The end of the joy ride in EURUSD?

• SW CPI Headline Rate MoM/YoY (Jul) out at -0.1%/4.4% as expected.
• SW CPI Underlying MoM/YoY (Jul) out at -0.3%/3.2% vs. -0.3%/3.2% expected.
• NO Industrial Production MoM/YoY (Jun) out at -0.7%/5.9% vs. 1.6%/2.8% prior.
• NO Ind. Prod. Manufacturing MoM/YoY (Jun) out at -1.2%/4.7% vs. -1.3%/5.3% expected.
• UK HBOS House Prices MoM/YoY (Jul) out at -1.7%/-8.8% vs. -1.5%/-8.6% expected.
• GE Industrial Production MoM/YoY (Jun) out at 0.2%/1.7% vs. 0.8%/1.5% expected.
• UK BoE Rate Announcement out at 5.00% (unchanged) as expected.
• E-Z ECB Rate Announcement out at 4.25% (unchanged) as expected.
• CA Building Permits MoM (Jun) out at -5.3% vs. -1.0% expected.
• US Initial/Continuing Claims out at 455K/3311K vs. 425K/3255K expected.
• US Pending Home Sales MoM (Jun) out at 5.3% vs. -1.0% expected.
• US EIA Natural Gas Storage Change out at 56 vs. 62 expected.
• US ICSC Chain Store Sales YoY (Jun) out at 2.6% vs. 3.4% expected.
• US Consumer Credit (Jun) out at $14.3B vs. $6.3B expected.
• JN Bank Lending incl. Trusts YoY (Jul) out at 1.8% vs. 2.0% expected.
• JN Eco Watchers Survey Current/Outlook (Jul) out at 29.3/30.8 vs. 28.9/32.1 expected.
• SZ Unemployment Rate (Jul) out at 2.3%/2.5% as expected.

• Canadian July Unemployment (11:00)
• US 2Q Nonfarm Productivity (12:30)
• US 2Q Unit Labor Costs (12:30)
• US Jun Wholesale Inventories (14:00)

Market Comments
 

With Trichet focusing on growth concerns in his post-rate decision comments and softening his earlier tone on inflationary pressures, the euro-bears have taken their long awaited cue to move the EURUSD near March lows. While we have seen virtually unmoving currency markets over the past month and a half, with no key market data releases managing to break the major trading ranges, the unwinding at EURUSD has come at the most unexpected moment. Pushing for a key support at 1.5132, which also marks 123& fibo level (1.6040 - 1.53), the pair remains well-offered below the 200 day MA at 1.5227. A decisive break of 1.5132 will open the scope all the way to 1.5020-1.50 zone.

Similar unwinding can be observed across the currency markets with USDZAR witnessing a significant reversal in the recent rand gains and USDTRY edging back towards the 1.1940 resistance having visited below 1.15 territory only earlier this week.

Whether this marks the decisive turnaround in EURUSD and in the fortunes of euro as well as other higher yielding carry trades remains to be seen, but all the ingredients seem to be placed together for continued weakness in euro.

The corresponding picture in the USD index is not all that different from the above depiction of dollar strength, with the index trading above the 200 daily SMA and now capped only by the longer term resistance at 75.35