Euro – Following a gentle slide on Monday the euro rallied from $1.3650 after a pair of Eurozone PMI reports for September showed economic activity in the area was gaining traction. The PMI Services and Composite readings for last month both rose to 54.1 with individual readings for Germany rising by a greater amount, while the French reading dipped slightly but maintaining a far stronger pace of expansion than in any other Eurozone nation. Investors are clearly far more motivated to own the euro than the dollar with lesser prospects for further quantitative easing in the background. A separate report showing retail sales dipped during August across the Eurozone was largely overlooked in the context of today’s survey data. The euro rallied against the yen where it stands at ¥114.75.

British pound – Another positive surprise for the British economy came in the form of jump in the PMI Services reading for September when analysts had expected a fall. The index rebounded from a slip towards a standstill for the sector and improved to 52.8 from 51.3. The pound shot up from $1.5750 to $1.5914 on the strength of today’s data, which economists reckon now reduces the likelihood of further quantitative easing. Last week MPC member Adam Posen launched further interest in that notion by proposing a debate on the issue.

U.S. Dollar – The dollar soured at the hands of a double-fisted assault from the European duo and the index appears to be on the verge of further decline. The dollar faces its own services PMI index reading later this morning. Fed Chairman Bernanke made remarks overnight to defend previous rounds of bond purchases and said that there is a role for more bond buying to help revive the economy.

Japanese yen – The Bank of Japan maintained its benchmark interest rate but reduced its target lending range to between zero and 0.1% at today’s policy meeting. It also announced the launch of a ¥5 trillion ($60 billion) fund to be used for buying government paper and other assets that would stimulate the economy. The expansion of the balance sheet is in addition to a target monthly purchase amount of ¥ 1.8 trillion and a credit program of some ¥30 trillion. In addition the central bank has attempted to sour dealers’ appetite for the yen by proving that it is willing to intervene and weaken its currency. So far it has performed this task on a single occasion and on a unilateral basis. Following today’s policy announcement the yen slumped against the dollar and fell to ¥84.00 before recovering to ¥83.31.

Aussie dollar – The RBA’s decision to maintain its benchmark interest rate at 4.50% today outsmarted dealers apparently craving a higher yield for the Australian dollar. The failure to budge on account of signs that policy is already biting in the nation’s housing market led to sale of the Aussie unit dragging it all the way back to 95.42 U.S. cents. It later recovered to 96.27 cents but still carries a daily loss of 0.5%.

Canadian dollar – The Canadian dollar could conceivably suffer from its affinity with the commodity-sensitive Aussie unit, but given its narrower yield gap above the greenback, it didn’t suffer much as a result of the Reserve Bank’s inaction. Indeed the loonie appears to be finding the sailing pretty good supported by the tailwinds of a rising price of crude oil, one of the nation’s largest exports. Dealers are less inclined to price in aggressive rate hikes from the Bank of Canada following last week’s warning from Governor Carney that future decisions on monetary policy need to be carefully weighed in light of what’s happening outside the economy.

Published on Tue, Oct 5 2010, 12:51 GMT

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LONDON (Reuters) – Oil rebounded to top $74 a barrel on Monday on a weaker dollar, but prices stayed close to last week’s six-week lows on bulging U.S. inventories and a lack of hurricane activity in the Gulf of Mexico.

The market gained support from the weaker U.S. dollar, which makes oil cheaper for holders of other currencies .DXY, and from a firmer start to trading by European equities.

U.S. crude for delivery in October was up 31 cents to $74.13 a barrel by 0856 GMT (4:56 a.m. EDT), having earlier risen as high as $74.30. October Brent crude was up 44 cents to $74.70.

“We’re still basically trading sideways and close to the bottom of the range, but I don’t think we’re necessarily into a nosedive,” said Christopher Bellew, a broker at Bache Commodities in London.

“Demand from developing countries such as China is supportive, and on the bearish side there’s fears of weak demand in Western economies.”

