Newsletter Archive

The dollar made gains across the board as the Fed, the US Treasury, falling oil prices and the week’s economic data all offered support.

 

 

Monday saw the euro (chart 1) rising to 1.5930 as oil prices continued to firm in the wake of Israeli-Iran tensions and concerns that hurricane Dolly could damage platforms in the Gulf of Mexico. The tide turned on Tuesday and from then on the greenback spent the rest of the week strengthening against the euro. The initial impetus came when US Treasury Secretary Henry Paulson repeated his strong dollar mantra in New York and was followed up by Philadelphia Fed President Charles Plosser saying that inflation was already too high and that the Fed should start raising rates sooner rather than later. Tuesday also saw rising US share prices; falling crude oil prices and a better than expected US House Price Index which all added up to a good day for the dollar and saw the euro fall to 1.5760.

Wednesday saw oil prices continue to fall, further strengthening the dollar against the euro.

Thursday opened with a raft of disappointing euro-zone data which spelt further falls for the euro until US unemployment data and existing home sales came in worse than expected. The euro recovered to reach above 1.57 before falling to its low of the week of 1.5627. Falling US equity prices saw the euro rise from this low to 1.5750 through Friday morning before falling in the light of strong US data including better than expected Durable Goods Orders, Consumer Confidence and New Home Sales.

 

 

Sterling held its ground rather better and found strong support on Tuesday and Wednesday at 1.99. Wednesday morning saw the release of the Monetary Policy Committee (MPC) meeting minutes which revealed that there had been one vote in favour of raising rates in the July 10^th meeting. However, falling oil prices late Wednesday and disappointing UK retail sales on Thursday saw the pound test our forecast support by falling to the week’s low of 1.9816. It rose as it moved into Friday only to be pushed back below 1.99 by that better than expected US data (see chart 1) and a further fall in oil prices to less than $124 a barrel. GBP/USD closed the week a tad above 1.99.

 

Here are the highlights of this week’s economic calendar (chart 3). For an extensive list of the week’s economic releases and events see our economic calendar

This week’s big news will be the US jobs data and I’ll be surprised if we see much price action in the first half of the week. Still, keep an eye on US house prices and consumer confidence on Tuesday. Thursday’s GDP numbers and Friday’s ISM (Institute of Supply Management Manufacturing Index) will give you an insight into the state of the US economy. Oil prices have been very data-sensitive of late and have also been having a significant effect on the price of the dollar, so you should also look out for US oil

inventories on Wednesday.

There’s been a lot of bad news coming out of the euro-zone recently and this week’s euro-data could have a greater impact than usual. It seems that the whole of Europe is relying on Germany to lift it out of the economic doldrums, so you’d do well to check German consumer confidence on Monday and German Retail sales on Friday. Consumer Confidence for the zone as a whole comes out on Wednesday. European economic activity will be gauged on Friday with the Manufacturing PMI (Purchasing Managers Index). However, the key European data this week has to be Thursday’s CPI (Consumer Price Index) measure of inflation.

Meanwhile those interested in the UK economy will be looking forward to the release of more housing data on Thursday and the UK’s Manufacturing PMI on Friday. UK consumer confidence will be gauged on Wednesday.

Our full economic calendar is available

The euro’s inability to hold 1.58 was very telling and we see the pair encountering strong resistance around 1.5875. The first significant level of support to test a down movement will be 1.5640. If this should crumble, the next target is 1.5520.

Last week saw GBP/USD complete a harami on the weekly chart to give a moderate bearish tone to this week’s coming action. We see the pair encountering resistance at around the $2 mark and support at 1.9625.

USD/JPY will continue to find support at 106 with resistance being found at 110.

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EUR/CHF
Wednesday’s high of 1.631 reflected how the widening interest rate spread between the two currencies continues to support the euro. Our target for this pair is a touch under 1.638. If the currency pair drops to 1.593 our intention is to load a long.
EUR/JPY
EUR/JPY broke strong resistance at 169 and just fell short of 170 to make an all time high. In the light of high uncertainty over further hikes of interest rates in the Euro Zone, we continue to suggest reducing, or at least not increasing any EUR/JPY longs at current prices.

EUR/GBP
Demand for the pound rose significantly on the release of the MPC meeting minutes and the euro fell to 0.784. Our target stands at 0.763, a significant correction level.

GBP/JPY
Our flagship pair continues to show impressive results. The British pound has risen almost 4% against the yen in the second half of last week and hit 215.9. Our medium term target stands at 216.7, the mid-point of the recent downtrend. 203.9 would be a good level to load longs.
GBP/CHF
This pair soared to 2.079 after breaking the upper level of a descending triangle last week (a medium term resistance line). We forecast an appreciation of GBP/CHF to 2.12 in the second half of the year. Only an ECB refinancing rate hike to 4.50% could cause a further decline in GBP/CHF.

USD/JPY
The Fed’s rate hike noises and the moderate growth of the Japanese economy saw many take profit on their dollar/yen shorts and price rose to 108. IMO 103.3 remains a good level to load a long and our medium term target rests at 109.7.

AUD/JPY
The Australian dollar continued to strengthen against the yen, with last week’s high being 104.4. This rise is mainly due to the interest rate differential. We intend to load a long at the re-jigged level of 98.3.

 

We are starting a series of live trading sessions. These sessions will last 2 hours. We will look at signals generated by the Colt FX trading system and will also look out for other trading opportunities generated by our forecasts, Aram’s carry trade calls and the charts themselves. The first session will be on August 6^th and if you are interested in taking part please drop me a line at colt@coltfx.com

Forex Club’s Platinum Package
Forex Club has started offering the Colt FX distance learning course as part of their package of incentives to open a Platinum account. You can learn more about the details of this offer at http://www.fxclub.com/platinum/. You can find out more about Colt FX in our short film What is Colt FX?

That wraps it up for this week. Thank you for reading this far. Have a great week and I hope to see you at www.coltfx.com

 

If you have any questions about this newsletter or any of our services, please drop me a line at colt@coltfx.com.

 

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