Mixed Feelings Spread in Markets after Rising Retail Sales and Falling Confidence

Despite starting strong on Friday after the better than expected rise in retail sales, yet U.S. equity markets trimmed their gains, as the University of Michigan confidence index fell below expectations, which raised concerns over the outlook of the U.S. economy.

Meanwhile, European markets also rose on Friday supported by a short-selling ban in several European countries, in addition to data from the European Central Bank, which showed demand for the overnight loan facility eased noticeably compared with a day earlier, which eased concerns from the European debt crisis.

The retail sales for July rose by 0.5% in line with expectations, while retail sales excluding autos rose above estimates, and retail sales excluding autos and gas also rose above expectations.

The University of Michigan released the preliminary estimate for consumer confidence for August, where consumer confidence eased to 54.9, compared with the prior estimate of 63.7 and below median estimates of 62.0. The economic conditions index eased to 69.3 from 75.8, and the economic outlook index eased to 45.7 from 56.0.

Stocks in the United States rebounded to the upside by opening on Thursday, where the Dow Jones Industrial Average was up by nearly 1.30% to trade around 10,857, while the S&P 500 index was up by nearly 1.25% to trade around 1135.

European stock indexes were mixed before closing on Thursday, where FTSE 100 was up by nearly 0.60% to trade at 5037 and the DAX was down by nearly 0.15% to trade around 5605.

The U.S. dollar fell against a basket of major currencies on Friday, where the U.S. dollar index was trading at 74.41, compared with the opening level at 74.76. The Euro gained slightly against the Dollar, where the EUR/USD pair fell to trade at $1.4237, compared with the opening level at $1.4215, and the British Pound extended its gains against the Dollar for a second day, where the GBP/USD pair traded around $1.6287, compared with the opening level at $1.6229.
Gold prices extended the drop for a second day on Friday after rising to a new record high above $1800 an ounce on Wednesday, as gold dropped to trade around $1733 an ounce, and crude oil prices extended the rise to trade around $86 a barrel.

Volatile Markets on Fragile Sentiment

The European debt crisis combined with fears global growth is losing momentum is keeping sentiment fragile. Thereby volatility was seen today within the financial markets, which are moving in relatively tight ranges.

The euro fell today to the lowest of 1.4148 on worries from the region’s debt crisis which could spread to other countries including the U.S. The downside pressures on the euro were supported by the disappointing industrial production report for June.

But as of this writing it regained strength and is trading around the 1.4244 level while the pound is trading around 1.6080 after France, Spain, Italy and Belgium decided to ban short-selling starting today, improving investors’ confidence in the banking sector.

The CHF weakened further today, and is trading around 0.7725 as of this writing, after the Swiss National Bank signaled it will continue its efforts to curb the Franc’s gains. Some reports even suggested the SNB could peg the Franc to the Euro, giving a stronger upside movement to the pair.

However gains could be limited since the uncertainties that surround the global recovery remain high, therefore demand for safe haven may be triggered at any moment. Today Asian and European stocks were volatile as well.

Meanwhile the yen continues to be strong, and is trading around the 76.66 level as of this writing. This is warring investors since it could determine the officials to intervene once again to weaken the currency’s gains which is damaging the country’s exports.

Traders will be eyeing today the U.S. retail sales figures later in the day, and if the outcome will be disappointing, it could trigger demand for the low yielding assets. For now the dollar index is almost unchanged trading around 74.50.

Crude oil is almost unchanged as well, trading around the $75.50 level, meanwhile gold extended yesterday’s losses and is trading around the $1748.00 level since the CME decided to increase the margin on gold contracts.

USD/CHF Daily Fundamental Analysis for August 12, 2011

On Thursday, the pair continued its advance as after the SNB Vice President Thomas Jordan said that there are talks about pegging the franc as the bank face mounting difficulties to halt the franc’s appreciation. The announcement along with yesterday and last week’s measures managed to halt the franc’s rally. It seems that the SNB is insisting on curbing the franc’s advance, which is hurting Swiss exporters, yet it is facing a hard mission as investors resort to the franc amid the undergoing tension and fears. Thus, the pair is expected to continue its rebound with the SNB monetary tools used and as the dollar is facing downside pressure due the risks surrounding the U.S. economy which led to the downgrade of U.S. top sovereign rating. On Friday, the week ends with the release of some fundamentals from the U.S. which are retail sales for July, University of Michigan confidence for August and business inventories for June at 12:30 GMT, 13:55 GMT and 14:00 GMT respectively. The released data may have an impact on the pair especially if it showed further deterioration as it will increase fears in markets, particularly after the S&P downgrade to U.S. rating; therefore, the pair may return to the downside direction.

