Economist Dana Saporta at Dresdner says 10am data were better-than-expected. She says "The trend for sales of new homes should remain downward, but at least the pace of decline is slowing."

Morgan Stanley strategists Sophia Drossos and Yilin Nie note that over the past 10 days WTI crude has fallen over 14%. "This includes the decline during the week, which was one of the largest in dollar terms on record," they say. In contrast, the euro fell only 1.5%. The correlation between the euro and oil prices has increased to about 23% compared with about 8% for the (1999 to present) sample period. The correlation is stronger when oil is rising (20%) than when oil is falling (15%). "...Had we been told that crude oil prices would fall $20/bbl in the span of 10 days, we would have imagined that euro-dollar would have tested the bottom of its well established trading range at $1.54 - not resting comfortably in the middle of its range," the strategists say.

Stocks have moved lower following a negative announcement from a major rating agency as it relates to key government-sponsored enterprises (GSEs).
Standard & Poor's affirmed its AAA/A-1+ senior unsecured debt rating on Fannie Mae (-0.83) and Freddie Mac (-0.75).

The yen weakened against all of the other major currencies as an unexpected increase in orders for U.S. durable goods last month bolstered speculation that investors will buy higher-yielding assets funded in Japan.
The dollar extended its gain versus the yen and pared its loss against the euro as sales of new homes fell in June less than forecast and a gauge of consumer confidence unexpectedly advanced this month. Traders raised bets that the Federal Reserve will increase borrowing costs in September.
Futures traded on the Chicago Board of Trade showed a 44 percent chance the Fed will increase its 2 percent target rate for overnight lending between banks by at least a quarter- percentage point by Sept. 16, up from 41 percent odds yesterday. Policy makers next meet Aug. 5.
The U.S. currency was headed for a 1.1 percent increase against the euro this week, the biggest since mid-June, and advanced 0.8 percent versus the yen. Japan's currency has gained 0.2 percent against the euro.
``We are bullish on the dollar,'' said Steven Englander, a currency strategist at Lehman Brothers Holdings Inc. in New York. ``The U.S. economy continues to surprise on the upside, while the rest of the world surprises on the downside.''
The Reuters/University of Michigan final index of consumer sentiment increased to 61.2 this month from 56.4 in June. The measure averaged 85.6 in 2007 and is up from a preliminary reading of 56.6 in early July.
Purchases of new homes fell 0.6 percent to a 530,000 pace in June, from an upwardly revised 533,000 in the prior month, the Commerce Department said. The median forecast of 75 economists was for a decline to a 503,000 pace from a previously reported 512,000 for May.
European Central Bank policy makers still have scope to raise interest rates, according to council member Klaus Liebscher. The Frankfurt-based central bank increased its main refinancing rate to 4.25 percent on July 3, citing the need to control inflation.
``We haven't exhausted our room for maneuver,'' said Liebscher, who also heads Austria's central bank, in an interview in his Vienna office yesterday. ``I'm not that surprised'' by the latest economic data, he added. ``We expected a weaker second and maybe third quarter.''

The major indices continue to chop along. Gains remain appreciable.
Large-cap tech names have been performing well, reversing part of yesterday's steep declines. The Nasdaq 100 is up 1.4% as heavyweights Microsoft (+0.33) and Google (+13.96) attract buyers.

