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The dollar continues its slide against the major currencies today as the running saga of U.S. corporate accounting scandals dragged the U.S. stock markets down from its holiday-shortened session rally on Friday. Japan Fin Min's Shiokawa's statements over the weekend indicating the possibility for UDSJPY to fall below 116 inaugurated the dollar sell-off in Asian and European trade. USDJPY fell within less than 10-pips of the 118.35 low from June 28th that had led the BoJ to enlist the ECB and the Fed in an intervention to check the rising trend of the yen. The dollar also fell vs. the euro to around 98.82, with the single currency rallying for the first time in five days, retracing nearly 2/3 of its 3-cent drop from its 99.87 high. Mixed signals from the Eurozone today failed to have a negative impact on EURUSD.
In a speech earlier today, Bundesbank President Ernst Welteke expressed concern over the U.S. economy and said that economic growth in the Eurozone was improving but has yet to reach the point of sustainability. He also welcomed the recent rise of the euro as a positive force in suppressing the inflationary rate. Nonetheless, the 8,000 increase in the leaked June unemployment figures from Germany shows that the country has yet to experience a full economic turnaround. Although these numbers are not seasonally adjusted, economists' average forecasts for the seasonally adjusted figure shows an increase of 28,000, after the May figure rose by 60,000 to 4.042 million. The June forecast will highlight Chancellor Schroeder's failed electoral campaign promise 4 years ago to cut unemployment under 3.5 million, and thereby could hamper his standing in this year's run for reelection. In seasonally adjusted terms, the unemployment rate to is expected up at 9.8% from May's 9.7%. The official data release is due tomorrow at 4:00 AM EDT (New York Time).
EURUSD has reversed its downturn from the past week, but not so much due to positive indicators in the Eurzone but because of continuing anxiety over the U.S. equity market. European bourses also faced minor declines today, but all eyes are on Wall Street when it comes to determining the dollar exchange rate. EURUSD is near the resistance level of 98.75-80 and could reach the 99 figure if it breaks the current level.
Despite lackluster output data from the U.K., cable managed to strengthen against the dollar, continuing its six-month rally to a 26-month high at $1.5377. Sterling's relative strength to the euro is demonstrated by cable hitting fresh multi-month highs against the dollar while euro struggles to regain its highs vs. the greenback.
USDCHF lost nearly 2 centimes, hitting a session low of 1.4869, riding on the dollar's overall declines. Support starts at 1.4860, followed by 1.4810 and stronger base at 1.4750. Key support stands at 1.47, which is the 50% retracement of the decline from the 1.128 low (April 1995), to the 1.8307 high (Oct 2000). Resistance isn't seen until 1.4970, followed by 1.5020 high. A break above it could lift momentum to 1.5100-the 38% retracement of the decline from the 1.5710 high to the 1.4738 low. Subsequent resistance found around 1.5180, which is just below the trend line extending from the 1.6168 low (June 2002) through the 1.5895 low (Jan. 2001), the 1.5590 low (Sept. 2001).
Wall Street was revisited by a fresh wave of selling that sent the NASDAQ down 42 pts. or 2.9% to 1406 and the Dow down 106 pts. to 9273.
Market will turn their focus on Tuesday's release of German June unemployment figures, German June ZEW Institute's economic forecast, German May industrial production, Eurozone Q2 GDP (2nd release).