Speculations For Slowing Economic Growth Outside US Supported The Dollar
The dollar rose against the basket of currencies on Friday, recovering from the previous day's losses, as gloomy British growth data backed views of a slowing global economy and raised prospects of interest rate cuts outside the United States. GBP on the Island scored a zero advance for Q2 and a rise of just 1.4% on year over year basis, while 1.5% expected. The data suggests that UK is probably already in recession, which could spread through the eurozone, and that scenario would force ECB and BoE to cut interest rates. The sterling fell against the dollar to $1.8508, while the euro eased to $1.4760. The US currency also scored a significant advance against the yen to 110.03 yen, after the stable recovery of the American equity market and the supportive for the greenback comments from Warren Buffet. On the contrary the gains of the dollar were limited by Federal Reserve Chairman Ben Bernanke's statement, as he said that a stable dollar and falling commodities should help slow inflation, which could postpone interest rate hikes. Despite that the analysts still expect the US currency will likely to continue to recover in the mid-term.
EUR/USD
Neutral trading remains as the euro continues to consolidate in a narrow range between the levels 1.4650 and 1.4980, which are respectively 50% and 38.2% retracement of the 1.3262-1.6035 rise. Probably the lack of clearly defined direction would maintain in the following days. Despite that, the risk for a new drop is still in effect as the main goal would be the key support level at 1.4320, which is 61.8% retracement of the mentioned rise. A break of that level could open a potential for a new steep decline, and a long lasting positioning below that level could even lead to a trend reversal in the mid term. On the upside above 1.4980, resistance is seen around the level 1.5250, which coincides with the 200 SMA, followed by 1.5440.
EUR/USD (chart, table)
USD/JPY
The yen continues to consolidate in a narrow range around the level 109.90, which is 50% retracement of the 124.12-95.75. Probably the neutral trading will be over soon and in the next days we can expect a resume of the upward movement with a main goal – the resistance at 113.30, which is 61.8% retracement of the mentioned drop. A decisive break of that level would affirm the forming in the moment positive mid term trend. On the downside support is seen at 108.20, which coincides with the 26 SMA, followed by 106.60, which is 38.2% Fibo retracement coinciding with 200 SMA and 104.90.
USD/JPY (chart, table)
GBP/USD
Although it managed to take a breadth for a while in the previous days, the sterling is put again under a severe downside pressure. The mid term trend remains negative and the downward movement is likely to continue but before a new steep decline we could witness a short narrow range consolidation. The next main goal is the support at 1.8080, followed by 1.8000 and 1.7730. On the upside, first resistance is seen at the level 1.8790, followed by the key 1.9120, which is 23.6% retracement of the 2.1159-1.8512 and 1.9315.
GBP/USD (chart, table)
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25.08.2008 FX daily review.pdf, 620 Kb
