore from a revised A$2.54 billion in January.

Home-building approvals growth slowed to +0.1 percent in February from January’s revised +1.4 percent.

Employment rose 14,800 in March for a record 17th month after hiring 36,700 people in February. The jobless rate rose to 4.1 percent from 4 percent.

This Week's Data and Events

United States
The US economic agenda is chuck-full of significant data this week.

It will open on Monday with the release of the Retail sales report for March.

Tuesday will see the release of the PPI report for March and of the Empire State Manufacturing Survey for April.

The CPI report for March is due on Wednesday, along with the Industrial Production and of the Housing starts reports for March.

The Eurozone
The Eurozone calendar will start on Monday with the release of the regional Industrial Production Report for February.

Tuesday will see the release of Germany’s ZEW Expectations report for April.

Also on Tuesday, the French CPI report for March is due.

Japan
Japan’s economic agenda only features the revision of the industrial production report for February on Wednesday.

The UK
The UK economic calendar will start on Monday with the release of the PPI output report for March.

The CPI report for March is due on Tuesday.

The DCLG house prices and the unemployment reports for February are due on Tuesday as well.

Canada
Canada’s economic agenda will start on Thursday with the CPI report for March.

The leading indicators for March are due on Friday.

Overview

Euro/dollar
Last week's range: 1.5628 – 1.5914 (Mixed)
Previous range: 1.5511 – 1.5894 (Mixed)

Once again, the overbought euro/dollar was all over the place last week but closed little changed – as expected. It coined new, if marginal, record highs, but my model remains short. Be careful, this overbought pair should encounter more choppy trading and its initial bias is down.

Immediate support is at 1.5740. Below 1.5625, euro/dollar has support at 1.5540. This is followed by 1.5340. Distant support comes at 1.5150.

Initial resistance is at 1.5853. The next level is 1.5914. Above it, resistance remains at 1.5985. Distant resistance is seen at 1.6040.

NEAR-TERM:Mixed
MEDIUM-TERM:Bullish
LONG-TERM: Bullish

Dollar/yen
Last week's range: 100.03 – 102.84 (Mixed)
Previous range: 98.82 – 102.95 (Up)

Dollar/yen failed to hold above the target of the 102.30 pivot and headed lower. My system went short. The pair got stuck in an inside range but the risk is on the downside.

Initial support is at 100.25 there is another 50-point pivot, which targets 99.75 and 100.75. This is followed by 99.25 from a 50-point pivot, which targets 98.75 and 99.75. Distant support lies at 98.25 from another 50-point pivot, which targets 97.75 and 98.75.

Immediate resistance is at 101.25 from a 50-point pivot which targets 100.75 and 101.75. The next level is at 102.30 from another 50-point pivot, which targets 101.80 and 102.80. Distant resistance is at 103.40 from a 50-point pivot, which targets 102.90 and 103.90. 104.50.

NEAR-TERM: Bearish
MEDIUM-TERM: Mixed
LONG-TERM: Bearish

Sterling/dollar
Last week's range: 1.9651 – 1.9954 (Down)
Previous range: 1.9730 – 2.0046 (Mixed)

Sterling/dollar fell to a 1 ½-month low early last week and never could recover. My model remains short. Choppy trading with downside bias is still likely.

Immediate support is seen at 1.9650. This is followed by 1.9610. Below 1.9504, distant support is 1.9363.

Initial resistance now comes at 1.9760. There is a pivot high at 1.9842 and another one at 2.0046. This is followed by 2.0190. Distant resistance looms at 2.0275.

NEAR-TERM:Slightly bearish
MEDIUM-TERM:Bearish
LONG-TERM:Mixed

Dollar/Swiss franc
Last week's range: 0.9889 – 1.0172 (Mixed)
Previous range: 0.9872 – 1.0217 (Up)

Dollar/Swiss closed little changed last week after trading in an inside range. My model went short on Friday. Choppy trading with upside bias is expected.

Immediate support is now seen at 0.9965. This is followed by 0.9875. Support is then pegged at 0.9790. Distant support is at 0.9642.

Initial resistance now comes at 1.0190. This is followed by 1.0251. The next level is 1.0375. Distant resistance now comes at 1.0450.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM:Mixed
LONG-TERM: Bearish

Dollar/Canada
Last week's range: 1.0039 – 1.0249 (Up)
Previous range: 1.0021 – 1.0325 (Down)

Dollar/Canada closed higher last week but got stuck in an inside range. My model went long on Wednesday. Expect a choppy upmove.

Immediate resistance is now seen at 1.0287. Above 1.0360, strong resistance is at 1.0465. Distant resistance is at 1.0530.

Initial support now comes at 1.0210. The next level is 1.0135. There is a pivot low at 1.0030. Below 0.9965, distant support is pegged at 0.9745.

NEAR-TERM: Bullish
MEDIUM-TERM: Bullish
LONG-TERM: Bearish

Euro/yen
Last week's range: 158.81 – 161.70 (Mixed)
Previous range: 156.06 – 161.08 (Up)

Euro/yen closed flat last week after hitting a two-month high. My model went short on Friday. Trading has been and will remain choppy.

Immediate support is at 158.80. This is followed by 158.35. This is followed by 156.55 and 155.80. The next level is at 154.60. Below 152.95, distant support is at 151.75.