Stocks gain as better-than-expected reports come from housing and manufacturing sectors. Oil prices plummet, contributing to advance.
Stocks bounced back Friday from a steep decline in the previous session, as investors welcomed encouraging reports on new home sales and factory orders.
Also, oil prices sharply declined, leading stocks higher.
About an hour after the market's open, the Dow Jones industrial average and the broader Standard & Poor's 500 index index both gained 0.4% from Thursday's close.
The tech-heavy Nasdaq composite index climbed 0.7%.
Stocks rose after the opening bell as investors cheered a surprise rise in factory orders. The advance continued as oil prices declined and a housing market report dealt a softer-than-expected blow.
Orders for durable manufactured goods rose unexpectedly in June, according to a U.S. Commerce Department report released Friday. Big-ticket orders to factories for items like cars, appliances and machinery rose 0.8% last month, far surpassing economists' forecast of a 0.4% decline.
Also sending stocks soaring was an encouraging report on new home sales. Sales of new homes fell 0.6% in June to an annual sales rate of 530,000 from an upwardly revised rate of 533,000 in May, according to the U.S. Census Bureau. Despite home sales slipping, that level was well above economists' expectations.
Investors cheered the news from the battered U.S. housing market, especially as Thursday brought a dour report on sales of homes by homeowners. Existing home sales slipped 2.6% in June, according to the National Association of Realtors.
Oil prices fell $2.17 to $123.32 a barrel on renewed concerns about demand destruction. Crude has plummeted about $24 from its high of $147.27 set on July 11.
A day after Ford reported its worst quarterly loss in company history, Honda Motor. reported a record profit for its fiscal first quarter. The Japanese carmaker said U.S. sales slumped, but sales grew rapidly in new markets.
Video rental company Netflix said profit rose 4%, boosted by an increase in subscriptions and the introduction of a set-top box that can deliver streaming video directly to a customer's television.
COMEX gold for August delivery rose 40 cents to $922.70 an ounce.
Treasury prices fell Friday, bringing the yield on the benchmark 10-year note up to 4.04% from 4.01% late Thursday. Bond prices and yields move in opposite directions.

U-Mich economist Richard Curtin said in his note, "Consumer confidence rose by a surprising amount in July, with gains posted across all income and age groups as well as among all regions of the country... (but this) still points toward declines in the pace of spending in late 2008 and early 2009. The gains could signal that consumers simply overestimated the extent of the economic damage or even that they now sense that the end of the economy's decline is on the distant horizon."

"The U.S. housing market is showing tentative signs of stabilizing, at least it doesn't appear to be in free-fall anymore."

After advancing nearly 0.9% the stock market is paring its gains as the financial sector trades without direction.
Financials were down as much as 2.2% earlier, but managed to swing to a 2.2% gain, influencing the broader market with each move. The financial sector is now back in the red, down 0.7%. Particular weakness is evident in the thrifts and mortgages industry where Fannie Mae (-1.40) and Freddie Mac (-0.74) are underperforming.

HFE economist Ian Shepherdson says Jun rebound in auto orders "is noise; the trend is strongly downwards, -17.3% y/y. Orders for electrical equipment, metals and machinery all rose but the data do not tell us how much of this was defense-related. Overall, then, not a bad report."

EUR/USD: $1.5750, $1.5770
USD/JPY: Y107.75/80
CHF/JPY: Y103.65
AUS/USD: $0.9700

The stock market remains on track for an upward start, according to futures (S&P futures+3.5, Nasdaq futures +8.5).
Durable goods orders made during June increased 0.8%, which is better than the prior increase of 0.1% and the 0.3% downturn that economists forecast. Excluding transportation, orders increased 2.0%, up from the 0.5% downturn in the prior month and above the 0.2% downturn that was expected.
After yesterday's close trendy footwear maker Crocs issued downside guidance that sent its shares plummeting in after-hours action. Casino operator Wynn Resorts announced better-than-expected earnings results, as did trucking outfit YRC Worldwide.

Eased down to $1.9910, as rate reacted to the release of stronger than expected US durable goods data, but able to settle back above $1.9920. Rate tracking euro-dollar moves as euro-sterling remains buoyed above stg0.7880 support. Cable bids seen placed to $1.9900, more between $1.9905/895, stronger toward $1.9870. Offers now seen placed to $1.9950,
stronger toward earlier rally highs at $1.9980.

