Talking Points
• Japanese Yen: Shirakawa Says Deep Adjustment Not Likely
• Euro: Tests 1.470
• British Pound: Heading Toward 1.8500
• US Dollar: Existing Homes On Tap
Euro And Pound Looking To Erase Earlier Loses, Will Housing Data Add Dollar Strength?
The Euro has climbed above 1.4745 after falling below 1.4700 during Asian trading. The EURUSD fell almost 100 bps on the back of falling oil prices and growing recession concerns. An empty economic calendar didn’t provide any additional event risk and left price action to the broader themes. Crude prices reversing would lead to the Euro looking to erase earlier losses.
The Euro could trade heavy throughout the week as the economic downturn continues to be revealed in the various indicators. The German GDP 2Q final reading is expected to be revised lower showing growth contracted in Europe’s largest economy. If the German IFO continues its downward trend we could see the pair look to test the yearly lows.
The Pound saw similar price action as the Euro dropping over 100bps in early trading nearly breaking below the 1.8400 price level, before firming oil prices would push the GBPUSD back above 1.8490. Flat growth in the second quarter has significantly increased expectations that the BoE will reduce rates before the end of the year. The Sterling has fallen through most support levels with 1.8182 the July 18, 2006 low as the next obstacle.
BoJ Governor Masaaki Shirakawa in a speech today in Osaka, said that current interest rates are accommodative and that “Japan’s economy is unlikely to experience a deep adjustment phase”. After finding trend line support, we could see the pair trading higher throughout the week, especially if there is resolution to the GSE troubles.
U.S. existing home sales is on the economic calendar and although the indicator is often overshadowed by other releases, it will have the stage all to itself today. Considering the front page headlines that Fannie Mae and Freddie Mac’s troubles have been generating, traders will be focusing on the housing data. A rebound in home sales could give investors hope that the housing market is turning and fuel bullish dollar sentiment.
Will The GBP/USD Continue to Fall? Join us in GBPUSD Forum
For More Fundamental Analysis, Check Out Our Other Daily Reports.
