Saturday, August 4, 2007

Dollar Falls on NFP's, to Continue Slide on Coming Fed Meeting

The US dollar tumbled for yet another trading day, as bearish Non Farm Payrolls data sent the greenback significantly lower against major trading counterparts. Officials reported that the domestic economy added a mere 92,000 jobs in the month of July?far below forecasts of a 127,000 gain through the period. The national unemployment rate subsequently jumped to 4.6 percent and left a pessimistic outlook for broader economic growth?leaving the dollar lower in its wake. A later tumble in the Dow Jones Industrial Average produced a small dollar bid, but later signs of recovery have left the trade-weighted Dollar Index at fresh two-week lows.

The Euro continued yesterday?s ascent, adding an impressive 90 points to buy $1.3785 through late New York trade. The British Pound was similarly bid, rallying 50 pips to $2.0423, while the dollar lost ¥0.50 to ¥118.72 Yen.
The widely anticipated Non Farm Payrolls data printed far below consensus estimates and sparked the prolonged USD drop. Soft labor market growth compounded recent fears of domestic economic slowdown and likewise led bond yields significantly lower through the period. (For more on NFP report, please see here) Given overall signs of weakness, markets have clearly begun to show hesitation over the future of domestic interest rates. The December Eurodollar futures contract, which settles to domestic short term interest rates, has now priced in a near 100 percent probability of a Federal Reserve 25 basis point rate cut by year-end 2007. Clearly, such expectations prove very bearish for the dollar?implying that further greenback losses are likely.

Later morning ISM Services data only further unsettled sentiment on the US economy, with the critical services sector showing its slowest growth in four months. The below-forecast headline print coincided with a lower Prices Paid result, implying that inflationary pressures continue to moderate in the broader services economy. Combined with yesterday?s ISM Manufacturing news and previous PCE Deflator prices figures, the Services report suggests that the Federal Reserve may significantly soften its stance on monetary policy through its upcoming meeting. According to DailyFX Currency Analyst Terri Belkas, Tuesday?s FOMC meeting may bring even further US dollar weakness.
Stock markets moved broadly lower on the day?s trade, with the S&P 500 a full percentage point off of yesterday?s close at 1,457.75. The NASDAQ Composite was likewise strongly lower, losing 0.9 percent 2,553.11. Large cap stocks were the least affected by the declines, however, with the Dow Jones Industrial Average losing a smaller 0.5 percent to 13,391.
Fixed income markets took advantage of recent market turmoil to head significantly higher on the trading day. The benchmark 10-year note traded nearly half a point higher to 98 and 13/32, with yields dropping to fresh three month lows of 4.70 percent.

I read from dailyfx forum

Friday, August 3, 2007

Fundamental Outlook at 1400 GMT (EDT + 0400)

The euro lost marginal ground vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3650 level and was capped around the $1.3680 level. Today’s range was relatively thin absent many economic data. As expected, European Central Bank kept its main refinancing rate unchanged at 4.00% today but surprised the markets with a statement from ECB President Trichet wherein he stated “strong vigilance is of the essence to ensure that risks to price stability over the medium term do not materialize.” Based on the ECB’s past use of similar statements, most traders believe the ECB will tighten monetary policy by +25bps in September. Data released in the eurozone today saw EMU-13 June producer price inflation up 0.1% m/m and 2.3% y/y. In U.S. news, weekly initial jobless claims were up 4,000 to 307,000 while continuing jobless claims were off 16,000 to 2.53 million, Also, June factory orders were up +0.6%, an improvement over May’s -0.5% level. Tomorrow’s July non-farm payrolls number will be closely watched by the markets and estimates have been scaled down on account of yesterday’s weaker-than-expected ADP payrolls report. Euro bids are cited around the US$ 1.3555 level.

¥/ CNY

The yen weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥119.25 level and was supported around the ¥118.35 level. A late-day rally in U.S. equity markets yesterday saw diminished demand for yen as traders bargain-hunted and early yen gains in the Australasian session reversed course overnight. A Japanese Ministry of Finance official anonymously reported that most yen carry trades are “resistant to exchange rate fluctuations.” Data released in Japan overnight saw the July monetary base fall 2.3% y/y, down for the seventeenth consecutive month, while foreign investors were net sellers of Japanese equities for the first time in five weeks, selling ¥291.1 billion last week. The Nikkei 225 stock index gained 0.67% to close at ¥16,984.11. Dollar bids are cited around the ¥117.25 level. The euro gained marginal ground vis-à-vis the yen as the single currency tested offers around the ¥163.00 figure and was supported around the ¥161.55 level. The British pound and Swiss franc came off vis-à-vis the yen as the crosses tested bids around the ¥240.15 and CHF 98.30 levels, respectively. In Chinese news, the yuan’s central parity rate was set at CNY 7.5723 vis-à-vis the U.S. dollar, up from CNY 7.5660.

