EUR/USD Daily Fundamental Analysis for August 10, 2011

The mixed sentiment and choppy trading prevailed for the EUR/USD with the focus predominantly on the Feds decision as the euro moved higher most of Tuesday ahead of the decision.

Investors focused on the fragile sentiment and worsening outlook for financial stability and growth which fueled speculations that the FOMC will likely take action to stem the crisis and the worsening state of confidence.

On Wednesday, the market movement is bound to be a reaction to the late Tuesday decision from the Federal Reserve and if the fed did not ease the jitters and stabilize markets, the strong selloff will return to control the market in a new pressure on policy makers for more coordinated efforts to control the crisis that echoes the starting days of the financial crisis.

As we said, the aftermath of the FOMC will remain the focus and eyes will also be on the performance across equity and bond markets for signs of stability to help the euro sustain the gains and otherwise the bearishness will return obviously on the pair.

In other data, Germany will release the final estimate for the July consumer price index which is expected unrevised at 0.4% rise on the month and 2.4% on the year and in EU harmonized terms also to remain unrevised with 0.5% monthly gain and 2.6% on the year.

From the U.S. the wholesale inventories index for June is due at 14:00 GMT and expected to ease to 1.0% following 1.8%.

At 18:00 GMT the Monthly Budget Statement for July is due with the deficit expected to widen to $140.0 billion from $43.1 billion.

GBP/USD Daily Fundamental Analysis for August 10, 2011

On Tuesday, the pair fluctuated as the dollar remained vulnerable before the Fed meeting, where the impact of the S&P cut to U.S. sovereign rating by one step to AA+, losing its top rating for the firs time since 1941, was still prevailing, lowering demand on high-yielding currencies.

Grim manufacturing and trade reports from theU.K.caused the pound to snap its earlier advance. Manufacturing production fell 0.4% in June compared with the prior 1.8% expansion, while visible trade deficit widened to 8873 million pounds in June from the revised deficit of 8467 million pounds, adding to worries the growth pace is slowing.

On Wednesday, the awaited inflation report will be available at 09:30 GMT; thereafter, theUSwill release MBA mortgage applications for August 5 at 11:00 GMT followed by monthly budget statement at 18:00 GMT.

The inflation report is predicted to have an impact on the pair if the growth or inflation expectations came higher than estimated as investors will wait to see the outlook for the bank and thereby predict its monetary action over the coming months.

 

USD/CHF Daily Fundamental Analysis for August 10, 2011

On Tuesday, the dollar fell to record low versus the Swiss franc after as the impact of the S&P cut to U.S. sovereign rating by one step to AA+, losing its top rating for the firs time since 1941, is still having negative effect on the market, sparking demand on refuges, led by the franc which remain the most favorable safe harbor amid the improvement in the Swiss economy. The dollar remained weak before the Fed meeting. The negative sentiment is still giving strong support to the franc which makes the mission of the SNB very difficult to curb the franc’s advance. Last week, the SNB unexpectedly cut interest rate and announced it may adopt any needed measures to stop the franc’s rally. On Wednesday, the US will release MBA mortgage applications for August 5 at 11:00 GMT followed by monthly budget statement at 18:00 GMT, while the Swiss economy lacks fundamentals. The news is not expected to have a significant impact on the market, where worries are expected to continue in the market.

NZD/USD Daily Fundamental Analysis for August 10, 2011

The market continues its downside movement as the global economic growth outlook falters, where haven assets advanced after the greenback after the Standard & Poor’s downgraded the US’s long-term credit rating, while the European crisis continues to escalate, damping the demand for higher-yielding investments and accordingly pressuring kiwi.

New Zealand dollar dropped against the greenback as concern over a slowdown in the U.S. economy and the euro-region’s debt crisis sapped demand for higher-yielding assets.

Kiwi also weakened with the selloff in Asian stock markets that declined to the lowest since 2008 on concern the U.S. economy might fall in recession. More losses were seen after the reported rise in Chinese inflation which fueled speculation for further monetary tightening that will dampen growth in New Zealand’s biggest trading partner.

On Wednesday, at 22.4 GMT (Tuesday) the New Zealand economy is to start by the NZ card spending for July, while it inclined by 0.8% in June.