The following data were issued

06:00GermanyImport prices (June) 1.5% 1.0% 2.4%

06:00GermanyImport prices (June) Y/Y 8.9% 8.4% 7.9%

06:00GermanyImport prices excluding oil (June) Y/Y 2.5% - 2.0%

08:00EU(15)M3 money supply (June) adjusted Y/Y 9.5% 10.4% 10.5%

08:00EU(15)M3 money supply (3 months to June) adjusted Y/Y 9.9% 10.4% 10.4%

08:30UKGDP (Q2) preliminary 0.2% 0.2% 0.3%

08:30UKGDP (Q2) preliminary Y/Y1.6% 1.7% 2.3%

The euro rose against the dollar after European Central Bank council member Klaus Liebscher said policy makers have room to raise interest rates a second time this year even as economic growth falters. Liebscher said ECB policy makers still have scope to raise interest rates. The Frankfurt-based central bank raised its main refinancing rate to 4.25% on July 3, citing the need to control inflation.
The dollar still headed for a second weekly advance against the euro as traders added to bets the Federal Reserve will raise interest rates from 2% this year. Philadelphia Fed President Charles Plosser said on July 23 rates should rise ``sooner rather than later'' to quell inflation.

EUR/USD opened in early Europe around $1.5712. Demand continued into Europe with rate lifting on to $1.5732 before euro fell briefly under $1.5700 amid the much weaker than expected eurozone M3 data. Euro recovered by the end of the morning to make a late show above $1.5750. Strong offers $1.5750/60, stops $1.5765, bids $1.5690.
GBP/USD opened early Europe at $1.9875. Early Europe extended this moveto $1.9894, easing off to $1.9865. Release of UK GDP, not providing any nasty surprises, allowed cable to recover, the move up gaining pace on break above $1.9900 as stops triggered taking it on to a high of $1.9976.
USD/JPY opened in early Europe around Y106.77 before rising up to Y107.30/40. Dlr-yen offers Y107.40/45, stronger Y108.00/20, bids Y106.60/50.

Today’s focus on US data, including Durable goods orders, new home sales and Un Michigan consumer confidence index.
The Commerce Department will today report sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, a separate survey of economists shows.

EUR/JPY extended the rally above Y168.00, with traders reporting strong German demand with the rate able to advance to highs for the day just shy of Y169.00. Small offers noted here, stronger at Y169.50 and on approach to barrier interest at Y170.00.

EUR/USD: $1.5750, $1.5770
USD/JPY: Y107.75/80
CHF/JPY: Y103.65
AUS/USD: $0.9700

The euro was supported by a sharp rise in German import prices, which coupled with hawkish talk from the European Central Bank suggest interest rates are still more likely to rise than fall in the euro area. German import prices increased 1.5%.

In the UK, the pound was slightly stronger, recovering from losses yesterday -- when retail sales data plunged. GDP data failed to support pound as they showed economy grew only 0.2% in the second quarter versus the median forecast of +0.3% q/q.

The dollar, meanwhile, has continued to remain weak after poor housing data on Thursday, which reminded markets that the U.S. economy is still not out of the woods. This has created a negative bias in the run-up to economic data later today. New home sales in June are expected to total an annual rate of 505,000 units, down from 512,000 annual units in the previous month and the seventh consecutive decline.

The University of Michigan consumer confidence indicator is expected to come.

Resistance 3: Y108.80
Resistance 2: Y108.20
Resistance 1: Y107.80
Current price: Y107.28
Support 1: Y106.60
Support 2: Y106.00
Support 3: Y105.30
Comments: Dollar recovers, getting close to resistance at Y107.80/90 with a break above will target Y108.20 and Y108.80. Support zone remains between Y106.40/60. Further support mentioned at Tuesday’s low on Y106.00/05 and Y105.30.

Resistance 3: Chf1.0520
Resistance 2: Chf1.0460
Resistance 1: Chf1.0400
Current price: Chf1.0328
Support 1: Chf1.0230
Support 2: Chf1.0180
Support 3: Chf1.0140
Comments: Dollar still under pressure with strong support at Chf1.0230. Below correction may extend to Chf1.0180 and stronger support on Chf1.0140 (Tuesday’s low). Resistance comes near yesterday’s high on Chf1.0400. Break above will target Chf1.0460 and then - Chf1.0520.

Resistance 3: $2.0130
Resistance 2: $2.0070
Resistance 1: $1.9960
Current price: $1.9940
Support 1: $1.9820
Support 2: $1.9780
Support 3: $1.9720
Comments: Pound challenges resistance zone between $1.9940/60. Above the rise may extend to $2.0070 (Jul 17 high). Strong zone is near $2.0130 (Jul 15 high). Support is around $1.9820. Below correction may dip to $1.9780 and $1.9720.