Thursday, August 2, 2007

Yen Falls From 3-Month High Versus Euro as Risk Aversion Abates

Aug. 1 (Bloomberg) -- The yen fell from a three-month high versus the euro after U.S. stocks rallied, allaying concern that losses in subprime mortgages will hurt credit markets and growth.

The Japanese currency earlier gained against the euro and dollar as investors cut riskier assets funded by loans in Japan, a practice known as the carry trade. At 0.5 percent, Japan has the lowest interest rate among industrialized nations. The U.S. subprime debacle has led traders to sell stocks and bonds in countries such as Turkey, Iceland and Brazil.

``We are seeing a temporary relief after the sell-off overnight in riskier assets,'' said Samarjit Shankar, director of global strategy for the foreign exchange group in Boston at Bank of New York Mellon. ``The market is reassessing the contagion from the credit market. It isn't clear how bad the subprime problem is and its impact on other sectors.''

The yen declined 0.3 percent to 162.71 per euro at 10:22 a.m. in New York. The Japanese currency earlier touched 160.47, the strongest since April 24. The yen also traded at 118.70 per dollar, from 118.61 yesterday. The Japanese currency earlier climbed to 117.60 per dollar, breaching the 118 level for the first time since April 19.

from 4xfindme

USDCHF,USDCAD Dollar continues to show positive dynamics, but alarms around it are still kept...

19:28 08/01/2007

So, yesterday's releases on economy of the USA were again positive. As a result it also brought at first to end of correction of the European currencies against dollar, and then, at the Asian session and since the beginning of European one today to dollar growth against the basic currencies.

Weakness of the American currency is still kept only against low-yield currencies such as the Japanese yen and the Swiss franc, which continued their growth. Here it is necessary to note nevertheless that the situation in the world stock markets continues to be stabilized, that, as a result, will most likely lead not only to delay of strengthening of the Japanese currency, but also will point out the end of fortnight correction of the basic currencies against yen and franc.

As a result, if today's data on business activity and on home sales for June in the USA will not bring unexpected surprises appeal of carry trade again will make yen cross-rates upward.

Let's remind, that yesterday's data on consumption and incomes for June in the USA, having been almost at a level of forecasts, did not lead to any change of a situation in the market.

So, an index of personal consumption in the USA made +0.1 % for June, at the forecast of +0.1 %, and the previous value of +0.5 %.

And the labor cost index in the USA for the second quarter made +0.9 %, at the forecast of +1.0 %, and the previous value of +0.8 %.

However, a pleasant surprise for dollar bulls became index of consumer confidence Conference Board in July which showed not only growth above predicted values, but also reached maximal values for last six years.

So, the parameter reached a level of 112.6 points, at the forecast of 105 points. And the previous value was also revised upwardly, from 103.9 points in June up to 105.3.

And components of the survey also supported a dollar exchange rate. We remind that the index of expectations in July made 94.8 points in comparison with 88.8 points, and the index of a current situation made 139.2 from 129.9 earlier. Thus, the index of annual expectations unexpectedly demonstrated decrease to 5.1 % from 5.4 % in June.

"A fly in the ointment" was the publication of Chicago PMI which was considerably below forecasts. We remind that a parameter in July achieved 53.4 points, at the forecast 58.0 and the previous value of 60.2.

However, many components of the report showed positive dynamics. For example, the index of the paid prices made 73.1 in comparison with 68.1 earlier, and the index of employment grew from 52.7 up to 61.6 points.

And the index of new orders continued its decrease and reached 53.4 points against 65.7 in June and 71.1 in May. Also the index of production demonstrated drop, having dipped to 59 points in July against 66.5 earlier. And the index of stocks decreased from 55.9 up to 55.1 points.

As a result, we do not exclude some correctional growth of euro and pound against dollar. And it, in turn, will allow dollar/franc "dive" more deeply under key levels 1.1960 - 1.2020, and to collect stops. The purpose of such movement is 1.1860.

At the rate the dollar/Canadian correctional movement downwards was ripened also. We recommend to sell the pair from the levels close to 1.0670 with stop, placed above 1.0700. The purpose of this correction id a level 1.0500.