European & US Summary: The dollar remained tepid throughout the day as traders were repealed by the larger than expected rise in US jobless claims. Nearly half of the 10K rise in jobless claims was due to the damage caused by Hurricane Charley in Florida. But traders were reluctant in taking sides ahead of tomorrow’s GDP report and Fed Chairman Greenspan’s speech in Jackson Hole, Wyoming. Initial jobless rose by 10,000 to 343,000 last week, reaching a 4-week high, while the 4-week average slipped by 750 to 336,750, hitting a 4-week low. Oil prices fell for their 5th consecutive day, reaching the $43 level from nearly $50 last week, but showed no reaction.

Despite the importance of tomorrow’s US preliminary GDP report US and the potential of market moving statements from Fed Chairman Greenspan, trading activity will likely diminish further as traders in the UK could be absent ahead of the Bank Holiday on Monday.

EURUSD regains $1.21
Although Germany’s IFO survey fell to 95.3 in August from the previous 95.0 reading, the figure fared better than expectations of 95, keeping relieving the currency from the worst. Tomorrow’s Q2 report is expected to show a downward revision to 2.6% from the initial Q2 reading of 3.0% due to deterioration in trade and consumer demand. But traders might not be quick to jump into rewarding the euro as Fed Chairman Greenspan may issue the usually dollar-supportive remarks.

Euro’s faces pressure at 1.2125-30, followed by 1.2170 and $1.22—the 38% retracement of the $1.2926-$1.1759 drop. Support starts at $1.2070, followed by $1.2030--the trend line support extending from the $1.1771 low of May 13. A breach below it faces major trend line support at 1.1975, extending from Nov 2002. Key foundation stands at $1.1950.

Yen edges off 110, awaits Japan’s CPI
Yen edges off the 100-day MA of 110.00 as traders gear up for tomorrow’s GDP revision from the US. But markets will first await Japan’s CPI, expected to once again fall by 0.1% in the year ending in July. Markets have been closely watching Japan’s inflation figures, which have been negative for the past 5 years, yet stabilizing as of late. A positive figure (above zero) should lead to a significant yen rally as it means the end of the zero policy
USDJPY support starts at 109.25, followed by the 200-day MA of 108.60. Key foundation stands at 108.30-35. Upside initially capped at 110, followed by 110.30—the 38% retracement of the 112.46-108.94 move. Subsequent pressure stands at 110.68—the 50% retracement of the same move.

Cable sluggish despite strong CBI, awaits GDP
Cable ended lower despite a survey from the Confederation of British Industry showing a figure of 2 in August, the second positive figure in nearly 8 years. Q2 GDP from the UK is also due tomorrow, expected up 0.9% from 0.7% q/q. Extended declines seen stabilizing at $1.79, followed by $1.7825-30 and $1.7781—the 38% retracement of the $1.5608-1.8018 rally. The key support stands at $1.77. Initial resistance seen at 1.8, followed by 1.8045-50 and the 200-day MA of 1.81.

At 8:30 US Weekly Jobless Claims (exp 331k, prev 331k)

The major pairs remained within recent ranges overnight amid a dearth of market moving news. The earlier release of Germany’s August Ifo survey failed to inspire any significant moves. Heading into the New York session, the dollar trades near 1.2075 against the euro and 110.10 versus the yen. Economic data slated for release today will see only US weekly jobless claims, forecasted to remain unchanged from last week at 331k.

The greenback is likely to remain supported by falling oil prices, which plunged beneath the $43 per barrel level for the first time since early August, posting its fifth consecutive daily decline. OPEC President Prunomo Yusgiantoro said that oil prices are falling too slowly and would like to see further declines, hoping to move around $30 per barrel. He also said that OPEC would discuss whether to raise output limits at the September 15th meeting. Separately, spot gold was predominantly unchanged in early Thursday trading.

Euro Unaffected By German Ifo

Although Germany’s August Ifo survey fell from last month, the decline was less than forecasted. The business climate index tumbled to 95.3 versus 95.6 in July, albeit better than consensus forecasts for a drop to 95.1. The business expectations component fell to 96.0, from 97.1 a month earlier, while the business conditions index edged up to 94.7, versus 94.1 in July. The Ifo said that results suggest that the economic recovery is not on solid ground.