Resistance 3:$1.6030
Resistance 2: $1.5940
Resistance 1: $1.5800
Current price: $1.5730
Support 1: $1.5680
Support 2: $1.5580
Support 3: $1.5520
Comments: Euro rises, getting close to $1.5800. Stronger level is near $1.5940 (Tuesday’s high) with key resistance comes at life-time high on $1.6030. Support comes at $1.5680. Below at $1.5580 and $1.5520.

GBP/USD breaks above $1.9900, with traders noting stops being triggered on the move. Currently rate holds near $1.9940. Offers come at $1.9920, a break above here to open a move on toward $1.9950/60.

EUR/USD: $1.5750, $1.5770
USD/JPY: Y107.75/80
CHF/JPY: Y103.65
AUS/USD: $0.9700

EUR
Bids: $1.5670, $1.5625/15, $1.5600/1.5590
Offers: $1.5735, $1.5750, $1.5780/85, $1.5800, $1.5825

JPY

Bids: Y106.50, Y106.00
Offers: Y107.00, Y107.45/50, Y108.00/20

GBP
Bids: $1.9850, $1.9830, $1.9800, $1.9780/70
Offers: $1.9880/85, $1.9900, $1.9920, $1.9950/60

AUSSIE
Bids: $0.9550, $0.9500, $0.9480
Offers: $0.9600, $0.9630/40

The yen gained, set for its first weekly advance against the euro since May, as a decline in stocks prompted traders to pare holdings of higher-yielding assets funded in Japan.
The dollar declined against the yen and the euro before government reports forecast to show U.S. durable-goods orders and new-home sales dropped in June.
The yen rose 2.5% against the New Zealand dollar this week, its biggest gain since June 6. The Reserve Bank of New Zealand said yesterday it may reduce borrowing costs further after policy makers cut the benchmark interest rate by a quarter point to 8%. Japan's currency also gained 1.3% against the Australian dollar and 0.9% per British pound this week.

EUR/USD rose from $1.5660 to $1.5730 before retreating to $1.5703.
GBP/USD also rose from $1.9830 to $1.9890.
USD/JPY fell from Y107.45 to Y106.55.

Today’s focus on US data, including Durable goods orders, new home sales and Un Michigan consumer confidence index.
The Commerce Department will today report sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, a separate survey of economists shows.

Japan's stocks dropped, snapping a three-day rally, on concern overseas earnings will shrink after Canon Inc. said profit declined on the stronger yen and slowing sales in the U.S. and Europe. The Nikkei 225 Stock Average declined 268.55, or 2 percent, to close at 13,334.76 in Tokyo, halting its longest winning streak since June 2. The broader Topix index fell 34.29, or 2.6 percent, to 1,298.28, the deepest dive since March 17.

Stock market fixing:
Nikkei 225 +290.38 +2.2% 13,603.31
Topix +29.22 +2.2% 1,332.57
DAX 30 -95.39 -1.46% 6,440.70
САС 40 -60.75 -1.38% 4,347.99
FTSE 100 -87.60 -1.61% 5,362.30
Dow -283.10 -2.43% 11,349.28
Nasdaq -45.77 -1.97% 2,280.11
S&P -29.65 -2.31% 1,252.54
10YR -1.3200 -0.318% 4.016%
NYMEX Crude Oil +1.05 +0.84% 125.49
Gold -0.10 -0.01% 922.70

Japan's stocks rose a third day as the stronger dollar and a drop in oil prices sparked optimism Japanese companies' overseas sales will weather a global slowdown.
Sony Corp. surged the most in seven weeks as the dollar rose to the highest in a month. Toyota Motor Corp. advanced after crude oil traded near a seven-week low, while oil explorer Inpex Holdings Inc. sank to the lowest in four months. Mitsubishi UFJ Financial Group Inc. led banks higher after U.S. lawmakers approved a rescue plan for embattled mortgage lenders Fannie Mae and Freddie Mac.
Sony added 3.9%, the biggest jump since June 2. Honda Motor Co. advanced 3.8%, the most since June 16. Toyota jumped 5.1%.
Inpex, Japan's largest oil and gas explorer, sank 5.5%, the lowest since March 21. Closest rival Japan Petroleum Exploration Co. dropped 1.5%.
Mitsubishi UFJ added 2.2%, the highest since June 19, and Orix Corp. climbed 5.8%.

