US Consumer Borrowing Unexpectedly Decreased In July

. Trade Balance (GB, 09:30 GMT)

. Housing Starts (CAN, 13:15 GMT)

. Trade Balance (U.S, 13:30 GMT)

. Trade Balance (CAN, 13:30 GMT)

Consumer borrowing in the U.S. unexpectedly decreased in July for the first time in almost a year, restrained by a second straight decline in credit-card debt. The $3.28 billion drop followed a revised $9.8 billion jump the previous month that was bigger than first estimated, the Federal Reserve said yesterday in Washington.

Merkel and German Finance Minister Wolfgang Schaeuble have expressed their confidence that the ESM will survive the constitutional test. Officials voiced greater concern over the details of the court’s ruling rather than the possibility of an outright rejection of the permanent bailout fund. While, in Greece, Samaras failed to secure an agreement from his two coalition partners on 11.5 billion euros in spending cuts required by the Troika, the Commission, the ECB and the International Monetary Fund. The Troika’s approval is required for the country to receive its next tranche of funds.

Spain is likely to seek assistance in the coming weeks, Der Spiegel reported, citing unidentified officials in the European Commission. The ECB’s plan foresees conditions on countries that want to participate in the bond operations. In the Netherlands, politicians were jostling for position as polls showed that the five parties that signed an austerity agreement under caretaker Prime Minister Mark Rutte won’t get enough backing for a majority. The Dutch Labor Party, which wants more time for the country to meet budget targets, has caught up with Rutte’s Liberal Party ahead of this week’s election, according to a poll taken by Ipsos Synovate

EUR/USD: The EUR/USD was trading slightly higher at 1.27636 at the time of writing ahead of the policy-setting Federal Open Market Committee starts a two-day meeting tomorrow, where investors are expecting additional easing to be announced at the FOMC meeting. Market sentiments and speculations will be driving the market on the European session as no major events are expected.

he risk events for the pair will come in the American session, when the U.S will release its trade balance data. In the political front, Greek PM Antonis Samaras is set to visit ECB president Mario Draghi in Frankfurt, while Chinese PM Wen Jiabao will give a speech at World Economic Forum held in Tianjin, which could bring some headlines adding volatility. Greek Democratic Left leader Fotis Kouvelis, whose party is one of the three in the coalition government, said no decision had been made on spending cuts and that poorer citizens must be protected from austerity measures.

The leaders of the three parties agreed to meet again tomorrow, two days before euro-area finance ministers gather in Cyprus for a briefing on Greek progress. Most importantly, investors will be monitoring the headlines out of Germany regarding Federal Constitutional Court ruling on the country’s participation in the European Stability Mechanism, which is due to release tomorrow. Investors should remain prudent and wait for some news to come on market to get visibility on the trend of the pair. The resistance level is at 1.28105 and the support level is at 1.27188.
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USD/CAD: The USD/CAD was trading lower at 0.97632 at the time of writing as investors anticipated the Federal Reserve will announce more stimulus this week to sustain growth in the nation’s largest trading partner. Bank of Canada Governor Mark Carney said last week an increase in interest rates “may become appropriate.”

On the other hand, Blake Jespersen, managing director of foreign exchange in Toronto at Bank of Montreal (BMO) said “The market is quite optimistic about the Fed unveiling some sort of quantitative easing and therefore we are seeing a fairly good overall tone.” In addition, Oil traded near a one-week high in New York on speculation that the U.S. and China will add measures to revive their economies.

Crude oil is Canada’s largest export. Market sentiments are bullish on the CAD; however investors should remain prudent as Canada will release its Housing Starts at 13:15 GMT and trade balance data at 13:30 today. The U.S will also release its trade balance data at 13:30 GMT. Latest news in the eurozone will also affect the direction of the pair. The resistance level is at 0.97883 and the support level is at 0.97317.
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GOLD: Gold was trading higher at 1729.50 at the time of writing as the outlook for more stimulus from the U.S. Federal Reserve spurred demand for the metal as a store of value. The policy-setting Federal Open Market Committee will weigh additional steps at its September 12-13 meeting as Chairman Ben S. Bernanke signaled last month that a third round of quantitative easing, or QE, might be needed to lower joblessness.

Under quantitative easing, the Fed buys assets such as Treasury holdings or mortgage-backed securities held by banks, pumping the economy full of fresh liquidity in a way that pushes down interest rates to encourage investing and hiring. Such accommodative policies tend to weaken the dollar by design, which sends the greenback's traditional hedge, gold, rising. Moreover, investors will be closely monitoring the latest developments in the eurozone to get more visibility on the yellow metal. The resistance level is at 1739.85 and the support level is at 1723.69.