Dollar Falls Despite Better than Expected Consumer Sentiment

[ul]
[li]US Dollar Falls Despite Better than Expected Consumer Sentiment [/li][li]Euro Bulls Make Another Attempt to Bring Down 1.42 [/li][/ul]

[B]Dollar Falls Despite Better than Expected Consumer Sentiment[/B]

This Friday, the US dollar lost ground against the world’s most heavily traded currencies despite the release of better than expect data for personal income and consumer confidence. Personal Income for May came in at 1.4 percent from 0.7 percent in the previous month and the University of Michigan Consumer Confidence indicator came in at 70.8, higher than expected. Foreign exchange traders were not particularly excited in these numbers and the euro appreciated 80 pips against the dollar to trade as high as 1.4180 from 1.3986 on Thursday. Also, the USDJPY lost more than 70 pips to trade as low as 95.04 yen. This has been a particularly volatile week for currency trading which makes it even more difficult to identify the fundamental triggers behind such moves in exchange rates. Nevertheless, several months of quantitative easing combined with expectations for a record high budget deficit are beginning to weigh on the US dollar exchange rate. Earlier in the day, Chinese officials reiterated their call to replace the U.S. dollar with a new global reserve currency and many countries are becoming increasingly concerned about their investments in US treasuries. Moreover, this week we learned that the Federal Reserve will continue to provide support to mortgage lending and housing markets by purchasing a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. However, the US dollar is likely to remain under heavy selling pressure until the US Federal Reserve presents a clear exit strategy for quantitative easing.

[B]
Euro Bulls Make Another Attempt to Bring Down 1.42[/B]

A change in investor’s sentiment towards more risk taking has been helping the euro to demolish the safe-haven status of the US dollar. Today, the EUR/USD gained 71 pips in few hours but one has to look at a longer term chart to really understand the magnitude of the EUR/USD up trend. The euro rallied more than 1700 pips since January trading from a low of 1.2544 in March to as high as 1.4337 in June. Having said that, the euro starts looking very expensive, in particularly for European exporters who have to compete against American companies for a share in global trade. Looking ahead, we expect a considerable deterioration of the euro zone economy which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar.

                                                [B]Currency[/B]

                                   [B]GMT[/B]

                                   [B]Release[/B]

                                   [B]Survey[/B]

                                   [B]Previous[/B]

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                                                     NZD

                                   22:45

                                   Trade Balance (New Zealand dollars) (MAY)

                                   250.0M

                                   276.0M

                                   Trade   Balance Surplus to rise for the third consecutive month while narrowing on   the year-to-date.

                                                     NZD

                                   22:45

                                   Balance (YTD) (New Zealand dollars) (MAY)

                                   -3637

                                   -4108

                                                     NZD

                                   22:45

                                   Imports (New Zealand dollars) (MAY)

                                   3.42B

                                   3.37B

                                   Trade   figures expected to post slight increases as global trade improves amid signs   of recovery.

                                                     NZD

                                   22:45

                                   Exports (New Zealand dollars) (MAY)

                                   3.70B

                                   3.65B

                                                     NZD

                                   22:45

                                   Building Permits (MoM) (MAY)

                                                 11.2%

                                   Permits   have trended cyclical in past several months.

                                                     GBP

                                   23:01

                                   Hometrack Housing Survey (MoM) (JUN)

                                                 0.0%

                                   Housing   survey posted no change in June following 19 consecutive monthly declines   while YoY contraction narrowed.

                                                     GBP

                                   23:01

                                   Hometrack Housing Survey (YoY) (JUN)

                                                 -9.6%

                                                     JPY

                                   23:50

                                   Industrial Production (MoM) (MAY P)

                                   7.0%

                                   5.9%

                                   Production   is expected to set record high expansion for the second month while   annualized figure improves.

                                                     JPY

                                   23:50

                                   Industrial Production (YoY) (MAY P)

                                   -28.8%

                                   -30.7%

                                                     JPY

                                   23:50

                                   Retail Trade s.a. (MoM) (MAY)

                                   0.0%

                                   0.7%

                                   Retail   trade to post no change following first gain in seven months. Annualized   contraction expected to narrow for the third time while large retailers'   decline to cool for second month.

                                                     JPY

                                   23:50

                                   Retail Trade (YoY) (MAY)

                                   -2.6%

                                   -2.8%

                                                     JPY

                                   23:50

                                   Large Retailers' Sales (MAY)

                                   -6.2%

                                   -6.7%

                                                     NZD

                                   3:00

                                   Money Supply M3 (YoY) (MAY)

                                                 6.9%

                                   Growth   in money supply has remaining within a range of six to ten percent in the   past year.