EURUSD remained confined to a tight range, again failing to break above the 1.21-level. Support is seen at 1.2040, followed by 1.20 and 1.1970 – the August 4th low. Subsequent floors are seen at 1.1930, backed by 1.19 and 1.1860. Resistance starts at 1.21, followed by 1.2120 and 1.2170. A move higher will target 1.22, backed by 1.2250 and 1.2280.

Cable Remains within Range

UK Q2 business investment edged up by 0.5% q/q and 4.7% from the previous year. Meanwhile, the number of mortgage approvals in the UK for house purchases fell by 20% from the year before in July, marking its lowest level since January. The sharp drop highlights the cooling effect on the housing market from the BoE’s earlier rate hikes – and thus provides the Bank with a longer timeline before additional hikes are needed, which in turn would be sterling negative.

Cable continues to trade near its 3-month low above the 1.79-level at 1.7950. Resistance is seen at 1.7980, followed by 1.80 and 1.8030. Further gains will target 1.81, followed by 1.8140 and 1.8170. Meanwhile, losses will be tempered at 1.7930, followed by 1.79 and 1.7880. Subsequent losses are seen at 1.7850, followed by 1.78 and 1.7760.

USDJPY Remains in Listless Range

USDJPY held steady above the 110-level, but remained within range. Further gains will encounter resistance at 110.60, followed by 111 and 111.50. A move higher will target 111.90, followed by 112.45 and 113. Losses will find support at 110, backed by 109.65 and 109.30. Subsequent floors are seen at 109, backed by 108.70 and 108.30.

USDCAD

Dollar/Cad continued to trade near its highs, edging up above the 1.31-mark overnight. Resistance is seen at 1.3115, followed by 1.3150 and 1.32. Subsequent ceilings are seen at 1.3220, backed by 1.3260 and 1.33. Losses will target support at 1.3030, followed by 1.30 and 1.2970. Additional losses will find subsequent floors at 1.2930, followed by 1.29 and 1.2850.

Aussie Narrows Within Flag

The Aussie continued to consolidate within a bearish flag pennant, testing both the upper and lower levels of the flag formation overnight. With the trading range becoming tighter, AUDUSD is poised for a breakout move within the coming sessions, with the bias at Forexnews.com for a move lower. The Australian dollar faces interim resistance at 0.7075 and 0.7120. Subsequent ceilings are seen at 0.7150, followed by 0.72 and 0.7250. Support begins at 0.70, backed by 0.6960 and 0.6920. A move lower will target 0.6840, followed by 0.6815 and 0.6770.

At 4:00 AM Germany Aug IFO Survey - Business Expectations (exp 96.3, prev 97.1) Germany August IFO Business Climate Survey (exp 95.1, prev 95.6) Germany August IFO Current Conditions (exp 94.1, prev 94.1) Eurozone July M3 Money Supply Growth (exp 5.0%, prev 5.4%) At 6:00 AM UK CBI Monthly Trends Survey, Quarterly Forecast

The dollar traded lower in Tokyo trading, but remained steady within a narrow range given the dearth of market moving news. The greenback drifted to just beneath the 1.21-level against the euro and 1.7985 versus the sterling. In the coming session, the key highlight currency traders will analyze will be Germany’s Ifo sentiment survey.

Oil prices continuing to slide further in early Thursday trading, remaining beneath the $44/barrel mark. Interestingly, the OPEC President said that oil prices are falling too slowly and would like to see further declines. He also said that OPEC would discuss whether to raise output limits at the September 15th meeting.

Euro Edges up Ahead of German Ifo

The German Ifo survey could trigger renewed euro selling as it expected to show a 95.0 reading in its August climate index, from the previous 95.6 reading. This would be the fourth monthly decline in Germany’s business sentiment survey. IFO economists have blamed oil on the expected slowdown. Last week, the ZEW survey’s August figure fell to 45.3, the lowest level in a year.

