Previous Currency Market Session Summary
The USD rebounded slightly earlier this week after the dollar index touched a new low for 2009 below the 78.40 level and both USD & JPY were buoyed temporarily as equity markets faltered. Fundamental data helped the US currency pare its losses versus the Euro and gain ground on the Japanese currency. One dollar bought JPY95.51, up from JPY95.04 on Wednesday. The low-yielding yen has been the biggest loser as investors warm up to holding riskier assets. Currency markets had a muted reaction to Japanese industrial production figures. The Ministry of Economy, Trade and Industry said Japan’s industrial output rose 8.3% in the April-June quarter from the January-March period – the biggest on-year jump since 1953.
The number of people out of work in Germany, Europe’s largest economy, fell more than expected. However, the figure excluded 30,000 jobless enrolled in a new government sponsored training program and is being kept artificially low by the extensive use of government subsidies to companies to keep staff on shortened hours rather than lay them off. Both the Federal Labour Office, which published the jobless data Thursday, as well as independent analysts, repeated that unemployment is likely to rise by another million or more over the next year as the worst recession in 60 years takes its toll.
In contrast, in the US the tally of continuing jobless claims – drawn by workers for more than one week - fell by 54,000 during the week ended July 18 to 6,197,000 the lowest level since April 11. This data set spurred the USD & Euro to intraday highs against the safe haven Yen. The Aussie Dollar also reached a session high against the US dollar to USD0.8262.
Forex Market Expectations
EURGBP extends to challenge stg0.8510 and a break opens a move toward stg0.8500 with stops noted below this level. If stops triggered then we could be seeing a deeper move toward stg0.8470 (76.4% stg0.8400/0.8698).
EURUSD trades to USD1.4010 area and finding support on the 40 day moving average and no doubt tempting Euro longs. Technical Cable traders can take note that the rate achieved its target level at USD1.6527 (76.4% USd1.6585/1.6338), with further technical levels coming through to USD1.6535. Added to this the gravestone doji on the hourly candlestick chart would suggest Cable could be in for a deeper pullback off rally highs. The USD1.6500 level holds an option expiry for the 1400GMT cut with traders suggesting that we could see cable drift lower following expiry.
Tomorrow’s advance GDP data is likely to offer more clues and could spark a USD rally if data shows that economic conditions will take much longer to turn back to growth. Look for a firm close in the USD today after two-way action.
