EUR/USD Daily Fundamental Analysis for August 02, 2011

The start of the week was still about the United States and comments from Obama that a deal is reached to raise the debt limit which affected the market and supported the euro versus the dollar which traded with high volatility.

Investors were worried and the focus was on the vote which was expected late Monday, and jitters were evident especially after the vote was delayed a number of times, and also the deadline is on Tuesday so there is no way out for the United States!

The market’s focus on Tuesday will still be about the debt ceiling debate and how rating agencies rate the move. Avoiding default will be supporting to the sentiment yet already have been priced in the market since the start of the week and accordingly the effect is only temporary as the focus returns to the heavy data and the slowing global recovery, especially the slowing U.S. economy.

At 09:00 GMT the euro area June Producer Price Index is due and expected with 0.1% rise on the month following a drop of 0.2% and on the year to ease to 6.0% following 6.2%.

The United States will release the income report for the month of June at 12:30 GMT, where personal income is expected to rise by 0.2%, compared with 0.3% in May, while personal spending is expected to rise by 0.2%, compared with the prior flat estimate. Core PCE is expected to rise by 0.2% in June, compared with 0.3% back in May, while compared with a year earlier, Core PCE is expected to rise by 1.4%, compared with 1.2% in the prior estimate.

GBP/USD Daily Fundamental Analysis for August 2, 2011

On Monday, the pound advanced against the U.S. dollar, following the upbeat sentiment that was fueled with the approval of raising debt ceiling, yet with the release of downbeat manufacturing data and growth forecasts cut to theU.K.economy, the pair moved to the downside.

U.S.officials agreed to increase in debt ceiling by $2.1 trillion in addition to cut in the budget deficit by $2.5 trillion over the coming 10 years. This news boosted demand on high-yielding currencies, yet the pound surrendered gains after the release of data showing thatU.K.manufacturing sector contracted to 49.1 in July relative to the revised 51.4, according to PMI gauge. Also, the sterling continued its drop after the Confederation of British Industry (CBI) lowered 2011 growth forecasts for the British economy to 1.3% expansion compared with the 1.7% growth estimated in May.

On Tuesday, at 08:30 GMT, PMI construction is set to show a drop to 53.2 in July from 53.6 in June, according to PMI gauge. Investors will carefully watch construction data to monitor the status of the sector, especially after the contraction witnessed in manufacturing. 

On the other hand, theU.S.economy will release personal income and spending for June, where the former is predicted to inch down to 0.2% from 0.3% while the later is expected to rise to 0.2% from 0.0%.

USD/CHF Daily Fundamental Analysis for August 2, 2011

On Monday, optimism prevailed in markets after the approval of raising U.S. debt ceiling before an August 2 deadline which prompted investors to sell low-yielding currencies, led by the yen and dollar, where the franc remained solid against majors. Chinese manufacturing boosted hopes after it showed better-than-estimated ease in expansion. On Tuesday, the Swiss economy will release retail sales for the year ending June at 07:15 GMT followed by PMI manufacturing for July, as of 07:30 GMT, which is expected to show an ease in expansion to 52.8 from the previous 53.4 recorded in June. After the slowdown in manufacturing expansion in July in all major economies, the sluggish pace is predicted to take place also in Switzerland, yet the extent of ease of expansion is going to detect the impact on the pair. On the other hand, the U.S. economy will release personal income and spending for June, where the former is predicted to inch down to 0.2% from 0.3% while the later is expected to rise to 0.2% from 0.0%.

Markets Boosted by the U.S. Debt Deal Agreement

President Barack Obama announced Sunday night that the U.S. lawmakers have reached an agreement on raising the nation’s debt ceiling and cut spending, which provided some relief, optimism and an instant boost to the equity, commodity and currency markets.

The Asian and European stocks rose today as the U.S. government is trying to finalized the debt agreement which implies raising the government’s borrowing cap to a record and cut spending by more than 2 trillion dollars over the next 10 years. This would avert a possible default and a credit rating downgrade.

Although markets are usually calm in August as investors like to take a break and enjoy their summer vacation, volatility and swift movements are about to persist this week due to the U.S. debt situation, the European debt crisis and the amount of economic data expected in the next few days.