Oil in New York ended last week at the lowest since early July, after prices touched an intraday low of $73.19. Prices have fallen more than 10 percent from an August 4 high of $82.97.

Even though forecasts are for the Atlantic hurricane season to be the most active in five years, there was little imminent threat of hurricane-related disruptions to oil output or refining in the Gulf of Mexico.

Tropical Storm Danielle formed over the mid-Atlantic on Sunday and could become a hurricane by Tuesday night, the U.S. National Hurricane Center said, but it was headed for Bermuda, posing no threat to oil and gas infrastructure in the Gulf.

“The upcoming storm in the Atlantic is expected to deviate north and will again be a storm that will not have any impact on oil assets in the U.S. Gulf,” said Olivier Jakob, analyst at Petromatrix, in a report.

Oil this year has traded in a $64.24-$87.15 range as recovering demand has been insufficient to drain ample supplies. U.S. petroleum stocks climbed to a record since weekly records began in 1990 in the week ended Aug 13.

“We’ve broken some short-term support at around $74.50 and the next short-term support would be around $72,” Bellew said, referring to Brent crude.

Last week’s economic reports included data showing U.S. jobless claims hit a nine-month high and U.S. regional manufacturing contracted for the first time in a year, reviving fears of a double-dip recession in the world’s largest economy.

Investors’ interest in oil diminished last week. Money managers cut net long crude oil positions on the New York Mercantile Exchange, the Commodity Futures Trading Commission said on Friday.

(Reporting by Alex Lawler in London and Alejandro Barbajosa in Singapore, editing by Alison Birrane)

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Meanwhile, better than expected German producer prices lifted the euro this morning – currently trading under yesterday’s highs of 1.2923. German PPI printed a gain of 0.5% vs. 0.2% forecast but still lower than the previous 0.6%.
Despite positive data, the euro failed to break the 1.3000 psychological level largely due to renewed concerns about Greece. An article in German magazine Der Spiegel released that the austerity measures implemented to cut spending may further increase debt service problems in Greece. Current support level lies at the 100-day moving average of 1.2770. A break below this level should likely move the euro to the next support of 1.2720.

The British pound continued to trade within recent ranges while remaining well supported by stronger than expected retail sales and public finance data. Sales, minus auto fuel, in July increased 0.9% vs. the previous 1.0% and 0.2% eyed. Meanwhile, the government posted a smaller deficit with net borrowing at 3.17 billion compared with 5.52 billion a year earlier and 4.8 billion expected.

The Canadian dollar reversed earlier gains against the US dollar as poor economic data from both regions increased concerns about North America’s economic recovery. In addition to disappointing US jobless claims, Canadian wholesale sales unexpectedly fell in June due to fewer shipments of machinery and equipment. Sales fell -0.3% vs 0.4% eyed. Ahead tomorrow, consumer price index for July is scheduled for released with an expected increase of 1.9% vs. the previous 1.0% y/y.

The Japanese yen continued to strengthen against the US dollar on news that the Bank of Japan may increase corporate loan program from 20 trillion yen to 30 trillion. According to the Sankei newspaper, BoJ may also extend the duration of the loan from three months to six months. On the other hand, the yen’s gains may be pressured later today as there are rumors of BoJ hosting an emergency meeting to discuss the potential of policy easing. Furthermore, Japan’s Vice Finance Minister Naoki Minezaki expressed concerns about the strong yen vs. other country’s artificially suppressed currencies.

The Australian and New Zealand dollars continued to be pressured by strong risk aversion and a weaker equity market today. The kiwi ended its three day gain against the dollar following central bank Governor Alan Bollard’s comments suggesting that policymakers may be overlooking inflation pressures caused by sales tax.

For the Aussie this week, the focus will be on the weekend’s election. A victory by opposition leader Tony Abbot will temporarily lift mining stocks and the Aussie due to his stance in resisting the proposed tax on mining companies.