                                                     JPY

                                   4:00

                                   Vehicle Production (YoY) (MAY)

                                                 -47.1%

                                   Contraction   has narrowed in the past two months.

                                                     EUR

                                   8:00

                                   Bloomberg Italian Retail Purchasing Manager Index (JUN)

                                                 46.5

                                   Retail   PMI in Euro-Zone has improved recently despite posting contraction in past   twelve months. Specifically, the French PMI came in the strongest of   continental Europe's three largest economies while Germany showed the most   weakness.

                                                     EUR

                                   8:00

                                   Bloomberg German Retail Purchasing Manager Index (JUN)

                                                 46.3

                                                     EUR

                                   8:00

                                   Bloomberg French Retail Purchasing Manager Index (JUN)

                                                 48.3

                                                     EUR

                                   8:00

                                   Bloomberg Euro-Zone Retail Purchasing Manager Index (JUN)

                                                 47.1

                                                     GBP

                                   8:30

                                   Mortgage Approvals (MAY)

                                   46.0K

                                   43.2K

                                   Approvals   to rise to highest level since April 2008.

                                                     GBP

                                   8:30

                                   Net Consumer Credit (MAY)

                                   0.3B

                                   0.3B

                                   Lending   remains constricted as consumers continue to lower debt and increase savings.

                                                     GBP

                                   8:30

                                   Net Lending Sec. on Dwellings (MAY)

                                   1.0B

                                   1.0B

                                                     GBP

                                   8:30

                                   M4 Money Supply (MoM) (MAY F)

                                                 0.2%

                                   Money   supply growth has slowed to a 0.2% pace for the past three months while YoY   rise remains relatively high.

                                                     GBP

                                   8:30

                                   M4 Money Supply (YoY) (MAY F)

                                                 16.6%

                                                     EUR

                                   9:00

                                   Euro-Zone Economic Confidence (JUN)

                                   71.0

                                   69.3

                                   Economic   confidence and business climate indicators are expected to improve for the third   month.

                                                     EUR

                                   9:00

                                   Euro-Zone Business Climate Indicator (JUN)

                                   -3.00

                                   -3.17

                                                     EUR

                                   9:00

                                   Euro-Zone Consumer Confidence (JUN)

                                   -30

                                   -31

                                   Confidence   to improve slightly from March -34.0 record low.

                                                     EUR

                                   9:00

                                   Euro-Zone Industrial Confidence (JUN)

                                   -32

                                   -34

                                   Industrial   confidence expected to rise for third month.

                                                     EUR

                                   9:00

                                   Euro-Zone Services Confidence (JUN)

                                   -23

                                   -23

                                   Services   sector is not expected to see significant improvement.

                                                     USD

                                   12:30

                                   Chicago   Fed National Activity Index (MAY)

                                                 -2.06

                                   National   activity index has improved to best level since August.

                                                     USD

                                   14:30

                                   Dallas Fed Manufacturing Activity (JUN)

                                                 -21.5%

                                   Dallas   manufacturing remain weak but has improved to best levels since August.

                                                                                                                                                           [B]Currency[/B]

                                   [B]GMT[/B]

                                   [B]Upcoming Events   & Speeches[/B]

                                                                                               USD

                                   13:30

                                   Fed's Rosengren   Speaks at Risk Capital Conference in Brussels

[B]SUPPORT AND RESISTANCE LEVELS[/B]

[B]CLASSIC SUPPORT AND RESISTANCE - MAJORS 20:00 GMT[/B]

                                     [B]Currency[/B]

                                   [B]EUR/USD[/B]

                                   [B]GBP/USD[/B]

                                   [B]USD/JPY[/B]

                                   [B]USD/CHF[/B]

                                   [B]USD/CAD[/B]

                                   [B]AUD/USD[/B]

                                   [B]NZD/USD[/B]

                                                     Resistance 2

                                   1.4616

                                   1.6800 

                                   103.75 

                                   1.2250

                                   1.1780 

                                   0.8500 

                                   0.6675 

                                                     Resistance 1

                                   1.4564 

                                   1.6500 

                                   102.50 

                                   1.2056

                                   1.1500 

                                   0.8200 

                                   0.6600 

                                                     [B]Spot[/B]

                                   [B]1.4098 [/B]

                                   [B]1.6547 [/B]

                                   [B]95.16 [/B]

                                   [B]1.0812 [/B]

                                   [B]1.1487 [/B]

                                   [B]0.8083 [/B]