EURUSD edged up in Tokyo trading, but failed to extend gains beyond the 1.21-level. Support is seen at 1.2040, followed by 1.20 and 1.1970 – the August 4th low. Subsequent floors are seen at 1.1930, backed by 1.19 and 1.1860. Resistance starts at 1.21, followed by 1.2120 and 1.2170. A move higher will target 1.22, backed by 1.2250 and 1.2280.

USDJPY Consolidates

USDJPY held steady above the 110-level, but remained within range. Further gains will encounter resistance at 110.60, followed by 111 and 111.50. A move higher will target 111.90, followed by 112.45 and 113. Losses will find support at 110, backed by 109.65 and 109.30. Subsequent floors are seen at 109, backed by 108.70 and 108.30.

Cable Stuck Near Multi-Month Low

Resistance is seen at 1.7980, followed by 1.80 and 1.8030. Further gains will target 1.81, followed by 1.8140 and 1.8170. Meanwhile, losses will be tempered at 1.7930, followed by 1.79 and 1.7880. Subsequent losses are seen at 1.7850, followed by 1.78 and 1.7760.

USDCAD

Dollar/Cad remained largely unchanged within range in early trading. Resistance is seen at 1.3115, followed by 1.3150 and 1.32. Subsequent ceilings are seen at 1.3220, backed by 1.3260 and 1.33. Losses will target support at 1.3030, followed by 1.30 and 1.2970. Additional losses will find subsequent floors at 1.2930, followed by 1.29 and 1.2850.

Aussie Trades Sideways

The Australian dollar faces interim resistance at 0.7075 and 0.7120. Subsequent ceilings are seen at 0.7150, followed by 0.72 and 0.7250. Support begins at 0.70, backed by 0.6960 and 0.6920. A move lower will target 0.6840, followed by 0.6815 and 0.6770

The dollar eased its rally on a round of mixed US data showing a 6.4% fall in new home sales and a larger than expected 1.7% rise in durable orders last month, resulting from a doubling in orders for civilian aircraft. Without aircrafts, orders rose 0.6%, following a 1.4% gain in June. Traders exploited the data to stabilize the recent consolidation-driven dollar rally ahead of Friday’s GDP report and the anticipated speech from Fed Chairman Greenspan. Analysts and traders are well aware of the summer effect weighing on trading volumes before jumping into conclusions on the recent market moves.

Oil prices continued their fall, pushing prices for the fourth straight day to reach below $44 per barrel. But the continued decline did not prevent the US Administration from considering tapping into its Strategic Petroleum Reserves in the event half of US oil imports are halted. The statement, which was made by VP Cheney has brought back the SPR topic to the fore ahead of the National Republican Convention.

Treasury auction draws strong foreign interest
Today’s $24 billion auction of 2-year Treasury notes, drew a languid 2.19 bid/cover ratio, under last month’s 2.36 ratio, but still above the year’s average. The auction drew a strong 43.6% from indirect bidders, who are a proxy for foreign central banks. This was, however, less than the 57% high from last month. Treasury auctions throughout the year have so far attracted relatively high levels of interest from foreign accounts, which augurs well for the US external position considering the deteriorating deficit.

EURUSD eyes $1.21
The euro regained the $1.21 level after the stronger than expected durable goods orders report from the US was found to be mainly from 50 orders of aircraft. Without these, durables would have risne less than half’s the prior month’s 1.4% rise. The weak figure in the core durables coupled with the slowdown in new home sales reminded traders of the incipient sluggishness in some sectors, a notion that could be underscored in Friday’s release of the Q2 GDP number. The report is expected to show a downward revision to 2.6% from the initial Q2 reading of 3.0% due to deterioration in trade and consumer demand.

Thursday’s IFO survey from Germany could trigger renewed euro selling as it expected to show a 95.0 reading in its August climate index, from the previous 95.6 reading. This would be the fourth monthly decline in Germany’s business sentiment survey. IFO economists have blamed oil on the expected slowdown. Last week, the ZEW survey’s August figure fell to 45.3, the lowest level in a year.

Euro’s upside potential faces pressure at the 100-day MA of 1.2122, followed by the 100-day MA of $1.22—the 38% retracement of the $1.2926-$1.1759 drop. Support starts at $1.2030--the trend line support extending from the $1.1771 low of May 13. A breach below it faces major trend line support at 1.1975, extending from Nov 2002. Key foundation stands at $1.1950.