Resistance is at 160.40 and 160.70. Above 161.35, resistance is at 162.30. The euro/yen has distant resistance at 164.00.

NEAR-TERM: Mixed with downside bias
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Euro/sterling
Last week's range: 0.7867 – 0.8037 (Up)
Previous range: 0.7823 – 0.7981 (Mixed)

Euro/sterling surged to a new 11 1/2-year high. My model went long. There is little reason to expect a sustained pullback.

Immediate resistance is now seen at 0.8050. Above 0. 8080, the next level now comes at 0.8155. Distant resistance is then seen at 0.8270.

Initial support is at 0.7975. A break below 0.7945 would signal a further correction to 0.7885. The next level is at 0.7823. Distant support remains at 0.7605.

NEAR-TERM: Mixed with upside risk
MEDIUM-TERM: Bullish
LONG-TERM: Bullish

Published on  Mon, Apr 14 2008, 06:33 GMT

A boost of premature confidence entered the market last week

Mon, Apr 7 2008, 06:27 GMT
by Cornelius Luca

GFT

A boost of premature confidence entered the market last week and the newly found appetite for risk vaulted the carry trades. The commodity currencies rallied, the yen weakened unexpectedly, while the European currencies basically consolidated. The dollar remains in a major downtrend, but trading should remain choppy and the short term bias is up.

United States
There is little doubt the US economy is in a recession, so what left is for the talking heads to debate the end of it – like they know. Fed Chairman Bernanke had little room but to admit the de facto contraction of the economy. The weak data abounded and the dollar should remain under pressure.

Non-farm payrolls contracted 80,000 in March after a downwardly decrease of 76,000 (from -63,000) in February. The March unemployment rate jumped to 5.1 percent from 4.8 percent, the highest since a matching rate in September 2005.

The dollar strengthened briefly on news that the Chicago PMI rose to 48.2 in March from a seasonally adjusted 44.5 in February.

Meanwhile, the Institute for Supply Management manufacturing index edged up to 48.6 in March from 48.3 in February, but remained below 50, so the contraction continues.

The Institute for Supply Management's non-manufacturing index edged up to 49.6 in March from 49.3 in February.

Construction spending fell 0.3 percent in February following a revised 1.0 percent decrease in January.

The dollar rallied briefly on news that the ADP National Employment Report showed an 8,000 rise in private sector payrolls in March, as the market had prices in a decline of 45,000. Really. This doesn't save us from further declines or recession, but the market took it as a tasty appetizer before the main course on Friday.

Factory goods orders fell 1.3 percent in February; pretty flat for the last four months. Shipments declined 2.1 percent, while unfilled orders rose 0.9 percent, and inventories increased 0.5 percent.

Initial jobless claims rose by 38,000 last week to 407,000 from an upwardly revised 369,000, the highest since just after Hurricane Katrina in September 2005.

The final University of Michigan Surveys of Consumers confidence index remained at 69.5 in March, its lowest since February 1992, from the previous month's reading of 70.8.

The Eurozone
The euro/dollar consolidated in choppy market but closed the week little changed.

German retail sales fell sharply by 1.6 percent in February from January’s downwardly revised 0.9 percent from the earlier estimate of 1.6 percent. On a yearly basis, retails sales fell 0.3 percent.

German manufacturing orders unexpectedly declined 0.5 percent in February from January, when they dropped 0.7 percent

European retail sales unexpectedly declined 0.5 percent in February, reversing the previous month's increase.

In addition, it became apparent on Thursday that two German banks needed $9.4 billion to cover trading losses.

The Eurozone CPI accelerated to 3.5 percent in March, the highest rate since June 1992.

The Eurozone producer prices slowed to 0.6 percent in February from 0.9 percent in January. On an annual basis, producer prices accelerated to 5.3 percent in February from 5 percent in the previous month.

Along the same lines, Italy's consumer prices rose 1.6 percent in March from the previous month and 3.6 percent from a year earlier, up from last month's 3.1 percent.

The Eurozone manufacturing PMI slipped to 52.0 in March from 52.3 in February, while services PMI fell to 51.6 in March from 52.3 in February.

German unemployment fell more than expected to 7.8 percent in March, the lowest level since August 1992, from 8 percent in February.

The Eurozone jobless rate was unchanged at 7.1 percent in February.

The Eurozone consumer and business confidence fell to 99.6 in March from 100.2 in February.

Japan
Dollar/yen rallied last week amid demand for carry trades. This strength should not last.

Industrial production fell 1.2 percent in February after contracting 2.2 percent January.

Housing starts decreased 5 percent year-on-year in February, on top of January’s decline of 5.7 percent.

The manufacturing PMI fell to 49.5 in February, matching the low from October 2007.

Confidence among Japan's largest manufacturers fell 11 points in March to a four-year low, from 19 in the fourth quarter, a second quarterly decline.

The UK
The sterling/dollar ended the week little changed.

The house prices fell 0.2 percent n March, the sixth month of contraction, while the annual rate of growth slowed to 0.4 percent, the least in two years according to Hometrack.

The CIPS manufacturing survey was unchanged at 51.3 in March.

The service sector PMI fell to 52.1 in March from 54.0 in February.

Canada
Dollar/Canada slipped last week amid demand for com