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Wednesday, July 1, 2009

Short-Term Forex Technical Outlook: GBP/CHF

The Swiss franc strengthened against the British pound this week following the drop in market sentiment, and we are likely to see the GBP/CHF fall lower over the remainder of the week as investors curb their appetite for high risk/reward investments however, the pair may continue to hold a tight range over the near-term as the Swiss National Bank pledges to stem the appreciation in the low-yielding currency.
Currency Pair: GBP/CHF Chart: 60 Min Charts Short-Term Bias: Flat
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posted by srikanth....july1

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US Dollar Up as Continuing Jobless Claims Fall for First Time Since January

US Dollar Up as Continuing Jobless Claims Fall for First Time Since January -Japanese Yen Down as DJIA Bounces From 8,500 -Euro Gains Versus Swiss Franc as SNB Reinforces Intervention Efforts -Canadian Dollar Down Despite Stronger-Than-Expect CPI - Retail Sales on Hand Tomorrow
US Dollar Up as Continuing Jobless Claims Fall for First Time Since January The US dollar ended the day mostly higher, losing only to the Australian dollar and New Zealand dollar because of demand for carry trades. US economic data offered a boost to risk appetite, but ultimately, the greenback's latest moves mark more of a consolidation against currencies like the euro and British pound, and intraday price action has had little to do with news. Nevertheless, the economic news has been impacting risk trends, making releases important to watch. Today, the US Labor Department said that initial jobless claims rose by 3,000 during the week ending June 13 to 608,000, but continuing jobless claims fell for the first time in six months by 148,000 during the week ending June 6 to 6,687,000. The shift in continuing claims is an encouraging development, but we need to see far more evidence before we can say that the surge in the unemployment rate may start to slow or even hold steady. Meanwhile, the Philadelphia Fed's gauge of manufacturing sector activity rose to -2.2 in June from -22.6, as new orders, shipments, and number of employees all rose. In fact, the shipments component tipped into positive territory for the first time since May 2008. Nevertheless, all of the other components remain negative, indicating that we have yet to see real signs of recovery in the sector. Adding to the mix, the Conference Board's leading index jumped for the second straight month during May by 1.2 percent to an 8-month high of 100.2. A breakdown of the report shows that increases in the pace of deliveries, building permits, stocks prices, M2 money supply, the interest rate spread, and consumer expectations all contributed to the large increase. Related Article: Dollar Marks Time Before Next Bull Leg Japanese Yen Down as DJIA Bounces From 8,500 The Japanese yen fell against the majors as FX carry trades bounced following their recent declines. Some of the JPY crosses have been moving in lockstep with US equities, as both the DJIA and EURJPY gained at the start of the US trading session and spent most of the day consolidating the move. As we mentioned yesterday, though, risk appetite still remains on edge and has not been helped by yesterday's downgrades of the credit ratings of 18 US banks by S&P, especially as five of them were pushed into junk territory. S&P cited the notion that "[o]perating conditions for the industry will become less favorable than they were in the past, characterized by greater volatility in financial markets during credit cycles and tighter regulatory supervision." On the other hand, 10 banks returned $68 billion worth of TARP funds today, including JPMorgan Chase and Goldman Sachs, indicating that not all is equal in the banking sector at this juncture. Ultimately, it's undoubtedly positive that some of the nation's biggest banks are returning taxpayer funds, but according to a press release published by the FDIC on May 27, their "Problem List" of troubled banks grew during the first quarter "from 252 to 305 institutions, and total assets of problem institutions increased from $159 billion to $220 billion." As a result, it's important to keep the situation in perspective, as there are still significant downside risks to the health of the financial sector and the economy at large. Euro Gains Versus Swiss Franc as SNB Reinforces Intervention Efforts The EUR/CHF experienced very choppy price action today, but ultimately ended the day higher after the Swiss National Bank (SNB) announced that they would be leaving their 3-month Libor target range unchanged at 0-0.75 percent, as expected, with the aim of bringing the rate down to the "lower part of the range" near 0.25 percent. The market-moving part, though, was that the SNB said they would "take firm action to prevent an appreciation of the Swiss franc against the euro.," The SNB also reiterated that they would continue to "provide the economy with a generous supply of liquidity and to purchase Swiss franc bonds with the aim of reducing risk premia on long-term bonds issued by private sector borrowers." Indeed, the central bank is ultimately concerned that there is a "not inconsiderable" risk of deflation, but their GDP growth forecast for 2009 has not changed from previous expectations for a real GDP decline of 2.5 - 3 percent. Looking ahead, EUR/CHF could simply remain range-bound, as it has for the past few months, but there are some notable levels to watch. For resistance, there is the 200 SMA at 1.5161 and a falling trendline at 1.5235. For support, we have the psychologically important 1.5000 mark. Canadian Dollar Down Despite Stronger-Than-Expect CPI - Retail Sales on Hand Tomorrow Statistics Canada released their latest inflation report, and the results initially pushed the Canadian dollar higher, but a rebound in the US dollar later in the day cut those gains short. Canada's headline consumer price index (CPI) jumped 0.7 percent in May due to increased costs for food, household operations, transportation, heath/personal care, recreation/education, and alcohol/tobacco. This rise prevented the year-over-year measure from falling negative, as had been expected, but the rate did still slow to more than 15-year low of 0.1 percent from 0.4 percent. On the other hand, the Bank of Canada's (BOC) core CP, which excludes 8 volatile components, rose 0.4 percent during the month and pushed the annual rate up to 2.0 percent from 1.8 percent, suggesting that the threat of deflation in Canada is minimal and that the BOC will not pursue a quantitative easing program. On Friday, Statistics Canada is expected to report that Canadian retail sales rose 0.1 percent during April, which would mark the fourth straight increase. Economic data for the nation has reflected mixed results in recent months, but figures for April, such as employment and Ivey PMI, were generally optimistic which may indicate that retail sales will rise a bit more than anticipate. On the other hand, Statistics Canada said yesterday that wholesale sales fell by 0.6 percent in April, marking the seventh straight month of contraction, which doesn't bode well for the retail side of the coin. ECONOMIC DATA **For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar SUPPORT AND RESISTANCE LEVELS Written by: Terri Belkas, Currency Strategist for DailyFX.com E-mail: tbelkas@dailyfx.com


