29/08/06
last week’s currency trading review
The Dollar was largely range bound against the major currencies last week. Data in the US continued to suggest a slowdown in economic activity, raising fears that the 17 consecutive interest rate rises by the Fed could have been overdone. However, this failed to take the dollar lower against the major currencies. Data out of the Eurozone supported expectations that the ECB will raise rates two more times before the end of the year. The Euro closed last week at 1.2766 having started the week at 1.2834. CPI data out of Japan had some analysts speculating that the BOJ could leave official interest rates on hold as this number was on the soft side. This weighed heavily on the Yen pushing it lower versus the dollar and the Euro. US$/JPY closed last week at 117.21 having started the week at 115.70. The GBP closed last week at 1.8878 having started the week at 1.8820. The A$ closed last week at 0.7560 having started the week at 0.7604.
The forex trading week preview
There is a heavy run of data out of the major economies in the coming week. Analysts suggest that this week could be crucial in confirming the contrasting trends in the global economy, certainly between the US and the Eurozone.
In the States they key focus will again be on the US non-farm payrolls (Friday). The payrolls gain over the past three months has averaged around 110k and with the pace of activity clearly slowing there seems little reason to expect acceleration in hiring in August. The other key release will be manufacturing ISM (Friday) which is expected to edge lower. The Chicago PMI (Thursday) is also forecast to be down, given the high-profile problems faced by the US car industry. In terms of activity data, this week brings the initial Q2 GDP estimate (Wednesday). In terms of the US consumer, the releases are forecast to be more mixed. Consumer confidence (Tuesday) is expected to be down in August. The other high profile release will be personal income/spending and the Core PCE Index both released on Thursday. We will provide our previews of these data releases in the daily summary.
In the Eurozone this weeks brings us the run of individual country manufacturing PMI releases as well the Eurozone aggregate (Friday). The EC survey (Thursday) is expected to show a decline in business confidence and this should drag the overall sentiment index lower. There is also consumer confidence data out of Ital & Germany (both Tuesday) and business confidence out of Italy (Thursday). Consumer confidence has been helped by the significant declines in unemployment and both are updated in Germany and France on Thursday. ECB watchers will pay close attention to the flash estimate of Eurozone inflation for August (Thursday). The upcoming ECB Council meeting (Thursday) is widely expected to leave interest rates unchanged. The market will monitor Trichet comments closely, as it seems highly likely that an October rate hike is on the cards. In the UK the key release in the coming week will relate to the housing market. Analysts expect we will see both a higher level of mortgage lending and a further improvement in mortgage advances (Wednesday). Manufacturing PMI will also be released in the UK on Friday. The pattern of retail sales has been erratic recently and the CBI’s Distributive Trades Survey will give the first impression of the pace of consumer spending in August (Wednesday). We will provide our previews and reviews of these data releases in the daily summary.
In Japan the only key release is the manufacturing PMI for August which will be released on Thursday. We will provide our previews and reviews of these data releases in the daily summary.
Key Weekly Pivot levels
| Currency |
Sup 2 |
Sup 1 |
Spot |
Res 1 |
Res 2 |
| EUR/USD |
1.2695 |
1.2723 |
1.2790 |
1.2854 |
1.2941 |
| USD/JPY |
116.09 |
116.42 |
117.20 |
117.87 |
118.22 |
| GBP/USD |
1.8775 |
1.8830 |
1.8950 |
1.8999 |
1.9026 |
| AUD/USD |
0.7489 |
0.7546 |
0.7590 |
0.7673 |
0.7702 |
| XAU/USD |
607.67 |
613.14 |
615.00 |
630.50 |
633.10 |
Initial support at 1.2723 (Aug 25 low) followed by 1.2695 (Aug 15 low). Initial resistance is now located at 1.2854 (Aug 23 high) followed by 1.2941 (Aug 21 high).
Initial support is located at 116.42 (Aug 25 low) followed by 116.09 (Aug 23 low). Initial resistance is now at 117.87 (July 19 high) followed by 118.22 (Apr 18 high).
Initial support at 1.883 (Aug 25 low) followed by 1.8775 (Aug 18 low). Initial resistance is now at 1.8999 (Aug 21 high) followed by 1.9026 (Aug 16 high).
- Australian Dollar – 0.7590
Initial support at 0.7546 (38.2% retracement of the 0.7269 to 0.7717 advance) followed by 0.7489 (Jul 20 low). Initial resistance is now at 0.7673 (Aug 23 high) followed by 0.7702 (Aug 16 high).
Initial support at 613.14 (Aug 28 low) followed by 607.67 (Aug 18 low). Initial resistance is now at 630.5 (Aug 23 high) followed by 633.1 (Aug 14 high).
