Sign inDarrell's Commentaries
Daily Currency Analysis
EUR/US$
The Euro was initially weaker in Asian trading on Monday, but found support below the 1.40 level against the US currency and pushed back to the 1.41 region during the day in subdued trading conditions.
Risk appetite gradually improved during the day which helped lessened dollar demand and push the Euro higher. There was also a recovery in the Euro-zone business and consumer confidence indicators which helped underpin confidence in the Euro-zone.
Immediate fears surrounding the threat of Baltic State currency devaluations also provided some underlying relief to the Euro. Markets will monitor any G8 comments on currencies closely ahead of their summit next week.
There were no major US data releases during the day to help guide markets. The mid-west manufacturing index did, however, weaken to a 16-year low as there were further substantial stresses in the auto sector. The Chicago PMI index and consumer confidence data will be watched closely on Tuesday for further evidence on economic trends. The dollar is liable to drift weaker if there is a sharp recovery in these two indices as risk appetite would improve.
With month-end trading also an important factor on Tuesday, there will be the risk of volatile trading, especially during the US session. The overall risks suggest that the Euro could gain support during the day on position adjustment.
Source: VantagePoint Intermarket Analysis Software
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Yen
The latest Japanese industrial data recorded a further 5.9% increase for May following a 5.9% gain the previous month as the inventory rebound continued. The gains were, however, lower than expected with manufacturers also expecting the rebound to stall over the next two months. There was a 2.8% annual decline in retail sales which was slightly weaker than expected and confidence will be fragile. Bank of Japan deputy Governor Yamaguchi stated that he expected the consumer prices decline to moderate.
There was a slightly more cautious attitude to risk on Monday with the Nikkei index lower, although the dollar was still finding good buying support in the important 95 technical and fundamental area.
As risk appetite improved during the day, the yen weakened back to the 96 region against the US currency while it also lost ground against the Euro.
Sterling
Hometrack reported that UK house prices were unchanged in June and this did not have a major impact. The UK currency found support near the 1.64 level against the dollar during Monday and pushed higher to test levels near 1.66 later in New York while the UK currency also strengthened beyond 0.85 against the Euro.
The latest mortgage lending data recorded a subdued increase of GBP0.3bn for May following a GBP0.9bn increase the previous month while bank lending was also very weak with a monthly GBP0.3bn increase.
There was a recovery in mortgage approvals for the month, but weakness in lending will cause significant concerns over the economy. Although the immediate reaction was limited, the data will pose underlying Sterling risks, especially if global risk appetite falters.
Swiss franc
The dollar was unable to sustain a move above the 1.09 level against the franc during Monday and weakened steadily to lows near 1.08 in US trading as the franc was generally resilient against the Euro.
There was no evidence of National Bank intervention during the day, but there will be the growing threat of further aggressive action by the central bank over the next few days. The bank may look to take any advantage of subdued trading liquidity conditions to push the franc weaker.
Source: VantagePoint Intermarket Analysis Software
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Australian dollar
The Australian currency was unable to sustain the gains and weakened to test support below the 0.80 level in local trading on Monday where significant support emerged. Underlying sentiment is still firm and there will be solid Australian dollar buying support on dips. The Australian dollar is still finding it difficult to make further headway with equity markets struggling to secure strong progress.
Confidence gradually strengthened during the day and this pushed the Australian currency to highs near the 0.81 level against the US dollar in New York. A key feature is that markets will be looking to buy commodity-related currencies on any significant retreats.
Tags:forex, currency
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