At 14:00 GMT, the U.S. economy will release the wholesale inventories for June, where the previous reading was 1.8% and expected to retreat to 1.0%. The monthly budget statement for July will be released at 18:00 GMT, where the previous reading showed a deficit of $43.1 billion and expected to widen to a deficit of $140.0 billion.

USD/JPY Daily Fundamental Analysis for August 10, 2011

The USD/JPY pair dropped for the second day, as the Japanese yen was able to cover 80 percent of its previous losses the dollar when BOJ intervened in the FX market and sold the yen.

Investors increased demand on the Japanese currency as a safe haven, after risk aversion returned to control the market, increasing pressure on the yen to soar to the dangerous zone against greenback.

The U.S. sovereign credit rating downgrade by Standard and Poor’s triggered a strong selloff across global bourses, where investors abandoned risky assets and shifted their investments to the yen, which increased expectations for another intervention from the BOJ.

On Wednesday at 23:50 GMT (Tuesday), the Bank of Japan will publish the minutes for July 11-12 meeting.

The Tertiary industry index for June will be released at 23:50 GMT, and expected to show a rise of 1.0% from the previous rise of 0.9%.

At 14:00 GMT, theU.S.economy will release the wholesale inventories for June, where the previous reading was 1.8% and expected to retreat to 1.0%. The monthly budget statement for July will be released at 18:00 GMT, where the previous reading showed a deficit of $43.1 billion and expected to widen to a deficit of $140.0 billion.

AUD/USD Daily Fundamental Analysis for August 10, 2011

The Australian dollar extends its downside movements against the U.S. dollar, the pair reached the lowest level in about five months at 0.9930, after the Australian economy reported that business conditions index dropped to -1 in July from 2.

Moreover, Aussie continues the bearishness as the stock markets slumped the most in three years on concerns that the loss of the US long-term credit may worsen on the global economic outlook amid dire growth expectations.

As for the negative outlook intensified after the Standard & Poor’s agency downgraded the US’s credit rating from AAA to AA+ along the sluggish US economy; at the meantime the global economy faces also the European debt crisis with the pressure spreading to Italy and Spain which might indeed worsen the outlook.

On the other hand, the Australian dollar dropped after the China’s consumer prices rose by more than economists forecast, stoking concern the government will take more measures to cool growth.

On Wednesday, the AUD Westpac consumer confidence index S.A. for August is due at 01:30 GMT, where the prior reading dropped 8.3% during July, while the economy also will release its retail sales ex. Inflation for the second quarter at 01:30 GMT.

At 14:00 GMT, the U.S. economy will release the wholesale inventories for June, where the previous reading was 1.8% and expected to retreat to 1.0%. The monthly budget statement for July will be released at 18:00 GMT, where the previous reading showed a deficit of $43.1 billion and expected to widen to a deficit of $140.0 billion.

Gold Becoming More Precious Than Platinum

Although platinum is among the rarest and most precious metals to be found, the renewed rears over the outlook for global growth increased demand on safe haven, which determined gold to become more expensive than platinum.

With a new global financial crisis being just around the corner, investors continue leaving the stock markets heading towards gold and the safe haven currencies like the yen and CHF.

Gold jumped to a new record high today at $1772.00 per ounce and as of this writing is trading around the $1750.00 level while platinum is trading around $1725.00 per ounce.

It was a black day for the global stock markets yesterday after the U.S. witnessed its first ever credit downgrade to AA+ from AAA, which fueled fears of a possible global downturn.

The S&P 500 lost 6.7%, the most since December 2008, while the Dow Jones witnessed on Monday its sixth-worst decline in 112 years. Shares in Asia and Europe fell today.

It was the eighth day of losses in Europe, the longest losing streak since 2003, as investors are also worries from Italy and Spain walking in the footsteps of Greece, Ireland and Portugal that fell victims to the sovereign credit crisis.

The ECB bought on Monday billions of euros worth of Italian and Spanish bonds, indicating a contagion became more probable. Today Germany released a disappointing trade balance report for June.

U.K. released a weak manufacturing and industrial production report and a disappointing trade balance report for June. However the pound is moving in a limited range with an upside bias around the 1.6335 as the USD is weakening.

