Chinese Data Weakens AUD and Crude Oil

After hitting a fresh seven-week high against the US dollar earlier in the week, the euro was unable to extend its gains during trading yesterday despite the release of positive French and German manufacturing data. In other news, weak Chinese economic data resulted in losses for both crude oil and the Australian dollar during the European session. Today, traders will want to note the results of the UK Revised GDP figure at 8:30 GMT, followed by the US Core Durable Goods Orders at 12:30. Any better than expected news could help both the GBP and USD before markets close for the weekend.

Forex Market Trends

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.2657	1.5968	79.65	0.9675	1.0543	0.8023
	1.2603	1.5915	79.17	0.9624	1.0497	0.7974
	1.2575	1.5883	78.89	0.9592	1.0465	0.7945
Support	1.2526	1.5831	78.36	0.9542	1.0412	0.7892
	1.2495	1.5799	78.05	0.9510	1.0384	0.7863
	1.2447	1.5747	77.56	0.9459	1.0332	0.7810

Economic News

USD - Core Durable Goods Orders Set to Impact USD

After taking significant losses earlier in the week as a result of the most recent FOMC Meeting Minutes, the US dollar was able to stabilize for the most part during European trading yesterday. The meeting minutes hinted at a possible new round of quantitative easing, which caused investors to sell the greenback. Yesterday, the USD/JPY gained close to 20 pips during mid-day trading, but quickly erased the gains following a worse than expected US Unemployment Claims figure. Against the Swiss franc, the dollar gained close to 25 pips to reach as high as 0.9578.

As markets get ready to close for the weekend, traders will want to pay careful attention to the US Core Durable Goods Orders figure, set to be released at 12:30 GMT. Analysts are forecasting the figure to come in at 0.5%, well above last month's -1.4%. If the forecasts turn out to be true, the dollar could recoup some of its recent losses against the Japanese yen during mid-day trading. At the same time, should the news disappoint, it may fuel speculations that the Fed will soon begin a new round of quantitative easing and could result in losses for the greenback.

EUR - EUR Takes Modest Losses vs. USD and JPY

After hitting a fresh seven-week high against the US dollar during early morning trading yesterday, the euro took moderate losses later in the day, despite positive French and German manufacturing data. After reaching the 1.2571 level, the EUR/USD fell as low as 1.2535 during European trading. Against the Japanese yen, the common-currency fell more than 40 pips during the second half of the day, eventually reaching as low as 98.26.

Turning to today, euro traders should monitor announcements out of the euro-zone. German and French officials have been meeting in recent days to discuss the current situation in the euro-zone, particularly with regards to Greek progress in the steps it needs to take to get its economy back on track. Any positive news concerning Greece's current debt situation may boost the euro before markets close for the weekend.

Gold - FOMC Meeting Minutes Continues to Boost Gold

Gold extended its bullish trend throughout European trading yesterday, following the most recent FOMC Meeting Minutes from earlier in the week. The meeting minutes, which hinted at a new round of monetary stimulus in the near future, led to risk taking in the marketplace. As a result, gold gained close to $16 an ounce to reach as high as $1673.

Today, gold traders will want to pay attention to US data, specifically the Core Durable Goods Orders figure at 12:30 GMT. If the news comes in above analyst expectations, it may lead to reduced speculations that the Fed is getting ready to initiate a new round of quantitative easing and could result in losses for gold.

Crude Oil - Chinese Data Leads to Losses for Crude Oil

A poor Chinese manufacturing indicator turned crude oil bearish yesterday. The news signaled to investors that demand for oil in China may decrease, and contributed to risk aversion in the marketplace. The price of oil fell close to $1 a barrel during European trading, reaching as low as $97.26 before bouncing back to the $97.65 level.

Turning to today, oil could see volatility if there are any announcements out of the euro-zone with regards to the current debt situation in Greece. Positive developments could lead to risk taking in the marketplace, which may boost the price of oil before markets close for the weekend. Conversely, negative developments in the euro-zone could result in oil extending its downward movement.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. A bullish cross on the same chart's MACD/OsMA indicates that the price shift could be upward. Going long may be the wise strategy for this pair.

GBP/USD

The Williams Percent Range on the weekly chart is approaching the overbought zone, indicating that this pair could see downward movement in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bearish cross. Opening short positions may be the wise choice.