The US.  Will release today the ISM manufacturing report, while U.K., Germany and Europe released the PMI manufacturing report for July which came in worse than expected. Europe also released the unemployment rate for June which matched the previous and the expected 9.9%.

However throughout the reminder of the week we will witness the release of some labor data from the U.S. which precede Friday’s important non-farm payrolls report. While on Thursday the ECB and BoE will issue their monetary policy decisions.

Optimism was also sustained today by China’s PMI manufacturing report for July which came above forecasts, supporting demand for higher yielding assets. This has weakened the low yielding U.S. dollar, Japanese yen and Swiss Frank during today’s morning session.

The USD is trading around the 73.75 level, the JPY is at 77.40, while the CHF is trading at 0.7900. Meanwhile the EUR rose today trading around the 1.4415 level, yet the pound failed to follow the euro’s movement after the disappointing PMI report.

Gold recorded on Friday a new record, and although today it came off its highs, it continues to trade with a positive momentum around $1614.20 per ounce. Oil gained today trading at $97.00 per barrel as growth prospects improved after the U.S. reached a debt deal agreement and could avoid a default.

USD/JPY Daily Fundamental Analysis for August 02, 2011

The USD/JPY pair advanced with the beginning of the week, as demand retreated on the Japanese yen and low yielding currencies after U.S. President Barack Obama and congressional leaders approved a plan to increase the debt ceiling.

Asian shares and higher yielding currencies advanced on the back of the risk appetite, while the USD/JPY pair could see further consolidation on concerns that the BOJ will interfere in the foreign exchange market after the Japanese currency hit its highest level since March 11 quake.

The Japanese Finance Minister Yoshihiko Noda said last week that the Japanese government and BOJ will take appropriate actions to prevent further gains for the Japanese yen which could hurt exports and corporate profits.

On Tuesday at 01:30 GMT, Japan will release the annual labor cash earning for June, where it had a previous of 1.1%.

At 12:30 GMT, the U.S. economy will release the personal income for June, where it had a previous reading of 0.3% and expected to show a rise of 0.2%. On the other hand, the personal spending for June is expected to come at 0.2% from the prior reading of 0.0%.

The U.S. core PCE is expected to show a rise of 0.2% from the previous 0.3%. However, the annual core PCE is expected to come at 1.4% from the previous 1.2%.

NZD/USD Daily Fundamental Analysis for August 02, 2011

New Zealand dollars advanced as President Barack Obama announced that party leaders have reached an agreement to raise the debt ceiling, spurring demand for higher-yielding assets.

Moreover, the New Zealand dollar also advanced as equity gains boosted demand for commodity currencies, along with the cheerful data from the Chinese economy, where China’ industrial production continued to accelerate, adding that New Zealand products will increase as China is the largest market for New Zealand goods.

At the meantime, the New Zealand economy gives some signs of picking up as retail sales soared during the first quarter, adding that the economic recovery starts to recovery.

On Tuesday the average hourly earnings for the second quarter in New Zealand is due at 22.45 GMT (Monday), while it inclined by 0.3% in the first quarter.

At 12:30 GMT, theU.S.economy will issue the personal income for June, where it had a previous reading of 0.3% and it’s expected to show a rise of 0.2%. On the other hand, the personal spending for June is expected to come at 0.2% from the prior reading of 0.0%.

At 12:30 GMT, the U.S. economy will release the personal income for June, where it had a previous reading of 0.3% and expected to show a rise of 0.2%. On the other hand, the personal spending for June is expected to come at 0.2% from the prior reading of 0.0%.

The U.S. core PCE is expected to show a rise of 0.2% from the previous 0.3%. However, the annual core PCE is expected to come at 1.4% from the previous 1.2%.

AUD/USD Daily Fundamental Analysis for August 02, 2011

The market is currently stabilizing after the US government reached an agreement to raise the nation’s debt ceiling which eased the prevailing jitters over U.S. default and slowing global recovery.

The Australian dollar soared against the most of its major counterparts after China reported that the manufacturing sector continued gathering momentum, adding that Australian exports will rebound. The industrial production expanded by more than anticipations bolstering the case for exports growth.