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posted by srikanth....july 1

Euro Vulnerable as German Retail Sales Stall, Bolstering Case for ECB Rate Cut (Euro Open)

The Euro may see selling pressure emerge in the forthcoming session as German Retail Sales come to a standstill in May, with the prospect of deepening recession boosting priced-in expectations for an ECB interest rate cut later in the week.
Key Overnight Developments
- Japan's Tankan Survey Reveals Dour Outlook for Manufacturing - Australian Retail Sales Top Expectations But Outlook Still Uncertain
Critical Levels The Euro is little-changed heading in the European market open after a choppy overnight trading session that saw the single currency test as low as 1.4002. The British Pound slipped a bit lower, paring initial losses that saw the sterling sink as low as 1.6415 to trade down -0.1% ahead of the opening bell in Europe.
Asia Session Highlights Japan's Tankan Large Manufacturers Index rose to -48 in the second quarter from a record low at -58 recorded in the three months to March. The forward-looking Outlook index that aims to predict the third-quarter outcome rose to -30, narrowly topping economists' forecasts of a -34 result. Despite the improvement in the headline figure, details of the report were far from encouraging: large manufacturers' sales are expected to fall -14% in 2009 fiscal year (12 months through March 2009), the most in five years, while profits are set to shrink -39.5%. Sub-indexes measuring employment conditions and production capacity are both forecast to decline by September while the difference of expected demand less supply is set to narrow in the same period. On balance, this bolsters the Bank of Japan's latest assessment calling for output and exports to "level out" due to inventory adjustments, meaning firms are set to continue to operate at leaner levels as demand remains lackluster. This means employment and consumption are set to remain at the lower end of the spectrum for some time notwithstanding recent improvements in household spending driven by a temporary boost from the government's record-setting $25 trillion yen stimulus package.
Australian Retail Sales grew more than economists expected in May, adding 1% after growing 0.3% in the previous month. Forecasts issued ahead of the release were calling for a 0.5% expansion. In annual terms however, receipts grew 6%, the smallest increase since February. Department stores and clothing retailers led the metric higher, adding 5.5% and 2.9%, respectively. Sales were likely driven by the government's aggressive spending efforts considering the same period also saw rising unemployment as well as shrinking private-sector credit. The big question going forward remains whether the economic growth will retain current momentum after the flow of stimulus cash dries up, and the outlook seems decidedly dour. A survey of economists conducted by Bloomberg calls for the jobless rate to hit 6.5% by the end of 2009, amounting to substantial headwinds for incomes and consumption, while Westpac Banking Corp has said the economy will shrink at an annualized rate of -1.5% through the second half of this year.


