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Dollar Falls As Euro Bulls Charge Against 1.42
Friday, 26 June 2009 22:28:32 GMT  |  Antonio Sousa, Chief Strategist
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A change in investor’s sentiment towards more risk taking has been helping the euro to demolish the safe-haven status of the US dollar.

Dollar Falls Despite Better than Expected Consumer Sentiment

This Friday, the US dollar lost ground against the world’s most heavily traded currencies despite the release of better than expect data for personal income and consumer confidence. Personal Income for May came in at 1.4 percent from 0.7 percent in the previous month and the University of Michigan Consumer Confidence indicator came in at 70.8, higher than expected. Foreign exchange traders were not particularly excited in these numbers and the euro appreciated 80 pips against the dollar to trade as high as 1.4180 from 1.3986 on Thursday. Also, the USDJPY lost more than 70 pips to trade as low as 95.04 yen. This has been a particularly volatile week for currency trading which makes it even more difficult to identify the fundamental triggers behind such moves in exchange rates. Nevertheless, several months of quantitative easing combined with expectations for a record high budget deficit are beginning to weigh on the US dollar exchange rate. Earlier in the day, Chinese officials reiterated their call to replace the U.S. dollar with a new global reserve currency and many countries are becoming increasingly concerned about their investments in US treasuries. Moreover, this week we learned that the Federal Reserve will continue to provide support to mortgage lending and housing markets by purchasing a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. However, the US dollar is likely to remain under heavy selling pressure until the US Federal Reserve presents a clear exit strategy for quantitative easing.
 

Euro Bulls Make Another Attempt to Bring Down 1.42

A change in investor’s sentiment towards more risk taking has been helping the euro to demolish the safe-haven status of the US dollar. Today, the EUR/USD gained 71 pips in few hours but one has to look at a longer term chart to really understand the magnitude of the EUR/USD up trend. The euro rallied more than 1700 pips since January trading from a low of 1.2544 in March to as high as 1.4337 in June. Having said that, the euro starts looking very expensive, in particularly for European exporters who have to compete against American companies for a share in global trade. Looking ahead, we expect a considerable deterioration of the euro zone economy which could lead to a significant shift of interest rate differentials in favor of the U.S. dollar.


Global Interest Rates

 

source: TradingEconomics.com

Next 24 Hours Calendar

Currency

GMT

Release

Survey

Previous

Comments

NZD

22:45

Trade Balance (New Zealand dollars) (MAY)

250.0M

276.0M

Trade Balance Surplus to rise for the third consecutive month while narrowing on the year-to-date.

NZD

22:45

Balance (YTD) (New Zealand dollars) (MAY)

-3637

-4108

NZD

22:45

Imports (New Zealand dollars) (MAY)

3.42B

3.37B

Trade figures expected to post slight increases as global trade improves amid signs of recovery.

NZD

22:45

Exports (New Zealand dollars) (MAY)

3.70B

3.65B

NZD

22:45

Building Permits (MoM) (MAY)

  

11.2%

Permits have trended cyclical in past several months.

GBP

23:01

Hometrack Housing Survey (MoM) (JUN)

  

0.0%

Housing survey posted no change in June following 19 consecutive monthly declines while YoY contraction narrowed.

GBP

23:01

Hometrack Housing Survey (YoY) (JUN)

  

-9.6%

JPY

23:50

Industrial Production (MoM) (MAY P)

7.0%

5.9%

Production is expected to set record high expansion for the second month while annualized figure improves.

JPY

23:50

Industrial Production (YoY) (MAY P)

-28.8%

-30.7%

JPY

23:50

Retail Trade s.a. (MoM) (MAY)

0.0%

0.7%

Retail trade to post no change following first gain in seven months. Annualized contraction expected to narrow for the third time while large retailers' decline to cool for second month.

JPY

23:50

Retail Trade (YoY) (MAY)

-2.6%

-2.8%

JPY

23:50

Large Retailers' Sales (MAY)

-6.2%

-6.7%

NZD

3:00

Money Supply M3 (YoY) (MAY)

  

6.9%

Growth in money supply has remaining within a range of six to ten percent in the past year.

JPY

4:00

Vehicle Production (YoY) (MAY)

  

-47.1%

Contraction has narrowed in the past two months.

EUR

8:00

Bloomberg Italian Retail Purchasing Manager Index (JUN)

  

46.5

Retail PMI in Euro-Zone has improved recently despite posting contraction in past twelve months. Specifically, the French PMI came in the strongest of continental Europe's three largest economies while Germany showed the most weakness.

