Forex Market Overview

Forex Market Overview 29 July 2008

The Usd was constricted to a tight range in the Asian session, as a lack of new data kept traders on the sideline. The EurUsd traded between 1.5737 – 1.5754, while the UsdJpy trended slightly lower from 107.60 to 107.30, on a string of stronger figures. The Jpy fueled carry trades were unchanged, with the king of carry,the TryJpy, trading around 88.950. Oil followed gold slightly higher to $124.98bll & $931.50oz. The US stock markets were sharply lower ( as financial shares led the DJIA and S&P -2.11% and -1.85% respectively), pushing down Asian indexes and European futures. The FDIC's seizure of two smaller failed banks, over the weekend weighed on sentiment and cast cloud over the health of the US's consumer banking sector. Quietly, the VIX has crept back up to 24.23, but FX 1 month implied vols are steadily easing. Oil prices seem to be the critical driver in Usd pricing, ahead of the late week's data releases.

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In Japan, the economic data came out stronger than expected. Retail Sales for June printed at 0.0% vs. -0.5% exp m/m (0.3% vs. -0.2% exp y/y). Household Survey was also stronger than the expectations, but the outlook is gloomy: Household Survey shows that real spending in June fell -1.8% vs. -2.8% exp. However, the number of respondents (in the Cabinet office survey), which indicated that they would cut back on dining out and entertaining spending, significantly exceed those who were looking to increase spending. BoJ's Nishimura spoke with the media and said that the BoJ's policy was 'wide open' between increasing upside inflation and downside growth risks.

In New Zealand, Building permits for June fell less than expected to -20.1 vs. -42.3% prior reading. While the NzdUsd received a slight boost on the release trading up to 0.7457, we don't expect the gains to hold.

Market will be watching a string of UK data in European session. The CBI Distributive Trades Survey has stabilized in the past couple of months, but it still highlights weak demand. Spending on summer clearance sales are reported to have been strong, but with consumers coming under pressure from rising inflation, the threat of unemployment and the fall of housing prices, we don't expect spending to stay buoyant. The number of mortgage approvals for new house purchase fell below their early 1990s lows in May and are expected to fall further in June. Supported by the British Bankers Association, figures already released are showing a fall last week. While the weak fundamental data will be tempered by inflation concerns, we are expecting some weakness in Gbp today on the negative data.

German regional CPI numbers will released throughout the day, along with the final national figure. With consensus at 3.1% we expect headline CPI to surprise to the upside.

Daily Forex Pivot Points
AUDUSD
R 3: 0.9794
R 2: 0.9675
R 1: 0.9637
CURRENT: 0.9580
S 1: 0.9527
S 2: 0.9477
S 3: 0.9451

EURJPY
R 3: 171.81
R 2: 171.07
R 1: 169.97
CURRENT: 169.41
S 1: 167.50
S 2: 166.01
S 3: 165.33

USDSGD
R 3: 1.3826
R 2: 1.3717
R 1: 1.3661
CURRENT: 1.3626
S 1: 1.3567
S 2: 1.3501
S 3: 1.3448