USD/JPY

The weekly chart's Bollinger Bands have begun to narrow, indicating that this pair could see a price shift this week. Furthermore, the Slow Stochastic on the daily chart has formed a bearish cross while the Williams Percent Range on the same chart is in overbought territory. Going short may be a wise choice for this pair.

USD/CHF

While the weekly chart's MACD/OsMA has formed a bearish cross, most other long-term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.

The Wild Card

NZD/USD

The Williams Percent Range on the daily chart has crossed into the overbought zone, signaling a downward correction in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a possible downward breach.

USD/JPY Forecast August 24, 2012, Technical Analysis

USD/JPY fell during the session on Thursday as the “risk off trade” continued. The pair looks like it is trying to find some type of support in that general vicinity and this of course makes sense as the 78 handle has been so important. By the end of the Thursday session, we have printed a very neutral candle.

The candle is in the epicenter of a massive support area between 78 and 78.75 roughly. This area has been protected by the Bank of Japan from various reports, and as such we are willing to take a long position on the first supportive candle that we see. This means that a break of the Thursday highs would be good enough for us to go long, as would any type of hammer or bullish engulfing candle a little below where we are now.

As for selling this pair is concerned, the Bank of Japan would certainly get involved in this market if the price was the fall below 78. Because of this, we will not sell this market even if it breaks below this area. In fact, we are willing to buy supportive candles below with even more vigor than the ones in this general area.

Going forward, 80 should be significant milestone in this currency pair, followed by the 80.60 level. If we can get above both of those there’s a good chance that we end up in the 84 area before it is all said and done. Above that level and we are talking a long-term buy-and-hold type of situation.

It should also be said that this pair is ideal for the short term trader, as there is so much volatility in a tight range that we can perhaps pickoff 20 to 30 pips at a time. It isn’t exactly glamorous work, but in the end it all pays the same. Because of all of this, we are not selling this pair, but would rather buy the closer we get to the 78, as we think the consolidation should continue. In fact, there is a little bit of an argument to be made that we could be heading into consolidation between 78 and 80.

USD/CAD Forecast August 24, 2012, Technical Analysis

The USD/CAD pair rose during the session on Thursday, to test the top of the shooting star that was printed on Wednesday. The “risk off” trade seems to be back into play now, and the commodity currencies all got whacked during the session. However, we did not break the top of that shooting star, so there really wasn’t a signal at that moment in time. This would be a countertrend trade, so we will have to be very picky when it comes to buying this pair.

It looks to us that the parity level above will be very resistive anyway, so more than likely it’s going to be prudent to ignore any buy signals. Looking forward, we think that rallies are set up to be faded, and that may be what’s about to happen. We are currently flat of this market, and don’t necessarily feel the need to change that status right now.

GBP/USD Forecast August 24, 2012, Technical Analysis

The GBP/USD pair attempted to continue higher on Thursday, but got old back instead in order to form a hammer. This hammer is essentially anchored at the 1.59 level, and as such it looks like we may be pulling back to confirm the breakout. Because of this, we are looking for some type of supportive candle in the vicinity of the 1.58 handle.

If we do get that supportive candle, we are more than ready to go along of the cable pair, and as such right now we see absolutely no chance of selling this pair.

EUR/USD Forecast August 24, 2012, Technical Analysis

The EUR/USD pair continued to March higher on Thursday, but gave back about half of the gains in order to close near the 1.2550 level. The market looks a little overextended at this point in time, and we are right in the middle of the massive resistance area going to the 1.27 level. With this being said, we think that it is only a matter of time before this pair searched the pullback, but the real question will be whether or not it actually breaks down.

We have yet to determine what exactly has changed in the Euro’s favor, and as such we think there will be a selling opportunity soon. Once we get above the 1.27 level however, we have to change her thesis and start buying. Truth be known, we find is very difficult to believe, but you never know what can happen in the Forex markets. A break below 1.25 would also have a selling.

AUD/USD Forecast August 24, 2012, Technical Analysis

The AUD/USD pair initially rose during the Thursday session, but it must be said that it sold off rather drastically by the end of the day. Looking at this chart, it’s easy to see that there is an uptrend line that the market is banging against currently. The 1.05 level seems to be massive resistance, and as such it seems like we have a real fight on our hands. The candle looks really weak for the Thursday session, and as such there is a possibility of a trend line break. If we get that trend line break, we think that the market will run to the 1.03 level. At that point time, support could be expected.

