Dollar Resumes Its Medium Term Decline

Asian Morning Update

Yesterday was a particularly quiet day on the release front with the only other stats published being the June ISM Factory data which managed to edge above forecast of 55.0 to come in at 56.0. The orders index rose 0.7 to 60.3 and prices paid dipping nicely to 68.0 and just below forecasts of 69.0. The 3-month average is now rising and there are early signs of the recovery that has been forecast for H2 but production is still around 13% lower than a year ago and the housing market is obviously a lot lower.

So even though the European manufacturing PMI numbers were net disappointing with only Germany putting in a positive number to save the EU face, the level of growth still remains stronger. This allowed the Dollar to resume the downtrend directly and approach the 1.3681 level against the Euro. The Pound has pushed above the 2.0131 high and this keeps the medium term targets at 1.40-1.41 Euro and 2.0505 Pound well on line to be met later this month before the August summer doldrums take us into a correction.

With tomorrow being a U.S. bank holiday we shouldn’t get the same degree of weakness – and without having done the analysis I can’t say whether the first part of the move is over just yet. However, tomorrow should provide consolidation and probably Thursday also with the BOE and ECB rate decisions. Who knows this could even last into next week given that the pullbacks since the Dollar highs have been so shallow it tends to point to a rather large correction now before the next leg lower.

More later when the analysis is complete.

Asian economic releases expected from Asia today are:

Japan June Monetary Base (YoY) - 4.2%
Australia May Retail Sales (MoM) +0.7%
Australia May Building Approvals (MoM) - 1.4%