Forex Investment and Currency Trading

Durable Goods Orders (Survey: 0.0%, Actual: 1.3%)

USD
The lingering shadow cast by the outlook for US financials and GSE’s continue to provide headwinds to sustained USD upside. USD has been under broad based pressure with sentiment not helped by a pick-up in oil prices as tropical storm Gustav nears the Gulf of Mexico. US data yesterday painted a mixed picture on the housing and labor markets but ended up playing second fiddle to the German Ifo. US new single-family home sales rose 2.4% in July, but sales figures for May and June were revised down by 46K, and the inventory of unsold homes remains at 10.1 months’ sales (down only modestly from a peak at 11.2 in March), marking an overall soft report. At the same time, home prices declined a record 15.4% oya in 2Q. The inventory overhang in the housing market points to significant further price declines, possibly at a somewhat slower pace. Durable goods orders, however, increased significantly this morning, a fact that could encourage USD buying through the day

EUR/USD

The price action in EUR/USD over the past 24-hours indicates that recent dataflow has not had a sustained impact on directional moves. The weak German Ifo reading should have provided the catalyst for a more sustained push below 1.46. Furthermore, today’s soft German regional CPI data should also have had a more meaningful negative impact on EUR. However, EUR/USD is currently trading higher than before the Ifo release. The price action is suggestive of profit taking on the recent move lower in EUR/USD as month-end approaches

Short term technical studies show support levels at 1.4620 and a resistance level at 1.4810.

GBP/USD

GBP/USD has followed the euro higher as dollar sentiment fades into the day. Concerns over Q3 earnings out of the US could keep pressure on the dollar and prevent any further significant GBP sell-offs in the near-term.  While UK economic fundamentals are still weak, market looks towards day-to-day economic indicators out of both the US and the UK to dictate the pair’s movement

Short term technical studies show support levels at 1.8360 and a resistance level at 1.8580.

AUD/USD

AUD/USD rose this morning off of its weakest level in almost a year as stocks advanced and commodity prices climbed encouraging carry trades. US earnings, particularly from financial companies, could be a major driver of broad AUD moves. Should investors continue to believe that the world will suffer from a sustained economic and financial slowdown, AUD should suffer. Neighboring New Zealand showed an increase in business confidence, lending to a boost in NZD/USD.

Short term technical studies show support levels at 0.8525 and a resistance level at 0.8690.

USD/JPY

The dollar retreated against the yen early this morning before durable goods data out of the US. The dollar appears to have overshot its recent gains with both high-yielders and low-yielders alike making gains this morning. Speculation is also increasing that the BoJ will be able to avoid cutting rates even further as CPI data showed that inflation in the area is accelerating.

Short term technical studies show support levels at 108.60 and a resistance level at 110.20.

USD/CAD

CAD appreciated the most in over a week yesterday as the dollar slipped against most majors. Higher oil and gold prices have also been supportive of CAD which is looking to push back below 1.0400 once again. Market continues to watch closely the developments of Hurricane Gustav and its effect on commodity prices, and in turn its effects on commodity currencies.

Short term technical studies show support levels at 1.0540 and a resistance level at 1.0725.

USD/BRL
Brazil’s key inflation indicator fell 0.32% in August. The drop in consumer, construction and wholesale prices is well off of the 1.76% climb in July. USD/BRL continues to follow EUR/USD fairly closely with Brazil making gains and losses alongside the euro.

BRL is currently trading near the high of the day’s range (1.6215-1.6275).

USD/MXN

USD/MXN is opening lower on the back of a weaker USD. Ranges have been fairly tight, however  the main driver of the pair is broad dollar movements through the day. Important levels to watch are 10.1250 support and 10.1850 resistance. Growth concerns have begun to increase in the area as it is becoming more clear that the slowdown that began in the US is spreading through Mexico.

MXN is currently trading near the high of the day’s range (10.1275-10.1575).

Commodities Update
Crude oil climbed for the third straight day as Tropical Storm Gustav moves into the Gulf of Mexico. The developments in the storm will be a major driver of price action over the next few days. Even if this particular storm does not send oil prices significantly higher, the threat of future storms of this kind should support crude from falling significantly further. Gold prices climbed as well as investors flocked to the commodity on the back of dollar weakness.