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Thread: EUR/USD Outlook For Next Week. Trading News.

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    Default EUR/USD Outlook For Next Week. Trading News.

    Most recent economic reports suggest that economic growth in the second half of the year may trend below the 3.4% growth witnessed in the second quarter. The monthly employment report released last week revealed that the economy added merely 92,000 jobs in July and the unemployment rate ticked up to 4.5%. Wachovia Securities' economist John Silvia describes the employment growth as one that is consistent with slower household income and consumption growth and slightly below trend growth for the overall economy the rest of the year. Silvia also believes that labor demand despite the modest growth is outstripping the supply of workers.

    Number crunching clarifies that much of the job loss is due to weakness in public education services, which can be explained by the timing of summer vacation. Excluding the fall in education services, job growth could have held close to the consensus estimate of 125,000.

    Personal spending rose a meager 0.1% in June. The real personal consumption expenditure, which is adjusted for inflation, revealed a decline. The softness may set the tone for another lackluster quarter of consumer spending. The overall as well as core PCE deflators were up 0.1% on a monthly basis. Commenting on the Labor Department report on the Employment Cost Index, Wachovia Securities economist Jay Bryson said that wage-push inflation is not a serious threat, as wages and benefit costs have grown at a very steady rate over the past few quarters.

    Overall employment costs were up 0.9% in the second quarter, while benefit costs surged up 1.3% as a payback effect of the mere 0.1% increase in the first quarter. An interesting development is that the total compensation of government workers is rising more rapidly than those employed in the private industry due to higher benefit costs.

    On a positive note, the Conference Board's consumer confidence index climbed 7.3 points to 112.6 in July,
    marking the highest level since the period just prior to September 11 attacks. Business conditions and employment conditions improved, while inflation expectations declined. Consumer confidence in all regions improved except the West Coast.

    Construction spending declined by 0.3% in June, with the weakness mainly due to a 0.7% decline in residential construction, which revealed a dip for the fourteenth consecutive month. Although non-residential spending slowed, it rose 0.3% for the month. Market Vitner from Wachovia Securities believes that spending on structures would contribute to growth in the second half of 2007, as this segment has grown at double digit pace in four out of the past six quarters.

    The Institute of Supply Management said that the purchasing managers' index based on its manufacturing survey fell to 53.8 in July from 56 in June. Nonetheless, the index stayed at a level that still suggests expansion. The new orders, employment and production indexes suggest continued growth, but at a slower pace than in the previous month. On a disconcerting note, the prices paid index remained at an elevated level, as aluminum, steel & copper products and soybean oil prices continuing to rise. The non-manufacturing survey of the ISM showed that the activity in the services sector expanded, albeit at a slower pace in July. The index declined to 55.8 in July from 60.7 in June.

    Meanwhile, the National Association of Realtors released the pending home sales index based on contracts signed in June, which rose 5% from a downwardly revised reading of 97.5 for May. However, annually, the index declined 8.6%. The association noted that the monthly gain is the largest since a 6.1% increase in March 2004.

    The upcoming week is fairly light on the economic calendar. The FOMC meeting scheduled for Tuesday is the major event that traders look forward to, especially due to the fact that the financial markets are in a turmoil following the collapse of the subprime mortgage market. Traders may also pay close attention to Labor Department reports on second quarter productivity and import & export prices for July.

    The Fed meeting is unlikely to throw in a surprise. Most economists look for an unchanged stance, which will leave interest rates at 5.25%. The anticipation stems from the fact that the Fed is overly concerned about inflation than an economic slowdown. Wachovia's read of Federal Reserve Chairman Ben Bernanke's semiannual testimony to the Congress suggests that the central bank is bracing for a below-trend growth in the second half of the year and about 2% increase in he core price consumption expenditure index.

    Avery Shenfeld of CIBC World Markets is of the view that the Fed may not be as dovish as the markets expect it to be. Shenfeld expects the Fed to make a mention of a tightening in credit market conditions and the continued weakness in the housing market. Even if the Fed concedes that there are downside risks to growth, it may hold forth inflation as a grave threat due to what it perceives to be a fairly robust job market that has the potential to add up to inflationary pressures.

    Economists expect productivity growth to rebound during the second quarter and the remainder of 2007. Specifically, Wachovia Securities believes that productivity should get a shot in the arm from the changing mix of economic growth, with more from business fixed investment and less from consumer spending and housing.

    Meanwhile, July import prices are expected to rise almost by the same magnitude as in the previous month due to higher petroleum prices. However, the annual increase in import prices has been slowing due to small price declines from Pacific Rim countries and due to the effect of petroleum prices. Export prices have registered strong gains due to stronger demand for grains meant to produce alternative fuels.

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    There are no significant economic reports due out on Monday.

    Tuesday

    Productivity, which measures the efficiency in producing the economy's goods and services and Unit labor Costs, which reflect the labor costs for producing each unit of output, is scheduled for release at 8.30 AM ET on Tuesday. The preliminary reading of second quarter productivity is expected to reveal 2% growth.

