EUR/usd
Last week the positive corporate reports provided immunity against euro sales in Forex. Surprising enough, but very often optimism was maintained by favourable sales outlook while the actual reports weren't always strong enough to delight investors. This week the situation in the euro zone has remained pretty much the same. The existing problems are still unsolved, but corporate reports don't make the markets happy any longer. Yesterday we mentioned that over Friday and Monday the S&P 500 futures approached the lower boundary of the ascending corridor before a possible growth. However, yesterday the bears proved to be stronger, breaking down that support and as a result triggering the simultaneous risk aversion in other markets. During active trading in New York EUR/USD dropped down to 1.2040. At the Asian session we could see some consolidation which drove the pair up from the lows, but still didn't let it go above 1.21. Is it possible that the bulls will hold the 1.20 point till the release of Fed's meeting minutes on August 1? In the history of the pair it has been frequently the case that speculators first pushed the rate above the previous high or below the recent low (now it is 1.1876) and only then reversal took place. Technically larger than 1hr time frames already indicate forming of a divergence. The strength of bears is draining away, nevertheless it's quite likely that they will give a final battle. In fact, we don't favour the euro and don't expect any positive shifts in handling of the EU issues, instead we suppose that the Fed will pursue a softer policy, indirectly stimulating the decline of the dollar. Yesterday the dollar index hit a fresh two-year high, which will hardly be to the liking of American manufacturers who for years have been working amid the decline of their local currency. Will we see testing of 1.20 today?
GBP/USD
Unlike the single currency the pound looked much stronger yesterday. After a decline below 1.55 on Monday GBP/USD was trading flat and set the high at 1.5486 and low at 1.5551. The release of the British GDP data for 2Q proved to be a real tragedy. According to the preliminary data the country's economy has lost 0.7%. Compared to the same quarter of the previous year the GDP has shrunk by 0.8%. In the previous quarters the economy often stumbled and its dynamics looked like running on the spot. After this release it is possible to say that Britain failed to keep the balance and tumbled down at full speed. The pound has followed the same path and, apparently, selling of the sterling will persist in the coming days.
USD/JPY
Just in line with the behaviour model we described the other day, USD/JPY was falling on the stock sales during the American session yesterday, but then grew back to the starting levels of the decline. Even EUR/JPY, though hitting 11-year lows, is mainly staying around 94.30. This hardly helps the country's exporters as well as all the other companies whose stocks depreciate much at the time of yen strengthening. The unexpected trade balance surplus in June in this context is nothing more than a spoonful of honey in a barrel of tar. Over the first half-year the accumulated trade deficit was twice as much as in the final six months of 2011. To estimate the full scope of the problem take into consideration that in the first half-year the deficit amounted to ¥2.9trln, in 2011 it was ¥2.5trln and in 2007 the surplus made ¥10.8trln. Without the surplus of external trade and current account balance investors may demand higher interest rate on the national debt, which makes almost 200% of the GDP.
AUD/USD
The Australian consumer prices have grown by 0.5% in the second quarter. This is just a bit worse than the average forecast of economists, suggesting the increase by 0.6%. This, in fact, hasn't placed an obstacle to the slowdown of the annual inflation rate from 1.6% to 1.2% in the previous quarter. Yet the RBA price indexes have proved to be at more acceptable levels, around 2%. This gives room for the bank to cut the rates, but doesn't force it to hurry with this and make a cut in August.
