The Forex Daily Digest – August 12, 2009

The USD held losses against the JPY and the EUR yesterday after an auction of $37 billion in U.S. Treasury notes. And government data showed that U.S. non-farm productivity in the second quarter rose at the fastest pace in six years as American companies cut costs to protect their profits. The Labor Department said productivity rose at a 6.4 percent annual rate, that’s the biggest gain since the third quarter of 2003.

Deutsche Bank AG said that the EUR will probably fall to 130 yen by the end of the year after it failed to break through so-called resistance at 141.04 yen. Resistance at that level represents the 50 percent retracement of the EUR’s decline from last year’s high of 169.96 yen reached toward the end of July, to this year’s low of 112.12 in the middle of January. Since reaching January’s low, the euro has gained 22 percent against the yen.

The CAD dropped the most in seven weeks as global stocks fell and traders pared their bets on higher-yielding currencies before this afternoon’s interest-rate decision by the U.S. Federal Reserve. The Loonie weakened 2.4 percent against the JPY as investors dropped riskier positions. Canada Mortgage and Housing Corp. reported that Canadian housing starts unexpectedly declined in July - down 4.1 percent.

U.S. gold futures ended slightly higher in quiet trading yesterday as the market took a breather amid a resilient USD, with bullion investors focusing on the upcoming Fed policy-setting statement. The European Central Bank and 18 other banks agreed to sell no more than a combined 400 metric tons of the metal a year through September 2014. That’s less than the annual cap of 500 tons in the current agreement, which expires September 26th.

In economic news, billionaire financier George Soros said he believes the U.S. economy has hit bottom and the current quarter will see positive growth due to the government's stimulus spending programs. Meantime, President Obama delivered a cautious note, saying the economy is "not out of the woods" despite signs lagging business investment was coming back to life. Last week, the White House indicated there were no plans for a second stimulus package.

It’s going to be a busy economic day with reports scheduled for release that could possibly affect your trading. Watch for the Trade Balance numbers for June at 8:30 am (Eastern Time). Later in the morning, the regular Wednesday Crude Inventories report is scheduled for release. At 2 pm, the July Treasury Budget report will hit the street and then at 2:15 pm the FOMC announcement will be announced.

In earnings today, look for BHP Billiton PLC, Toll Brothers, Great Basin Gold, Bally Technologies Inc., ING Groep NV, Sara Lee, Liz Claiborne Inc., and Tower Semiconductor.

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