Commodity Currencies Soar on Risk Appetite

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Commodity currencies are all strong today as boosted by recovery in global risk appetite on optimism that Greece would avoid an immediate default. Data from Canada maintains a firm tone in the loonie. Canadian GDP avoided a contraction in May and was flat m/m. Crude oil is staying firm around 95 level for the moment and helps support the loonie, which will likely extend the CPI triggered rally against dollar in near term. This week's data fuel speculation that while BoC would likely be on hold in Q3, it may restart tightening in Q4.

New Zealand dollar rises to new record high against dollar today, getting additional boost from RBNZ Governor Bollard and confidence data. Bollard said that "rising commodity prices are improving export incomes but putting pressure on the exchange rate." Bollard noted that the New Zealand economy will continue to be driven by growth in our East Asia and Australian trading partner" and "volatility will pose challenges for monetary policy." NBNZ business confidence jumped sharply from 38.3 to 46.5 in June.

Greece's development will remain the focus of markets in near term. The article-by-article approval of the austerity plan is expected to be just a formality. Investors are expecting EU and IMF to approve release of the EUR 12b tranche of the EUR 110 bailout package to Greece in July when finance minister meet on July 3. Meanwhile, focus is gradually shifting to the formulation of the second bailout package for Greece, and in particular, on how private investors would be involved. Some details would be released after German banks meet with the Finance ministry.

Sterling is one of the weakest currency today, as driven by strong rally in EUR/GBP. Economists continue to delay the expectation of rate hike and some are now forecasting BoE to be on hold till next Q2 2012. Economic data from UK provided no help to the poind neither, with Gfk consume sentiment dropped more than expected to -25 in May. Nationwide house price index was flat in June, below expectation of 0.1% mom rise as demand in the housing market remained subdued.

Other data released today saw US initial jobless claims roe to 428k in the week ended June 25. Eurozone CPI was unchanged at 2.7% yoy in June, M3 money supply grew 2.4% yoy in May. German unemployment dropped less than expected by -8k in June while unemployment rate was unchanged at 7%. Japan housing starts rose 6.4% yoy in May, PMI manufacturing dropped to 50.7 in June.

USD/CAD Mid-Day Outlook

Daily Pivots: (S1) 0.9650; ( P ) 0.9737; (R1) 0.9785; More .

USD/CAD's decline is still in progress and reaches as low as 0.9653 so far in early US session. Intraday bias remains on the downside with 0.9714 minor resistance intact. As noted before, , rebound from 0.9444 low should have completed at 0.9912 already. Further decline is now expected to retest 0.9444 low next. On the upside, above 0.9714 minor resistance will turn bias neutral and bring consolidations. But recovery should bel limited below 0.9912 resistance and bring fall resumption.

In the bigger picture, at this point, there is no indication that medium term down trend from 2009 high of 1.3063 has completed yet. Outlook will remain bearish as long as 0.9973 resistance (38.2% retracement of 1.0851 to 0.9444 at 0.9981) holds and further fall could be seen towards 0.9056 key support (2007 low). Though, we'd again start to look for reversal signal as USD/CAD approaches this key support level. Meanwhile, sustained break of 0.9973 will suggest that USD/CAD has indeed bottomed out already and should bring stronger rally towards 1.0851 key medium term resistance.


Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
22:45 NZD Building Permits M/M May 2.20% 3.20% -1.60% -1.20%
23:01 GBP GfK Consumer Sentiments Jun -25 -24 -21
23:15 JPY Nomura/JMMA Manufacturing PMI Jun 50.7
01:00 NZD NBNZ Business Confidence Jun 46.5
05:00 JPY Housing Starts Y/Y May 6.40% 3.10% 0.30%
07:55 EUR German Unemployment Change Jun -8K -17K -8K
07:55 EUR German Unemployment Rate Jun 7.00% 7.00% 7.00%
08:00 EUR Eurozone M3 Y/Y May 2.40% 2.10% 2.00%
09:00 EUR Eurozone CPI Estimate Y/Y Jun 2.70% 2.80% 2.70%
12:30 USD Initial Jobless Claims 428K 420K 429K
12:30 CAD GDP M/M May 0.00% -0.10% 0.30%
13:45 USD Chicago PMI Jun
54 56.6
14:30 USD Natural Gas Storage
80B 98B


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Commodities

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