US financial turmoil is worsening but FX market await data later this week

The Dollar eased on Monday, amid concern losses at US financial companies will continue to weigh on the slowing economy, after Merrill Lynch said Lehman Brothers may post a loss in the Q3 and take an additional $2.5 bio write-down on home loans for the period. Negative sentiment was completed by comments from Minneapolis Fed President Gary Stern saying that the next two to three quarters could be disappointing. British house prices fell for a tenth straight month in July causing the EurGbp to rise to a session high of 0.7933 before retreating to last trade at 0.7894. Unexpectedly strong New Zealand trade data lifted NzdUsd 0.54% to 0.7459. But it stayed near the six-month low of 0.7388 traded last Thursday. Market focus this week will shift to a deluge of data, particularly Q2 US GDP on Thursday and Friday's US jobs figures.
News and Events:


The Dollar eased on Monday amid concern losses at US financial companies will continue to mount and further weigh on the slowing economy, limiting the Federal Reserve's ability to raise interest rates by year-end. Demand for the Dollar fell as Merrill Lynch said Lehman Brothers may post a loss in the Q3 and take an additional $2.5 bio write-down on home loans for the period. The report, which came after news that regulators seized two small US banks on Friday, put pressure on Wall Street stock indexes.

Negative sentiment was completed by comments from Minneapolis Fed President Gary Stern saying that the next two to three quarters could be disappointing.

US stocks declines helped pull the Dollar down from a one-month high against the Yen at 108.08. UsdJpy ended down 0.39% at 107.42. Still in the lack of data to push Euro above $1.6000; EurUsd traded 0.27% higher at 1.5747. UsdChf was 0.29% lower to 1.0333. GbpUsd rose 0.18% to 1.9950. Analysts said signs that the fallout from the US credit crisis was spreading to Europe, Australia and New Zealand meant traders were not keen to buy the Euro and other high-yielding currencies aggressively.

British house prices fell for a tenth straight month in July, their biggest annual fall since the survey by property consultants Hometrack began in 2001. That caused the EurGbp to rise to a session high of 0.7933 before retreating to last trade at 0.7894. Unexpectedly strong New Zealand trade data lifted NzdUsd 0.54% to 0.7459. But it stayed near the six-month low of 0.7388 traded last Thursday.

Market focus this week will shift to a deluge of data, particularly Q2 US GDP on Thursday and Friday's US jobs figures.



Today's Key Issues (time in GMT):


06:40 EUR July French Consumer confidence -48 vs -49
06:40 EUR July French Producer prices 0.7% vs 1.3%
07:30 SEK June Retail sales 0.3% vs 0.9% (MoM)
07:30 SEK June Retail sales 0.6% vs 1.3% (YoY)
08:30 GBP June BoE consumer Credit £1.1B vs £1.38B
08:30 GBP June Mortgage Approvals 37k vs 42k
10:00 GBP July CBI distributive trades -15 vs -9
14:00 USD July Consumer confidence 50 vs 50.4
21:00 USD weekly ABC CCI -41 vs -41
23:50 JPY June Industrial output prelim -1.7% vs 2.8%
The Risk Today:

EurUsd:
Market broke on Wednesday 1.5800 support which lightly undermine the current 3-month uptrend. Further weakness might play in 1.5400 – 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low. Key initial resistance holds 1.6000. A break up there would open the way to Trendline resistance 1.6200.


GbpUsd:
Cable is set in short term 1.9800 – 2.0100 trading range. It hit 2.0158 high two weeks ago. Key level holds again 2.0100. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low.


UsdJpy:
Recovery pushed the market up to 108 last week and 108.08 yesterday. Friday strong Dollar rebound put focus on mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high. On the downside, a return below 105 may open the way toward 102.73 support and 100 pivot point.


UsdChf:
Recent Dollar strength pushed last week over 1.0200 and is now trading near 1.0400. This is reopening the view for a 1.0200 – 1.0600 consolidation range. Initial resistance holds 1.0408 last week high. Renewed weakness below 1.0200 would retest the 1.0000 pivot point and may open the way toward 0.9637 17th March low.



Resistance and Support:


By
Jean-Claude Braha
- ACM Advanced Currency Markets, Geneva, Switzerland