Daily Forex Analysis by Finexo.com 28/07/2010

The Dollar appreciated against the most of its major counterparts on Tuesday, as a drop in U.S. consumer sentiment to a five-month low cut risk appetite. Yesterday, the CB Consumer Confidence index for July fell to 50.4, below its expected reading of 51.3, as Americans become increasingly concerned over the stability of their jobs and their wages. Meanwhile, a separate report showed that home prices rose more than predicted in May as a government tax credit underpinned sales.

Up ahead today, U.S fundamentals will again play an important role in the direction of the major currency pairs. US Durable Goods Orders are expected to provide evidence in support of the current recovery trend. Last month, the Core manufacturing figure rose by 1.6%; this time around, analysts expected a slightly smaller increase of 0.6%, which highlights the recent weakness in consumer confidence, and could potentially lead to more risk aversion.

Meanwhile, the Australian Dollar fell by the most in more than a week as a report showed consumer prices increased at a slower than predicted pace, increasing speculations that the central bank will hold interest rates unchanged in August. Also up ahead today, the New Zealand Rate central bank rate statement. Last time, the RBNZ increased the key interest rate by 0.25bps to 2.75%. This time around, another rise to 3% is expected.


Yesterday, the EUR/USD rose to a fresh 11 week high of $1.3045; however the pair was unable to hold about the $1.30 key level and quickly slipped back down to $1.294. This morning, the Euro successfully broke the $1.30 resistance line, edging up against the Dollar to hit $1.3016 during the late Asian sessions. Sentiments towards the pair remain bullish, with most technical indicators supporting an upward move. A move towards the $1.3095 resistance level, the highest price since May 10th, could encourage more short covering on the pair and clear the path for more gains to come.


The GBP/USD rose for fourth consecutive day today as the pair extending its rally to hit a high 5-month high of $1.5600. The recent rise in risk appetite is expected to continue to feed the rising Pound , while any drawbacks on US data will potentially weigh down on the Dollar.

Today, Bank of England Governor Mervyn King will appear before the Treasury Select Committee and will lay out the current situation in Britain. Investors are advised to pay close attention to the BOE Governor’s tone. Recent improvement in UK data, including an increase in the number of jobs, a jump in GDP, a rise in inflation could indicate a hawkish stance, which could suggest a future interest rate hike, and thus an increase the value of the Pound. However, if King appears to take a more cautious tone, it could lead to a decline for the British currency.

Written by Finexo.com