Markets are now eyeing the Feds rate decision later in the day. Ben Bernanke may step out to restore confidence and announce a third quantitative easing program soon. This is weakening the dollar index which is trading around 74.60.

China also made news today, since inflation rose by the fastest pace in three years during July, by 6.5% from 6.4% previous. This could limit China’s attempts to support growth, and a weaker global recovery has become more possible.

Therefore the yen strengthened today and as of this writing is trading around the 77.20 level. Oil meanwhile fell below the $80.00 per barrel level and now is trading around $78.45 per barrel.

This morning crude oil fell to the lowest of $75.50, after fears the U.S. will fall into another recession triggered a global selloff in equities and commodities. Today things might not look better either, since fears and caution will persist.

EUR/USD Technical Analysis August 9, 2011

The EUR/USD pair fell on Monday, continuing the downward pressure that we have seen in this market for a while. The two purple lines on the chart point out how this pair has gradually fallen over the last several months. This pair is a “sell only” pair now, and as such we don’t buy. The idea of owning whatever issues going on in Europe is ridiculous. The pair may bounce, and if it does – we sell.

AUD/USD Technical Analysis August 9, 2011

The AUD/USD fell yet again on Monday. The pair simply cannot get out of its own way, and now finds itself at a massive support area. If this area cannot hold – we are going to really fall out of bed at this point. The 1.02 level was a massive resistance area before, and a break of it started another bullish run towards all-time highs. There is plenty of support in this area, now we need to see a supportive candle in which to buy. If we can get to parity and below – this will start a new bearish trend in this market.

NZD/USD Technical Analysis August 9, 2011

NZD/USD fell on Monday, as traders shunned anything related to risk. The pair looks like it is going to run down to the 0.8000 level, and it is at that area that we will see a lot decided. The bullish trend is still intact believe it or not, but we are starting to get to a point that you really have to question this. The 0.8000 mark will make or break this pair in our opinion. 

GBP/USD Technical Analysis August 9, 2011

GBP/USD fell hard on Monday as the “risk off” trade came into vogue again as a result of the US downgrade. The pair was near the top of the recent consolidation area, in the form of the 1.65 zone. Because of this, the market was already “leaning” in a downward direction and it only took a little bit of bad news to get the riskier Pound to sell off. However, we feel that the 1.63 area is support, and this pair will more than likely continue to chop around in this 200 pip zone for a while.

USD/JPY Technical Analysis August 9, 2011

USD/JPY fell again on Monday, as traders sold off everything risk related. In fact, the Dow fell over 600 points, and as such – the “risk off” trade came into play. The Bank of Japan has made it well-known that they are considering another intervention, so we aren’t involved in this pair. In fact, it looks like the 77.50 area could be a natural support level. If we had to take a position in this pair – we would perhaps buy. But luckily for us, we don’t have to be involved in this pair at all.

USD/CAD Technical Analysis August 9, 2011

USD/CAD rose yet again on Monday as the oil markets continue to fall. The oil markets control the fate of the CAD, and as the Light Sweet Crude market is sitting right at $80 – we can monitor that to decide how to trade this pair. The $80 level is key for oil, and if it gives way, this pair will rise as the Loonie falls in value. The parity level is just above, and one cannot help but think it should be massively resistive. We are waiting to see if we get to it, and would be very interested in selling the pair at parity.

EUR/CHF Technical Analysis August 9, 2011

The EUR/CHF pair fell on Monday as traders ran from anything related to risk in the marketplace. The pair is inversely correlated to the price of gold, which rose $70 during the session, so there is no surprise this pair fell. The trend is down, and we continue to sell this pair with the belief that it will eventually head towards parity.

USD/CHF Technical Analysis August 9, 2011

The USD/CHF pair fell on Monday, but managed to bounce a bit towards the end of the session as the Dollar got a little bit of a bid at the 0.75 level. The pair is in a bearish trend, and the truth is that we will not buy this pair, and as a result we wait to see if we can get a bounce in which to sell. A break to new lows gets us selling as well.

USD/CAD Daily Fundamental Analysis for August 09, 2011

The USD/CAD pair extended its rise on Monday, as pessimism dominated global financial markets after the S&P rating agency downgraded the United States AAA credit rating, in addition to mounting concerns from the European debt crisis despite the ECB announcement to include Italian and Spanish bonds in its bond purchases program, which weighed down on confidence among traders and boosted demand for lower yielding and more safe assets, and the provided the USD/CAD with strong bullish momentum.