                                   [B]0.6465 [/B]

                                                     Support 1

                                   1.2500 

                                   1.3695 

                                   86.50

                                   1.0550 

                                   1.0800 

                                   0.6248

                                   0.4831

                                                     Support 2

                                   1.2329 

                                   1.3500 

                                   86.00 

                                   1.0400 

                                   1.0500 

                                   0.5868

                                   0.4500

CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 20:00 GMT

                                     [B]Currency[/B]

                                   [B]USD/MXN[/B]

                                   [B]USD/TRY[/B]

                                   [B]USD/ZAR[/B]

                                   [B]USD/HKD[/B]

                                   [B]USD/SGD[/B]

                                                     Resistance 2

                                   14.0000

                                   1.6500

                                   8.7800

                                   7.7900

                                   1.5060

                                                     Resistance 1

                                   13.6000

                                   1.5773

                                   8.2700

                                   7.7850

                                   1.4750

                                                     [B]Spot[/B]

                                   [B]13.2275[/B]

                                   [B]1.5349[/B]

                                   [B]7.8655[/B]

                                   [B]7.75003[/B]

                                   [B]1.45345[/B]

                                                     Support 1

                                   12.3500

                                   1.5196

                                   7.7506

                                   7.7450

                                   1.4400

                                                     Support 2

                                   11.8212

                                   1.5000

                                   7.6500

                                   7.7400

                                   1.4170

INTRA-DAY PIVOT POINTS 20:00 GMT

                                     [B]Currency[/B]

                                   [B]EUR/USD[/B]

                                   [B]GBP/USD[/B]

                                   [B]USD/JPY[/B]

                                   [B]USD/CHF[/B]

                                   [B]USD/CAD[/B]

                                   [B]AUD/USD[/B]

                                   [B]NZD/USD[/B]

                                                     Resistance 2

                                   1.4202 

                                   1.6685 

                                   96.42 

                                   1.1002 

                                   1.1617 

                                   0.8127 

                                   0.6521 

                                                     Resistance 1

                                   1.4150 

                                   1.6616 

                                   95.79 

                                   1.0907 

                                   1.1552 

                                   0.8105 

                                   0.6493 

                                                     [B]Pivot[/B]

                                   [B]1.4066 [/B]

                                   [B]1.6491 [/B]

                                   [B]95.42 [/B]

                                   [B]1.0852 [/B]

                                   [B]1.1499 [/B]

                                   [B]0.8065 [/B]

                                   [B]0.6451 [/B]

                                                     Support 1

                                   1.4015 

                                   1.6422 

                                   94.79 

                                   1.0757 

                                   1.1434 

                                   0.8043 

                                   0.6423 

                                                     Support 2

                                   1.3931 

                                   1.6298 

                                   94.42 

                                   1.0701 

                                   1.1381 

                                   0.8002 

                                   0.6382 

INTRA-DAY PROBABILITY BANDS 20:00 GMT

[B][/B]

                                     [B]Currency[/B]

                                   [B]EUR/USD[/B]

                                   [B]GBP/USD[/B]

                                   [B]USD/JPY[/B]

                                   [B]USD/CHF[/B]

                                   [B]USD/CAD[/B]

                                   [B]AUD/USD[/B]

                                   [B]NZD/USD[/B]

                                                     Resistance 3

                                   1.4299

                                   1.6804

                                   96.63

                                   1.0960

                                   1.1669

                                   0.8244

                                   0.6605

                                                     Resistance 2

                                   1.4249

                                   1.6739

                                   96.26

                                   1.0923

                                   1.1624

                                   0.8203

                                   0.6570

                                                     Resistance 1

                                   1.4199

                                   1.6675

                                   95.89

                                   1.0886

                                   1.1578

                                   0.8163

                                   0.6535

                                                     [B]Spot[/B]

                                   [B]1.4098[/B]

                                   [B]1.6547[/B]

                                   [B]95.16[/B]

                                   [B]1.0812[/B]

                                   [B]1.1487[/B]

                                   [B]0.8083[/B]

                                   [B]0.6465[/B]

                                                     Support 1

                                   1.3998

                                   1.6418

                                   94.43

                                   1.0738

                                   1.1395

                                   0.8002

                                   0.6395

                                                     Support 2

                                   1.3948

                                   1.6354

                                   94.06

                                   1.0701

                                   1.1349

                                   0.7962

                                   0.6360

                                                     Support 3

                                   1.3898

                                   1.6290

                                   93.70

                                   1.0664

                                   1.1304

                                   0.7922

                                   0.6325