    Non-farm productivity rose at a quarterly pace of 1% in the first quarter, revised down from the preliminary estimate of 1.7% growth. Economists had expected a 1% increase in productivity for the quarter. Productivity of the business sector as a whole was up a more modest 0.5%. The manufacturing sector revealed productivity growth of 2.4%. Annually, productivity of the non-farm sector rose 1%.

    First quarter output of the non-farm business was up 0.6% from the previous quarter and 2% from the year-ago quarter. Hourly compensation climbed 2.8% from the previous quarter, while the annual increase was a steeper 3.2%. The unit labor costs rose 1.8% in the first quarter. The annual comparison of unit labor costs revealed 2.2% growth.

    The Federal Open Market Committee is scheduled to meet on Tuesday to decide on its monetary policy. The central bank is expected to announce its decision on interest rates at 2:15 PM ET through the release of a post meeting policy statement.

    The FOMC maintained its benchmark interest rates at 5.25% following its June meeting. In its post meeting policy statement, the Fed changed its commentary on growth as a modest improvement, while in May the Fed had acknowledged that growth slowed down. While suggesting that core inflation improved, the committee also said sustained moderation is yet to be convincingly demonstrated. The FOMC upheld its view that inflation remains its primary concern, which gave no scope for contemplating an interest rate cut in the near future.

    Consumer Credit, which is the dollar value of consumer installment credit outstanding, is scheduled for release at 3 PM ET on Tuesday. Economists expect Consumer Credit to reveal an increase of $7 billion for the month of June.

    In May, consumer credit outstanding rose at a better than expected annual rate of 6.5% to $2,440.6 billion. Revolving credit increased 9.8% to $894.8 billion, while non-revolving credit increased 4.4% to $1,545.8 billion.

    Wednesday

    Wholesale Trade data for the month of June is expected to be released at 10AM ET on Wednesday. Economists currently forecast a 0.4% increase in June wholesale inventories.

    Wholesale inventories rose 0.5% in May to $396.7 billion, while the previous month's figures were revised up by $0.3 billion. Inventory growth was aided by a 2.5% increase in inventories of metals and minerals, except petroleum and a 1.9% gain in electrical and electronic goods stocks. Meanwhile, durable good inventories were up 0.6% from the previous month. Annually, inventories increased 6.7% in May.

    Wholesale sales rose at a 1.3% monthly pace and an 8.7% annual rate. The monthly comparison revealed that durable good sales fell 0.5%, as sales of motor vehicle and motor vehicle parts and supplies declined 5.3%. However, wholesale sales of non-durable goods climbed 2.9%.

    The Energy Department's Crude Oil Inventory report is scheduled to be released at 10:30 AM ET on Wednesday.

    Crude oil stocks declined 6.5 million barrels to 344.5 million barrels in the week ended July 27th, but they remain well above the upper end of the average range for this time of the year. Despite increasing 0.6 million barrels, gasoline stocks were below the lower end of the average range. Distillate stocks increased 2.8 million barrels and were in the middle of the average range.

    Refinery utilization improved to an average of 91.6% in the four weeks ended July 27th compared to 90.7% in the four weeks ended July 20th. However, the utilization rate was softer than the 92.5% reported for the same period of last year.

    The price of crude oil averaged $77.03 in the week ended May 27th, up 1.99% from last week and up 5.1% from the year-ago period. The nationwide average retail price of regular grade gasoline was $2.8876 a gallon as of July 30th compared to $2.958 as of July 23rd , 2007 and $3.004 as of July 31st, 2006.

    Thursday

    The weekly Jobless Claims data for the week ended August 3rd is likely to be released at 8:30 AM ET on Thursday.

    Jobless claims increased 4,000 to 307,000 in the week ended July 28th from the previous week's upwardly revised average of 303,000. Economists expected jobless claims to have increased to 310,000 from the 301,000 that were originally reported for the previous week.

    The less volatile four-week moving average declined 3,500 to 305,500 from the previous week's revised average of 309,000. Continuing claims for the week ended July 21st decreased to 2.525 million from the preceding week's revised level of 2.541 million.Friday

    Import and Export Prices for the month of July is expected to be released at 8:30 AM ET on Friday. Import and Export prices are indexes of prices of goods bought in the U.S. but produced abroad and the prices of goods sold abroad but produced domestically.

    Import prices rose 1% in June after increasing at an upwardly revised 1.1% pace in May, according to a report released by the U.S. Labor Department. The growth was mainly due to a 4.7% surge in petroleum imports after they increased at a revised 3.7% rate in May.

    Export prices rose 0.3% in June following an upwardly revised 0.2% rate in May. Prices of agricultural exports jumped 2.9% in June after edging up merely 0.1% in May, while prices of non-agricultural exports were up 0.1%.