Moreover, crude oil prices dropped amid the uncertainty surrounding the outlook for global growth, which weighed down on the CAD as well.

Investors will be focused on the FOMC rate decision on Tuesday amid the recent developments, where it’s unclear whether the FOMC will signal the possibility of QE3 after the S&P downgrade to the U.S. debt. Meanwhile, investors will most likely continue to target lower yielding assets, and that should keep the bullish momentum going for the USD/CAD pair over the coming period.

Tuesday August 09:

Canada will release the housing starts index for the month of July at 12:15 GMT, where housing starts are expected to ease to 193.2 thousand, compared with the prior estimate of 197.4 thousand back in June.

The main focus will be on the FOMC rate decision at 18:15 GMT, where the Federal Reserve is expected to keep the rate at their historical low of 0.0-0.25% and might not take more actions to support the fainting recovery, nevertheless, investors are bracing for a surprise after the unexpected moves from the SNB and the BoJ and followed by the ECB with expanding the special money operations to ease the market tension and the Fed might just do so.

S&P Downgrades Sent Global Equity Markets to the Ground, while Gold Soars above $1700 an ounce

Global equity markets fell heavily on Monday after the S&P announced on Friday after markets closed it downgraded the longstanding AAA credit rating of the United States to AA+, which sent a huge wave of pessimism across global markets, where investors shunned risky assets and headed to safety investments.

Although the downgrade was somewhat expected in markets, yet traders are still not sure what the aftermath of this downgrade will be on economic growth, especially since recent signs suggested economic growth is losing momentum, which raises more questions over the outlook of global growth.

The S&P also announced on Monday it downgraded the senior debt rating for Fannie Mae, Freddie Mac, and Federal Home Loans Bank from AAA to AA+, which increased fear in markets and widened losses in stock markets.

Moreover, the European debt crisis continued to dominate investors as well, despite the ECB decision to expand its bond purchase program to include Italian and Spanish debt, while the G7 signaled it will cooperate to support confidence in markets amid the confidence crisis that has been prevailing over the past period and pushed global equity markets sharply lower.

Stocks in the United States fell sharply by opening on Monday, where the Dow Jones Industrial Average was down by nearly 3.10% to trade around 11,090, while the S&P 500 index was down by nearly 3.70% to trade around 1155. European stock indexes were also lower before closing on Monday, where FTSE 100 was down by nearly 2.15% to trade at 5133 and the DAX was down by nearly 3.45% to trade around 6020.

The U.S. dollar rose sharply against a basket of major currencies on Monday, where the U.S. dollar index was trading at 74.80, compared with the opening level at 74.39. The Euro fell heavily against the Dollar, where the EUR/USD pair traded at $1.4146, compared with the opening level at $1.4308, and the British Pound also fell heavily against the Dollar, where the GBP/USD pair traded around $1.6313, compared with the opening level at $1.6422.

Gold prices rose on Monday to a new record high above $1715 an ounce, while gold was last trading around $1702 an ounce, and crude oil prices extended losses to trade around $83 a barrel.

EUR/USD Daily Fundamental Analysis for August 09, 2011

The EUR/USD started the week on Monday with heavy volatility and fluctuations amid rising pessimism and fears over the debt crisis across both ends of the Atlantic and the euro remained weak despite the ECB’s steps to calm markets.

After the decision announced over the weekend, the European Central Bank stepped in the market to calm nervous investors and shelter Italy and Spain from surrendering to rising market pressures. The ECB started the bond buying which instantly drove the bonds higher and lowered borrowing costs, yet surely did not calm nerves and the euro remained weak.

Investors see that the ECB is playing on risky grounds and will need to expand its balance sheet strongly to prevent the contagion spread to both critical nations that are too big to fail. The ECB was out of options and had to act preemptively and not leave both nations vulnerable to market speculation until they are forced to ask for assistance.

The jitters and downbeat sentiment remain dominant and sparked by Friday’s late move from S&P to cut the United States top credit rating. Fears are evident over the outlook for the recovery and the risk of falling in another recession which is now complicated by the debt crisis that also worsens with recessionary prospects, which reminds us again of the same vicious cycle seen with the outbreak of the financial crisis and that keeps the market tensed.

