Wall Street was closed today for Fourth-of- July Holiday and our attention remain focused on Europe. Just as quickly as EU officials thought they were out in the clear of the Greek debt crisis, the rating agencies pull them back in. Early in the morning S&P announced that the French led Greek debt rollover plan in its current form would be considered a credit event, sending EU officials back to the drawing board. In a release earlier this morning S&P announced it would view both French banking proposals as a “selective default.”
While the decision by S&P is certainly a negative for the euro, the 17-nation currency was off its early highs versus the dollar but has been able to maintain its position above the 1.4500 level, perhaps due to expectations of an interest rate hike by the ECB this week. This week the ECB is expected to raise the refinancing rate 25 bps to 1.50% as Trichet expressed last week the ECB will maintain “strong vigilance” when it comes to fighting inflation. Traders should also be eyeing Tuesday’s euro zone services PMIs which could show a bit of weakness in the euro zone economy from the month of June.
Cable was stronger after construction PMI survey was in-line with consensus forecasts. The Sterling was initially supported as were gilts, but the rally faded as the European trading session extended into the afternoon hours. Recent UK economic data releases have been in the doldrums and therefore sterling got a lift from the data. Market positioning has also fallen out of favour with sterling as Friday’s CFTC Commitment of Traders report shows speculators are now net short sterling for the first time since mid-January, a possible signal of a shift in the long term trend of the GBP/USD.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP Services PMI
9:00 AM EUR Retail Sales m/m
2:00 PM USD Factory Orders m/m
Forex & Commodities Technical Analysis
Natural Gas
The natural gas market started to shift direction in the U.S. as natural gas prices plummeted very sharply and very promptly during the second half of June along with other major commodities. The natural gas started to cool down; the EIA will publish its U.S. natural gas stocks, production and consumption report for the week ending on July 1st. In the recent report, natural gas storage rose by 3.3% or 78 Bcf; as a result, the natural gas storage inclined to 2.432 billion cubic feet for all lower 48 states. We have yet to hit the bottom and further decline is expected.
Stop Loss: 4.36
Take Profit: 4.25
EUR/USD
Now that European problems appear to have been settled for the time being, we can shift our attention to the Durable Goods Order data due out today. This report will show the main changes in the new orders, shipments, inventories and capital goods of manufacturing goods in June 2011; in the last report regarding May 2011 new orders manufacturing goods inclined by $3.6 billion or 1.9% to $195.6 billion. If this report will continue to show an increase, this might be a indication for a recovery of the US economy. The USD will likely strengthen today.
Stop Loss: 1.4496
Take Profit: 1.4432
AUD/USD
Since November 2010 the overnight money market interest rate of Australia’s Reserve Bank didn’t change and remained at 4.75%. Since Australia’s inflation rate remains at the Bank’s target inflation, and the labour force remained robust with unemployment rate near 5%, it’s likely that the interest rate will remain unchanged. Sooner or later investors will flock back to AUD and its attractive interest rate. Our forecast calls for a return to the northbound movement in the hours preceding the central bank decision.
Stop Loss: 1.0659
Take Profit: 1.0742
Published by www.SolidityBrokers.com