USD/JPY Technical Analysis August 12, 2011

USD/JPY had a back and forth day on Thursday as traders tested the lows again, but backed off as fear of intervention certainly must come into play every time we get close to the lows. The 77 level has become a bit of a battleground for bears and bulls in order to determine the future direction of this pair. The trend is down, but with the Bank of Japan willing to jump into the market in order to buy this pair – we are not comfortable selling at these low prices. The buy side doesn’t look all that rosy either. Quite frankly – we are avoiding this pair at this time, but would consider a small position on the buy side if we can break above 77.50 or so.

USD/CHF Technical Analysis August 12, 2011

The USD/CHF pair rose on Thursday as a SNB member mentioned the possibility of a peg to the Euro. The truth is this rise if probably going to be short-lived, and traders should be on the lookout for any weakness in this market as a possible selling opportunity. The pair certainly will run into resistance at the 0.80 level, but is facing it in a minor way at the current area of 0.77 and could possibly signal more selling at this point as well. We won’t buy this pair under any circumstances as being patient for selling opportunities has made a lot of money for us over the last several months.

USD/CAD Technical Analysis August 12, 2011

The USD/CAD pair fell on Thursday as the oil markets climbed, pushing the demand for Canadian dollars in the marketplace. The pair has a natural back stop in the form of parity, and the trend is certainly down. Because of this, we like selling this pair still, and will continue to say so until we can clear 1.02 or beyond. This pair is going to be very beholden to the oil markets, and as those charts look healthy all of the sudden, we feel that all rallies are to be sold, and eventually we will see a return to lower pricing in this pair.

NZD/USD Technical Analysis for August 12, 2011

The NZD/USD pair continued its wild swings on Thursday as the markets seem to run from one direction to another every 24 hours. The pair seems like it is in consolidation between 0.84 and 0.81 and could stay in that range for a little while. A break to either side runs into opposing forces just 100 pips away. Because of this, we are sitting out of this market until we can do analysis on Friday as to the longer-term look of it. If you are inclined to scalp the markets, this could be a good pair for you, depending on the spread you pay.

GBP/USD Technical Analysis for August 12, 2011

GBP/USD bounced on Thursday as traders bought into the markets, pushing risk higher again. However, this pair is finding a little bit of trouble at the 1.6300 area. This is roughly the area that once served as support, and could serve as resistance. This is classic “what was once the floor becomes the ceiling” technical analysis, and now all we can do is wait to see if it happens to hold the advance in this pair. If not, we feel that there is a serious ceiling in place at the 1.65 area. We are looking to sell weakness in the 1.6250 area, and if we don’t get it – are willing to wait until closer to 1.65 in order to sell weakness.

EUR/USD Technical Analysis for August 12, 2011

The EUR/USD rose for a while on Thursday, but started to pull back in the later hours as the markets continue to go back and forth around the world. The pair is still grinding lower overall, and we prefer selling until the pair can break above the top of the downtrend channel drawn on the chart. The 1.40 area giving way would be a massive sell signal, and we would then become very aggressive at that point in our selling. Any weakness near the 1.44 area, the recent highs, we will sell as well.

EUR/CHF Technical Analysis for August 12, 2011

The EUR/CHF pair rose on Thursday as traders ran from the Franc due to a comment from SNB officials suggesting that a peg to the Euro might be a possible solution to the rapidly appreciating Franc. This spooked the Franc bulls, and the buying of this pair kicked off. The trend is down, and it remains so. This move is setting up as another pop in the pair that could be sold if we see bearish action. The 1.10 area is just above, and we are very interested in selling at that area if we get negative candles. We do not buy this pair under any circumstances.

AUD/USD Technical Analysis for August 12, 2011

The AUD/USD pair rose again on Thursday as the trading world continues its tug-o-war on a global scale. The AUD/USD caught a bid in a risk-seeking move, and we are presently at the top of the most recent consolidation area between the 1.04 and 1.01 areas. The pair has resistance just above at 1.05, and we feel that is the real fight to come. Because of this, we buy only on a daily close above that area. If not, we are willing to sell a break below parity if we get it on the close. In the meantime, it is a decent scalping pair as it continues to go back and forth.