EUR

8:00

Bloomberg German Retail Purchasing Manager Index (JUN)

  

46.3

EUR

8:00

Bloomberg French Retail Purchasing Manager Index (JUN)

  

48.3

EUR

8:00

Bloomberg Euro-Zone Retail Purchasing Manager Index (JUN)

  

47.1

GBP

8:30

Mortgage Approvals (MAY)

46.0K

43.2K

Approvals to rise to highest level since April 2008.

GBP

8:30

Net Consumer Credit (MAY)

0.3B

0.3B

Lending remains constricted as consumers continue to lower debt and increase savings.

GBP

8:30

Net Lending Sec. on Dwellings (MAY)

1.0B

1.0B

GBP

8:30

M4 Money Supply (MoM) (MAY F)

  

0.2%

Money supply growth has slowed to a 0.2% pace for the past three months while YoY rise remains relatively high.

GBP

8:30

M4 Money Supply (YoY) (MAY F)

  

16.6%

EUR

9:00

Euro-Zone Economic Confidence (JUN)

71.0

69.3

Economic confidence and business climate indicators are expected to improve for the third month.

EUR

9:00

Euro-Zone Business Climate Indicator (JUN)

-3.00

-3.17

EUR

9:00

Euro-Zone Consumer Confidence (JUN)

-30

-31

Confidence to improve slightly from March -34.0 record low.

EUR

9:00

Euro-Zone Industrial Confidence (JUN)

-32

-34

Industrial confidence expected to rise for third month.

EUR

9:00

Euro-Zone Services Confidence (JUN)

-23

-23

Services sector is not expected to see significant improvement.

USD

12:30

Chicago Fed National Activity Index (MAY)

  

-2.06

National activity index has improved to best level since August.

USD

14:30

Dallas Fed Manufacturing Activity (JUN)

  

-21.5%

Dallas manufacturing remain weak but has improved to best levels since August.
           

Currency

GMT

Upcoming Events & Speeches

      

USD

13:30

Fed's Rosengren Speaks at Risk Capital Conference in Brussels

      

 

 

 

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - MAJORS 20:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

Resistance 2

1.4616

1.6800

103.75

1.2250

1.1780

0.8500

0.6675

Resistance 1

1.4564

1.6500

102.50

1.2056

1.1500

0.8200

0.6600

Spot

1.4098

1.6547

95.16

1.0812

1.1487

0.8083

0.6465

Support 1

1.2500

1.3695

86.50

1.0550

1.0800

0.6248

0.4831

Support 2

1.2329

1.3500

86.00

1.0400

1.0500

0.5868

0.4500

 

CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 20:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Resistance 2

14.0000

1.6500

8.7800

7.7900

1.5060

Resistance 1

13.6000

1.5773

8.2700

7.7850

1.4750

Spot

13.2275

1.5349

7.8655

7.75003

1.45345

Support 1

12.3500

1.5196

7.7506

7.7450

1.4400

Support 2

11.8212

1.5000

7.6500

7.7400

1.4170


INTRA-DAY PIVOT POINTS    20:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

Resistance 2

1.4202

1.6685

96.42

1.1002

1.1617

0.8127

0.6521

Resistance 1

1.4150

1.6616

95.79

1.0907

1.1552

0.8105

0.6493

Pivot

1.4066

1.6491

95.42

1.0852

1.1499

0.8065

0.6451

Support 1

1.4015

1.6422

94.79

1.0757

1.1434

0.8043

0.6423

Support 2

1.3931

1.6298

94.42

1.0701

1.1381

0.8002

0.6382

 

INTRA-DAY PROBABILITY BANDS    20:00 GMT

 

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

Resistance 3

1.4299

1.6804

96.63

1.0960

1.1669

0.8244

0.6605

Resistance 2

1.4249

1.6739

96.26

1.0923

1.1624

0.8203

0.6570

Resistance 1

1.4199

1.6675

95.89

1.0886

1.1578

0.8163

0.6535

Spot

1.4098

1.6547

95.16

1.0812

1.1487

0.8083

0.6465

Support 1

1.3998

1.6418

94.43

1.0738

1.1395

0.8002

0.6395

Support 2

1.3948

1.6354

94.06

1.0701

1.1349

0.7962

0.6360

Support 3

1.3898

1.6290

93.70

1.0664

1.1304

0.7922

0.6325

 Antonio Sousa is a Chief Strategist for DailyFX.com at FXCM in New York City where he performs global economics research and develops systematic trading strategies. Please send your comments to asousa@fxcm.com.

 

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