Forex Market Bulletin, Aug 01, 2011

Pulse of the Market

·      Obama said that leaders of both parties had approved an agreement to raise the U.S debt ceiling

·      Euro Zone economic docket heavy with EU crisis, ECB decision and Italian GDP on deck

·      British Pound might come across diminutive encouragement from Bank of England meeting

·      Japanese Yen knocked into anti Dollar sentiment and paying no attention to BoJ decision

The U.S Dollar gained against major rivals in today’s Asian trading session, after U.S lawmakers reached an agreement on a deal to raise the debt ceiling and reduce the deficit. Political leaders in Washington agreed to raise the U.S government debt ceiling in two stages by at least $US2.2 trillion from the current $US14.3 trillion level. Whereas, the Greenback traded lower against the basket of major currencies on Friday. On the economic docket in Friday’s session, the U.S economy expanded by an annualized pace of only 1.3 percent in the second quarter against a forecast of 1.8 percent. Personal consumption grew only 0.1 percent between April and June compared to a downwardly revised growth of 2.1 percent in the first quarter. Manufacturing activity in the Chicago region also slowed while consumer confidence numbers were revised lower. The Euro traded higher against the U.S Dollar in Friday’s trading session. After selling off aggressively between the Asian and European trading sessions, the surprisingly weak U.S GDP numbers renewed demand for Euros. Earlier in Friday’s session, Moody’s decision to put Spain’s credit rating on negative watch caused the currency to plunge sharply as European contamination fears overtook concerns about the credit worthiness of the U.S Dollar. However that changed quickly after investors realized that both parts of the world have major fiscal troubles but growth in the Euro Zone is healthier than growth in the U.S. Germany and France reported strong consumer spending numbers, with retail sales in the Euro Zone’s largest country growing by a whopping 6.3 percent. The British Pound ended the day higher against the U.S Dollar and slightly lower against the Euro despite mixed economic data. Consumer confidence deteriorated in July with the GfK index falling from -25 to -30, a 3 month low. According to Nationwide, house prices rose 0.2 percent in July and mortgage approvals rose from 46.4K to 48.4K. Consumer credit also increased but net lending and money supply decreased. With less fiscal problems than the U.S and Europe, the Pound gained value against the Euro and U.S Dollar last week. The Japanese Yen continued to strengthen against all the majors with the exception of the Swiss Franc. The month over month industrial production printed at 3.9 percent versus the 4.5 percent eyed. The surprise came as major corporations cautioned the threat of the record high Yen.

Time(GMT)	Economic Release	IMP	Actual	Forecast	Prior
	GBP Halifax House Price (3MoY) (JUL)	Low		-2.8%	-3.5%
00:40	U.S President Obama's Press Conference on Debt Agreement	Medium
07:55	German Purchasing Manager Index Manufacturing (JUL)	Medium		52.1	52.1
08:00	Euro Zone Purchasing Manager Index Manufacturing (JUL)	Medium		50.4	50.4
08:30	U.K Purchasing Manager Index Manufacturing (JUL)	Medium		51.0	51.3
09:00	Euro Zone Unemployment Rate (JUN)	Medium		9.9%	9.9%
14:00	U.S ISM Manufacturing (JUL)	High		55.0	55.3

Euro

The Single was back towards the top of its weekly range after trading through a volatile session. The Euro initially came under selling pressure after Moody's put Spain's sovereign debt rating under review and downgraded the rating of six of its provinces. Fear that the debt contagion is spreading to larger Euro Zone members, most notably Spain and Italy, has limited the Euro's upside potential. Overall, the EUR/USD traded with a low of 1.4228 and a high of 1.4412 before closing the day around 1.4368 in the New York session.

Yen

The Japanese Yen continues to grind higher on Friday, edging ever closer to the all time high reached in wake of the earthquake and tsunami earlier this year. The Yen's appeal as a "safe haven" currency has prompted the recent gains as both the U.S and Euro Zone struggled with mounting debt. Officials have made it clear that intervention is unlikely. Overall, the USD/JPY traded with a low of 76.88 and a high of 77.85 before closing the day around 76.96 in the New York session.

British Pound

The British Pound was higher in Friday’s trading session. A measure of British consumer sentiment declined in July, fueling speculation that the BoE will delay raising interest rates. Nevertheless, the unfolding debt saga in the U.S and the Euro Zone has supported the Pound as an alternative to both countries' currencies. Overall, the GBP/USD traded with a low of 1.6260 and a high of 1.6469 before closing the day at 1.6417 in the New York session.

Canadian Dollar

The Canadian Dollar ended the day lower against the Greenback. The proximity of the U.S. and Canada is perhaps the country’s biggest problem. In the month of May, the Canadian economy contracted by 0.3 percent, which was the weakest in 2 years. For the Bank of Canada, these latest numbers will encourage them to keep monetary policy comfortably on hold. Overall, USD/CAD traded with a low of 0.9484 and a high of 0.9588 before closing the day at 0.9551 in the New York session.

Australian Dollar

The Australian Dollar traded lower against the Greenback. This week will be a busy one for Australia. The Reserve Bank of Australia will be the first central bank to meet this week and like the others, rates are expected to remain unchanged. Overall, the AUD/USD traded with a low of 1.0910 and a high of 1.1015 before closing the day at 1.0984 in the New York session.

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The RSI is above 40 and lies below the neutral zone. Overall, the cross has lost 0.62%.

Sterling-Yen

Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bullish and MACD is also indicating a bullish stance. The RSI is above 45 reading and lies below the neutral zone. The pair has lost 0.62%.

Aussie-Yen

Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic gives bullish and MACD is also indicating a bullish stance. The RSI is above 51 reading and lies above the neutral region. The pair has lost 1.07%.

Euro-Sterling

This cross is trading above below 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish and MACD is also issuing a bearish signal. The RSI is above 39 reading and lies below the neutral region. The pair has lost 0.01%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The RSI is above 36 and lies below the neutral region. The pair has lost 1.45%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.4076	1.4152	1.4260	1.4336	1.4444	1.4520	1.4628
USD/JPY	75.64	76.26	76.61	77.23	77.58	78.20	78.55
GBP/USD	1.6086	1.6173	1.6295	1.6382	1.6504	1.6591	1.6713
USD/CHF	0.7626	0.7739	0.7805	0.7918	0.7984	0.8097	0.8163
USD/CAD	0.9390	0.9437	0.9494	0.9541	0.9598	0.9645	0.9702
EUR/JPY	108.95	109.66	110.12	110.83	111.29	112.00	112.46
GBP/JPY	124.52	125.30	125.82	126.60	127.12	127.90	128.42
CHF/JPY	95.43	96.05	96.90	97.52	98.37	98.99	99.84
AUD/JPY	82.58	83.40	83.96	84.78	85.34	86.16	86.72
EUR/GBP	0.8678	0.8705	0.8728	0.8755	0.8778	0.8805	0.8828
EUR/CHF	1.1047	1.1171	1.1241	1.1365	1.1435	1.1559	1.1629
GBP/CHF	1.2607	1.2751	1.2837	1.2981	1.3067	1.3211	1.3297

Sources: News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)