On Tuesday, the focus will remain on central banks and financial chiefs ability to calm the nerves and take effective measures to stem the selloff and the bear market we are entering! The G7 and G20 pledged to take “all necessary measures” to support the sentiment and ensure financial stability and growth.

The focus will mainly be on the Federal Reserve and the FOMC decision. The markets before downplayed the odds for a swift and rapid move from the Fed to expand into QE3 now, yet after the sudden move from S&P now investors expect the Federal Reserve to act and maybe not rush into quantitative easing, yet act to calm markets at least take the same steps as the ECB which instantly last week expanded the liquidity operations with the 6-month tender to ease the tension and provide liquidity which investors will also eye on Tuesday to see the extent of demand on the tender as a reflect to the financial sector’s jitters.

The data on Tuesday will start from Germany at 06:00 GMT with June trade figures, where the trade surplus is expected to narrow slightly to 14.0 billion from 14.8 billion as exports are expected with 1.0% drop following 4.3% rise and imports to drop 1.8% following 3.7% rise. The current account surplus on the other hand is expected to widen to 10.0 billion euros from 6.9 billion.

As we said, the main focus will be on the FOMC rate decision at 18:15 GMT where the Federal Reserve is expected to keep the rate at their historical low of 0.0-0.25% and might not take more actions to support the fainting recovery, nevertheless, investors are bracing for a surprise after the unexpected moves from the SNB and the BoJ and followed by the ECB with expanding the special money operations to ease the market tension and the Fed might just do so.

EUR/CHF Daily Fundamental Analysis for August 09, 2011

The swiss franc returned to its record territories and the appreciation rally returned once again to govern the market amid risk aversion and jitters with the intensified debt crisis at both ends of the Atlantic and also rising threat of recession again.

The swiss franc started the week with strong gains versus the dollar and the euro on renewed jitters and fears and rapid developments over the weekend that pressured the market to open with a wide gap.

We saw the sentiment shift strongly bearish and pessimistically after Standard & Poor’s late Friday after the markets close in the United States downgraded the U.S. top credit rating by one notch to AA+ with a negative outlook which increased the jitters and downside pressure amid already circulating threat of relapse into recession.

Also, the euro remained weak versus swissy on the rising risk aversion and fears of the worsening outlook for global growth and the outlook for the debt crisis. The fear intensified with the speculation over Italy and Spain to be the next to fall which prompted the ECB to take more weekend actions to start buying Italian and Spanish bonds to ease the market pressure on both nations that will eventually crumble under the rising pressure and the speculation will force them to ask for support.

Rising jitters and fears will keep risk aversion evident on Tuesday with the focus turning to central banks and governments and the measures that might be taken to ease the market stress. The pair will continue to fluctuate with fear of another SNB intervention to step the franc’s record gains ahead of the Federal Reserve’s interest rate decision and possible coordinated move by central banks if conditions continued to worsen and accordingly more volatility will be evident on Tuesday.

Also, Switzerland will release the SECO Consumer Confidence for July at 05:45 GMT which is expected to decline to -5 from -1.

GBP/USD Daily Fundamental Analysis for August 9, 2011

On Monday, the pair fell sharply as the jittery situation in the market, after S&P cut toU.S.sovereign rating by one step to AA+, losing its top rating for the first time since 1941, sparked demand on low-yielding currencies.

On Tuesday, as of 08:30 GMT, theU.K.will release important data; manufacturing production for June is predicted to retreat to 0.2% from 1.8%, while visible trade deficit is estimated to narrow to 8100 million pounds from 8478 million pounds.

The data is predicted to have an impact on the pair if it came worse than expected as it will provide more evidence theU.K.economy is passing through a sluggish phase.  

In the U.S., eyes will be on the FOMC rate decision , due 18:15 GMT, in case of any surprise from the Fed may announce a third round of stimulus to reinvigorate growth that started to slowdown after the end of QE2 in June, especially after the monetary interventions seen last week by the SNB, BoJ and ECB. Yet expectation refer to no change on monetary policy as the Fed will probably keep interest rate unchanged and will not announce new stimulus.