    The Treasury Budget, a monthly account of the surplus or deficit of the federal government, is due out at 2 PM ET on Friday. The changes in the budget balance are keenly watched to know the budgetary trends and the thrust of the fiscal policy. Economists expect the Treasury Budget for July to reveal a surplus of $31 billion.

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    the last week, the weak us payroll report crushed 1 position i had.
    i underestimated the news so i am gonna pay attention to this.
    the next week is forecasted the dollar could recover many losses if some of those news are positive, so pay attention and you could get some sm_win

    good luck!

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    EURUSD

    EURUSD is testing the previous high resistance at 1.3851, further rise above this level to reach the next cycle top is still possible in a couple of days. Near term support is at 1.3750, break below this level will delay the resumption of the up trend

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    EURUSD

    Last week saw a correct full correction move in the market to the 1.3608 level, even against sterling this market has achieved also a better base build position before the Friday push and close to the next major resistance. We now believe that the 1.3671 level will be able to sustain any downside correctional pricing going forward. The strong price building action at this level has supported the longer term and medium term bullish sentiment in the market. Whilst we still anticipate that downside risk is still in the market as Friday managed to control the upside the bears are really under pressure. Only if they can remove the 1.3671 level and push through the 1.3608 level would they be able to feel comfortable. The bulls on the other hand have been blocked correctly at the 1.3773 level but have left it as a bullish engulf of the final downside push. This strengthens their position far greater than that of the bears as the Euro bulls now need to see the 1.3773 level fall to a closing high and the next stop will be at 1.3872. If this was taken then we would expect to see fresh highs and the 1.40 handle being printed on the way.

    The divergence closure has also been constructive to the bullish trend of the market and this has seen narrowing to that divergence too. This supports the bull in the longer term. Whilst the topside is at risk the downside can not be fully written out of the equation yet and this is why we still expect to see some downside pricing pressure coming forward during the course of the week and this should be able to assist the bulls to gain further good entry levels to the market at the 1.3671 level as the exit is at 1.3660 to await 1.3608 again. This is possible but unfortunately to the bears not that easy to achieve. The bulls however would be better served with an attempt to the 1.3872 and an upward pricing consolidation before the next Bull Run.

    The house view remains that the bull trend is intact and has further to run and our ultimate target of 1.4668 is still very firmly in play. We expect some downside pressure but would be using this to enter the market on the longside rather than try shorts. The topside is now very vulnerable to another surging price action as early as Wednesday or Thursday which could remove the highs and accelerate the Euro. Technically the Euro is one of the strongest pairings against the USD. Bears should be cautious.



    LONG TERM TREND:
    UP
    MEDIUM TERM TREND:
    UP
    SHORT TERM TREND:
    UP but some correctional downside is still possible but limited to 1.3671. Correction does now look complete and trend resumption requires the 1.3773 level to fall and sustain to a close

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    How did the US economy get here?
    As an investor of the forex and US equities markets, this past week I've found myself reflecting on the conditions and events that have led us to this brink of utter fearfulness. For me it reached an apex (in humor and sentiment) when perpetual bull and US stock market champion Jim Cramer about broke down in tears on CNBC.

    As I was reading and commenting on another post here, I came to a conclusion, I also became a bit scared, because the growth that brought us here appears unsustainable, and we've never seen economic growth fueled this way. Let me explain the sequence of events:

    The US economic growth of the last 5 years has been fueled in large part by low interest rates. When Interest rates are low, people borrow to build and spend.

    Construction booms, housing appreciates and job and economic growth are fueled. The USD sees strong performance and sentiment.

    People spend more because the job market is good, and they borrow against the appreciation in their homes to buy luxuries. Despite an excess of disposable income, nobody saves money (evidenced by the negative savings index).

    Housing appreciates so dramatically that people new to the housing market have to find creative loan programs (Adjustable Rate Mortgages, or ARMs) in order to afford a home. Then, people who CAN afford a home start using those creative programs to buy even bigger homes. If ARMs adjust, they just borrow against the equity appreciation to make payments, thinking that will weather the storm. This continues as long as rates stay low.

    But then rates rise - ARMs adjust people out of an affordable monthly payment, people stop borrowing, construction slows, so does job growth, foreclosures grow, further perpetuating economic decline (maybe even recession), and things eventually adjust back to a reasonable mean.

    And we're here at the point where foreclosures are growing, and job growth is declining, as evidenced by the US Labor numbers on Friday.

    But unlike Cramer, I think this adjustment is necessary. Cramer called for Bernanke to basically, pull his head out of his posterior, and lower rates. It's unlikely that will happen - and I say that's a good thing.

    Whether Bernanke is doing it intentionally or not, a correction due to housing slump (or crash) and construction decline is needed to end the lending, spending and borrowing madness. Lowering interest rates just puts us back in that cycle and delays the inevitable.

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    i read the history, the paragragh was going so cool until it finished "the inevitable".

    what is the inevitable... an economy into chaos? sm_rolleye

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