USD/CAD Daily Fundamental Analysis for August 12, 2011

The USD/CAD pair was little changed on Thursday, where the trade deficit in Canada widened worse than expectations, which weighed down on the CAD against the USD, while the better than expected jobless claims from the United States failed to boost optimism in higher yielding currencies, as traders remained cautious on rising fears the European debt crisis is spreading into major economies within the Euro Zone area, which provided the USD/CAD pair with bullish momentum.

The huge pessimism that continues to dominate global financial markets should continue to boost demand for lower yielding and more safe assets, and accordingly, we preserve our bullish outlook for the USD/CAD pair, and any downside movements are not expected to prevail, since risk aversion will provide the USD/CAD pair with the needed bullish momentum.

Friday August 12:

The United States will end the week with a high note starting with the retail sales index for July at 12:30 GMT, which are expected with 0.4% rise following 0.1% and excluding autos with 0.2% rise after remaining unchanged in June and excluding auto and gas to hold steady with 0.2% rise.

The University of Michigan Confidence for August is due at 13:55 GMT, and expected with a slight drop to 63.2 from 63.7.

The business inventories index for June will follow at 14:00 GMT and expected to slow to 0.6% from 1.0% the previous month.

Jobless Claims Boost Confidence in U.S. Markets, while EU Debt Crisis Continues

Optimism returned to U.S. markets on Thursday after strong earnings from Cisco Systems Inc and better than expected jobless claims eased concerns over the outlook for the U.S. economy, nonetheless, investors remain cautious, as fears the European debt crisis is worsening continued to cast doubts among traders.

The U.S. Labor Department released the jobless claims for the week ending August 5, where jobless claims fell to 395,000 below expectations of 405,000, marking the lowest in four months, where the drop in jobless claims eased concerns over the outlook for the U.S. economy amid recent signs that suggested economic activities are slowing down.

The U.S. trade balance was released from the Commerce Department for June, where the trade deficit widened in June worse than expectations. Moreover, concerns continue to mount that the European debt crisis is spreading into major economies within the Euro Zone area, where traders are now speculating the debt crisis could hit France, the second largest economy in the Euro Zone area.

Stocks in the United States rebounded to the upside by opening on Thursday, where the Dow Jones Industrial Average was up by nearly 1.30% to trade around 10,857, while the S&P 500 index was up by nearly 1.25% to trade around 1135. European stock indexes were mixed before closing on Thursday, where FTSE 100 was up by nearly 0.60% to trade at 5037 and the DAX was down by nearly 0.15% to trade around 5605.

The U.S. dollar extended its gains for a second day against a basket of major currencies on Thursday, where the U.S. dollar index was trading at 74.77, compared with the opening level at 74.56. The Euro gained slightly against the Dollar, where the EUR/USD pair fell to trade at $1.4192, compared with the opening level at $1.4136, and the British Pound rose back against the Dollar, where the GBP/USD pair traded around $1.6197, compared with the opening level at $1.6111.

Gold prices dropped on Thursday after rising to a new record high above $1800 an ounce on Wednesday, as gold dropped to trade around $1763 an ounce, and crude oil prices extended the rise to trade around $82 a barrel.

EUR/USD Daily Fundamental Analysis for August 12, 2011

The EUR/USD continued to trade with high volatility on Thursday with the lack of major fundamentals to alter the outlook for the debt-laden euro area that fell a victim of rumors and keeping the downside pressure on the euro.

The downside bias was still evident on the pair with the euro still weak against the dollar amid the prevailing risk aversion and uncertainty over the outlook and the debt crisis status. The market is still recovering from the French rumors and speculations that forced the French president to summon the ministers from the holiday to contain a new confidence crisis.

Pressures mounted on the French president after the cost to insure French debt hit a record and borrowing costs rallied on speculation that the top credit rating might be lost amid slowing growth and inability to meet the fiscal targets.

Rating agencies still affirm their stable outlook for the French credit rating while Sarkozy provided the ministers with a week to provide spending cuts details to ensure bringing the debt burden lower and the deficit reduction to 3.0% of the GDP.

