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EURUSD<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Durable Goods Lends Dollar Bias

Sparked by the better than expected durable goods orders figure, greenback strength continued on for the second straight day as the market continues to price in another 25 basis point rate hike next week.  On the month, durable goods fell by 0.3 percent, much lower than the consensus forecasted.  However, optimistic, and ultimately adding to current rate speculation, was the ex-transportation component.  According to the Commerce Department, durable orders excluding the volatile transportation figure actually climbed 0.7 percent as business ramped up purchases and investment.  Notably, one of the largest increases was seen in commercial construction which picked up in the month.  The figures add to an already 100 percent probability that Federal Reserve policy makers will be increasing rates at their next meeting scheduled for next week.  Whispers rumors are even pitting a possible rate hike of 50 basis points, although the consensus remains skeptical of this extreme scenario.  Nonetheless, with economic data recently stronger and hawkish statements plentiful, the decision looks all but likely decided.  Separately boosting the dollar in the North American session were rumors of a <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />US bank covering short positioning on sour emerging market positions.  With sector currencies taking a beating in recent weeks, international players are unwinding positions to minimize losses, exacerbating demand for the greenback.

Rumorville

Heading into the close, thin offers are looking to keep the major under pressure at the 1.2530 figure with further selling higher above the figure.  Comparably, buying interest looks to emerge at the 1.2480 and 1.2465 figures with rumored central bank buying tipping off in proximity to the levels.

GBPUSD

MPC Decisive Future In Limbo

The US durable goods orders report added weight to the pound sterling as well with dollar buyers entering the market with size following the positive core report.  Comparably, yesterdays news of Waltons death is also suppressing any near term bullishness as traders are contending with two new members and a likely third following the untimely incident.  Now with the direction of the Monetary Policy Committee in question, the previously expected rate hikes may be placed on hold till closer to the end of the year.  Markets had already begun pricing in a probable August hike in mid year trading.  Looking ahead, the UK economy has little to report in the first two days of the week, with the first report being considered in midweek action.  As a result, even more attention will likely be placed on dollar fundamentals as concern continues to grow over a widened rate spread between the two economies.  This may place further downward pressure on the pound in coming days with no temporary reprieve in sight.

Rumorville

Orders are looking thin at the moment as selling pressure looks to keep the pound sterling heading into the weekend.  Further selling looks to protect downside bias at 1.8285 and 1.8315 with stops slightly above.  Comparative buying interest is surfacing at the 1.8130 figure and lower to the 1.8230 level.

USDCAD

Canadian Dollar Takes Hit, Tests 113

Following the major theme of dollar strength, the Canadian dollar declined against the greenback as rate speculators infiltrated the broader market.  The push higher in the morning hours ultimately kicked in stops in the process, triggering a move higher to 1.1290 before being option defenses capped the days gains.  Comparatively and almost as suddenly, profit taking and position paring moved the major lower through the North American close as it looks to stall heading into the weekend.  At this point, further rangebound scenarios should have traders taking in a short sell as the current technical picture is purporting a likely channel for next week.  However, fundamentally speaking, there seems to be plenty of underlying room for weakness as Bank of Canada Governor David Dodge is likely to keep rates at the current level.  This is not to say that inflationary pressures or strong growth have abated by any means.  Simply, higher rates at this point may very well jeopardize the current level of manufacturing and exporting activity, choking off further expansion.  Next weeks data remains light with only a handful of releases to provide direction.