On Tuesday, the Australian economy has a busy day, where it is going to release many data with a heavy impact on the market movement. At 01:30 GMT the Australian economy will start the day with the house price index for the second quarter after declined 1.7% in the first quarter, and at the same time to release June’s trade balance, whereas the trade surplus reached A$2333 million in May.

Moreover, at 01:30 GMT Australia will release the building approvals index for the month of June, after it dropped 7.9% in May.

The market is waiting the RBA rate decision for August at 04:30 GMT, where the expectations indicated that the Bank will leave the borrowing costs at 4.75%.

At 12:30 GMT, the U.S. economy will release the personal income for June, where it had a previous reading of 0.3% and expected to show a rise of 0.2%. On the other hand, the personal spending for June is expected to come at 0.2% from the prior reading of 0.0%.

The U.S. core PCE is expected to show a rise of 0.2% from the previous 0.3%. However, the annual core PCE is expected to come at 1.4% from the previous 1.2%.

EUR/USD Technical Analysis Aug 1, 2011

The EUR/USD pair fell, and then rose on Friday, as traders really don’t which side of the Atlantic is worse right now. Because of this, the pair will be choppy at best. However, if the markets get a deal out of Congress that it likes in the debt limit discussion, this pair could turn decidedly bearish. We look to sell rallies because we think it is only a matter of time before common sense prevails in DC.

USD/JPY Technical Analysis Aug 1, 2011

The USD/JPY fell apart on Friday as the US GDP numbers came out poorly, and the Congress is still failing to come to any kind of consensus as to what to do about the debt limit talks. The USD is getting punished all over, and this pair is no exception. It should be noted that it is now trading at the same levels that saw intervention previously. With the Bank of Japan increasing the rhetoric, we are still clear of this trade.

GBP/USD Technical Analysis Aug 1, 2011

The GBP/USD pair rose again on Friday as lawmakers in the US simply cannot come to an agreement involving the US debt ceiling and national deficit. The longer this continues, the more likely we are to see weakness in the USD. The UK already has austerity measures in place, and as such….is a safer bet at the moment. The 1.65 did hold, so we think upside gains are limited at this point. Choppy conditions are probably the short-term trading conditions.

USD/CHF Technical Analysis Aug 1, 2011

The USD/CHF pair finally broke through the 0.80 level on Friday, and now begins a new leg down. Because we are in uncharted territory, this pair is likely to have reactions at major round numbers, so expect a slight bounce every one hundred pips or so. The market could also retest the 0.80 level to see if it is now resistance, which would also confirm the next down move.

EUR/CHF Technical Analysis Aug 1, 2011

The EUR/CHF continued its relentless march south on Friday, as traders ran for cover after a bad GDP number out of the USA. The pair is a safe haven, and as such – this pair gets sold in bad times. The Euro has its own problems as well, so it is likely to continue selling off. The pair is a sell on rallies, and we would like to see a bounce towards 1.15 to get short again.

USD/CAD Technical Analysis Aug 1, 2011

The USD/CAD spike during the Friday session, and ran all the way up to the 0.96 area, a place that we suggested could turn out to be resistance. The pair did fall from there, but only in later trading. With the oil markets falling, the CAD suffered. The pair looks like it could have a little more in that tank for a move up, but ultimately is a bearish pair, so we will look to sell rallies.

NZD/USD Technical Analysis Aug 1, 2011

The NZD/USD has reached new all-time highs again on Friday, and the 0.88 handle is now being tested. Because of this, we feel that the pair is overextended, but we certainly wouldn’t sell it. We want to see a pullback in which to buy from. Look for a pullback in order to go long.

USD/JPY Daily Fundamental Analysis for August 01 2011

The USD/JPY pair ended last week gains for the Japanese currency, as the U.S. and EU debt crisis increased fears among traders which abandoned the high yielding currencies and shifted their investments to the Japanese yen.

The downside movement for the USD/JPY pair could be threaten by BOJ intervention bets, where the latest comments fromJapan’s officials indicate that the next move from the BOJ could be very close.

On Monday at 05:00 GMT, the Japanese economy will release the annual vehicle sales index for July, where the previous reading was down by 23.3%.

The U.S. economy will release the construction spending for June at 14:00 GMT, where it’s expected to show a drop of 0.1% from the prior fall of 0.6%.

