Currency market review, July22

Data released (actual, consensus, previous):                          

14:00     US        Existing Home Sales Change (MoM)    -1.2%     0.5%     3.4%

 

The pound strengthened for a fifth day against the dollar, the longest winning streak in almost three months, after Prime Minister David Cameron said an improving economy may allow the government to cut taxes.

 

The U.K. currency advanced versus 12 of its 16 major counterparts before a report this week that analysts say will show economic growth accelerated in the second quarter. The expansion of the financial services industry may create more than 250,000 jobs and fuel a 2 percent to 3 percent increase in gross domestic product, according to PricewaterhouseCoopers LLP. U.K. government bonds rose.

 

Measures of U.K. services, manufacturing and construction all improved last month and recent reports have suggested increasing house prices and falling unemployment are helping to spur consumer confidence.

 

          

EURO:

The euro’s strength was limited against the dollar after Portugal’s president late Sunday backed the current coalition government of Prime Minister Pedro Passos Coelho. The support from President Anibal Cavaco Silva removed the threat of snap elections and associated hurdles to implementing unpopular austerity measures, reports said.

 

Portugal’s Prime Minister noted country must regain lost confidence. 10-year Portuguese bonds yield 6.26%; down 48 bps

 

EUR/USD has reached  $1.3208 (high Jul 11) resistance. A break above would expose $1.3255 (high Jun 21). Next support comes at $1.2966 (low Jul.11) ahead of $1.2949 (high Jul.10) and finally $1.2755 (low Jul.1).

 

POUND:

The pound still rises after U.K. Prime Minister David Cameron said an improvement in the economy may allow the government to lower taxes.

 

A report this week will show Britain’s economy expanded 0.6% in the second quarter, double the rate in the previous three months, according to the median prediction of economists.

 

GBP/USD has broken $1.5300. Above the figure the resistance comes $1.5390/00 (61.8% Fibo of the $1.5750 - $1.4810 decline). Initial support comes at $1.5200 with a break below losses may extend to $1.5150 (Jul 18 lows) and $1.5080 (Jul 17 lows).

 

YEN:

The dollar increases its losses against the Japanese yen  as Prime Minister Shinzo Abe’s ruling party consolidated its power in this weekend’s election.

 

Abe’s Liberal Democratic Party and its New Komeito ally now have 135 of the 242 seats in the upper house. The LDP has controlled the lower house since elections in December.

 

USD/JPY stays near the channel support line from Jun 13 at Y99.40 with a break under widens losses to Y98.20 (Jul 11 lows). Back above Y100.00 targets Y100.50 (Jul 15 highs), then - at Y101.00 and Y101.50 (Jul 7 highs).      

 

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