EUROPEAN session review (03.09.2013): market awaited US data

Data released: 

05:45 GMT Switzerland Gross Domestic Product s.a. (QoQ) (Q2) 0.5% 0.3% 0.6% 

05:45 GMT Switzerland Gross Domestic Product (YoY) (Q2) 2.5% 1.7% 1.2% 

08:30 GMT UK PMI Construction (Aug) 59.1 56.8 57.0 

The dollar marched further upward Tuesday ahead of U.S. manufacturing data due later in the day. An inaccurate Russian report as of "Russia says rocket launch seen in Mediterranean Sea" appeared across the board; but now the market is calm again. 

EURO 

The European Union’s statistics office will probably confirm tomorrow that gross domestic product in the 17-nation currency bloc expanded 0.3% in the April-June period, ending the longest recession on record, according to the median estimate of economists. 

EUR/USD stays around $1.3160 and remains under pressure. Below rate may test $1.3060 (Jul 18 lows) and $1.3000 (Jul 15 lows). Initial resistance comes at Asian highs on $1.3200, above - at $1.3250 (yesterday’s hourly highs) and $1.3400 (Aug 23 highs). 

POUND 

The recent revised GDP estimates in the United Kingdom suggest the economy grew by 0.7% in Q2 and even though better weather was a health factor, various indicators point to an underlying strengthening in activity. 

Experts have nudged their GBP/USD forecasts up to +1.3% this year and +2.4% next. Following the BoE Governor Mark Carneys Inflation Report press conference, the central case is now that there will be no further QE. 

GBP/USD trades within the 60-points range, below yesterday’s high on $1.5590/00 (initial resistance). Above resistance comes at $1.5640 (Aug 23 high) and $1.5715 (Aug 21 highs). Initial support is near $1.5480 (channel suppoort line from Jul 9), extending to Friday’s lows at $1.5460. 

YEN 

The yen touched a one-month low as signs of economic improvement across the globe damped demand for refuge assets while data from Japan signaled progress in the central bank’s easing efforts. Japan’s currency slid after data showed the nation’s monetary base expanded by the most in 40 years as Bank of Japan policy makers prepare to meet this week. 

USD/JPY holds near Y99.50. Resistance extends up to Y99.80/90 (channel resistance line from Aug 27). Above bulls may lift the rate to Y100.80/85 (Jul 2 and 18 highs). Initial support is around Y99.00 (yesterday’s hourly lows), but back below Y98.70 (earlier broken channel line) may drag the rate down to Y98.00/Y97.90 (Aug 30 lows) and Y97.40 (Aug 29 lows). 

DATA AHEAD: 

US data include Jul Construction Spending at 14:00 GMT. Aug ISM Manufacturing PMI is schedule to release the same time.

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