Daily Market Review - 25th July 2012
YouTradeFX | Jul 25, 2012 08:18AM ET
- German Business Expectations + German Ifo Business Climate Index (GER, 09:00 GMT)
- GDP (QoQ) (GB, 09:30 GMT)
- CBI Industrial Trends Orders (GB, 11:00 GMT)
- Treasury Secretary Geithner Speaks + New Home Sales (U.S, 15:00 GMT)
- RBNZ Rate Statement + Interest Rate Decision (NZ, 22:00 GMT)
Bloomberg News reported that demand for new U.S. homes probably climbed in June to the highest level in two years, economists’ project a report today will show, another sign the housing market is recovering. Purchases increased to a 371,000 annual rate, the most since April 2010 and up 0.4 percent from the prior month, according to the median forecast of 74 economists surveyed by Bloomberg News.
The International Monetary Fund said China’s slowing economy faces significant downside risks and relies too much on investment, urging leaders to boost consumption and channel citizens’ savings away from housing. The IMF repeated an assessment that the yuan is “moderately” undervalued, which China disputed, the Washington-based lender said in an annual review. On the other hand, Japan’s Finance Ministry said its record foreign-exchange intervention last year was effective and central bank Deputy Governor Hirohide Yamaguchi indicated officials won’t hold back on easing.
German business confidence probably fell for a third straight month in July to the lowest in more than two years as the worsening sovereign debt crisis damped the outlook for economic growth and company earnings. The Ifo institute’s business climate index, based on a survey of 7,000 executives, will drop to 104.5 from 105.3 in June, according to the median forecast of 35 economists in a Bloomberg News survey.
German Finance Minister Wolfgang Schaeuble and his counterpart from Madrid said Spain’s borrowing costs don’t reflect the strength of its economy as they pledged to work towards deeper integration to fight the debt crisis. “The current levels of interest rates on sovereign debt markets don’t correspond to the fundamentals of the Spanish economy,” Schaeuble and Spanish Economy Minister Luis de Guindos said after meeting in Berlin yesterday.
EUR/USD: The EUR/USD was trading slightly higher at 1.20748 at the time of writing on market corrections after falling to nearly a two year low on speculation that Europe’s sovereign-debt crisis is worsening spurred demand for safety. The pair is likely to fluctuate within the resistance level of 1.21399 and the support level of 1.20432 ahead of risk events for the EUR, German Business Expectations and German Ifo Business Climate Index at 09:00 GMT. According to a survey conducted by Bloomberg News, business confidence in Germany probably fell to the lowest level in more than two years. If this news is confirmed later on the European session, the pair might drop to the support level of 1.20432. Later in the day, investors should closely monitor the Treasury Secretary Geithner Speech and the New Home Sales data in the U.S. to get more visibility on the EUR/USD. A wait and see strategy is recommended on the pair.
GBP/USD: The GBP/USD was trading in the narrow range of 1.55170 and 1.54862 at the time of writing as investors jumped to the sidelines ahead of the GDP (QoQ) data at 09:30 GMT and the CBI Industrial Trends Orders data at 11:00 GMT. The pair is likely to dip to test the current support level of 1.54799 as The GDP data is expected to show the British economy shrank 0.2% in the three months to June from the same period last year, which would confirm that the UK economy contracted for a third consecutive quarter, as the recession continues. If the pair breaks through the support level the next target might be the level of 1.54503 ahead of Treasury Secretary Geithner Speech and New Home Sales data in the U.S. Investors should remain cautious and adopt a wait and see strategy on the GBP/USD. The resistance level is at 1.55546.
Oil (WTI): Oil was trading at 88.060 at the time of writing after an industry report showed crude stockpiles increased for the first time in four weeks in the U.S., the world’s biggest consumer of the commodity. The commodity is likely to continue its decreasing trend to test the support level of 86.668 as a report in the UK will probably show that the GDP data decreased as well as a report in Germany will probably show Business confident dropped, pointing that the global economy is cooling, which might lead to a decrease in the demand for the commodity. Investors should also focus the economic data in the U.S to get more visibility. Moreover, Iranian and European Union officials met yesterday to prepare for another possible round of talks on the nuclear program that has prompted the sanctions against the second - biggest crude producer in the Organization of Petroleum Exporting Countries. Investors should monitor the latest developments in the meeting to assess the direction of the price of oil.
DOW: The DOW declined on renewed concerns about Greece amid Spanish and Italian troubles, and on the weak outlook for U.S. economic growth due to a recent slew of disappointing reports. The index is likely to register some market corrections following the huge losses registered since the beginning of the week on ahead of some very important data in the Eurozone and the U.S. if weak data are released in the Eurozone and U.S, the DOW might dipped to hover around the level of 12400.00 during the day. Investors should be very prudent and wait for data to come on market to get visibility.
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