USD highlights

Dollar gained some lost ground after Fed kept rates on hold and reiterated that inflation remains the primary concern. EURUSD traded to a low of 1.3734 while USDJPY traded to a high of 119.05. Although the recent market volatility and tighter credit conditions were mentioned in the statement, the Fed is still optimistic about growth picking up in the future.

Weaker than expected retail sales growth in July brought the Pound to its lowest level against EUR for the past 2 months. EURGBP traded to a high of 0.6818 and is still hovering above the 0.6800 levels. Sterling is also pressured by the recent run of weaker than expected data, causing the market to pare back on expectations for further BoE hikes. Attention will be turned to the BoE Quarterly Inflation Report for clues on the rate outlook.

RBA raised rates to 6.50% as expected. AUDUSD rose as a result but remain under 0.8600 as market remains concerned over the stability of the US stock and credit market. However, RBA cited developments to date do not appear to have change the broader global outlook and world commodities prices will remain a driver for the Australian economy.

XAU/USD Gold remains on the uptrend. Buy on dips to 665 target 685. Place stop below 650.

UK highlights

Despite UK Industrial production reporting an increase of 0.1% m/m in June, as expected by the market, a technical break on the EURGBP cross-triggered a Sterling sell-off. GBPUSD dropped to a low of 2.0281 below rebounding to 2.0321.

However, all eyes will be on the FOMC meeting today, with market widely expecting the Fed to keep interest rate on hold at 5.25%. If the Fed maintains that inflationary pressure remains a predominant concern, we may see a possible rebound in the dollar as technicals are pointing towards dollar-oversold levels.

Having broken out the downtrend line EURAUD look to rally up to 1.6400. Long on dips at 1.6050. Place stops below 1.5950.

News Highlights

The Dow Jones Industrial Average had the first two-day gain in two weeks to 13,463.33 and the S&P500 rose to 1,472.20 causes the investors to resume the carry trades both to global equity and to high yielder currencies.

EUR may gain against the dollar after the ECB President Trichet said at the post meeting press conference that “strong vigilance is of the essence”, which is a clear signal of a Sep rate hike.

Today USD may be under pressure as market eyeing for US July Non-farm payroll report, which may be weaker. This is due to earlier US ADP report on Wednesday, which came in at 48k, weaker than expectations of 100k.

Buy AUD/JPY at 101.85 for target 105. Stops at 100.47

Better take vacation

The US stock market rally in computer and consumer shares lifted the Dow Jones Industrial Average 150 points to 13,362.37 and the S&P500 increased 0.7% to 1465.81 as investors think it’s a good time to get in. The FX market moves accordingly as risk aversion drives the direction of carry trades.

The dollar weakens after the ADP estimate for July’s US non-farm payroll came in at 48k fell below market expectation of 100k.

Today's important news will be the rate decision from BOE and ECB, expects no change. But market will see the statement from ECB President Trichet, if he signal further tightening needed, the EUR is likely to strengthen.

Sell USD/CAD at 1.0600 for target 1.0350. Stops at 1.0755

News Highlights

Expect the unwinding of carry trade to continue. Both the AUD and NZD likely to dip further. However if we have stronger AUD June Retail Sales data this morning, AUD should be more supported than NZD. AUDNZD will remain firm.

Buy EUR/JPY at 161.50 for target 164.00. Stops at 159.60

News Highlights

Investors risk aversion eased after the global stock market rebounded yesterday, the S&P’s 500 index surged 1.15% to 1474, the Dow Jones industrial average roses more than 100pts to 13358.

Important data today will be the release of US June personal spending and income expecting 0.5% vs. 0.4% in May. We’ll also see the release of Canada May GDP tonight, the market expects a reading of 0.4% m/m vs. 0.3% m/m in Apr.

News Highlights

Risk aversion was the theme that marked most of yesterday’s sessions. Global equity markets fell more than 2%, prompting carry trades liquidation, a long-awaited move. Overnight, USD/JPY traded to a low of 118.03; AUD/USD to 0.8667 and NZD/USD to 0.7783. U.S. new home sales dropped 6.6 percent in the month of June. Clearly, the U.S. housing market is in the slumps as credit woes worsen.

Earlier, the German Ifo survey revealed a deterioration of business sentiment, dropping from 107 to 106.4 in July.

The yen’s gains this morning however were capped by the release of a negative CPI of –0.1%. Nonetheless, a further meltdown of the equity markets could ignite another round of risk aversion.

U.S. GDP is due tonight. With the recent disappointment in U.S. data, GDP could come out on the weaker side.