Published on Fri, Aug 20 2010, 04:31 GMT

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Yen Extends Drop, Dollar Fell on ADP

The yen extends drop after breaking technical resistance at 93 versus the dollar, and the pair reached as high as 93.61 in Wednesday trading session. As a low-yielding funding currency in carry trades, the yen is likely to fall further in the medium to long term when market risk appetite improves in global recovery.

The Bank of Japan’s quarterly Tankan survey which reflects business confidence will come with Japanese new fiscal year tonight. Tankan big manufacturer’s index is expected to improve from -24 to -13 in the first quarter, and small manufacturer’s index and non-manufacturer’s index are estimated to rise slightly as well. Should the report come in as positive as expected, the yen might rebound briefly, while the longer term downtrend should not be changed.

The dollar fell after ADP report showed an unexpected 23k job losses this month in US private sector versus the consensus of a 20k increase and a 23k decline in the previous month. The market will focus on the most important job market gauge, the nonfarm payroll report released by the Labor Department due this Friday morning.

Though the euro rose 1 percent to 1.3548 against the dollar today, the advance might not be sustained amid lingering concerns over Greece debt woes. The EUR/USD pair is currently trading below 1.3550 level. If it fails to break a major resistance at 1.3640, the pair is likely to resume a downtrend to 1.33.

The Aussie tumbled today after an unexpected drop in retail sales. The currency is still supported by the expectation that the Reserve Bank of Australia is likely to raise interest rates by another quarter percentage on its monetary policy meeting next week.

Thursday will see US weekly jobless claims, US March ISM manufacturing index(exp 56.5, prev 56.5), US February construction spending(exp -1.5%, prev -0.6%).

EURUSD will face interim resistance at 1.3550, followed by 1.36 and 1.3640. Additional ceilings will emerge at 1.37, backed by 1.3750. Support starts at 1.35, backed by 1.3450, 1.34 and 1.3380. Subsequent floors are eyed at 1.33.

GBPUSD encounters interim resistance at 1.52, backed by 1.5250 and 1.5270. Subsequent ceilings will emerge at 1.53, followed by 1.5380. On the downside, support begins at 1.5160, followed by 1.5080 and 1.5040. Additional floors are eyed at 1.50, backed by 1.4960 and 1.4870.

USDJPY encounters interim resistance at 93.70, backed by 94 and 94.50. Subsequent ceilings will emerge at 95.10, followed by 95.70 and 96. On the downside, support begins at 93 and 92.75, followed by 92.30. Additional floors are eyed at 92, backed by 91.75 and 91.

Published on Wed, Mar 31 2010, 22:23 GMT

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With regard to the euro-dollar pair, it is showing slight decline on the daily charts despite the better-than-expected manufacturing data for March. The pair has been moving around key resistance at 1.3481 which represents 61.8% Fibonacci retracement to the upside trend that started in March last year. Still, the outlook for the euro is concerning with worries that Greece and other highly-indebted European economies will not be able to tackle their huge deficits. The pair is currently trading at 1.3487 while recording a high of 1.3560 and a low of 1.3458, where the coming support is seen at 1.3435 and next resistance is at 1.3560.

As for the sterling-dollar pair, it is showing advance for the sixth day on the daily charts; however, the pair is facing downside pressure from the 4-hour and 1-hour charts. Today’s data showed that manufacturing climbed to 57.2 from 56.5, adding to hopes the economy is on the right track towards recovery after the 0.4% expansion witnessed in the fourth quarter. Despite the progress seen by the sterling, it may face pressure due to political tensions and high deficit in Britain. Meanwhile, the pair is trading at 1.5234 after hitting a high of 1.5263 and a low of 1.5169 while it is expected to move between support at 1.5170 and resistance at 1.5270 then 1.5315.

Relative to the dollar-yen pair, it is continuing its advance on the daily and 4-hour charts. However, the pair is currently unable to remain above cluster resistance at 93.76 after reaching a high of 93.89 and a low of 93.27 earlier today, whereas support is seen at 92.15 while resistance is at 94.00 then 94.50.

Published on Thu, Apr 1 2010, 14:07 GMT

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