We think that the gold markets rising should eventually give a lift to the Australian dollar as well, and we find it on that the gold markets did so well during the Thursday session, while the Australian dollar got absolutely pummeled. Sooner or later the correlation will return, and the markets will realign themselves. We think that even if the trend line breaks down, that the 1.03 level should offer enough support that we can serve buying the Australian dollar then. In the meantime, this is going to be a messy pair to trade.

Forex: EUR/USD trapped inside a 15 pip range above 1.2550

FXstreet.com (Barcelona) - As it's been usual for some recent Asia-Pacific sessions, EUR/USD is currently inside a very narrow range 1.2568/53 since session started, last at 1.2561, off yesterday's and fresh 6-week highs at 1.2588. Local share markets trade all in the red losing on average more than -1%, while gold retreats at $1665 from recent 4-month high yesterday at $1673, and US SP500 futures stay flat barely above the 1400 points mark.

Again London session ahead will show no EUR macro data related risk events on the agenda, with focus on Greek-EZ leaders meetings going on, today with Greek PM Samaras visiting German PM Merkel, and also on Spain possibly asking for the bailout as soon as mid Sept according to sources, with its risk premium back above the 500bps for German 10y yields. As usually for Fridays, no EZ sovereign debt auctions will take place today.

Immediate resistance to the upside for EUR/USD shows at recent fresh 6-week highs yesterday and 0.38 retrace of 1.3489/1.2037 down leg at 1.2588/93, followed by former Jan 2012 lows at 1.2622,and June 11 highs at 1.2668. To the downside, closest support comes at Tuesday's highs/0.38 retrace of 1.2293/1.2588 up leg at 1.2487/77, followed by Aug 06-07 highs/Wednesday's lows/0.5 retrace of same up leg at 1.2440/32, and Aug 14/17 highs at 1.2385.

FOREX-Euro eases, support seen from trimming of bearish bets

* Euro remains not far from 7-week high vs dollar

* Trimming of euro bearish bets may persist -analysts

By Masayuki Kitano

SINGAPORE, Aug 24 (Reuters) - The euro eased versus the dollar on Friday but still hovered near a 7-week high hit the previous day, its downside seen limited in the near term by the potential for the further unwinding of euro short positions.

The euro, which rose after Fed minutes on Wednesday suggested the U.S. central bank may opt for more monetary stimulus "fairly soon", got a further lift on Thursday after sources said Spain is negotiating with the euro zone over conditions for aid..

The Spain news helped offset a scaling back in expectations of an imminent U.S. easing after St. Louis Federal Reserve President James Bullard said the minutes are a bit stale given stronger data since the Fed's last policy meeting.

The euro dipped 0.1 percent to $1.2554, having hit a high of $1.2590 the previous day on trading platform EBS, its highest level in about seven weeks.

Against the Australian dollar, the euro touched a six-week high of A$1.2047 earlier on Friday.

"The moves that have taken place are nothing more than position unwinding," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, referring to the trimming back of euro-bearish bets.

Such unwinding may persist in the near term given a recent accumulation of short euro positions.

"Various potential pitfalls for the euro are coming up, so people want to sell when it rises. They sell and then buy back, sell and then buy back. There has been a continuation of that," Okagawa said.

The euro has bounced since hitting a two-year low of $1.2042 in late July, buoyed by expectations that the European Central Bank will announce plans to help lower Spanish and Italian bond yields at its policy meeting on Sept. 6. The euro could come back under pressure if the ECB disappoints the market. Another event that the market awaits is a German constitutional court ruling on the European Stability Mechanism, the permanent European rescue fund, due on Sept. 12.

The medium-term outlook for the euro remains murky, but the single currency might rise to around $1.27 to $1.28 in the near term, said Sim Moh Siong, FX strategist for Bank of Singapore.

"There's probably a bit more room for the further unwinding of short euro positions in the crosses, so I think we might see a bit of a higher euro in the interim," he said.

The dollar, which had slid against the yen following the release of the Fed minutes on Wednesday, gained a bit of respite versus the Japanese currency, rising 0.1 percent to 78.59 yen .

Since U.S. economic indicators released after the Fed's most recent policy meeting were fairly upbeat, traders are divided on exactly what the Fed will decide at its next meeting in September, said a trader for a major Japanese bank in Bangkok.

The market is now hunting for clues on the latest thinking of Fed Chairman Ben Bernanke, who will give a speech at the annual informal conference of central bankers and economists at Jackson Hole, Wyoming at the end of this month.