European stocks fell after German business confidence sank the most since September 2001 and forecasts from Daimler AG and EasyJet Plc sent carmakers and airlines lower.
Daimler tumbled 9.6% after cutting its profit forecast. EasyJet dropped after saying earnings will slide as much as 46%. ABB Ltd. slumped the most in four months as the world's biggest builder of electricity grids posted earnings that missed analysts' estimates. BHP Billiton Ltd., the largest mining company, retreated to the lowest since April as metals declined.
Business confidence in Germany, Europe's largest economy, declined the most since the Sept. 11 terrorist attacks in 2001, signaling growth is faltering. The Ifo institute said its business climate index fell to 97.5 from 101.2 in June. Economists expected a drop to 100.1, based on a survey.
Renault SA lost 3.4%. Ford Motor Co. of the U.S. also fueled the declines in automakers after posting a second-quarter loss of $8.7 billion.
EasyJet fell 10% after saying fiscal-year pretax profit will slump as much as 46% because of higher fuel expenses.

Dow tumbles more than 100 points as investors jeer huge losses from carmaker, a sharp rise in initial jobless claims and a sharp decline in existing home sales.

The National Association of Realtors reported that sales of homes by homeowners fell 2.6% to a lower-than-expected 4.86 million annual rate in June. The economy has slumped as home sales continue to decline, because American homeowners have lost much of their purchasing power, leading to a decline in consumer spending.
Also driving down stocks was a report from the U.S. Labor Department that said new unemployment claims rose much more than expected last week. New applications filed for jobless benefits rose by a seasonally adjusted 34,000 to 406.
Furthermore, the struggling U.S. automaker Ford reported a huge $8.7 billion net loss for the second quarter. The third largest automaker by sales said it would restructure its North American product line to include more of the fuel-efficient vehicles, as rising gas prices have severely hampered consumer interest in big trucks and SUVs. Shares of Ford fell 6% in early trading.
Internet retailer Amazon.com , posted better-than-expected second-quarter earnings after the market's close Wednesday. Amazon also boosted its 2008 revenue projections, as CEO Jeff Bezos said high gasoline prices may be luring shoppers to its Web site.

The euro suffered fresh falls after a raft of weak data out of the region suggested that the economy is faltering rapidly.Data showed that both the manufacturing and services sectors in the area is shrinking, highlighting that a recession is now a real possibility. The euro zone Purchasing Managers Index for services slipped to a five year low of 48.3 in July from 49.1 in June. Euro zone manufacturing activity also slumped, falling to 47.5 from 49.2 in June. Both figures were below expectations.
At the same time, a key survey from Germany, the Ifo index also came in weaker than expected. The Ifo research institute said its July business climate index fell to 97.5 from 101.2 in June, dropping below analysts' forecasts of a decline to 100.0. The figure for June was revised down from 101.3.
Separately, the pound also fell prey to weak data, this time on the state of UK retail sales which suffered a massive slump in June. Retail sales in the UK plunged in June by their biggest amount since records began in 1986 but inflationary pressures, particularly within food, continue to mount, official figures showed today. The office for National Statistics said retail sales in June dropped by 3.9%.
Later dollar came under pressure after U.S. home resales dropped to a 4.86 million annual rate in June, the lowest level in a decade, from a 4.99 million pace the prior month.

EUR/USD printed high on $1.5712 before retreating to $1.5630. Later rate rebounded to $1.5680/90.

GBP/USD tested lows around $1.9810 before rate rose to $1.9870.

USD/JPY failed to break above Y108.00, spurring correction to Y107.30.

