Oil continues to fall but weak stocks hamper the USD

U.S. Dollar Trading (USD) gave up some ground as equities continued their slump lead by financials facing possible rating downgrades from Fitch. The Dollar did receive some support from oil which despite Iran test firing missiles and US crude inventories falling managed to continue its pullback from last weeks record highs. In the U.S. share markets, the NASDAQ was down 59 points (-2.60%) and the Dow Jones was down 236 points (-2.08%). Crude Oil closed -$0.39 ending the New York session at $135.60 per barrel. Looking ahead, Weekly Jobless claims expected to ease slightly to 397K from 404K previous. The market will be focused on FED’s Bernanke and Treasury’s Paulson testifying before House Committee.

·The Euro (EUR) was able to regain some ground against the Dollar yesterday although mixed data and sluggish oil capped gains. 1st quarter GDP for the Eurozone was revised lower to 0.7% and the German Trade balance came in lower than expected at 14.4 Billion. ECB President Trichet commented that inflation was ‘worrying’ provided some Euro positive bias. Overall the EUR/USD traded with a low of 1.5650 and a high of 1.5750 before closing the day at 1.5740 in the New York session. Looking ahead, ECB president Trichet is scheduled to speak.

·The Japanese Yen (JPY) tracked equities closely with most crosses hitting day’s highs as US stocks opened in positive territory before falling in line stocks weakness. Core Machinery Orders supported came in very strong at 10% for May vs. expectations of 1.1%.  Overall the USDJPY traded with a low of 106.78 and a high of 107.66 before closing the day around 106.79 in the New York session.

·The Sterling (GBP) had a very good day gaining against most currencies in surprising moves higher given recent poor data and the Bank of England rate decision today. May’s trade balance came in near forecasts at -7.49 Billion. Overall the GBP/USD traded with a low of 1.9674 and a high of 1.9820 before closing the day at 1.9819 in the New York session. Looking ahead, June Halifax House price index expected to fall -1% after falling -2.4% in May. The Bank of England Rate Announcement widely expected to remain at 5.00% with slight risk of .25% cut given recent weak economic data.

·The Australian Dollar (AUD) came under pressure as July Consumer sentiment hit 16 year lows of -6.7%. Also weak, Home Finance down -7.9% in May indicating that the economy maybe cooling off faster than many market participant thought.  Overall the AUD/USD traded with a low of 0.9477 and a high 0.9591 before closing the day at 0.9579. Looking ahead, June Employment change expected to bounce back to +10K after falling -19.7K in May. The Unemployment Rate is forecast to remain at 4.3%.

·Gold (XAU) made some solid gains as safe haven flows increased after reports of Iran testing missiles and US equities plunging.  Overall trading with a low of USD$916 and high of USD$929 ending the New York session at USD$928 an ounce.

Euro – 1.5730
Initial support at 1.5651 (July 9 low) followed by 1.5606 (50.% retracement 1.5303 to 1.5910). Initial resistance is now located 1.5754 (July 7 high) at followed by 1.5910 (July 3 high).

·Yen – 106.85
Initial support is located at 106.25 (July 8 low) followed by 105.78 (Jul 3 low). Initial resistance is now at 107.76 (July 7 high) followed by 108.19 (Jun 26 high).

·Pound – 1.9820
Initial support at 1.9673 (July 9 low) followed by 1.9637 (61.8% retracement of 1.9410 to 2.008 rally). Initial resistance is now at 1.9834 (July 7 high) followed by 1.9849 (July 4 high)

·Australian Dollar – 0.9555
Initial support at 0.9477 (July 9 low) followed by 0.9459 (61.8% retracement of the 0.9328 to 0.9670 advance). Initial resistance is now at 0.9592 (July 9 high) followed by 0.9642 (July 7 high).

·Gold – 929
Initial support at 913.35 (Jul 8 low) followed by 885.1 (Jun 26 low). Initial resistance is now at 936.5 (July 4 high) followed by 946.5 (July 3 high).