The pressure is evident and the banking sector shares are suffering especially after the rumors also on the French bank Societe Generale is about to go under, which intensified the negative pressure in the market.

The volatility will prevail on Friday with the fragile sentiment and end of the week trading. Also on Friday the euro area industrial production for June is due at 09:00 GMT and expected to remain steady on the month with 0.1% gain and to rise 4.5% on the year following 4.0%.

The United States will end the week with a high note starting with the retail sales index for July at 12:30 GMT which are expected with 0.4% rise following 0.1% and excluding autos with 0.2% rise after remaining unchanged in June and excluding auto and gas to hold steady with 0.2% rise.

The University of Michigan Confidence for August is due at 13:55 and expected with a slight drop to 63.2 from 63.7.

The business inventories index for June will follow at 14:00 GMT and expected to slow to 0.6% from 1.0% the previous month.

EUR/CHF Daily Fundamental Analysis for August 12, 2011

The EUR/CHF continued to trade with high volatility on Thursday and the franc was on the receiving end as the talk of further intervention from the SNB powered the euro to rise from the record low versus swissy.

The focus remains on the debt-laden euro area and the deepening debt woes, which accordingly is favoring swissy gains on haven demand and keeping the euro fragile. Nevertheless, a week after the SNB intervention and the ECB action to ease the jitters the market is starting to respond, though the volatility remains evident.

On Friday, the market is expected to be affected by intervention expectations again alongside end of the week position squaring. The comments from SNB Vice President in an interview with Tages-Anzeiger newspaper that a temporary peg of the franc might be a coming measure to stem the franc broad rally was the main trigger of renewed intervention jitters.

The comments were confirmed from the SNB spokesman and added downside pressure on the franc with the possible peg as means to ease the pressure on the franc and the economy.

Those comments will keep choppy trading evident for the EUR/CHF. In other news the euro area industrial production for June is due at 09:00 GMT and expected to remain steady on the month with 0.1% gain and to rise 4.5% on the year following 4.0%.

GBP/USD Daily Fundamental Analysis for August 12, 2011

On Thursday, the showed slight rebound, where the pound hovered around three-week low versus the dollar, after falling in the previous three sessions.

Yet, the pair is predicted to continue its downside direction as the undergoing tensions are expected to lower demand on high-yielding currencies.

In addition, the sterling remains under pressure after the release of August’s quarterly inflation report which included cutting of growth and inflation outlook by the BoE. The BoE said growth outlook is now weaker and inflation will decline below target in the medium term.  

On Friday, the week ends with the release of some fundamentals from the U.S. which are retail sales for July, University of Michigan confidence for August and business inventories for June at 12:30 GMT, 13:55 GMT and 14:00 GMT respectively, while the U.K. lacks fundamentals. 

The released data may have an impact on the pair especially if it showed further deterioration as it will increase fears in markets, particularly after the S&P downgrade toU.S.rating; therefore, the pair may return to the downside direction.

 

Gold Breaks the $1,800 Level on Renewed Fears About Europe

With conditions stabilizing in the U.S., investors turned their attention towards Europe. They fear that officials will fail to contain the sovereign debt crisis, especially after rumors ignited about a possible downgrade for France, which kept demand on risky assets limited.

However the rumors were denied and markets felt some relief in the afternoon. Yet it was too late for the Asian stock markets which fell today by almost 0.4%. Stocks in Europe managed to rise after some French banks defended their status, giving an upside push to the euro as well.

Concerns from a damaged financial system kept confidence fragile and investors will seek shelter if any bad news will emerge from Europe or the U.S. As uncertainties continue to be high and the outlook for the global recovery unclear, the earnings expectations for exporters started to drop.

As sentiment witnessed some improvement and the U.S. equities are expected to continue rising today, demand on the USD dropped. The dollar index fell to the lowest at 74.32 and now is trading around the 74.50 level. Markets await today the release of an improved trade balance report and a weak jobless claims report.

The CHF weakened today after officials indicated they might act again to stop the Swiss Frank’s strength. The CHF was trading around 0.7390 as of this writing. The Yen however continued to strengthen reaching the lowest of 76.29 despite BoJ’s record intervention last week.