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posted by srikanth....july 1

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Pound Sunk By Biggest GDP Contraction Since 1958, After Reaching Highest Level Since October

he pound would set a fresh yearly high of 1.6746 before the final reading of 1Q GDP showed the lowest quarterly growth since 1958 of -2.4% down from -1.9%. The steeper than expected contraction dragged the annualized reading to -4.9% versus expectations of -4.3%. Total business investment in the country fell by 7.9% which was the most since September dimming the prospects for future growth. Meanwhile, Nationwide LLC showed that house prices rose 0.9% in June which helped support earlier bullish sentiment. However, the weak growth figures has the GBP/USD testing 1.6600The BoE’s success in their bond purchase program continues to raise optimism for the U.K. economy. The central banks aggressiveness in their monetary policy to start the year is starting to pay dividends which continue to provide sterling support. Our contention that we may be seeing the pound become overvalued was supported by the weak growth numbers including a 1.3% drop in household spending and exports falling for a fourth quarter by 6.9%. However, with the GBP/USD reaching its highest level since last October there is very little in the form of resistance until 1.6888-50.0% Fibo of 2.0160-1.3504. Euro bulls have regained control after a brief sell off following weak money supply figures and German unemployment reaching 8.3%-the highest since June 2007. Although, we saw a 31,000 increase in the number of unemployed Germans it was less than the 45,000 that economists were expecting. The Euro-zone June CPI-estimate also printed better than expected at -0.1% versus -0.2% which will help the ECB keep rates at 1.00% as they maintain their price stability focus. Policy members have consistently maintained that rates are appropriate and unless we see the risks of deflation substantially increase a bottom may be in place at the current record low. Bollinger band resistance at 1.4207 may limit upside potential fro EUR/USD.The dollar has started to regain its footing after rising oil prices and higher equity prices kept it under pressure during Asian trading. Slow growth and rising unemployment in Europe is weighing on risk appetite and could lead to dollar support heading into U.S. trading. However, the expected rise in consumer confidence to 55.3 from 54.9, which would be the highest since September 2008, could fuel demand for risky assets. Additionally, Chicago PMI is forecasted to rise to 39.0 from 34.9 as manufacturing steadily improves which will raise expectations for domestic growth and future employment. Therefore, we could see the greenback trade lower on increased optimism and increased risk appetite. However, the S&P Case-Shiller house price data is also ahead and weakness in the housing market could dim the outlook for a recovery.


for details visit
http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Pound_Sunk_By_Biggest_GDP_1246356560350.html


posted by srikanth....july 1

Forex - Dollar steady on lower US Consumer Confidence

The Canadian dollar fell against the U.S. currency on Tuesday as lower U.S. consumer confidence data for June dampened hopes for an early economic recovery, and pushed the market toward safer havens. Sterling reached an eight-month high against the dollar on Tuesday due to surprisingly strong UK house price data, but its gains fizzled out after a moderating decline in U.S. home prices which later boosted the U.S. currency. Market was volatile on the last day of the quarter and half-year, and analysts said corporate demand to buy and sell the dollar for last-minute book keeping purposes was driving broader currency movements. The Dollar steadied overnight, holding gains made the previous day after an unexpected fall in U.S. consumer morale cooled optimism about an economic recovery, prompting investors to seek the safety of the greenback. EURUSD has traded even lower this morning on the back of an FT article rehashing the UK’s bad GDP result yesterday. EURUSD traded in a range of 1.4000-1.4054 and USDJPY in a range of 96.17-96.99 as volatility continues to ease. The Yen edged down against the dollar after the news but the market's reaction was subdued overall as investors decided that it offered no surprise. As the BOJ's closely watched tankan survey has passed, investors now await the U.S. government's high-profile monthly employment report. The New Zealand dollar was around 1 percent lower this morning as weaker stock markets and soft U.S. consumer data prompted investors to trim their exposure to risk and high yield currencies. Kiwi resumes local trading around $0.6450 level after retreating from a near one-month high of $0.6550 the previous day. With the ECB and payrolls out tomorrow, the market may choose to tread cautiously and we expect this to remain the dominant theme today.


for details visit
http://www.ac-markets.com/forex-news/daily-forex-news.aspx

posted by srikanth....july1