Thursday 21 July 2011

Forex Market Bulletin, July 21, 2011

Pulse of the Market
·      Greenback plummeted as intimidation height on deficit countdown and EU troubles ease
·      Euro edged up after Germany and France agreed on a joint position for bailing out Greece
·      British Pound to be had modest support by additional discouraged BoE minutes
·      Canadian Dollar interest rate anticipated rally cooled down after the policy report
The Greenback ended yesterday’s trading session lower against the basket of major currencies. Investors are cautiously hopeful that the debt confrontation will come to a halt in the U.S and Europe this week. President Obama has expressed willingness to cooperate further, avoiding a default that would undoubtedly cause widespread volatility in the financial markets. However Obama’s July 22nd deadline is looking very susceptible right now and the lack of concrete developments over the past few days means it is very possible that a short term debt solution will be needed. If deadline comes to pass with no major news, it could perceive panic and selling of U.S Dollars. In the meantime, U.S economic data continued to disappoint with existing home sales declining in the month of June. Economists were looking for sales to rebound by 1.9 percent but unfortunately it fell for the third consecutive month, by 0.8 percent. If the debt ceiling is not raised, the weakness of the U.S economy will become a far bigger problem for the U.S Dollar. The Euro traded higher against the U.S Dollar in anticipation of a major announcement from Europe. One of the primary focuses of the currency market this week is today’s EU Summit. If they fail to introduce measures aimed at providing additional support for the financial system, investors could return to selling Euros as they realize the EU is all talk and no action. Nevertheless there is a hope because the emergency summit was delayed because the Germans did not want to have a meeting if there was nothing concrete to discuss. On the economic docket, German producer prices rose 0.1 percent. PMI numbers for the Euro Zone are scheduled for release today and these reports are always important because they provide the latest on the health of the Euro Zone economy. The British Pound as well joined the risk rally by appreciating against the U.S Dollar but its gains were limited against the U.S Dollar as it lost value against the Euro. The Japanese Yen strengthened against all the major currencies with the exception of the Swiss franc as investors sought safe haven assets ahead of the European leader meeting over containment of the sovereign debt crisis.

Time(GMT)
Economic Release
IMP
Actual
Forecast
Prior
04:30
Japan All Industry Activity Index (MoM) (MAY)
Medium

1.8%
1.5%
06:00
Switzerland Trade Balance (Swiss franc) (JUN)
Medium


3.25B
07:30
German Purchasing Managers' Index Manufacturing (JUL)
High

54.1
54.6
08:00
Euro Zone Purchasing Managers' Index Manufacturing (JUL)
High

51.5
52.0
08:30
U.K Retail Sales (YoY) (JUN)
Medium

0.0%
0.0%
09:00
Switzerland ZEW Survey (Expectations) (JUL)
Medium


-24.3
11:00
Euro Zone Meeting of Finance Ministers
High



12:30
U.S Initial Jobless Claims (JUL 15)
Low

410K
405K
14:00
U.S House Price Index (MoM) (JUL)
Medium

0.1%
0.8%
Euro

The Single Currency was quiet in yesterday’s trading session, consolidating ahead of the today's important economic summit in which a new Greece deal may be announced. The potential of disunity without the Union is another issue that investors will be closely watching. Overall, the EUR/USD traded with a low of 1.4132 and a high of 1.4239 before closing the day around 1.4216 in the New York session.

Yen

The Japanese Yen strengthened with risk off trade and weak U.S economic data helping push the USD/JPY and crosses lower. USD/JPY broke under support at 79.00 Yen and as it pushes lower the chance of BOJ intervention talk/action grows. The IMF recommended that the BOJ support the economy by picking up its asset purchases, its main policy tool at this point. Overall, the USD/JPY traded with a low of 78.69 and a high of 79.30 before closing the day around 78.76 in the New York session.
British Pound
The British Pound was quiet in a tight range with losses against the Yen and Euro the merely noticeable movement. The MPC minutes remained the same as the previous month and the outlook is for no action from the central bank for the next few months. Overall, the GBP/USD traded with a low of 1.6068 and a high of 1.6166 before closing the day at 1.6151 in the New York session.
Canadian Dollar
The Canadian Dollar strengthened to a two and a half month high against the Greenback in yesterday’s session, after the Bank of Canada discussed the prospect of higher rates and investors became more hopeful about European and U.S debt woes. Overall, USD/CAD traded with a low of 0.9455 and a high of 0.9511 before closing the day at 0.9473 in the New York session.
Australian Dollar
The Australian shrugged was strong even with negative stocks with most investors waiting for more news in regards to the U.S debt ceiling debate and Greece bailout before fresh direction. Major resistance is seen at 1.0800 and could contain while 1.0500 is providing plenty of support in recent weeks. Overall, the AUD/USD traded with a low of 1.0709 and a high of 1.0759 before closing the day at 1.0744 in the New York session.
Euro-Yen
EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The RSI is above 39 and lies below the neutral zone. Overall, the cross has lost 0.04%.
Sterling-Yen
Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bullish and MACD is indicating a bearish stance. The RSI is above 39 reading and lies below the neutral zone. The pair has lost 0.34%.
Aussie-Yen
Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic gives bearish and MACD is also indicating a bearish stance. The RSI is above 43 reading and lies below the neutral region. The pair has lost 0.39%.
Euro-Sterling
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish and MACD is issuing a bearish signal. The RSI is above 47 reading and lies below the neutral region. The pair has gained 0.30%.
Sterling-Swiss
This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The RSI is above 40 and lies below the neutral region. The pair has lost 0.41%.
Appendix
Daily Pivot Points

Trading Range

Contract
S3
S2
S1
Pivot
R1
R2
R3
EUR/USD
1.4045
1.4089
1.4152
1.4196
1.4259
1.4303
1.4366
USD/JPY
77.92
78.31
78.53
78.92
79.14
79.53
79.75
GBP/USD
1.5993
1.6030
1.6091
1.6128
1.6189
1.6226
1.6287
USD/CHF
0.8085
0.8131
0.8162
0.8208
0.8239
0.8285
0.8316
USD/CAD
0.9392
0.9424
0.9448
0.9480
0.9504
0.9536
0.9560
EUR/JPY
110.96
111.31
111.64
111.99
112.32
112.67
113.00
GBP/JPY
125.55
126.13
126.67
127.25
127.79
128.37
128.91
CHF/JPY
95.19
95.46
95.79
96.06
96.39
96.66
96.99
AUD/JPY
83.50
83.96
84.29
84.75
85.08
85.54
85.87
EUR/GBP
0.8709
0.8739
0.8769
0.8799
0.8829
0.8859
0.8889
EUR/CHF
1.1518
1.1561
1.1605
1.1648
1.1692
1.1735
1.1779
GBP/CHF
1.3081
1.3139
1.3186
1.3244
1.3291
1.3349
1.3396


Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

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