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The Japanese currency slid across the board today, posting a four day consecutive losing streak vs the greenback. While the European majors rose against the dollar on anticipation of a lower Wall Street opening and a gloomier than expected U.S. consumer confidence report, they pared their gains during afternoon trading as stock indices recovered from their session lows.
U.S. consumer confidence in July fell to a five-month low of 97.1 from the 106.3 revised figure in June, reflecting the toll of the dismal stock market on consumer sentiments. The decline was led by the sharp fall in the expectations index to 95.7 from 107.2, indicating that consumers are pessimistic about future conditions. The deterioration mirrored the University of Michigan's consumer sentiments survey released last week. According to the Confidence Board, continued weakness in consumer confidence could threaten the nascent economic recovery in U.S. While U.S. equities have seen two powerful rallies in the past week, renewed anxieties over economic conditions and corporate malpractice could drag stocks down again.
For the fourth consecutive day, the yen weakened across the board, receiving no relief from the stagnate June jobless rate of 5.4%. Looking at today's data with the disheartening industrial production numbers from Monday, the Japanese recovery seems to have lost momentum in June. Even with a 337-pt Nikkei rally to 10,003 above the crucial 10K level, the yen failed to find a foothold.
USDJPY broke above the 120 resistance but gains remain contained below 120.30. Further upside capped at 120.70, the 50% retracement of the decline from 125.89 (June 13) to 115.50 (July 16). Support starts at 119.50, the 38% retracement of the aforementioned move, then 119.25 and 118.35.
German President Gerhard Schreder and French President Jacques Chirac met today to discuss their plans on EU enlargement and agricultural reform. They joined the ranks of officials offering reassurances of sound economic conditions, but the euro showed little reaction to their jawboning. Prospects for the bloc continues to look discouraging with the release of pessimistic business climate and outlook assessments for France in July. General business outlook fell to 16 from June's revised 2, and tomorrow's June unemployment rate is expected to remain stagnate near 9.0%.
EURUSD broke below the 20-day moving average last Tuesday for the first time since May 15th's brief dip. This suggests that the euro rally may be losing steam, and the trend is looking less favorable for the single currency in the interim. Interim resistance lies at 99.15, the 50% retracement of the decline from 1.0065 (July 25) to 0.9767 (July 29th) with stronger pressure encountered at parity. A breach above parity puts the 1.021 high into focus. Support is eyed at 98.30 then 97.65.
Despite a weak U.K. consumer confidence survey, cable shot up more than a cent near 1.5724 during U.S. trading. Resistance starts at 1.5770-5, followed by the 26-month high of 1.5850. Support eyed at 1.5615-20 and 1.5565-75. Looking at the daily chart, sterling could be set for additional gains vs the euro and the greenback. A bullish flag is spotted during June 26 to July 8 period, and the flag from July 23 onward could lead to another rally for the pound.
USDCHF rebounded a centime off its session low of 1.4728. The dollar's rally and a surprise interest rate cut by the SNB last Friday has been pushing Swissie off its 40-month lows. Resistance located at 1.4910, followed by 1.5070-51.57. The previous 1.47 resistance has turned into a base for downward momentum, with a break below the figure drawing 1.4630-35 into sight.
The Dow turned in a lackluster performance, closing down by 32 pts at 8680. NASDAQ fared better with a 9-pts gain 1344. Telecom giant Worldcom was officially delisted from the tech-laden index on Monday, after having declared bankruptcy last week.
Markets will be turning their attention to the major announcement of U.S. Q2 GDP at 10:00 AM (EDT). While Q1 GDP soared by 6.1%, the rise was primarily attributed to growth in the housing sector and government spending. Consensus forecasts estimate Q2 GDP growth to slow to 2.5%, though on a positive note, business investment is expected to have risen for the first time since 2000. Chicago purchasing manager's index will also be released tomorrow at 10:00 AM. The index is predicted to dip to 56.9 in July from 58.2. And from the Eurozone, flash estimates of HICP are expected to edge up slightly to 2.0% from 1.8%, reflecting a rise in inflationary pressure in Italy and Germany.