Expert Analysis of Today's Market

Dollar Oversold

Hans Nilsson 2007-07-23

In NY trading Monday, the dollar was close to recent lows on concerns over US subprime mortgage problems. The Australian and New Zealand dollars hit fresh cyclical highs overnight against the dollar. New Zealand’s dollar rose above the $0.80 level for the first time in a quarter of a century on speculation the Reserve Bank of New Zealand will hike interest rates. The EUR/USD briefly touched a fresh lifetime high of important resistance at 1.3846. The dollar is oversold against most key currencies. We sell one unit of GBP/USD as the dollar may be supported by possibly strong US data this week.

The USD/JPY fell to 120.80 overnight on unwinding carry-trades but pared losses on rising US equity prices. Important support at 121 has held so far. If this support was broken, the USD/JPY would drop further. That is unlikely to happen unless the stock markets fall.

Financial and Economic News and Comments

US & Canada

No major economic data today.

Europe

UK annual house price inflation fell in July, according to the latest Rightmove house price index. Asking house prices rose 0.3% m/m in July, down from the 0.8% m/m rise in June. Home prices rose 10.3% y/y, below the 11.2% expected.

Asia-Pacific

Sales at supermarkets in Japan fell 1.5% y/y in June to ¥1.138 trillion, down for the 18th consecutive month as higher beverage sales were offset by weaker sales of vegetables, an industry group said.

News reports suggested that the LDP is likely to lose the upper house election and this could be the end of Prime Minister Abe’s rule.

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