bforex's  Instablog

USD
The USD continued to trend lower against the major currencies on Monday and finished the day at the weakest parts of its range versus the big three – the EUR, GBP, and JPY. The greenback has been giving back ground to many of the international currencies the past few weeks including the AUD and the question that now must be asked is if this is happening on the heels of weak U.S. data or a natural pull back following strong gains. New Home Sales figures were released yesterday and they provided a nice surprise coming in with a result of 330K compared to the estimate of 317K. However, the previous month’s total was revised downward to 267K, which may have dampened sentiment. Today housing sector news will continue with the S&P/CS Composite 20 HPI and the forecast is anticipating a gain of 3.9%. Also the CB Consumer Confidence reading is on schedule and expecting a mark of 51.3.

Wall Street continued its quarterly earnings parade yesterday and Fed Ex announced a promising outcome and a better outlook. But the broad equity markets continue to experience rather choppy terrain and the volumes within the markets indicate a bit of apprehension, besides typical summer doldrums. Tomorrow the Core Durable Goods statistics will be brought forth and on Friday the Advance GDP numbers loom. Investors who have been tentative  regarding the markets still have plenty of ammunition to point to when making their ‘bear’ sentiment known, but traders have been able to take advantage of the currencies the past few weeks if they have had enough risk appetite. While questions pervade about the overall health of the American economy, the European debt situation, and government polices (interventions), essentially traders who have had the stomach to ride the momentum of ranges have had the opportunity to experience some sunshine.
 

EUR
While the debate rages on about the creditability of Banking Stress Test Results from Europe, the EUR continues to pick up steam and finds itself within ‘valuations’ not seen for a few moons. There was no major data from the E.U. yesterday and today the GfK German Consumer Climate reading is the only noteworthy release on the calendar. Investors continue to argue over the merits of the Stress Test, with naysayers pointing out that the test did not even consider the possibility of a Sovereign Debt default. On the opposing side, others are saying that the test shows that the E.U. has a legitimate plan for moving forward and are showing their seriousness in issuing the report. The EUR has had three solid weeks of rather good results as it has gained lost ground versus the USD. No matter the reason for the sudden reversal in its fortune, the EUR has shown enough stability to merit attention and it appears that it has enough backers who believe that it may have some additional upside. Europe still has many hurdles facing it regarding its economic outlook, but traders who have been willing to step into short term positions and stay focused have found a positive run for the Single Currency.
 

GBP
The Sterling continued to gain against the USD on Monday and its summer rally has not shown signs of letting up quite yet. The U.K. will release its CBI Realized Sales reading today and a mark of 2 is the expected result. This would be better than the previous outcome of minus -5. The data from the U.K. has been mixed at best the past few months, but on Friday the GDP report added fire power to investors carrying bull sentiment. Today’s report will play its part in either continuing the momentum or dampening it just a bit. Tomorrow BoE Governor Mervyn King will testify on the stability of the economy with other members of the MPC. The GBP has shown significant stability the past month on a flurry of proactive austerity moves by the government. The Sterling may continue to find backers today.

JPY
The JPY continues to trade in the stronger parts of it range versus the USD. While the Asian bourses did perform better yesterday, cautious sentiment remains a strong undercurrent. Gold is within a tight consolidation and the question is when this will end and if it will occur with volatility.  Even as some risk appetite has emerged within the broad markets, the price of Gold has not lost a substantial amount of its value and continues to linger within striking distance of it highs should volatility break out once again in the international financial sectors.

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USD
The USD finished the week softer against the EUR and GBP. Although Wall Street continues to turn in tentative results the broad market place showed that enough risk appetite exists in order to create a strong debate among bulls and bears. The greenback essentially finds itself at the weaker parts of its strong trend versus the EUR, and the GBP has pulled itself back into a fairly buoyant range. The U.S. did not release any major data on Friday, but investors will get New Homes Sales figures today and the estimate is 317K compared to the previous result of 300K. The housing market in the States remains a critical part of the economy and today’s numbers will be watched carefully. Tomorrow the CB Consumer Confidence reading and the S&P/CS Composite 20 HPI will be published. Highlighting the data this week in the States will be the Advanced GDP which will be brought forth on Friday.

Quarterly earnings will continue from the U.S. today and Wall Street will continue to keep a keen eye on the corporate reports. Some of the companies that will bring their numbers forward today are McDonalds, Honeywell, Akzo Nobel, and Ford. The USD has taken a hit as traders have shown the ability to push away concerns about a sluggish recovery in the States, questions about the methodology of the European Bank Stress Test Results, and continued evidence that a large proportion of investors remain sitting on the fence. Traders have found opportunity if they have had the ability to test ranges. Having said that, a huge amount of questions remain about the health of the major international economies, and the currencies and equity markets still have many hurdles to jump over.

