US Inflation surges to fastest pace in 17 years

CURRENCY TRADING SUMMARY – 15th August 2008 (00:30GMT)
 

U.S. Dollar Trading (USD) continued to gain as US CPI surged to 17 Year Highs. July m/m Jumped 0.8% and an 5.6% annual rate. July Core CPI was more moderate at 0.3% slightly higher than the 0.2% expected but adding to arguments for interest rate hikes to control inflation. Weekly Jobless claims remained high at 450K, slightly greater than the 440K forecasted. The Dollar also found strength through another significant fall in commodities and gains in the US share market. In the U.S. share markets, the NASDAQ was up 25 points (1%) and the Dow Jones was up 82 points (0.72%). Crude Oil closed down $0.99 ending the New York session at $115.01 per barrel. Looking ahead, June TIC Net Long-Term Transactions are forecast at $65 Billion.  July Capacity Utilization is seen at 79.8% along with Industrial Output at 0.0%. Also released is the Preliminary August Consumer Sentiment expected at 62 up slightly from 61.2 in July.

The Euro (EUR) received a small boost as German Q2 GDP was not as bad as expected at -0.5% vs. -0.8% forecast. July Eurozone Inflation ticked down to 4.0% Y/Y from 4.1%Y/Y in June supporting the view that inflation had topped last month. Q2 Provisional GDP was seen at -0.2% for the Eurozone confirming the weakening growth outlook. Overall the EUR/USD traded with a low of 1.4777 and a high of 1.4936 before closing the day at 1.4780 in the New York session. Looking ahead, Public Holiday in the Eurozone.

The Japanese Yen (JPY) lead by the USD/JPY which regained a lot of the losses seen on Wednesday’s carry trade unwind. AUD/JPY and NZD/JPY had considerable bounces during the European session and Strong US stocks also supported. A slide in commodities towards the end of the day capped further gains in the crosses.  Overall the USDJPY traded with a low of 109.03 and a high of 109.99 before closing the day around 109.60 in the New York session.  

The Sterling (GBP) managed a slight recovery during the European session after the heavy falls seen yesterday but was unable to sustain the gains as the USD started to appreciate on falling Oil and increasing US rate hike speculation. Support at the 1.8620 held for the time being.  Overall the GDP/USD traded with a low of 1.8619 and a high of 1.8788 before closing the day at 1.8680 in the New York session.

The Australian Dollar (AUD) was able to recover strongly on heavy AUD/JPY buying and a bounce in both Gold and Oil. During the US session sentiment turned again as Oil dropped nearly $4 dollars off highs and gold dropped over $20 an ounce. Comments from the RBA calling for rate cuts to be passed on from the banks was seen by some as an overt declaration of rate cuts in September.  Overall the AUD/USD traded with a low of 0.8670 and a high of 0.8798 before closing the US session at 0.8700.

Gold (XAU) continued to recover during the day before another wave of selling forced Gold back towards the $800 level. Overall trading with a low of USD$805.40 and high of USD$836.50 ending the New York session at USD$810 an ounce. UPDATE GOLD BREAKS $800

TECHNICAL COMMENTARY

Euro – 1.4775

Initial support at 1.4719 (76.4% retrace 1.4311 to 1.6038) followed by 1.4700 (Round Number). Initial resistance is now located 1.4815 (Aug 12 low) at followed by 1.4981 (Aug 13 high).

Yen – 109.90

Initial support is located at 109.04 (Aug 14 low) followed by 108.22 (Aug 6 low). Initial resistance is now at 110.40 (Aug 11 high) followed by 112.15 (Jan 2 high).

Pound – 1.8660

Initial support at 1.8619 (61.8% retrace 1.7048 to 2.1161) followed by 1.8518 (Oct 11 2006). Initial resistance is now at 1.9036 (Aug 13 high) followed by 1.9123 (Aug 12 high).

Australian Dollar – 0.8660

Initial support at 0.8593 (Aug 13 low) followed by 0.8513 (Jan 22 low). Initial resistance is now at 0.8797 (Aug 14 High) followed by 0.8846 (Aug 12 high).

Gold – 794

Initial support at 789.93 (61.8% retrace 640.00 to 1032.5) followed by 773 (Nov 20 reaction low). Initial resistance is now at 803 (Aug 12 low) followed by 836.8 (Aug 14 high).