The AUD rose today although the economy witnessed an unexpected rise in the jobless rate. However the gold’s strength and the appetite for risk sustained the Australian dollar which is trading around the 1.0270. The euro is trading with an upside bias around the 1.4240, while the GBP is trading at 1.6155.

The Chinese yuan rose today beyond 6.4 per dollar for the first time in 17 years. The country’s strong economic growth is giving investors the confidence to buy the yuan especially after the U.S. vowed to maintain the interest rates near zero till mid 2013.

Gold climbed to a new record high today breaking the $1,800 level. However for now it retreated towards the $1790.00 after the margin on gold contracts was increased 22% by the world’s largest futures market, CME Group Inc, since the volume of gold’s futures and options surged to a record on Tuesday.

Crude oil extended its gains today supported by a weaker dollar and the rise in risk appetite, and as of this writing is trading around the $83.00 per barrel level. Europe and U.K. will be light with fundamentals today, however tensions will continue to be dominant and volatility will persist within the Forex markets.

NZD/USD Daily Fundamental Analysis for August 12, 2011

The New Zealand dollar inclined for the first time against the dollar after heavy losses during last past period especially after the Standard & Poor’s cut reduced the US’s long-term credit rating. However kiwi recovered in a relief rally on the slight improvement for commodities and equities.

Commodities recovered slightly which supported the New Zealand dollar to gain versus greenback, also it increased after data showed consumer confidence rose.

On Friday, at 22:45 GMT, NZD retail sales Ex. inflation for the second quarter is due after the recorded 0.9% in the first quarter.

At 12:30 GMT, the U.S. economy will release the advanced retail sales for July, where the previous reading was 0.1% and expected to come at 0.4%. The University of Michigan confidence for August will be released at 09:55 GMT, where the preliminary reading is expected to come at 63.2 from the previous of 63.7.

The U.S. business inventories for June will be released at 10:00 GMT, where it had a previous of 1.0% and expected to come at 0.6%.

AUD/USD Daily Fundamental Analysis for August 12, 2011

The Australian economy is still struggling at this period as a result of the natural disaster that hit the nation in the first half of the year, along with the European debt crisis and the slowing global growth, all reducing the demand for higher yielding assets.

On the other hand, Australian unemployment increased to the most since October 2010 as a result of higher interest rates after the central bank sought to restrain inflation with 175 basis points of rate increases from October.

The outlook for the Australian economy worsened with the negative events that face the nation’s economic recovery as the Bank sees that the economy needs time to recover, adding that the Bank isn’t going to increase borrowing costs until the year’s end to support the recovery.

Moreover, the Bank has noted that Australian policy makers won’t increase the interest rates until the end of the year, as the government wants to support the economic recovery amid the negative obstacles that face the global economy.

On Friday, Australian isn’t going to release any fundamental data, but at 12:30 GMT, the U.S. economy will release the advanced retail sales for July, where the previous reading was 0.1% and expected to come at 0.4%. The University of Michigan confidence for August will be released at 09:55 GMT, where the preliminary reading is expected to come at 63.2 from the previous of 63.7.

The U.S. business inventories for June will be released at 10:00 GMT, where it had a previous of 1.0% and expected to come at 0.6%.

USD/JPY Daily Fundamental Analysis for August 12, 2011

The USD/JPY pair remained aggressively bearish as the pair hovers near post-war lows, where the Japanese yen enjoys the strongest performance against the majority of its major counterparts on concerns over the global economic outlook.

Fears over Europe’s debt crisis increased demand for the safest assets, in addition to the Federal Reserve which assured the loose monetary policy and pledged to keep the interest rate at all time low till mid-2013.

The USD/JPY pair is now trading near pre-intervention levels, which fueled fears of another intervention from the BOJ, especially with the ongoing slump across global bourses which increased demand for safe haven currencies like green back and the Japanese yen.

On Friday at 04:30 GMT,Japanwill release the industrial production for June, where the previous reading was 3.9%, as for the annual reading it had a prior reading of – 1.6%.

At 12:30 GMT, the U.S. economy will release the advanced retail sales for July, where the previous reading was 0.1% and expected to come at 0.4%. The University of Michigan confidence for August will be released at 09:55 GMT, where the preliminary reading is expected to come at 63.2 from the previous of 63.7.

The U.S. business inventories for June will be released at 10:00 GMT, where it had a previous of 1.0% and expected to come at 0.6%.