EUR
The EUR showed that it had the ability to withstand the rumors that were cascading around the Bank Stress Test and finished the week within the higher realms of its recent range against the USD. The results of the Stress Test which came out on Friday evening are still being debated and tough questions remain about its measurements. While many point to a brighter future for the fiscal ability of Europe’s financial institutions, others continue to ask about criteria and what could take place if an economic recovery is not as attainable as has been prescribed by the ECB. The German Ifo Business Climate reading produced a result of 106.2, beating the forecast of 101.5. There will be no major data from the E.U. today, but tomorrow the GfK German Consumer Climate figures will be published. The crux of the story today for the EUR will be the manner in which the Banking Stress Test Results are examined and debated. The EUR is at the mercy of a ‘confidence game’ and its gyrations will be determined largely by the surrounding debate.
 

GBP
The Sterling finished the week within the stronger parts of its range against the USD. The GBP has had a very good run the past few weeks. The Sterling has gained a considerable amount of value on the heels of the austerity measures being undertaken by the U.K. government and on Friday it got an additional shot in the arm when the Prelim GDP number beat estimates and produced a gain of 1.1%. While in most instances a gain of 1.1% would not be something to create a glowing report around, the result was enough to bolster confidence among some who have been rattled by warnings of a possible double dip recession. There will be no major economic data from the U.K. today and tomorrow the CBI Realized Sales will be released. Traders have enjoyed a solid ride of momentum as the GBP has gained. Questions do remain on the horizon, but traders may continue to take on risk in the current environment.
 

JPY
The JPY remains a critical lynchpin and signpost that not all is wine and roses in the broad markets. Investors continue to keep the JPY in the stronger reaches of its range against the USD in what appears to be a move generated by risk adverse trading. Gold finds itself around 1192.00 USD an ounce and it has been solidly range bound for a couple of weeks. The Japanese currency is an important barometer of overall sentiment and it continues to show that caution remains palpable.

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USD
The USD gained on the EUR, but produced rather range bound trading versus the GBP and JPY on Tuesday. The greenback advanced against the EUR, but its move will be interpreted as rather tranquil by most. Housing Starts data proved disappointing yesterday missing its estimate, but Building Permits turned in slightly better than anticipated figures – thus leaving sentiment on the rather tentative ground it had started the day out with. Goldman Sachs basically met the same fate as it turned in numbers that were not up to expectations. However, investors did manage to produce gains for the investment banking giant by day’s end. Today there will be very little economic data, but Fed Chairman Ben Bernanke will testify before the Senate Banking Committee.

Bernanke’s testimony today will be followed by a question and answer period, which could produce fireworks. The testimony will be about monetary policy and the prospects for the American economy. Taking into consideration that this coming November will be have a vital election, many believe the Senate today and the House of Representatives tomorrow will use these next two days as a political platform. The Fed Chairman will certainly face questions about the recovery which has proven hard to grasp and the lack of job creation and its effect on the housing sector and broad consumer sentiment.  Leading up to today’s American trading session, market participants have been tentative. The Bernanke hearings, and tomorrow’s Existing Home Sales and weekly Unemployment Claims, should be enough to cause a stir. The question is if investors will be prompted to climb down from their fences, but taking into consideration the lack of confidence that pervades, it is likely that traders will be the first to battle as they search for fair values across the board.
 

EUR
The EUR lost some ground to the USD on Tuesday, but it did not happen with any great force. There was little in the way of economic data from the E.U. yesterday except for the German PPI which had a result of 0.6%. Today will be quiet again, but tomorrow PMI data will come from via Germany and France and should offer insight regarding the economic health of the continent. Stress Tests rumors continue to swirl around the continent regarding the publication which will be released this Friday. Investors can be expected to take a cynical approach to the results and question the findings taking into consideration that not all of the banks will be part of this dynamic. The approach that the E.U. is taking regarding its examination is certain to come under fire and the tests will certainly be compared to the tests which took place earlier in the United States. The EUR has found stability the past few weeks and finds itself trading at the higher levels of its rather weak range versus the greenback. Traders may find that the rather calm manner in which the Single Currency has been moving may change in the coming days.
 

GBP
The Bank of England will release the MPC Meeting Minutes today, but no great surprises are expected. The Sterling has found calm waters the past two days of trading as it has essentially range traded. The U.K. produced mixed data yesterday as Prelim Mortgage Approvals underperformed and Public Sector Net Borrowing beat estimates by a slight margin. Tomorrow Retail Sales figures will be published and this will be followed on Friday with the Prelim GDP statistics and this is where the facts could hit the road and cause volatility. It is likely that traders may begin to position themselves today ahead of these two big reports. The U.K. has not produced evidence of a strong recovery and the question for investors is if the coming data may in fact suggest that a slide back into recession is at stake.
 

JPY
The JPY continues to trade in a strong manner, but did give some of its gains back to the USD later on Tuesday. Nervous bourses throughout Asia have created a rather palpable run to the perceived safe haven of the JPY and it remains strong. There has been ‘talk’ again that the Japanese government is eyeing the currency and considering a possible intervention. However, taking into account the lack of a track record by the Japanese government to battle what has been a strong JPY for an extended amount of time, suggestions of an intervention must be viewed skeptically until ‘real’ facts make themselves known.