By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar weakened against all of the G10 currencies as risk-seeking continued with equities up 1% and oil back above $77. Treasury yields also came down as investors digested the less stringent than expected Basel II negotiations and the decent Chinese economic data. The only data release of the day was the monthly budget statement, which showed a deficit for the 23rd consecutive month, the longest stretch on record. Retail sales data will help show how the consumer has weathered the recent soft patch in data. We are expecting a moderate rise in August, though some tepid auto sales could weigh on the headline figure.
EUR
The euro benefited from the renewed risk-seeking but the German ZEW survey data will be another important step to see if softer times are ahead for the Eurozone. Consensus estimates are for a dip in the economic sentiment reading but an increase to 50.0 for the current situation.
ECB President Trichet said what was decided on Basel III would not hamper the global recovery and said he saw no deflation risk in advanced economies for now. Trichet did not offer any comments on monetary policy.
JPY
USDJPY remained heavy ahead of the DPJ leadership election as investors put some more money to work across asset classes. Press reports suggest the race is still too close to call and given recent price action, there appears more scope for an upside USDJPY surprise should Ozawa win given that it would inject uncertainty into the future policies of the DPJ and also given his outspoken support of FX intervention. Results are expected around 0600GMT.
GBP
Investors have been concerned about elevated inflation readings but BoE MPC members believe the data should start to come back down. We should see slight easing in the y/y figures for both CPI and RPI, which could temper investor expectations for the BoE at this stage in the recovery.
TECHNICAL OUTLOOK
EURUSD BEARISH Violation of 1.2588 and 1.2434 thereafter is required for the confirmation of bearish trend. Resistance holds at 1.2919.
USDJPY BEARISH Trend is bearish; there is little support till 79.75 key level. Short-term resistance is defined at 85.23.
GBPUSD BEARISH Stalled above 1.5297; a break here would expose 1.5125/15 ahead of 1.4906. Near-term resistance lies at 1.5565 ahead of 1.5731.
USDCHF BEARISH Focus is on the downside with initial support lying at 1.0061 ahead of 0.9918. Near-term resistance comes in at 1.0278 ahead of 1.0466.
AUDUSD BULLISH Bullish pressure targets 0.9389; break of the level would favour another run towards 0.9406. Near-term support is at 0.9171 ahead of 0.9055.
USDCAD NEUTRAL 1.0673 and 1.0108 define the next bull and bear triggers respectively.
EURCHF BEARISH Sell-off from 1.3924 found support at 1.2766; break of the level would expose 1.2626 ahead of 1.2403. Resistance at 1.3163.
EURGBP NEUTRAL Model is neutral; 0.8390 and 0.8142 mark key near-term directional triggers. 0.8068 defines a key support level.
EURJPY BEARISH Focus is maintained on 105.44, next support at 100 psychological level. Resistance is at 111.19.
Forex Daily Market Commentary provided by GCI Financial Ltd.
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