Monday, August 6, 2007


The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.3790 level and was supported around the $1.3610 level. The pair gained about 150 pips last week. Evidence emerged that the U.S. credit shakeout from migrated to other asset classes such as corporate bonds and to other global markets. St. Louis Fed chief Poole said the Fed will “not ignore” market uncertainty and won’t contribute to it with the Fed’s policy. The FOMC is expected to keep rates unchanged on Tuesday and acknowledge the reassessment of risk in the credit markets.

The ECB kept the refinancing rate unchanged at 4.00% with Trichet twice pledging “strong vigilance.” Most traders see a +25bps hike next month by the ECB.

Data released in the U.S. last week saw the Q2 employment cost index was up +0.9% with benefit costs up 1.3%; June personal spending was up +0.1%; June personal incomes were up +0.4%; the core PCE price index was up +0.1% and +1.9% y/y; July consumer confidence improved to 112.6 from 105.3 in June; June construction spending was down 0.3%; July Chicago PMI fell to 53.4 from 60.2; June pending home sales were up 5.0%; the July ISM manufacturing index fell to 53.8 from 56.0 in June; July ADP payrolls were up 48,000; weekly initial jobless claims were 4,000 to 307,000; continuing jobless claims were off 16,000 to 2.53 million; June factory orders were up +0.6%; July non-farm payrolls were up 92,000 with a cumulative -8,000 downward revision for May and June; July unemployment ticked up to 4.6% from 4.5%; July average hourly earnings were up +0.3% m/m and +3.9% y/y; and the July ISM services index moved lower to 55.8.

Data released in the eurozone last week saw German June wholesale sales up +0.1% m/m and +0.2% y/y; the EMU-13 preliminary July HICP moderated to +1.8% from +1.9% in June; the EMU-13 July economic sentiment indicator fell to 111.0 from 111.7; the German July jobless rate at 3.715 million, up 28,000; June retail sales were up +0.7% m/m and off 0.8% y/y; the July PMI survey printed at 54.9, down from June’s 55.4 tally; EMU-13 June PPI was up +0.1% m/m and +2.3% y/y; and June retail sales were up +0.9% m/m and +0.4% y/y.

Technical Outlook

Last week’s high (1) was above the 23.6% retracement of the 1.3261-1.3851 range and last week’s low (2) was just below the 38.2% retracement of the same range. The 1.3840/ 1.3910/ 1.3970/ 1.4040/ 1.4125 levels represent upside resistance targets while the 1.3712/ 1.3626/ 1.3537/ 1.3420/ 1.3302/ 1.3273 levels represent downside support targets.

No comments: