dailyfx financial markets headlines

Dollar Lulls Before Pick Up

Thursday, 13 July 2006 17:20:06 GMT  |  John Kicklighter, Junior Currency Analyst

The steady pace of dollar appreciation over the past week took a break in the morning hours Thursday’s New York session as the come down from yesterday’s positive shift in the trade balance led into the initial speculation of tomorrow’s retail sales report.  Looking over price action in the majors, the dollar spent most of the Asian and European sessions on sell lists.

The EURUSD had worked its way up to around 1.2730 around 7:30 GMT, making a choppy return to the previous day’s low at 1.2675.  In the other three most liquid dollar-denominated pairs, the retracements in the greenback were less momentous.  In the yen backed currency pair, the dollar dipped to 115.00 while three tests were made on the strengthening 115.50 resistance level.   For the USDCHF, steady shorting from yesterday’s close shed 100 points from the pair until dollar bulls instigated a rally off of 1.2275 support to secure a hefty 60 point retracement.  Anti-dollar sentiment in the overnight sessions was most serious in the GBPUSD where multiple tests off 1.8330 sparked a 130 point advance before being topped by the open of the US capital markets.

The barren economic calendar for the US this week has generated little conviction amongst bulls or bears.  Today’s numbers were much of the same as weekly claims numbers were the only indicators available for the morning hours of the North American session, while June’s budget statement, submitted by the US government, offered little more for volatility in the afternoon hours.  Continuing claims for the week ending July 1st made a better than expected contraction to a standing 2,429,000 people, slightly better than the 2.430 million expected and 18,000 fewer than the previous week.  The initial claims report, generally the more influential of the two, didn’t provide the same positive picture however.  First time claims in the week ending July 8th ballooned to 332,000 from 313,000 for the final week of June.  Offering the first employment-related data set since last Friday’s disappointing read on non-farm payrolls, the health of the labor market is already off to a weak start in July, and it may lead into the selling point the Fed needs in deciding to through the breaks in August.  Later today, specifically at 14:00 GMT, June’s monthly budget statement will hit the newswires.  While America’s deficits have garnered significant reaction from the FX market in the last couple months, the fiscal deficit will probably turn few heads in the dollar spot pool.  This is especially true as political dollar interest is more concentrated on the North Korea, Iran and Israeli/Arab conflicts.  As the geo-political tensions escalate, interest in investments in economies that are directly involved or otherwise geographically near will wane on risk aversion.  When looking for the safest place to transfer capital, the 5.25% for the US dollar sparkles.   Tomorrow will pick the economic scene pick back up with June retail sales and the advanced read of the University of Michigan’s confidence survey for July.  Both of these indicators will offer a definitive look into consumer’s recent confidence levels and spending habits, which will play a big role in sustaining economic growth for the months to come.

Equities were trading lower for the second session as pessimistic earnings were catalyzed by record crude prices.  The Dow Index led the way with a 0.6% decline to 10,943.79 by 16:45 GMT.  Both the NASDAQ and the S&P 500 indices were trailing with 0.3% contractions to 2,082.98 and 1,255.04 respectively.   Making the headlines were shares of Wal-Mart, which slipped 1.7% or $0.77 to $44.38 on an analyst downgrade.  Also, providing a much needed break from the normal disappointing earnings and forecasts hitting the market for the past two day, PepsiCo. Inc. announced second quarter earnings of $0.80 per share versus expectations of $0.77.  Stock price of the beverage company rallied $0.91 to $62.01 for a 1.5% gain.

Debt markets were little changed by mid-day with an auction of 10-year TIPS securities restraining prices that are feeling upward pressure from crude oil prices rising to record highs.  The 10-year note was steady at 100 7/32nds with yields unchanged at 5.10, while a slight 2/32nds rise in face of 30-year Bonds to 90 13/32nds also generated no change in yields at 5.13 by 16:45 GMT.

Resources

• free demo account
• forex courses
• open an account
• forex stream
• free webinars