Dollar Extends Recent Rally on Lower Oil and Positive News

Daily Forex Fundamentals | Written by AC-Markets | Jul 29 08 22:16 GMT |

The Usd showed considerable strength in the European session based on additional positive economic data out of the US. The EurUsd traded through the prior support level of 1.56 to the high 1.55 price area, while the UsdJpy rose sharply to the 108 level. The GbpUsd is trading with a 1.97 handle, down significantly from previous close near 1.99 due mostly to the recent turnaround in the dollar. The Equity markets saw triple digit gains in the US, and also a positive move to the upside in Europe based on better than expected economic news and rhetoric that writedowns from major banks may be concluding. Bond Traders continued to sell off govt. securities as risk returns to the marketplace with lighter pressure from commodity prices with oil down to 122 and gold off 11.20 at 916. Regional CPI in Germany came out mixed, with surprising results to the upside. Eurozone CPI is projected to come in around 4.1%, confirming the possibility for further inflationary pressure to the consumer. Consumer confidence in France fell to -48, which is slightly worse than market expectations of -47. If the consumer based data continues to point to the downside the ECB will be prompted to take some type of action against weaker growth. The EurUsd slid over 100 pips in today’s trading session and with the recent break in support there is certainly a higher potential for additional downside risks. The UK continued its trend of negative economic data which is reflected in the cable’s recent losses. Mortgage approvals dropped to 36k, which is a 1k less than the estimated figure. The CBI reading fell to its lowest levels in 25yrs and is currently running beneath the running average of +25. We maintain our bearish outlook on the cable, with expectations of the GbpUsd to fall to 1.93 closer to yearend. The US financial markets demonstrated great resilience today, with a rally mostly inspired by lackluster economic figures. Even though consumer confidence and the Case and Schiller came in better than expected, the expectations are still negative and should be reason enough for us to remain cognizant of the current state of affairs in the US economy. Consumer confidence came in at 51.9 vs. 50.1 estimated, and the CS Home Price Index also came in slightly better than estimated at -15.78%. This is an eventful week, but regardless of what we see in terms of news on the economic side, oil remains a controlling factor. With oil trading at the 122 level it provides the Usd an opportunity to sustain a longer term appreciation without the heavy inflationary pressure from commodities. We hold our view that the dollar can approach the 1.50 level towards year-end vs. the Euro. AC Markets http://www.ac-markets.com Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.