Weekly Summary – 12th July 2010

Euro Finds Support as Stock Selling Continues

Last week’s currency trading review

The Dollar was under broad based pressure last week as stocks staged a 4 day rally the biggest since May and the Euro and risk currencies surged. Oil Rallied $4 a barrel and the Dow Jones Index reclaimed the key 10000 level on Wednesday with an impressive 300 point gain. US June Services PMI slipped to 53.8 vs. 55.4 previously and confirmed that the speed of the US recovery is stalling. One positive note however was the drop in Weekly Jobless Claims to 454k vs. 475k previously. The Euro was able to move higher on easing Eurozone crisis concerns and talk of solid bank stress tests to be released on July 23. CDS spreads dropped considerable on European banks and Greece adding to the Euro Rally. The ECB held at 1.0% on Thursday and President Trichet commented that some investors were too pessimistic about the future of the EU.The EUR/USD gained +0.59% closing at 1.2640, after opening the week at 1.2565.

The Japanese Yen positive sentiment and aggressive cross buying made the yen the weakest currency in the market last week with USD/JPY rebounding off Y87 to end above Y88.50. AUD/JPY in particular helped the major push above Y88 on Thursday and large stops above the figure continued the move.The GBP was surprisingly weak as the pound lost its appeal and came under profit taking to stay in an upper range for most of the week. Resistance above 1.5200 proved formidable and the pair eventually fell back back below 1.5100 after multiple failures. The outlook is mixed with UK Government Debt concerns still lingering and cross buying faltering. The BoE held at 0.5% as widely expected.The GBP/USD fell -0.86% closing at 1.5062 after opening at 1.5192. The AUD traded in stark contrast to the previous week with the fortunes of the risk currency changed dramatically by strong economic data and large equity rallies. June Employment Change jumped +45k vs. +15k forecast and the Unemployment rate fell to 5.1% vs. 5.2% previously. The RBA met and held at 4.5% but was relatively upbeat on Asia growth and the Australian economy.The AUD/USD gained +4.09% closing at 0.8773 after opening at 0.8414.

The forex trading week preview

In the States On Monday, Fed Members Bernanke and Lacker are due to speak. On Tuesday, May Trade Balance is forecast at -39bn vs. -40.3bn previously. On Wednesday, June Retail Sales are forecast at -0.2% vs. -1.2% previously. Also released, Minutes from June’s FOMC meeting. On Thursday, Weekly Jobless Claims are forecast at 453k vs. 454k previously. Also released, June Industrial Production forecast at 0.0% vs. 1.3% previously. On Friday, June CPI is forecast at 0.0% vs. -0.25 previously. Also released, UoM Consumer Confidence forecast at 74 vs. 72.5 previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Tuesday, German Zew Forecast at 25 vs. 28.7 previously. On Wednesday, June CPI is forecast at 1.4%. On Friday, May Trade Balance is forecast at 1.2bn vs. 1.6bn previously..In the UK, On Monday, Q1 GDP is forecast at 0.3%. On Tuesday, June CPI is forecast at 3.2% vs. 3.4% previously. On Wednesday, June Claimant Count is forecast at -20k vs. -30k previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Tuesday, May Industrial Production is released and Consumer Confidence. On Friday, BOJ Rate Decisions are forecast to remain at 0.1%. In Australia On Thursday, NZ Retail Sales are forecast at 0.5% vs. -0.3% previously. Also released, July Westpac Consumer Confidence previously -5.7%. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.2610

Initial support at 1.2480 (July 6 low) followed by 1.2194 (July 1 low). Initial resistance is now located at 1.2807 (76.4% retrace of 1.3094-1.1877) followed by 1.3094 (May 10 high)

Yen – 89.00

Initial support is located at 86.97 (July 1 low) followed by 85.87 (Nov 30, 2009 low). Initial resistance is now at 89.42 (June 28 high) followed by 89.98 (June 24 high).

Pound – 1.5045

Initial support at 1.5000 (Psychological level) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5242 (38.2% retrace of 1.6878-1.4231) followed by 1.5391 (April 30 high).

Australian Dollar – 0.8755

Initial support at 0.8622 (July 8 high) followed by the 0.8450 (June 7 high). Initial resistance is now at 0. 8859 (June 21 high) followed by 0.9000 (Big Level).

Gold – 1210

Initial support at 1185 (July 7 low) followed by 1166 (May 21 low). Initial resistance is now at 1214 (July 5 high) followed by 1244 (July 1 high).

Oil – 76.20

Initial support at 75.00 (Intraday Support) followed by 72.50 (Intraday Support). Initial resistance is now at 77.00 (Intraday Resistance) followed by 78.00 (Intraday Resistance).