Weekly Review 19.7.2010:
The Dollar weakened versus all majors as investors start doubting U.S long- term recovery, after a week with weaker economic data released, turning the positive outlook around. U.S equity markets declined slightly as well, as common perspective is that the U.S economy is facing a recovery slowdown. Earnings’ season is on the go and S&P companies are expected to publish earnings this week as well. The current assessment is that the Dollar will remain choppy until a major Sentiment change occurs. NASDAQ and Dow Jones declined by 0.8% and 0.98% respectively. Gold (XAU) weakened by 1.56% closing at 1192$.Crude oil declined by 0.62% closing at 75.75$ a barrel. Looking ahead, Fed chairman Bernanke will testify this week, initial jobless claims are due to b published alongside existing home sales. Crude oil inventories are also expected this week.
The Euro rallied 2.3% versus the Dollar as investors gain back the appetite for risk after improvement and stabilization in the EU. Greece and Spain have successfully auctioned their debt, restoring believe in a potential recovery from the crisis. Growing investors’ optimism was also fueled by impressive industrial production data released. Overall, EUR/USD traded with a high of 1.3006 and a low of 1.2521. EUR/USD is at new highs, after three weeks of climbing up. The main trend continues to be bearish despite a large retracement from its lows in June, but no immediate signs of reversal down are seen. 1.35 price levels are expected to hold as a resistance for the pair if it reaches them. Looking Ahead, a relatively empty week of economic data lowers the risk of increased currency volatility. German manufacturing PMI and ifo business climate index are expected this week.
The Pound rose by 1.34% versus the Dollar as British fundamentals seem solid re- encouraging investors that the European debt crisis won’t affect Britain. The U.K. economy continues to show signs of being able to sustain growth in the face of the austerity measures being under taken by the new government. Jobless claims declined by 20,800 in June as the claimant count rate fell for a fifth straight month to a one year low. The improving labor market and declining inflation raised the outlook for domestic growth. Overall, GBP/USD traded with a high of 1.5471 and a low of 1.4946. GBP/USD has reached resistance levels around 1.5550 price levels and a reversal is possible. Looking Ahead, MPC meeting minutes are expected. Retail sales data, GDP data and BBA mortgage approvals are also due to be published this week.