Today’s focus on US data, including Durable goods orders, new home sales and Un Michigan consumer confidence index.
The Commerce Department will today report sales of new houses dropped to an annual pace of 503,000 from 512,000 in May, a separate survey of economists shows.

Resistance 3: Y108.80
Resistance 2: Y108.20
Resistance 1: Y107.80
Current price: Y106.76
Support 1: Y106.40
Support 2: Y106.00
Support 3: Y105.30
Comments: Dollar declines, challenging support zone between Y106.40/60. Further support mentioned at Tuesday’s low on Y106.00/05 and Y105.30. Resistance comes at Y107.80/90 with a break above will target Y108.20 and Y108.80.

Resistance 3: Chf1.0520
Resistance 2: Chf1.0460
Resistance 1: Chf1.0400
Current price: Chf1.0338
Support 1: Chf1.0230
Support 2: Chf1.0180
Support 3: Chf1.0140
Comments: Dollar retreats with strong support at Chf1.0230. Below correction may extend to Chf1.0180 and stronger support on Chf1.0140 (Tuesday’s low).
Resistance comes near yesterday’s high on Chf1.0400. Break above will target Chf1.0460 and then - Chf1.0520.

Resistance 3: $2.0130
Resistance 2: $2.0070
Resistance 1: $1.9940
Current price: $1.9862
Support 1: $1.9820
Support 2: $1.9780
Support 3: $1.9720
Comments: Techs on pound hasn’t changed much. Resistance comes at hourly high on $1.9940. Above the rise may extend to $2.0070 (Jul 17 high). Strong zone is near $2.0130 (Jul 15 high). Support is around yesterday’s low on $1.9820. Below correction may dip to $1.9780 and $1.9720.

Resistance 3:$1.5940
Resistance 2: $1.5800
Resistance 1: $1.5710
Current price: $1.5706
Support 1: $1.5630
Support 2: $1.5580
Support 3: $1.5520
Comments: Euro tests yesterday’s high on $1.5710 with further resistance is near $1.5800. Stronger level is near $1.5940 (Tuesday’s high). Support comes at yesterday’s low on $1.5630. Below at $1.5580 and $1.5520.

High Low Close
EUR/USD 1.5713 1.5625 1.5677
USD/JPY 107.97 107.17 107.39
GBP/USD 1.9988 1.9816 1.9862
USD/CHF 1.0406 1.0350 1.0365

EUR/JPY 169.40 167.87 168.36
EUR/GBP 0.7906 0.7843 0.7891
GBP/JPY 215.69 212.76 213.32
GBP/CHF 2.0753 2.0559 2.0588

Change % Change Last
Nikkei 225 +290.38 +2.2% 13,603.31
Topix +29.22 +2.2% 1,332.57
DAX 30 -95.39 -1.46% 6,440.70
САС 40 -60.75 -1.38% 4,347.99
FTSE 100 -87.60 -1.61% 5,362.30
Dow -283.10 -2.43% 11,349.28
Nasdaq -45.77 -1.97% 2,280.11
S&P -29.65 -2.31% 1,252.54
10YR -1.3200 -0.318% 4.016%
NYMEX Crude Oil +1.05 +0.84% 125.49
Gold -0.10 -0.01% 922.70

06:00 Germany Import prices (June) 1.0% 2.4%
06:00 Germany Import prices (June) Y/Y 8.4% 7.9%
06:00 Germany Import prices excluding oil (June) Y/Y - 2.0%
08:00 EU(15) M3 money supply (June) adjusted Y/Y 10.4% 10.5%
08:00 EU(15) M3 money supply (3 months to June) adjusted Y/Y 10.4% 10.4%
08:30 UK GDP (Q2) preliminary 0.2% 0.3%
08:30 UK GDP (Q2) preliminary Y/Y 1.7% 2.3%
12:30 USA Durable goods orders (June) -0.5% 0.0%
12:30 USA Durable goods orders excluding transportation (June) - -0.9%
12:30 USA Durable goods orders excluding defence (June) - -0.6%
13:55 USA Michigan sentiment index (July) final 56.0 56.6
14:00 USA New home sales (June) 507K 512K