Yen stabilizes
Yen edged higher today, interrupting a 3-day losing streak against the euro and the Aussie. This puts in perspective the dollar rally of the past 4 days, suggesting it was partly triggered by the yen cross rates. Traders will mull at this evening’s trade figures expected to show Japan’s surplus to have fallen to 900 bln yen last month from 1.147 trillion yen.

USDJPY hovers around the 100-day MA of 110.00, facing to initial resistance at 110.30-- 38% retracement of the 112.46-108.94 move. Subsequent pressure stands at 110.68—the 50% retracement of the same move. Subsequent support starts at 109.25, followed by the 200-day MA of 108.60. Key foundation stands at 108.30-35.

Cable stabilizes off its 3-month lows
Cable stabilized after Tuesday’s 3-cent loss to 3-month lows of $1.7882, as short-covering deemed the $1.8 to be the next consolidation focus. Renewed selling faces initial support at $1.79, followed by $1.7825-30 and $1.7781—the 38% retracement of the $1.5608-1.8018 rally. The key support stands at $1.77. Initial resistance seen at 1.8, followed by 1.8045-50 and the 200-day MA of 1.81.

CAD maintains upper hand
The CAD retained the upper hand following Tuesday’s high CPI, and held on despite today’s release of Canada’s index of leading indicators, which slowed to 0.6% in July, from 1% in the prior 2 months, undershooting expectations of a 0.8% rise. At any rate the index showed an increase in 8 out of its 10 components.

USDCAD support starts at 1.3015-20, followed by 1.2935 and 1.2870. Upside seen capped at 1.31, the 38% retracement of the drop from the 1.3334 high. Subsequent pressure stands at 1.3142 and 1.3186—the 61.8% retracement of the said move.

At 8:30 AM US July Durable Goods Orders (exp 1.0%, prev 0.9%) Canada July Leading Indicators (exp 0.8%, prev 1.1%) At 10:00 AM US July New Home Sales (exp 1,300k, prev 1,326k) At 12:30 PM Atlanta Fed President Guynn Speech

The dollar was mixed overnight, pushing higher against the yen past the 110-level while losing ground to the euro and the pound. In a relatively quiet week of economic data, currencies have taken their direction from the squaring of dollar shorts. Also supporting the dollar in previous sessions were upbeat comments from Federal Reserve officials. The week will also culminate with a keynote speech from Fed Chairman Alan Greenspan, in which traders will analyze closely for comments on the US economy, as well as clues on the timing of the next rate hike.

In the coming session, data slated for release include US July durable goods orders, Canada July leading indicators, and US July new home sales. Also of note for today will be a speech from Atlanta Fed President Guynn. The July durable goods orders are seen edging up to 1.0%, from the previous 0.9%. The ex-transports number is forecasted to reverse last month’s 0.4% drop, instead rising by 1.7%.

Euro Edges off 2-week low

ECB President Trichet said earlier that higher oil prices were bad for growth and inflation, but there was no need to downwardly revise Eurozone growth due to the appreciation in oil prices. He reiterated confidence in the gradual economic recovery and said the ECB would maintain its July and August interest rate outlook. Lastly, Trichet reinforced the ECB’s vigilance in maintaining interest rates beneath the 2% ceiling.

EURUSD edged higher overnight, but continued to stall near the 1.21-level. Support is seen at 1.2040, followed by 1.20 and 1.1970 – the August 4th low. Subsequent floors are seen at 1.1930, backed by 1.19 and 1.1860. Resistance starts at 1.21, followed by 1.2120 and 1.2170. A move higher will target 1.22, backed by 1.2250 and 1.2280.

Cable Mired Near 3-Mo Low

Yesterday’s-off in the sterling pulled to currency to multi-month lows against the yen and the dollar. Cable continues to trade near its 3-month low above the 1.79-level at 1.7950. Resistance is seen at 1.7980, followed by 1.80 and 1.8030. Further gains will target 1.81, followed by 1.8140 and 1.8170. Meanwhile, losses will be tempered at 1.7930, followed by 1.79 and 1.7880. Subsequent losses are seen at 1.7850, followed by 1.78 and 1.7760.

