Crude Rises on hurricane fears in the US, USD rises after yesterdays data-led correction

US Housing starts initiated a Dollar correction against majors yesterday, while hurricane fears in the U.S pushed Crude higher. Gold rose above $810/o.z on both strong demand and dollar slump. Today's trading to be influenced by continued dollar strength and news from Canada on retail sales and leading indicators.

News and Events:

The Dollar retraced against the majors yesterday primarily on news that housing starts were down on previous months by 11%. The news that Tropical storm FAY could turn into a Hurricane before hitting U.S Shores sent crude Higher, as well as the news that Venezuela would ask OPEC for a quota-cut on daily production. The inter-market relationships are at work here as GOLD rose significantly passed $800/oz on this news.

Furthermore, recent transactions in Gold have moved into the hands of long-term holders, expecting the Gold index to rise on continued physical demand. In recent weeks the dollar rally has off-set the clear cut fundamentals on gold.

S&P Stocks slumped yesterday as wholesale prices slumped more than analysts expected; this was not helped by the continued pessimism on the financial health of the U.S’ largest financial firms. Fannie Mae and Freddie Mac hanging on to upwards of $100Bn in maturing debt say government – chartered businesses.

The BOJ has yet again down-graded it’s assessment of it’s economy as the steady out-flow of negative news has not failed to affect overall performance in Japanese financials and manufacturers. This overall sentiment isn’t helped by the recently published drop of 0.9% in June’s “all industry index”.





Today's Key Issues (time in GMT):


12:30 CAD Canadian Retail Sales
12:30 CAD Canadian Leading Indicators
23:50 JPY Japanese Merchandise Trade Balance
The Risk Today:

EurUsd:
The dollar dropped yesterday on weak data regarding housing starts and PPI. This is to be taken at face-value, despite the surprising – better than expected – German Zew numbers yesterday, the Euro-zone continues to be under-pressure from it’s private sector. The EURUSD rose on news yesterday, but analysts feel this is simply a dollar correction – in line with negative news, should it be seen as a new upward trend? We see a 1 week support at 1.4650, while a resistance level could be drawn at 1.4800.


GbpUsd:
The British pound extended it’s losses yesterday as BoE policy makers weighted a rate-hike against rate-cut, before a majority vote for a status-quo and leave official interest rates at 5%. The British pound remains 0.4% lower versus the USD at $1.8588. Today’s graph shows the clear bearish trend on this pair, a clear channel showing the momentum this move has taken. Currently trading near two-year lows.


UsdJpy:
The BoJ is largely expected to keep it’s interest rates at 0.5%. Analysts think rates could stay unchanged for 2008 and into 2009. A government report shows the economy has shrunk by 2.4% in the second quarter. The USDJPY slumped slightly on negative US numbers yesterday. 1 week support stays at 109.50, we expect to test 110.30 resistance as dollar continues it’s bullish trend. If we push to 111.92 this could see a pull-back to 108.59.


UsdChf:
Continues to be range bound for the past few days, short term support at 1.090, while short-term resistance stands at 1.103. The dollar index – yesterday showed a reversal day, which shows the over-bought situation of the dollar. Swiss currency continues to be a safe-haven currency.



Resistance and Support:



By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland
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Provided by ACM: http://www.ac-markets.com