Date: Tuesday 20 Jul 2010
The US dollar continues to find itself weighed down but at least it was enjoyed in its discomfiture by sterling yesterday as both competed for the 24 hour ugly crown with the pound coming out ahead.The Euro on the other hand was able to shrug off the problems in Hungary, and the Moody’s downgrade of Ireland, and continue to push higher on optimism about this weeks stress test results, as the market demonstrates its inability to focus on more than one thing at a time. As a result the dollar and sterling continue to suffer at the expense of the resurgent single currency.
This week is an important week for both currencies starting with sterling and the UK public finance data out this morning is expected to show Public Sector Net Borrowing (PSNBR) to come in at £13.0bn in June, compared to £16bn in May, and £14.7bn in June 2009.
The CBI is also expected to announce its industrial trends survey for July and it is expected to show that the balance of manufacturers reporting that their orders are at normal levels was stable at -23%.
In data out of the US housing starts for June are expected to show a decline of 2.7%, an improvement on last months fall of 10%, but it is the earnings data that will probably take centre stage, before the opening bell with Goldman Sachs and bank of New York Mellon due to announce earnings of $4.72c a share, and $0.56c a share respectively.
EURUSD – despite a brief dip early yesterday morning to 1.2870, after the Moody’s downgrade of Ireland, the single currency has maintained its resilience again testing the 1.3000 level before drifting back.
The next price objective in the medium term lies at 1.3125 which is the 38.2% retracement of the down move from the highs at 1.5145 to the 1.1880 lows.
A failure to break above 1.3000 could see a correction towards yesterday’s lows around 1.2870/80, a break of which could target a deeper correction back towards the 1.2750/60 area.
GBPUSD – the pound has had a bit of a nightmare in the last 24 hours falling on the back of weaker housing data hitting a low of 1.5205 before rebounding into the New
We need to see a rally back above 1.5300 to stabilise in the near term, to keep alive the scenario for a test towards 1.5610 ehich is the 61.8% retracement of the down move from the 2010 peaks at 1.6460 to the lows at 1.4230.
EURGBP – as suspected the resurgent euro hit the 0.8520 level yesterday touching 0.8530 before falling back. The move back above the 0.8400/10 could well see further gains towards 0.8610, which would be a 50% retracement of the down move from the 0.9150 highs to the June lows at 0.8068.
The 0.8400/10 area should now act as significant support for this move higher. Any move below the 0.8400/10 re-targets the 0.8320/30 level.
USDJPY – continued poor US data continues to weigh down the dollar here and with falling yields continuing to weigh, the Japanese authorities have a bit of problem to contend with.The risk remains of a move to last year’s yen lows at 84.80, a break of which would open up levels last seen in 1995. This would present the Bank of Japan with a decision of whether or not to intervene in the markets, something they haven’t done since 2004, to weaken the yen as their exporters become less competitive.
Any rallies need to overcome the pivotal 88.00/10 area to stabilise and re-target 89.20, a break of which would re-target the 90.00 area.
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