EUR/US$

The Euro continued to probe dollar support levels in early Europe on Wednesday, but was unable to break fresh ground and consolidated in the 1.44 area.

The Euro-zone data was mixed with a slightly stronger than expected PMI reading for the services sector while the retail sales report was weaker than expected with a 0.2% monthly decline.

The ECB policy decision will be watched closely on Thursday with a particular focus on comments on quantitative easing from ECB Chairman Trichet. Overall, there is a strong probability that the bank will hold policy steady at this stage, especially with evidence of a tentative recovery in the economy. Any move to expand quantitative easing would tend to undermine the Euro.

The latest US economic data releases were slightly weaker than expected. There was a 371,000 decline in private-sector employment according to the latest ADP survey compared with expectations of a 345,000 decline, although this was still a significant improvement from the previous month. The number of planned job cuts also increased for the month.

The ISM index for the services sector dipped to 46.4 for July from 47.0 the previous month, contrary to expectations of a monthly recovery. The orders and employment components also declined over the month.

The data combined will tend to trigger a downward assessment of Friday’s payroll estimates and this will tend to unsettle risk appetite to some extent. The Euro dipped to lows near 1.4350 before reclaiming the 1.44 level as Wall Street rallied.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 80% accurate. 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Yen

Asian equity markets edged slightly weaker on Wednesday with caution ahead of key economic events later in the week and the subdued tone helped provide yen protection with the dollar fluctuating around the 95 level during the session. 

Markets were unable to challenge any key technical levels during the day with some concerns that global services-sector demand was faltering following weaker data from Australia.

The dollar dipped to 94.65 following weaker than expected US data releases, but the yen was still hitting heavy selling pressure on rallies and consolidated near the 95 level.

Sterling

Sterling held above the 1.69 level against the dollar in Asian trading on Wednesday and gained further support from a raft of firm UK data with a test of 10-month highs above the 1.70 level against the dollar.

The Halifax house-price index rose 1.1% for July, maintaining the recent run of favourable housing-sector data.

The other data releases were also stronger than expected with the CIPS index for the services sector rising to 53.2 in July from 51.6 the previous month while there was a 0.5% increase in industrial output for June as car output recovered from the earlier shutdowns. The data overall will help underpin confidence in the economy and will also underpin Sterling confidence.

There will also be expectations that the Bank of England will announce a pause in the quantitative easing at Thursday’s MPC meeting. Given the shift in expectations, Sterling will be vulnerable to significant selling pressure if there is a move to expand the bond-buying programme.

Sterling weakened following the US data releases before another test of resistance above 1.70 later in the US session.

Swiss franc

The dollar pushed to a high of 1.0660 against the franc on Wednesday, but was unable to sustain the advance and edged back to near 1.06 later in the US session. The Euro was generally firm against the franc, but with resistance above the 1.53 level.

The franc gained some slight support when risk appetite dipped weaker, but movements were limited.

Markets will remain very sensitive to National Bank comments surrounding the currency and will be on high alert for further intervention, especially if the dollar comes under renewed selling pressure.

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 80% accurate. 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Australian dollar

The Australian dollar again pushed to highs around the 0.8450 level against the US dollar on Wednesday, but was unable to sustain the gains amid a slightly more nervous market mood.

There was a significant decline in the latest services-sector PMI index which will create some caution over the economy, especially after the weaker than expected retail sales data. A narrower trade deficit did not have a major market impact.

The Australian dollar dipped to lows around 0.8360 following the US data before consolidation around 0.84 with the risk of further near-term choppy trading.