The ISM manufacturing for July will be released at 14:00 GMT, where it is expected slightly higher to 55.4 from 55.3.

USD/CHF Daily Fundamental Analysis for August 1, 2011

The week starts with the release of no data from the Swiss economy, yet the U.S will release important data, at 14:00 GMT, which is ISM manufacturing for July; the reading is expected to show an ease in expansion to 55.0 compared with June’s reading of 55.3, noting that a reading above 50 means expansion and vice versa. The U.S. data may have a significant impact on the pair if it signaled any surprise.

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In the week ended July 29, the market sentiment was negative on concerns the U.S. may be prone to a downgrade to its AAA credit rating as well as possible default due to the delay ofU.S.officials to approve debt-ceiling increase plan.

Also, U.S. GDP data showed a strong slowdown in growth to 1.3% from the revised 0.9% which was 1.9% initially, adding to the mounting concerns.

On Monday, the attention will be towards manufacturing data which may give some indication about the status of the economy in the third quarter after strong ease in expansion witnessed in the second quarter.

NZD/USD Daily Fundamental Analysis for August 01, 2011

The NZD/USD pair continued its upside movement to record a new all time high, as the cheerful outlook for the New Zealand economy helped Kiwi to soar against most of its major counterparts.

The New Zealand economy faced the natural disaster that hit the nation in the first half of the year, but we see that the NZ economy has many resources that help the economic recovery. The nation’s GDP expanded more than expected during the first quarter as milk and lumber exports rose.

New Zealandpolicy makers left the benchmark interest rate at a record low for a third straight meeting and signaled it will need to boost borrowing costs to contain prices during the fourth quarter of the year as the nation’s economic recovery gathers pace.

At 01:30 GMT, New Zealand economy is to start the week by releasing its ANZ commodity price index for July that slid 1.2% in June.

The U.S. economy will release the construction spending for June at 14:00 GMT, where it’s expected to show a drop of 0.1% from the prior fall of 0.6%.

The ISM manufacturing for July will be released at 14:00 GMT, where it is expected slightly higher to 55.4 from 55.3.

GBP/USD Daily Fundamental Analysis for August 1, 2011

The week starts with the release of important manufacturing data from both economies which will provide some clues about the third quarter’s condition after the sluggish growth seen in the three months ended June. As of 08:30 GMT, PMI manufacturing will show an ease in expansion to 51.0 in July from the prior 51.3.

the U.S will release important data, at 14:00 GMT, which is ISM manufacturing for July; the reading is expected to show an ease in expansion to 55.0 compared with June’s reading of 55.3, noting that a reading above 50 means expansion and vice versa. The U.K. and U.S.data may have a significant impact on the pair if they signaled any surprise.

If both readings came in line with expectations, this will add to worries in markets as it will increase expectations the sluggish growth would continue in the third quarter.

In the week ended July 29,U.S.annualized 2q GDP showed a strong slowdown in growth to 1.3% from the revised 0.9% which was 1.9% initially, whileU.K.economy showed an ease in expansion to 0.1% compared with the prior 0.5%.

EUR/USD Daily Fundamental Analysis for August 01, 2011

The EUR/USD will start the week on Monday with heavy volatility as the market continues to react to the weak GDP and the progress in the debt talks.

The deadline is approaching and US lawmakers are to reach the final decision to avert default, which might ease the pessimism slightly, yet the overall downside pressures prevail.

The euro will still be pressured by the fear of the spreading debt crisis to Spain after Moody’s warned of a downgrade and Zapatero called for early elections.

Also on Monday, Germany will start with the final revision for the PMI Manufacturing for July at 07:55 GMT and expected unrevised from the flash estimate with the slowing pace from June at 52.1.

The euro area is set to release the final revision for the PMI Manufacturing for July at 08:00 GMT and expected to maintain the slowing pace from June unrevised from the advanced estimate of 50.4.

At 09:00 GMT the euro area unemployment is due and expected steady at 9.9% in June.

The Institute for Supply Management manufacturing index will be released from the United States at 14:00 GMT, where the ISM manufacturing index is expected to ease further in July to 55.0 from 55.3 reported back in June.