[B]Economic News
USD[/B]
The US dollar softened throughout the New York session as mixed reports from the housing sector reaffirmed much of the negative sentiment on everything from construction to sub-prime loans. The actual effect on the mortgage market will be felt soon, after the Housing starts was released in line with expectations by 2.1% to 1474K from an upwardly revised 1506K, signaling that homebuilders are not initiating projects as quickly as in previous months. However, building permits jumped a greater-than-expected 3.0% to 1501K from an upwardly revised 1457K. As a leading indicator for starts, the data points to a pick up in construction during the summer. Given a lack of solid demand for properties, these building plans will only contribute further to softness sector-wide as inventories will only rise further, and prices will have to be cut in order to liquidate. Meanwhile the breakdown of data is worthless: Improvements were contained to multi-family units - which tend to be rented out - while declines were seen across the board for single-family units - which are typically mortgaged. Although the multi-family index tends to be highly volatile, this will be a factor worth watching as potential homeowners seem to be shifting towards more affordable rentals and away from expensive loans as mortgage rates rise. It looks as if the USD is going to maintain its weakening trend, at least until next week which will contain a bit more value with regards to news events.
[B]EUR[/B]
The EUR dropped back below 1.3400 during European trading after the ZEW survey reflected surprisingly gloomy economic outlooks among investors. Both the German and Euro-zone ZEW figures unexpectedly fell back to 20.3 and 19.0, respectively, as the European Central Bank’s overtly hawkish stance has started to take its toll on optimism. Nevertheless, the EUR made a comeback over the course of the US session as the readings still hold at encouraging levels and German sentiment regarding current conditions actually reached another record high of 88.7. Overall, the status of Euro-zone expansion appears to be keeping pace, as the labor market remains tight, exports continue to thrive, and consumption grows. However, these factors combined with inflation holding at 1.9%, just below the ECB’s ceiling of 2.0%, may not be enough to initiate policy action within the next few months. Given the fairly aggressive series of rate hikes that the ECB has enacted over the past year, the end of the tightening cycle may be closer than we think, especially if price pressures ease in line with the central bank’s outlook.
The Bank of England left interest rates on hold at 5.50% at the June MPC meeting. No statement was released at the time and the minutes from that meeting will, therefore, have an important impact on interest rate expectations and Sterling. The consensus is that there was a 7-2 vote increase for steady rates at the meeting with two members, probably Sentance and Besley, calling for an immediate increase to 5.75%.
There is little doubt that the inflation concerns continued at the meeting and that the bank will have retained a tightening policy bias, especially as Bank Governor King took a firm stance in a recent speech. There is also no doubt that there was a wide range of views on the inflation outlook. It is assumed however, that the net risks suggesting, Sterling should have a weaker bias following the minutes. The strong level of carry trade activity will, however, fuel additional short-term Sterling volatility.
[B]JPY[/B]
TOKYO (XFN-ASIA) - The business sentiment diffusion index for leading companies fell to minus 0.9 for the April-June quarter from a reading of plus 6.2 in the January-March period, according to the results of a quarterly survey conducted by the Ministry of Finance and the Cabinet Office. The index is computed by subtracting the percentage of large companies reporting deteriorating business conditions from the percentage of companies reporting an improvement. A positive figure indicates the majority of large companies see an improvement. The finance ministry gave the following breakdown of the business sentiment diffusion indices for April-June, compared with the figures for January-March: Total - minus 0.9 vs. plus 6.2.
Generally this kind of figure might bring a negative behavior of traders relating the JPY when it’s only strengthening the conjecture of the disbelief in the JPY those days and even may cause another ran away of the JPY buyers to seek for other attractive alternatives .
[B]Technical News[/B]
[B]EUR/USD[/B]
The pair now consolidates around 1.3428 which is the 50% Fibonacci of the 1.3540/1.3260 move. The daily charts are defiantly bullish as the hourlies support. A preferable strategy might be buying on a dip around 1.3405.
[B]GBP/USD[/B]
The daily charts are pointing higher as the hourlies are dwelling in neutral levels. Traders should look for the 1.9900 break which will signal that the pair is seeking the 2.0000 levels again. Is a break does not occur, than a consolidation around 1.9800 is expected.
[B]
USD/JPY[/B]
After peaking at the 123.70 level, the pair now rests back on the 123.30 area with a distinct intention to travel north again. The dailies are very bullish as the hourlies rotate in and out of bullishness. The next target price is 124.00.
[B]USD/CHF[/B]
The pair is losing ground after the impressive uptrend from 1.2150, and it looks like the downtrend is becoming more solid in the past few days. The dailies are bearish and the hourlies are mostly neutral. The bias seems to be slightly bearish with a daily target of 1.2350.
[B]
The Wild Card
NZD/JPY[/B]
With strong JPY selling in place and a stronger then ever bullish notion, there is a great opportunity for Forex traders to jump into an impressive uptrend. The pair now trades at 93.58 and it still has plenty of room to run.