News & Fundamental Analysis

The dollar remains under pressure from the deteriorating subprime mortgage market. The euro set a record high at 1.3797 versus the dollar and the sterling hovers around high levels 2.03. Economic data from US came out in line with expectations and did not impact the dollar much. Trade deficit rose from 58.5 billion to 60 billion in May as expected.

The Bank of Japan left interest rates at 0.50% as expected last night. The report showed board members voted 8-1 to keep the rates unchanged, a signal that August may still be too early for the central bank to raise rates. The yen remains under pressure from carry trades.

The market will look at US retail sales report, University of Michigan consumer sentiment survey, and business inventories for more clues on the economic conditions and outlook.

CAD will out perform USD in the months ahead with market pricing in another rate hike by the end of the year. The underlying trend remains intact from a MT/LT perspective. Look to sell any significant bounce around 1.0600 for a target of 1.0300, stop at 1.0760.

News Highlights

The US dollar remained on the defensive against European currencies, though EURUSD held below the 1.3787 high. Against the yen, the USD strengthened to a high of 122.53 as key carry trades, e.g., NZDJPY and AUDJPY rebounded from overnight lows. US equity and credit markets stabilized, while crude prices moderated slightly.

The near-term outlook for the greenback remained quite negative due to uncertainty regarding the deteriorating subprime mortgage industry, and its potential to spark a credit crunch and cause investors to flee risky trades.

The Bank of Japan will release the results of its policy meeting some time around midday. The Bank is widely expected to leave policy unchanged, but, with markets pricing roughly 66% odds of a hike in August, the press conference at 2:30 GMT will be watched for signs that the BOJ is moving towards tightening.

CAD will out perform USD in the months ahead with market pricing in another rate hike by the end of the year. The underlying trend remains intact from a MT/LT perspective. Look to sell any significant bounce around 1.0650/80 for a target of 1.0400, stop at 1.0760.

News Highlights

The dollar fell sharply across the board as unfavourable housing-sector-related earnings guidance along with the decision by rating agency S&P to review credit ratings on a series of sub-prime assets put US credit markets under renewed pressure, and pushed US equity markets and yields down further.

Speaking Tuesday on inflation, Fed Chairman Bernanke steered clear of commenting on the economy or interest rates, nor did he provide any signal of a shift in focus away from core to headline inflation. Rather, Bernanke noted that "although inflation expectations seem much better anchored today than they were" in the past, "they appear to remain imperfectly anchored.” No market-moving effect was found in his speech.

The Bank of Canada hiked rates by 25bp to 4.50% Tuesday, as widely expected. While the accompanying statement left the door open for "some modest further increase," the BoC omitted the "in the near-term" reference that was included in May, suggesting a September pause. With the market pricing a good deal of tightening going into the meeting, the subsequent reaction to the hike was a reduction in tightening expectations going forward. The Canadian currency finished lower against the US dollar.

AUD/NZD With the lows hit last Tuesday at 1.0903 very fractionally above the 76.4 retrace of the entire move up from Dec 05 lows. LT 76.4 retrace holds are often seen as significant turning points. Attractive to look at longs with a stop just below 1.0900.

Fundamental analysis by Admin

The dollar remained largely unchanged on Monday, with little data out to inspire moves. As data on consumer spending and the housing market has been sufficiently weak to preclude serious discussion of a policy tightening and with rate expectations still under upside pressure in other major economies, the USD has remained on the defensive. High oil prices also continue to weigh on the dollar, which diverts USD accumulation from Asia reserve managers to petro-currency funds, likely to diversify dollar holdings.

The Canadian dollar, the biggest winner across the board, hit a fresh 30-year low at 1.0447 against the dollar. Bank of Canada is likely to increase its interest rates by a quarter percentage point to 4.50% today. Besides, recent data showed Canada labor market is in good shape and manufacturing expanded. Also commodity prices are moving in the Canadian dollar’s favor.

Market will be watching Fed Chairman Bernanke speaks on inflation tonight for clues on the FX market.

With the lows hit last Tuesday at 1.0903 very fractionally above the 76.4 retrace of the entire move up from Dec 05 lows. LT 76.4 retrace holds are often seen as significant turning points. Attractive to look at longs with a stop just below 1.0900.

Technical Analysis GBP/USD

GBP seems hawkish against USD after BOE interest rate which decide to 5.75%.
For the uptrend strong moment, if there any retrace, commonly until 23.6 fibo.
With the trend line still up, breaking 2.0147 will confirm the up with target 2.0299.
Try to buy on dip with stop loss below 2.0150 or place buy stop above 2.0147.
If there any questions, please leave it in the comment box.
Have good trade! God Bless You

Fundamental Highlights (previous week and upcoming)

In early session, the dollar gained instantly after non-farm payrolls came out at 132k, better than the forecast of 120k. Following the robust job report, the euro fell to 13570 versus the dollar, while the sterling slipped to as low as 2.0060.

However, the euro and sterling pared losses against the dollar later as the jobs data merely confirmed a view that the Federal Reserve will keep interest rates on hold at 5.25% this year, in contrast to the euro zone and Britain, where further monetary tightening is in store.

The star performer was the Canadian dollar after a report showed that 34.8k jobs were created in June, beating the consensus forecast of 17.0k. The US dollar fell to a new 30-year low at 1.0465 versus the Canadian dollar. The Bank of Canada is likely to increase its interest rates by a quarter percentage point to 4.50% on its policy meeting tomorrow.

GBP is consolidating at the top of the range, stabilising above the previous highs at 2.0134. The next significant resistance comes in at 2.0299. Overall the trend remains to the upside. Look to buy on dip around 2.0060.

News Highlights

The Dollar rose versus the majors after the better-than-expected U.S. services sector activity and ADP employer services. The European Central Bank kept the rate unchanged at 4 percent, but was still quite hawkish about the possibility of another rate hike later this year. The EURUSD was traded at high of 1.3660 before it slipped below 1.3600. In addition, Bank of England increased the rate as expected to 5.75% and said that inflation risks remained to the upside.

The biggest winner yesterday was New Zealand Dollar, reaching 0.7881, the highest since 1985.

As for today, most important data will be U.S. change in Non-farm payroll. Other key economic data is Sterling Industrial production and Canada Employment number.