ZEW Survey Brings Euro Back to Ground Zero.

Another month of disappointing ZEW Survey data and as time passes, it seems like it's getting worse. This time with a plunge to a 5-year low due to the concern of higher interest rates and taxes. The immediate news release in the early London session has erased the gains of the 11-month high to where it was started. German economic growth may cool, after outpacing the U.S. for the first time in five years in the second quarter, as the European Central Bank raises interest rates to contain inflation and near-record oil prices threaten to curb global demand. A government plan to raise a sales tax in 2007 is adding to concern about slower growth by boosting costs for consumers.

Another disappointing event is the Eurozone June Industrial New Orders missed the consensus by having a drop of 2.5% from an expected of 0.6% gain. For the YoY Industrial New Orders it climbed to 5.2% compared to the previous year but however lower compared to the economists consensus of 7.9% which indirectly points of bearish Euro data.

For the USD, Dallas Fed president says he sees an increase in inflationary momentum but Fed is committed to fighting price increases and and policy-makers will not hesitate to raise interest rates again if incoming data show it is necessary. Although this statement is slighly hawkish but it will afterall be dependant on the market data which currently is showing inflation slowing down and economic growth is moderating as months before. I'm no longer expecting the Federal Reserve to make another increment of interest rates for the end of the year judging by the current economic condition and there's no way that the economic all of sudden gives positive growths again. The continuous hike of interest rates for the past 2 years is not taking it's place slowly from a strong economy in the beginning of the year. Therefore, I'm not expecting the cool-off is over so soon. It's gonna take at least another 6 more months before the economic gets geared up again.

I'm keeping my bullish bias to Euro or any Dollar denominated pairs as I'm still sticking with the dollar bearish overall view and since the Fed has started pausing interest rates, I'm not seeing it resuming hiking once more. The crucial data this week is the New Home Sales in the US which I'm expecting a lower than consensus report signalling a cooling growth in the real estate business in the US. This would be another break for the USD and hopefully I can see 1.30 this time.

Happy TRading.