Friday 25/07/2014 - Midday comment

·         The dollar traded unchanged or higher against most of its G10 peers during the European morning Friday. It was higher against NZD, CAD, CHF, EUR, JPY and GBP, in that order, and was virtually unchanged against AUD and NOK. The greenback was lower only against SEK.

·         The Germany Ifo Business Climate Index fell to 108.0 in July from 109.7 the previous month. This was the third consecutive drop in the index, since the geopolitical tensions are most likely impacting the German economy. The expectations index also declined for a third successive month, to reach its lowest level since August 2013. EUR depreciated approximately 0.15% at the release of the news, giving back all the gains that it made after Thursday’s strong PMI readings.

·         The first estimate of UK GDP for Q2 was +0.8% qoq, the same pace as the final Q1 figure and in line with the market forecast. Sterling strengthened slightly at the release but gave away all the gains immediately, as at this stage data content in the first estimate is less than half of the total required for the final Q2 output figure. GBP/USD continued to weaken, probably due to expectations of a rebound in the US durable goods orders for June, coming out later in the day.

·         Copper has been the best-performing asset this week of the currencies and commodities that we track on a daily basis. The higher-than-expected rise in China’s PMI has pushed copper higher. The futures today continued yesterday’s rally and at the time of writing the price is trading marginally below the resistance barrier of 3.2775 (R1). During the Asian morning Thursday, the metal emerged above the 3.2245 hurdle, signaling the completion of an inverted head and shoulders formation and reversing the prior down path to an uptrend. The price structure remains higher highs and higher lows and a clear move above the 3.2775 (R1), is likely to target the resistance zone of 3.2920 (R2). Nevertheless, although the shot-term picture remains to the upside, zooming on the 30-minutes chart, the RSI fell below its 70 level, while negative divergence is identified between the MACD and the price action. This raises concerns for a possible corrective wave before the longs take over the reins again, as we expect.

·         Support: 3.2670 (S1), 3.2515 (S2), 3.2335 (S3)

·         Resistance: 3.2775 (R1), 3.2920 (R2), 3.3000 (R3)