"Views are split and I think we will get some sort of conclusion at Jackson Hole," the trader said.

FOREX-Euro hits 7-week high vs dollar

* Spain in negotiations with euro zone for aid-sources

* Merkel and Hollande unite in tough message for Greece

* Expectations of ECB action, Fed easing seen boosting euro/dollar

* Fed minutes prompt expectation of easing next month

By Julie Haviv

NEW YORK, Aug 23 (Reuters) - The euro rose for a fourth straight day against the dollar on Thursday to hit a seven-week high on a report that Spain is negotiating with the euro zone over conditions for aid, though a final decision to request a bailout has not been made.

In the talks aimed at bringing down Spain's borrowing costs, the favored option is that the existing European rescue fund, the EFSF, would purchase Spanish government bonds at primary auctions while the European Central Bank would intervene in the secondary market to lower yields, sources with knowledge of the matter told Reuters on Thursday.

The news added to risk sentiment that was already in play after the release of Federal Reserve minutes the previous day that hinted at more quantitative easing in the United States. Sur v eys on French and German business activity tha t wer e not as dour as feared als o benefited the euro.

"We got the pop (in the euro) because we are getting some clarity on this whole bailout package for Spain," said David Song, currency analyst at DailyFX in New York. "Suggestions of a more accelerated approach or common ground is what's helping the euro right now."

The euro last traded at $1.2564, up 0.3 percent on the day, after earlier hitting a peak of $1.2589, its highest since July 4.

Fed minutes on Wednesday showed the U.S. central bank may "fairly soon" opt for more stimulus, which investors expect to be a third round of quantitative easing, known as "QE3."

"While this does suggest that the Fed is one step closer to further policy easing, in our view such a move is not yet a 'done deal' for September given the somewhat firmer economic data released after the August meeting," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

The Fed has pledged to keep U.S. interest rates low through late 2014.

The foreign exchange markets should be bumpy in the coming weeks as expectations fluctuate ahead of European Central Bank and Fed September meetings, Serebriakov said.

"While there is still uncertainty about the exact policy mix for both central banks, our sense is that the net outcome is likely to be positive for risk sentiment and thus consistent with a weaker U.S. dollar trend," he said.

The dollar pared some of its losses against the euro after St. Louis Federal Reserve President James Bullard told CNBC television that data since the last policymakers' meeting on July 31-Aug. 1 had been somewhat better and that the minutes were "a bit stale."

GREECE EYED

Angela Merkel and Francois Hollande presented a united front towards Greece, telling Athens it should not expect leeway on its bailout agreement unless it sticks to tough reform targets.

The German and French leaders met in Berlin to fine-tune their message to Prime Minister Antonis Samaras, who begins a charm offensive in Berlin and Paris this week in the hope of persuading Europe's big powers that Greece deserves patience.

Analysts, however, saw scope for further gains for the euro in the near term due to expectations the European Central Bank will act to lower Spanish and Italian bond yields next month.

"There is a lot of momentum, people are still short of the euro and you have both sides of the equation, the Europe side and the U.S. side, coming together," said Audrey Childe-Freeman, head of foreign exchange strategy at BMO Capital Markets in London.

"Another round of Fed QE was something many people were talking about but not many were believing. If you look at previous times the Fed has done QE it is undeniably bearish for the dollar."

Childe-Freeman said if Federal Reserve Chairman Ben Bernanke confirms more QE is possible when he speaks at a conference in Jackson Hole, Wyoming, next week and if there are no "nasty negative shocks" from Europe, the euro could rise to $1.2760 -- the 50 percent retracement of the March to July selloff -- next month.

The dollar suffered its biggest one-day loss in nearly two months against the yen on Wednesday after the Fed minutes.

The U.S. dollar last traded down 0.1 percent against the Japanese yen at 78.48 yen with the session peak of 78.69 yen and a session low at 78.34, according to Reuters data.

USD/CAD Intraday Technical Analysis and Trading Recommendations for August 24, 2012

The USD/CAD pair was trading in oversold position within a wide range bearish channel which is depicted on the chart in red.

Recently, the USD/CAD pair broke through the upper limit of the short term bearish channel which is depicted on the chart in Blue indicating a possible bullish retracement towards price level of 0.9970 which was confirmed yesterday with successful retesting of the backside of the broken channel at 0.9888.

