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At 4:30:00 AM UK June M4 money supply m/m (exp 0.7%, prev 0.4%) UK June M4 money supply y/y (exp 5.7%, prev 6.0%) UK June M4 lending (exp 9.0 bln sterling, prev 10.8 bln sterling) At 6:00:00 AM UK Q2 British Chamber of Commerce Quarterly Survey (exp n/f, prev 20)
The dollar continued its rough consolidation against the majors, showing some signs of strength but indicating little directional bias going forward. Rumor of yet more accounting irregularities at US firms could take its toll on US equities today after another volatile ride led to another late session sell off on Wall Street. The Dow ended up almost 1%, but only after falling for seven consecutive sessions. Nevertheless, the rebound had a positive effect on the greenback. But most dealers see the bounce higher as more an adjustment to previous losses than renewed faith in US markets.
EUR/USD consolidated around support/resistance at 1.0085 in Asian trade after falling from a new overnight high of 1.0162 to a low of 1.0030, the 38% retracement of the rally from 98.35 to 1.0162. This is backed by a previous low of 1.0020 and followed by the 50% retracement at the 1.00 handle. Maintaining above parity remains both technically and psychologically important for the euro as a break below could trigger d j vu for euro bulls. Key resistance is seen at 1.0150.
Possibly hindering the euro is evidence that data from the Eurozone indicated that the economic climate remains anemic. May Industrial Production (m/m) grew a meager 0.1% while the year-to-year figure fell 1.2%. There is no key European data today which means markets will likely tune into US equity futures for direction on US markets and subsequently the dollar.
The dollar also benefited from intervention fears this morning as the Japanese have stepped up their rhetoric about a falling USD/JPY rate. The Finance Ministry's Mizoguchi reiterated yesterday's remark from Japan's government spokesman Fukuda that the current yen level is too high. This gave renewed hope to USD/JPY today as it reached a session high of 116.65. However, today's high failed to overcome the overnight peak at 116.70 and the pair also slipped back below key support/resistance at 116.40/50. Nevertheless, Japan has regained the market's attention by indicating that Japan may cooperate with Europe and the US on FX if needed, thereby adding weight to its verbal warnings.
USD/JPY needs to make a more decisive break beyond 116.40/50 area and overcome the 117 mark to post further gains. Failure to do so could put renewed downward pressure on the pair, which could then target 10-month lows around 115.45. A break below this key support is seen calling upon 114.34, the February 2001 low ahead of 114.10, the 62% retracement of the 101.25 to 135.15 rally. Key resistance is seen at 116.40, the 62% retracement the decline from 116.95 to 115.45. Above there USD/JPY seen targeting 116.90/117.00 followed by 117.30 and 117.60.
Cable edged back below the 1.57 level as it continued to retrace gains since hitting a 26-month high of 1.5787. Upside movements will face pressure at the 1.58 resistance, followed by 1.5835 along with a longer term resistance found at 1.5915, the 68% retracement of the decline from the October 1998 high of 1.7354 to the June 2001 low of 1.3680. Support starts at 1.5622, the overnight low and a support/resistance level seen on the weekly chart. If GBP/USD falls below that level, 1.5540 will provide a subsequent support as the 38% retracement of the rally from 1.5143 (July 5) to 1.5787 (July 16).
USD/CHF continues to mirror EUR/USD movements as 1.4585 still serves as the immediate resistance, followed by previous highs of 1.4610 and 1.4630. Failure to overcome these levels is likely to lead to a retest of 1.45 and its lowest level since October 1999 at 1.4454. Subsequent foundation is seen at 1.44 followed by 1.4370. Long-term support stands at 1.3845-50, the 62% retracement of the aforementioned move. Any upside is seen limited at 1.4585, 1.47, 1.4735 and 1.4750.