US Unemployment Benefits Fall As Progress Falters In Labor Market

· Nationwide HPI (MoM) (GB, 07:00 GMT)

· Unemployment Rate + CPI (YoY) (EU, 10:00 GMT)

· GDP (MoM) (CAN, 13:30 GMT)

· Chicago PMI (U.S, 14:45 GMT)

· Michigan Consumer Sentiment (U.S, 14:55 GMT)

· Fed Chairman Bernanke Speaks (U.S, 15:00 GMT)

U.S unemployment benefits fell last week, a sign that progress in the labor market is faltering amid a slowing economy. Jobless claims were little changed at 374,000 in the week ended August 25, matching the upwardly revised figure from the prior week, the Labor Department reported yesterday. On the other hand, Americans stepped up spending in July for the first time in three months as an increase in incomes. Purchases increased 0.4 percent after being little changed in June, Commerce Department figures showed yesterday. Other reports showed consumer confidence held close to a seven-month low.

Japan’s consumer prices slid at a faster pace in July and industrial production unexpectedly slumped, raising the danger that the world’s third-largest economy has slipped back into a contraction. Today’s releases reflect diminishing demand overseas for the nation’s exports amid the European crisis and exchange-rate appreciation, and the end of incentives for vehicle purchases. With Prime Minister Yoshihiko Noda’s government today predicting it will miss a deficit-reduction target, pressure may rise on the BoJ to expand stimulus and sustain the recovery.

Prime Minister Mariano Rajoy delayed seeking a second rescue for Spain while pledging to continue bailing out its regions as Valencia requested more money to settle bills and cover debt. Rajoy spoke yesterday following a meeting in Madrid with French President Francois Hollande. Catalonia, Valencia and Murcia this week claimed more than half of an 18 billion-euro ($23 billion) fund announced by Rajoy last month to help the regions face bond redemptions and finance their deficits in the second half.

EUR/USD: The EUR/USD was trading lower at 1.25042 at the time of writing after Spain’s Prime Minister Mariano Rajoy said his government would delay deciding seeking a sovereign bailout until the aid conditions are clear and on positive economic data in the U.S. Market sentiments remain fragile on the EUR, as European leaders are struggling to find solutions to the worsening euro region’s sovereign-debt crisis.

Events likely to bring fluctuations on the market on the European session ahead are; retail sales data in Germany and Spain, Unemployment rate, CPI and PPI data in Italy and Unemployment Rate and the CPI in the eurozone. On the American session, the U.S will release Chicago PMI and the Michigan Consumer Sentiment. The key risk event for the pair will be Fed Chairman Bernanke Speech, where he will signal a new round of stimulus for the U.S. economy in Jackson Hole, Wyoming.

Investors should be very prudent and closely monitor all the events to get visibility on the pair. Talks that Bernanke may hold off stimulus measures following improving economic data in the U.S may weaken the EUR/USD before the official announcement. The resistance level is at 1.25661 and the support level is at 1.24764.
EUR/USD" title="EUR/USD" width="624" height="314">
USD/JPY: The pair was trading lower at 78.439 at the time of writing after Spain’s Prime Minister Mariano Rajoy delayed seeking a sovereign bailout for his country, spurring demand for haven assets amid Europe’s fiscal turmoil. Moody’s Investors Service said its review of Spain’s debt rating will continue through September and reiterated the risk of a possible downgrade. Investors will closely monitor all economic events in the eurozone and the U.S to get more visibility on the USD/JPY today.

The JPY remain resilient as investors weigh whether Federal Reserve Chairman Ben S. Bernanke will signal new stimulus when he speaks today in Jackson Hole, Wyoming. The U.S. central bank has a tough decision on whether to add further stimulus to promote a stronger economic recovery. Investors should remain focus and wait for fundamental news and the latest developments in the Europe and U.S to come on market to better assess the direction of the pair. The resistance level is at 78.638 and the support level is at 78.267.
USD/JPY" title="USD/JPY" width="621" height="313">
Oil (WTI): The price of oil was trading lower at 94.625 at the time of writing as producers work to restore Gulf of Mexico output and refiners prepare to resume operations after Hurricane Isaac passed and a fire at Petroleos de Venezuela SA’s Amuay refinery, the country’s largest, would disrupt supplies. The company planned to finish cooling the area affected as early as yesterday and start resuming operations, according to Oil Minister Rafael Ramirez.

Investors will closely watch Fed Chairman Bernanke speech today in Jackson Hole, Wyoming. Policy makers have said they are prepared to provide new stimulus “fairly soon” unless there is evidence of “substantial and sustainable” improvement in the recovery. However, Investors should remain very cautious as there are growing speculations that the Fed may hold off from stimulus measures following improving economic data in U.S.

Additional news is that Iran wants global oil prices to rise to $130 a barrel and is producing as much crude as it did before the U.S. and Europe tightened sanctions on its exports, Oil Minister Rostam Qasemi said yesterday without specifying a grade of crude. The resistance level is at 95.664 and the support level is at 93.860.