Breakout above the bearish Blue channel opens the way for the USD/CAD pair to visit the upper limit of the longer-term channel around the price level of 1.0025 as long as the pair is trading above the most recent low around 0.9840.

Price level of 1.0025 not only corresponds to Fibonacci levels of 50% and 78.6% of the most recent two bearish swings, but also corresponds to the upper limit of the long term bearish channel depicted on the chart. That's why price action should be watched there for a possible SELL entry with SL located above 1.0080.

Dollar Selling Extends into Asian Trade, Eurozone PMI Data on Tap

Talking Points

• US Dollar Selling Continues in Asia as FOMC Minutes Feed QE3 Outlook
• Australian Dollar Lags Comm Bloc Counterparts on Soft Chinese PMI Data
• Eurozone PMIs in Focus as the Next Key Inflection Point for Risk Trends

The US Dollar continued to edge lower against its top counterparts in overnight trade, extending a selloff sparked in the wake of minutes from Augusts’ Federal Reserve policy meeting. The report showed that many FOMC members thought additional easing would “likely be warranted fairly soon” unlessincoming data point to a “substantial and sustainable” strengthening in the economic recovery.

The remarks stoked hopes that additional stimulus would boost US demand for Asian exports, sending an MSCI benchmark gauge of regional stock performance 0.8 percent higher. The risk-sensitive commodity bloc currencies outperformed but the Australian Dollar lagged behind its counterparts after the HSBC Chinese Manufacturing PMI measure dropped to 47.8 in August, showing factory-sector activity shrank at the fastest pace since November 2011. China is Australia’s top export market and key source of demand driving its mining-sector boom.

Looking ahead, the spotlight turns to the preliminary set of Augusts’ Eurozone PMI figures. Another print below the 50 “boom-bust” level on the region-wide measure is expected to show manufacturing- and service-sector activity shriveled for the seventh consecutive month, though the pace of contraction remained unchanged from July.

The deep slump in Eurozone economic growth represents the most significant headwind facing global output this year. With that in mind, any signs of stabilization perceptible from the PMI data set are likely to boost risk appetite and compound downward pressure on the US Dollar. Needless to say, disappointing results have scope to dent sentiment and offer the greenback a lifeline as haven demand returns.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
2:00	CNY	Conference Board Leading Index (JUL)	236.4	-	234.8
2:30	CNY	HSBC Flash Manufacturing PMI (AUG)	47.8	-	49.3

Euro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
6:00	CHF	Trade Balance (CHF) (JUL)		2.19B	Medium
6:00	CHF	Exports (MoM) (JUL)	0.5%	-2.6%	Low
6:00	CHF	Imports (MoM) (JUL)	-	-3.1%	Low
6:00	EUR	German GDP s.a. (QoQ) (2Q F)	0.3%	0.3%	Medium
6:00	EUR	German GDP n.s.a. (YoY) (2Q F)	0.5%	0.5%	Medium
6:00	EUR	German GDP w.d.a. (YoY) (2Q F)	1.0%	1.0%	Medium
6:00	EUR	German Imports (2Q)	1.0%	0.0%	Low
6:00	EUR	German Exports (2Q)	1.2%	1.7%	Low
6:00	EUR	German Domestic Demand (2Q)	-	-0.3%	Low
6:00	EUR	German Capital Investment (2Q)	-1.5%	-1.1%	Low
6:00	EUR	German Construction Investment (2Q)	2.0%	-1.3%	Low
6:00	EUR	German Private Consumption (2Q)	0.2%	0.4%	Low
6:00	EUR	German Government Spending (2Q)	0.2%	0.2%	Low
7:00	EUR	French PMI Manufacturing (AUG P)	43.7	43.4	Medium
7:00	EUR	French PMI Services (AUG P)	50.0	50.0	Medium
7:30	EUR	German PMI Manufacturing (AUG A)	43.4	43.0	High
7:30	EUR	German PMI Services (AUG A)	50.1	50.3	High
8:00	EUR	Euro-Zone PMI Composite (AUG A)	46.5	46.5	High
8:00	EUR	Euro-Zone PMI Services (AUG A)	47.7	47.9	High
8:00	EUR	Euro-Zone PMI Manufacturing (AUG A)	44.2	44.0	High
8:30	GBP	BBA Loans for House Purchase (JUL)	27250	26269	Low
10:00	GBP	CBI Reported Sales (AUG)	16	11	Low

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.2461	1.2606
GBPUSD	1.5805	1.5958