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Daily Currency Analysis
EUR/US$
The dollar was unable to make any attack on the 1.4150 level in Europe on Thursday and the Euro continued to probe resistance levels above 1.4220 during the day.
The latest US initial jobless claims data was close to expectations with an increase to 554,000 for the week after a revised 524,000 the previous week while the continuing claims data was better than expected.
The existing home sales data recorded a slightly larger than expected monthly increase to 4.89mn for June from a revised 4.72mn the previous month. Prices were higher over the month while inventories also declined for the month which provided some degree of reassurance over the housing-sector trends, although sales are still at historically very subdued levels.
The combination of data served to bolster risk appetite which curbed defensive dollar demand and underpinned higher-yield currencies. The Euro pushed to a high around 1.4290, but was unable to sustain the gains and dipped sharply later in the US session. Losses accelerated following the break of 1.42 support with lows near the 1.4140 level after the US close.
The German ZEW data, together with the latest flash PMI data will be watched closely on Friday for a further assessment of Euro-zone economic conditions and any evidence of weakness would be a significant negative factor for the Euro.
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Yen
The latest Japanese trade data recorded a slightly smaller than expected surplus for June with the export data a principal focus. There was a 35.7% annual decline with a 1.1% monthly increase in shipments which provided some degree of relief over near-term trends as exports to Asia looked to increase.
The Nikkei index pushed to a three-week high during Thursday and there was also evidence of significant institutional Japanese currency selling in local trading as players attempted to challenge resistance levels. There were also rumours that a key fund was set to buy the dollar on any dips to the 93 level. The yen weakened to significantly against the dollar while the Euro was attempting to hold above the 134 level.
As risk appetite remained firmer, the yen weakened to lows near 95.30 against the dollar in US trading before consolidating near 95.0.
Sterling
Sterling held firm in early Europe on Thursday and continued to challenge resistance levels above 1.65 against the dollar.
The headline UK retail sales data was stronger than expected with a 1.2% increase for June after a revised 0.9% decline the previous month as sales were boosted by favourable weather conditions and discounting.
There was also an increase in BBA mortgage approvals according to the latest data with approvals at a 15-month high and this helped maintain the mood of greater confidence towards the UK housing sector which also underpinned risk appetite.
Bank of England MPC member Sentance stated that the bank may pause the quantitative easing process, although there was also still a high degree of uncertainty over the situation.
UK currency trends are still being driven to a large extent by trends in risk appetite and firmer equity markets continued to offer support. Sterling did, however, decline back to below the 1.65 level later in the US session.
Swiss franc
The dollar continued to find support below the 1.0650 level against the franc on Thursday and tested above 1.07 later in the session even though the dollar was still struggling. The Euro strengthened significantly to around 1.5240 against the franc before edging back to the 1.52 area.
The Swiss currency weakened during Thursday with speculation that several key financial institutions were set to have their credit ratings downgraded.
The franc will also tend to lose ground when there is a sustained improvement in risk appetite.
Source: VantagePoint Intermarket Analysis Software
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Australian dollar
The Australian dollar remained robust on Thursday with risk appetite firm and rising commodity prices. Confidence could remain firm in the very short term and there was solid currency buying support on dips with the Australian currency pushing to a high near the 0.8220 level in US trading.
The Australian dollar was unable to sustain the gains and weakened sharply to near 0.81 following the New York close as weaker than expected earnings and a stronger US dollar pushed the local currency down. There will also be speculation that the Reserve Bank will sell Australian dollars at elevated levels to help curb any further appreciation.
Tags:forex, currency, australian-dollar, swiss-franc, sterling, yen, euro, u-s-dollar
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