Forex Wrap-Up: Headlines Hurt Stocks But Not Dollar

Negative headlines relating to the US economy may be dominating these days - worse-than-expected existing home sales; Ford’s (F) $8.7 billion loss for second quarter etc - but still none of them have been able to dislodge the US dollar. This week marks the second week the dollar closed up against major currencies such as the Euro, Swiss franc, Japanese yen, Aussie and Kiwi, and this has been due to traders repricing their expectations of a near-term rate hike by the Federal Reserve after Philadelphia Fed chief Plosser said that interest rates should be hiked sooner or later. And as mentioned earlier, it doesn’t matter that he only has one vote to give since his sentiments are likely to echo that of his other voting FOMC colleagues.

Sluggish US housing data released this week, especially that of US existing home sales, is likely to weigh on US stocks, but is unlikely to affect the USD much. In any case, the greenback had plenty of support from Friday’s release of economic data. The final University of Michigan consumer sentiment index came out better than what most had expected, jumping to 61.2, from 56.4 in June, compared to the initial reading of 56.6. Plus, US durable goods orders for June also increased by a larger-than-expected 0.8%, with demand rising for automobiles as those orders rose 1.8%, the most since July 2007.

Euro is having trouble maintaining its stickiness near to its record high of 1.6040 reached last Tuesday, and is now down to below 1.5800. According to the latest German IFO data, German corporate sentiment fell to its lowest level since September 2005, declining to 97.5 from a revised 101.2 in June, and that was much weaker than the expected reading of 100.

EUR/USD has a couple of overhead resistance around 1.5750, 1.5780 and 1.5820, and its nearest support can be found around 1.5650.

This coming week will be one that is guaranteed to raise your adrenaline. US non-farm payrolls, ISM manufacturing and 2Q GDP will top the list of major economic releases. Stock investors will be looking forward to more earnings results from companies.

Meanwhile, the US Senate voted 80 to 13 to allow 30 more hours of debate to pave the way for a vote that would send the Housing Bill proposed to the President to be signed into law. The Senate is to vote finally Saturday to approve this bill which would insure up to $300 billion in refinanced mortgages and to establish a new regulator for messed-up mortgage titans Fannie Mae (FNM) and Freddie Mac (FRE).

Watch this space.

Comments

[scobbydube]

My money says the Fed does nothing except jaw-bone the market and this market can be easily swayed by MSM and the talking heads.. Bottom line in my mind - dollar goes down over the next six months.. And of course the Senate will give more of our (Main St) money away for future generations to repay ..

[calvino]

Do you ever read the charts before you write? How about check the lack of cause and effect between your statements and the currency moves.? The dollar got its boost Friday morning at 8gmt. It went on a vertical ascent vs the jpy and the chf. Almost vertical on the euro and the cad. There was no USA news at 3am. There was some hawkish talk by an ECB member, which might have affected the euro. Asia was diving, which might have affected the yen. By the time the Michigan survey and the durable goods came out five hours later, the move was finished and the dollar was flat the whole US trading session. Whatever prompted the dollar strenght had nothing to do with the chf and the cad, nor the factors that you mention. If the Fed raises, the chf and the cad are still higher. Who is going to come out of that trade because Plosser spoke. He has been speaking a year and Helicopter does whatever he wants anyway. I wish SA would get an fx analyst that actually traded currencies.

[CLH]

The dollar cant go down unless the euro goes up. Europe is sinking rapidly into a no growth region. The dollar will continue to strengthen because the US will be first to come out of its slow growth.

The fed will only raise interest rates after the US economy is moving up. However the weakness of the euro will keep the dollar from going down any more.

Thanks Grace

[Calvin C.]

Grace Cheng is hot!

[Retired One]

With the dollar as worthless as it is and the economy in stagflation no one yet is thinking come Sept 1st my oil tank is going to cost $1400.00 tap off.
Hey guys please straighten me out here, i need some thoughtful responses.
I can't help think that any increase in the dollar is to spur foreign capital into our 30 yr. bonds the U.S.A. needs the money to keep afloat.
What do you all think?
I feel forget any real increase in business activity we have slowed the world economy, as well as home.
And at home, except people desperate for a car they have put off buying, finally buying a car that replaces the old gas eater, it's not enough it's short lived. The dollar will have to have the rate lowered before it gets cold out as this rate can't overcome people's lack of buying power, school cloths yes but that won't carry the sales needed to spur business, or help recover the real estate market.

This situation scares me as the entire country is living paycheck to paycheck and charged to the limit. Unemployment is higher than many think as so many are working two jobs to make ends meet even before the heating season starts.
I;m retired and i have a remodeled home that houses three familes with 6k taxes but i can't work.What's a person to do? All my family have moved out of state for work. How can a retired person get a income if they can't sell their home for a decent price? Rates have to come down to spur things along but they have to make them higher first so they give the impression that things will come back even to the stock market as well as the home owner stuck in his home. Will the scam work?