Weekly Summary – 26th July 2010

Q2 GDP Ahead, Stocks Firm

Last week’s currency trading review

The Dollar was under pressure with weak economic data combining with strong company earnings to leave little demand for the Greenback. June Housing starts were at 0.55m vs. 0.58 forecast whilst Weekly Jobless Claims came in at 464k vs. 427k previously. Fed Chairman Ben Bernanke spoke before congress and rattled the markets with his comments the US Recovery was ‘Unusually Uncertain’. The Euro was under the spotlight and had a volatile trading week breaking briefly above 1.3000 before reversing hard to 1.2700 on concerns the Bank Stress tests would expose the Eurozone to more downside risks. The Concerns subsided into Friday and the market finished above 1.2900. The Stress Tests showed 7/91 banks failed with 5 from Spain and 1 from both Germany and Greece but already over the weekend some analysts expressed concern about scenario selection as being too weak for a real stress test. The EUR/USD fell -0.18% closing at 1.2906, after opening the week at 1.2929.

The Japanese Yen was strong against the USD for most of the week but finished above Y87 on strong cross buying on Thursday and Friday. The Medium and longer term downtrend is still targeting the Y85 level as the line in the sand were previously the Japanese government has been very vocal about Yen strength. The USD/JPY gained +1.01% closing at 87.45 vs. 86.57 previously. The GBP enjoyed solid gains on Friday as the Q2 GDP figures blew away expectations at 1.1% vs. 0.6% forecast. Some of the improvement was put down to new calculation methods but still the current uptrend has resumed and 1.55 is the first topside target for the bulls as the recovery continues. EUR/GBP reversed the previous week’s gains and finished under 0.8400.The GBP/USD gained +0.78% closing at 1.5419 after opening at 1.5298. The AUD was the best performing currency over the week with the risk currency tracking the 4% gain in US stocks to finish just under the 0.9000 level. This week’s CPI figure will be extremely important in swaying the RBA whether to raise rates in August. The AUD/USD gained +2.98% closing at 0.8954 after opening at 0.8687.

The forex trading week preview

In the States On Monday, June New Home Sales are forecast at -5% vs. -32.7% previously. On Tuesday, July CB Consumer Confidence forecast at 51 vs. 52.9 previously. On Wednesday, June Durable Goods Orders are forecast at 1% vs. -0.6% previously. On Thursday, Weekly Jobless Claims are forecast at 450k vs. 464k previously. On Friday Q2 GDP is forecast at 2.5% vs. 2.7% previously. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone On Wednesday, July CPI is forecast at 1.25 vs. 0.9% in Germany. On Thursday, German July Unemployment Rate is forecast at 7.6% vs. 7.7%. On Friday, June EU Unemployment Rate is forecast at 10.0% vs. 10.0% previously. Also released, July EU CPI is forecast at 1.8% vs. 1.4% previously. In the UK, On Wednesday, July CBI Sales are forecast at 3 vs. -5 previously. On Friday, July GFK Consumer Confidence is forecast at -20 vs. -19 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan On Friday, June CPI is forecast at -0.7% vs. -0.9% previously. Also released, June Industrial Production forecast at 18.9% vs. 20.4% previously y/y. Also released, June Jobless Rate forecast at 5.2% vs. 5.2% previously. In Australia On Wednesday, Q2 CPI is forecast at 3.4% vs. 2.9% previously. On Thursday, New Zealand is forecast at 3.0% vs. 2.75% previously. On Friday, June Private Sector Credit is forecast at 3.1% vs. 2.7% previously. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.2910

Initial support at 1.2709 (July 15 low) followed by 1.2480 (July 6 low). Initial resistance is now located at 1.3094 (May 10 high) followed by 1.3416 (April 27 high)

Yen – 87.50

Initial support is located at 86.27 (July 16 low) followed by 85.87 (Nov 30 2009 low). Initial resistance is now at88.50 (July 15 high) followed by 89.16 (July 12 high).

Pound – 1.5435

Initial support at 1.5125 (July 20 low) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5472 (38.2% retrace of 1.6878-1.4231) followed by 1.5816 (Feb 17 high).

Australian Dollar – 0.8940

Initial support at 0.8738 (July 22 high) followed by the 0.8622 (June 8 high). Initial resistance is now at 0. 9077 (76.4% retrace of 0.9389-0.8067) followed by 0.9389 (April 12 high).

Gold – 1192

Initial support at 1175 (July 20 low) followed by 1157 (May 5 low). Initial resistance is now at 1218 (July 13 high) followed by 1244 (July 1 high).

Oil – 79.05

Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.50 (Intraday Resistance).