USD Shows Renewed Strength, But Pauses Ahead of Q2 G22цц www.forexnews.com
At 8:30:00 AM US Q2 Implicit Deflator (exp 1.3%, prev 1.3%) US Q2 Final Sales (exp n/f, prev 2.6%) US Q2 GDP q/q (exp 2.2%, prev 6.1%) At 9:00:00 AM US July New York NAPM (exp n/f, prev 256.4) At 10:00:00 AM US July Chicago PMI (exp 56.7, prev 58.2) At 2:00:00 PM US Fed Beige Book (exp n/a, prev n/a)
The dollar posted sharp gains in London trade but dealers took to the sidelines soon afterwards as they wait for key US GDP data due at 8:30 AM. After a sharp 6.1% rise in Q1 GDP, all eyes are on today's preliminary Q2 figure which is expected to rise 2.2% on the quarter. While this data is backward looking and largely anticipated it will be telling if the market continues to push USD higher despite slower growth outlook. It would also be a good indication that traders are still reevaluating the relative risks to the other majors after exclusively selling the dollar since April.

Business investment is expected to grow for the first time after 5 consecutive quarters of contraction. Business spending will be key going forward for the economy, so after the headline figure, economists will be most interested in this component. The implicit deflation (inflation) figure is also expected to show no change at a non-threatening 1.3%.

The other key figure today is Chicago PMI, which is expected to show a decline to 56.7 in July from 58.2.

Of course, just as important as the economic data to the dollar's performance will be the direction Wall Street provides. A late session rebound last night left the major indices little changed on the day after a series of sharp gains. This makes today's action very important if there is to be a sustained equity rally. Technically, there is a little more room to the upside in US stocks, and today's futures are pointing higher. But without a fundamental improvement in the US earnings outlook there is no real reason to support the current stock rally, which makes further dollar gains difficult as well. Moreover, barring a substantial rise in foreign capital flows to the US, the dollar remains at risk to fears over the growing current account and fiscal deficits.

Traders pushed the euro sharply lower this morning after a surprise 2.2% fall in German retail sales in June. EUR/USD fell from a session high of 98.55 to a low of 97.86. This move was anticipated given that the overnight rally fizzled out at a high of 98.90. Failure to hold above 98.80, the 38% of 1.0065 to 97.65, was indicative of a correction, meaning the euro is likely to now break back below the 97.65 low and target 97.10. Today's move below 98.15, the 62% of 97.65-98.90, was the first indication of a break to the downside. Support is seen at today's low of 97.85 followed by 97.65 and key support at 97.10. That level should be tough to break, and below that, key support at 95.80, the 38% retracement of the entire rally from 85.65 to 1.02, should stave off any further euro losses (barring any sustained US equity market rally)
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Japanese exporter sales pushed USD/JPY to a session low of 119.40 after hitting a 3-week high of 120.41 in early Tokyo trade. But the pair rebounded back above the 120 mark in London trade on the back of a broadly stronger dollar. USD/JPY is now testing its previous high of 120.40 ahead of key resistance at 120.75/80. The dollar's strong 4-yen rise over the past week puts it on sound footing after scaring Japanese officials into issuing daily verbal warnings to support the pair. Support is seen at 119.65 ahead of 119.20, the 62% retracement of 118.45-120.40. A break below 119.20 opens the downside targeting 118.50 ahead of 117.90, with a move below 117.50 putting bigger lows back at risk.
GBP/USD followed EUR/USD to a session low of 1.5645 after stalling overnight ahead of 1.5750, the 62% of 1.5865 to 1.5565. Today's one-cent selloff stopped on support at 1.5650. A break below targets 1.5630, the 62% of 1.5565 to 1.5740. Below here would then target 1.5585 congestion and the 1.5565 low. But a large buildup around 1.4550/1.4500 should contain any further losses in GBP/USD.