Stops Push USDJPY Past 110

After breaching the 110-level, stops were subsequently triggered pushing the dollar/yen pair to its highest level in a week at 110.44. Further gains will encounter resistance at 110.60, followed by 111 and 111.50. A move higher will target 111.90, followed by 112.45 and 113. Losses will find support at 110, backed by 109.65 and 109.30. Subsequent floors are seen at 109, backed by 108.70 and 108.30.

USDCAD Steady Near Highs

Dollar/Cad continued to trade near its highs, stopping short near the 1.31-mark overnight. Resistance is seen at 1.3115, followed by 1.3150 and 1.32. Subsequent ceilings are seen at 1.3220, backed by 1.3260 and 1.33. Losses will target support at 1.3030, followed by 1.30 and 1.2970. Additional losses will find subsequent floors at 1.2930, followed by 1.29 and 1.2850.

Aussie Consolidates

The Australian dollar faces interim resistance at 0.7075 and 0.7120. Subsequent ceilings are seen at 0.7150, followed by 0.72 and 0.7250. Support begins at 0.70, backed by 0.6960 and 0.6920. A move lower will target 0.6840, followed by 0.6815 and 0.6770.

No Key Data

The dollar held onto overnight gains versus the euro and sterling in the Asian session, hovering near 1.2080 against the euro and 1.7950 versus the sterling. With no economic data due out from the Eurozone and the UK today, traders will look ahead to US durable goods orders slated for release at 8:30 EST.

Markets will also keep a close eye on the geopolitical developments in both Iraq and Russia, amid continued insurgent violence in Najaf and Falluja, as well as the earlier reports of two Russian plane crashes. Interfax, Russia’s news agency reported that a hijacking alarm had been activated on one of the two the planes that crashed in Russia. The two passenger planes had crashed nearly simultaneously, after departing within minutes of each other.

Euro Steady Near Lows

ECB President Trichet said earlier that higher oil prices were bad for growth and inflation, but there was no need to downwardly revise Eurozone growth due to the appreciation in oil prices. He reiterated confidence in the gradual economic recovery and said the ECB would maintain its July and August interest rate outlook. Lastly, Trichet reinforced the ECB’s vigilance in maintaining interest rates beneath the 2% ceiling.

EURUSD edged up in Tokyo trading, but failed to extend gains beyond the 1.21-level. Support is seen at 1.2040, followed by 1.20 and 1.1970 – the August 4th low. Subsequent floors are seen at 1.1930, backed by 1.19 and 1.1860. Resistance starts at 1.21, followed by 1.2120 and 1.2170. A move higher will target 1.22, backed by 1.2250 and 1.2280.

USDJPY Confined to Narrow Range

Dollar/yen traded within a narrow range, however posting a lower high than the previous session, climbing earlier to 109.76. Resistance is seen at 110, followed by 110.60 and 111. Subsequent ceilings are eyed at 111.50, followed by 111.90 and 112.45. Meanwhile, losses will find support at 109.30, backed by 109 -- which marks the ascending support line from Mar 31st low at 103.40 through the July 12th low at 107.56 and 108.70. Further losses will target 108.30, backed by 108 and 107.50-60 – the low from July 12th.

Cable Stuck Near Multi-Month Low

The sharp overnight sell-off in the sterling pulled to currency to multi-month lows against the yen and the dollar. Cable continues to trade near its 3-month low above the 1.79-level at 1.7950. Resistance is seen at 1.7980, followed by 1.80 and 1.8030. Further gains will target 1.81, followed by 1.8140 and 1.8170. Meanwhile, losses will be tempered at 1.7930, followed by 1.79 and 1.7880. Subsequent losses are seen at 1.7850, followed by 1.78 and 1.7760.

USDCAD

Dollar/Cad remained steady near its highs, hovering near 1.3070. Resistance is seen at 1.3115, followed by 1.3150 and 1.32. Subsequent ceilings are seen at 1.3220, backed by 1.3260 and 1.33. Losses will target support at 1.3030, followed by 1.30 and 1.2970. Additional losses will find subsequent floors at 1.2930, followed by 1.29 and 1.2850.