Forex Investment and Currency Trading

USD began this week on the back foot relinquishing most of Friday’s gains in a move that coincided with a bounce in gold and oil prices. Gold edged up 1% off the lows overnight, pushing back up to around USD800/ozt, while crude oil was also better bid, rallying up to around USD115/bl following an article in the WSJ which quoted Iran’s OPEC governor as saying the oil cartel may decide to cut oil production at its September meeting. The London open saw a moderate correction to these moves with oil falling back to around USD114/bl, gold dipping to USD797/ozt, and DXY edging back up to 76.9.

The US data flow gets off to a slow start today with only the NAHB housing market index scheduled for release (cons. 16, prev. 16). In the remainder of the week, July PPI, housing starts and building permits are due out tomorrow, while Philly fed and initial jobless claims are announced on Thursday. Fed’s Fisher is scheduled to speak about the US economy tomorrow and Fed Chairman Bernanke will speak on financial stability this Friday.

USD/CAD initially drifted lower through the Asian trading session, before catching a bid as London opened to more than recover those losses: The day ahead sees the release of June international securities transactions data which is unlikely to be market moving, though later in the week two important releases will provide clearer direction to CAD: June retail sales (Wed) and July CPI (Thu). Market expects a weaker print for core CPI, and if so, the expected retracement in USD/CAD in the earlier part of this week may quickly turn into another USD/CAD rally.

EUR/USD pushed up to 1.4828 before dipping back to around the 1.4725 level in a move dictated by USD price action. In terms of data, the Eurozone trade balance printed below expectations and in negative territory at -€0.1bn, -€3.0bn seasonally adjusted (cons. €1.2bn, €0.5bn). In the week ahead, the German ZEW Survey out tomorrow and Thursday’s flash estimates of Eurozone manufacturing and services PMIs for August will take the spotlight.

GBP was softer against most the majors overnight, though posted marginal gains against a weakening USD. Rightmove house prices fell 2.3%m/m in August pulling the y/y rate down to a new low for the 6-year old series of -4.8%. The week ahead is heavy with important UK data providing much in the way of event risk for GBP over the next 5 days. Highlights include the BoE’s MPC minutes (Wed), which is expected to show a 3 way split in the MPC for the second month running, the latest CBI industrial trends survey (Wed), and the July retail sales report (Thurs), where is seen downside risk to an already conservative market expectation.

AUD/USD was better bid overnight as Australia’s third most valuable export, gold, recovered from its recent lows. Domestic data is very light this week and focus will be firmly on tomorrow’s release of the minutes from the last RBA meeting. The text will be examined closely for any insight as to the speed and duration of the Bank’s imminent easing cycle.

NZD/USD enhanced Friday’s gains overnight as the pair pushed up to around 0.712. The Kiwi calendar may look deceptively light this week but Q2 PPI out today, and key July retail indicators on Thursday will be important. The former will give a gauge to the extent of the margin squeeze, while the latter is likely to confirm the trend of weak retail activity.