Daily Market Review - 14th August 2012

Today’s highlights:
·French GDP (QoQ) + French CPI (MoM) (Fra, 06:30 GMT)
·German GDP (QoQ) (Ger, 07:00 GMT)
·French Non-Farm Payrolls (QoQ) (Fra, 07:45 GMT)
·CPI (MoM) (GB, 09:30 GMT)
·Industrial Production (MoM) + ZEW Economic Sentiment + GDP (QoQ) (EU, 10:00 GMT)
·German ZEW Economic Sentiment (Ger, 10:00 GMT)
·Core Retail Sales (MoM) + PPI (MoM) (U.S, 13:30 GMT)

According to Bloomberg News, Retail sales in the U.S. probably rose in July for the first time in four months, alleviating concern that the expansion was foundering, economists said before a report today. The 0.3 percent increase in purchases would follow a 0.5 percent drop in July, according to the median forecast of 85 economists surveyed by Bloomberg News. Another report may show prices paid by producers rose last month.

Greece’s economy contracted for a ninth straight quarter, making it harder for the government to meet the budget-reduction targets required under the country’s international bailouts. Gross domestic product declined 6.2 percent in the second quarter from the same period last year after dropping 6.5 percent in the first. Greece’s economic slump, now in its fifth year, has been exacerbated by austerity measures imposed by creditors to reduce the nation’s budget deficit. Without further rescue loans, Greece may default on its debts, which could precipitate its departure from Europe’s monetary union.

EUR/USD: The EUR/USD was trading at 1.23557 at the time of writing after Italy’s debt sale damped concern nations in the currency bloc won’t be able to access the debt markets. Speculations that the Federal Reserve and the Bank of Japan may loosen monetary policy hindered the demand for safe-haven dollar and yen and send higher-yielding currencies like the euro up. However the gains were limited after data showed that Greece’s economy shrank less than expected during the last quarter. Today, investors will be monitoring some important economic data in the Eurozone and U.S to better assess the trend of the pair. Events that might bring volatility on the European session are the French prelim 2Q GDP and CPI m/m at 06:30 GMT, followed by German prelim 2Q GDP at 06:00 GMT, French jobs data 45 minutes later, EUR flash GDP at same time than ZEW, and EU industrial production. The risk event for the European morning will be the German ZEW economic sentiment at 10:00 GMT. Later in the day, the U.S will release its Retail Sales (MoM) and PPI (MoM) data at 13:30 GMT, followed by Redbook (MoM) data at 13:55 GMT, IBD/TIPP Economic Optimism at 15:00 GMT and Business Inventories (MoM) at 15:00 GMT. In addition, the U.S will release the API Weekly Crude Stock and API Weekly Gasoline Stock at 21:30 GMT. The resistance level is at 1.23873 and the support level is at 1.23222.

GBP/USD: The GBP/USD was trading higher at 1.56692 at the time of writing as sentiment strengthened as Italy saw borrowing costs rise only slightly after it auctioned the full targeted amount of EUR8 billion of 12-month government bonds at an average yield of 1.69%, up from 1.55% previously. Today, investors will be waiting for CPI (MoM) and DCLG House Price Index (YoY) data in the U.K at 09:30 GMT to get some visibility on the pair on the European session. On the American session, the U.S will release the Retail Sales (MoM) and the PPI (MoM) data at 13:30 GMT, followed by the Redbook (MoM) data at 13:55 GMT, the IBD/TIPP Economic Optimism at 15:00 GMT and the Business Inventories (MoM) data at 15:00 GMT. In addition, the U.S will release the API Weekly Crude Stock and API Weekly Gasoline Stock at 21:30 GMT. Investors will also pay particular attention to economic data and latest development in the Eurozone to get indications on the direction of the GBP/USD. The resistance level is at 1.57342 and the support level is at 1.56468.

Oil (WTI): The price of oil was at 93.240 at the time of writing on speculation that inventories declined for a third week in the U.S., the world’s biggest crude consumer. U.S. crude stockpiles probably fell by 1.75 million barrels last week, according to the median response in a Bloomberg News survey. To better assess the direction of the commodity, Investors will watch the U.S. retail sales figure because it’ll provide an insight into whether the improvement that we saw in employment growth is in fact an indication of improving confidence levels. Moreover, the increasing tensions between Israel and Iran are fuelling concerns over a disruption to supplies from the Middle East. The fears on the escalation of hostilities between Israel and Iran could send oil prices skyrocketing. The resistance level is at 94.638 and the support level is at 91.668.

DOW: The DOW was trading at 13157.7 at the time of writing as Bank of Japan minutes showed policy makers are prepared to stimulate the economy and Investor confidence found some support however, as Italy saw borrowing costs rise only slightly after it auctioned the full targeted amount of EUR8 billion of 12-month government bonds at an average yield of 1.69%, up from 1.55% previously. Investors are awaiting the ZEW economic sentiment numbers for the euro zone as well as a retail sales report that may show demand is recovering in the U.S to have visibility on the Index. The resistance level is at 13211.3 and the support level is at 13070.2.

Good Luck in trading…