Forex Market Bulletin, July 22, 2011

Pulse of the Market

·      Dollar’s link to the Euro is certainly strong enough that the efforts in EU would have remarkable effect

·      Euro presented a wide-ranging bailout curriculum with exceptionally numerous holes

·      British Pound took no notice of confidence, sales and financing economic data to watch Euro

·      Canadian Dollar financiers prepared for retail sales and CPI data to back rate volatility

The Greenback ended yesterday’s trading session lower against the basket of major currencies. President Obama’s deadline for an agreement has been reached in time for legislation to be drafted and passed. Republicans and Democrats are still so divided that investors are almost certain that the market will be disappointed today. The reality of the matter is that there might not be enough time to cut a deal that would raise the debt ceiling and reduce government spending before the U.S Treasury runs out of money on August 2nd. Investors around the world have begun to seriously consider the possibility of a downgrade which would undoubtedly have severe consequences for the financial markets. The prospect of a downgrade has already driven the U.S Dollar to a fresh record low against the New Zealand Dollar, 3 year low against the Canadian Dollar and 3 month low against the Japanese Yen. The U.S Dollar’s safe haven status curtails directly from the U.S government’s long history of repaying its loans on time and missing one interest payment is all it takes to strip away this label. Yesterday’s U.S economic reports were mixed with jobless claims rising more than expected but leading indicators and the Philly Fed survey improving. The Euro was firm throughout yesterday’s trading session but icing on the cake was the EU’s pledge to start a European Monetary Fund. The EMF would operate on the secondary market and enable states to recapitalize banks directly according to French President Sarkozy. Having a support system regionally is big step in the right direction for the Euro Zone. The IMF provides support on a global level and the EMF would provide support on a regional level. The goal of the EMF would be to provide member nations with support in times of financial difficulty while at the same time avoid instability in the region by imposing sanctions on countries that defy the limits on debt. Overall, Greece will receive aid worth 109B Euros with approximately 37B Euros in private sector aid. The sharp rally in the Euro and decline in European CDS spreads indicate that investors are generally satisfied with the EU's plan. British Pound rose to a one month high against the U.S Dollar, following an improvement in risk appetite combined with stronger economic data. The overwhelming support for Greece will benefit banks in the U.K by helping them avoid significant losses. In terms of economic data, retail sales rebounded in the month of June. After falling 1.3 percent the previous month, consumer spending rose 0.7 percent. The Japanese Yen weakened against all the major currencies with the exception of the U.S and Canadian Dollars as risk appetite returned to the market on news that Greek default may contain the debt crisis.

Time(GMT)	Economic Release	IMP	Actual	Forecast	Prior
08:00	German IFO - Current Assessment (JUL)	Medium		122.3	123.3
08:00	German IFO - Expectations (JUL)	Medium		105.0	106.3
09:00	Euro Zone Industrial New Orders (YoY) (MAY)	Medium		10.1%	9.0%
11:00	Canada Consumer Price Index (MoM) (JUN)	Medium		-0.2%	0.7%
12:30	Canada Retail Sales (MoM) (MAY)	Low		-0.3%	0.3%

Euro

The Single Currency fell to 1.4150 in early European trade before staging a remarkably rally on the Greece plan announcement and trading above 1.4400. EUR/JPY and EUR/GBP both enjoyed good gains in a broad Euro rally. In addition to assisting Greece there is interest rate on loans on Ireland and Portugal lowered to help their ability to repay. Overall, the EUR/USD traded with a low of 1.4138 and a high of 1.4433 before closing the day around 1.4422 in the New York session.

Yen

The Japanese Yen gained against the U.S Dollar but was very weak against the crosses in yesterday’s trading session as stocks markets surged. EUR/JPY rallied above 113.00 Yen and could be poised for further gains after finding support at 110.00 Yen and the EU debt agreement was reached. Overall, the USD/JPY traded with a low of 78.27 and a high of 79.01 before closing the day around 78.28 in the New York session.

British Pound

The British Pound broke out of the range to the topside and surged to 1.6300 before stabilizing ahead of closing of yesterday’s trading session. EUR/GBP climbed back above 0.8800 as the Euro outperformed. June Retail Sales were strong at 0.7% against -1.3% previously. Overall, the GBP/USD traded with a low of 1.6120 and a high of 1.6333 before closing the day at 1.6328 in the New York session.

Canadian Dollar

The Canadian Dollar continued to surge in yesterday’s session after the Bank of Canada issued a hawkish report Tuesday on its outlook for raising interest rates and indicated it expects inflationary pressures to rise over the next nine months and global investors pushed into the safety of Canadian assets. Overall, USD/CAD traded with a low of 0.9421 and a high of 0.9491 before closing the day at 0.9431 in the New York session.

Australian Dollar

The Australian Dollar broke above resistance at 1.0800 in yesterday’s trading session as risk appetite surged post EU summit plan and is looking to 1.1000 in coming days. AUD/JPY is back above 85.00 Yen and is an important cross for providing fresh direction to the major. Overall, the AUD/USD traded with a low of 1.0693 and a high of 1.0856 before closing the day at 1.0839 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 44 and lies below the neutral zone. Overall, the cross has gained 0.84%.

Sterling-Yen

Currently GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing bullish and MACD is also indicating a bullish stance. The RSI is above 45 reading and lies below the neutral zone. The pair has gained 0.49%.

Aussie-Yen

Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic gives bullish and MACD is indicating a bearish stance. The RSI is above 48 reading and lies below the neutral region. The pair has gained 0.28%.

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 46 reading and lies below the neutral region. The pair has gained 0.35%.

Sterling-Swiss

This cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The RSI is above 44 and lies below the neutral region. The pair has gained 0.57%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.3934	1.4036	1.4229	1.4331	1.4524	1.4626	1.4819
USD/JPY	77.29	77.78	78.03	78.52	78.77	79.26	79.51
GBP/USD	1.5975	1.6047	1.6188	1.6260	1.6401	1.6473	1.6614
USD/CHF	0.8011	0.8074	0.8111	0.8174	0.8211	0.8274	0.8311
USD/CAD	0.9334	0.9378	0.9404	0.9448	0.9474	0.9518	0.9544
EUR/JPY	110.17	110.81	111.86	112.50	113.55	114.19	115.24
GBP/JPY	125.93	126.46	127.15	127.68	128.37	128.90	129.59
CHF/JPY	95.03	95.33	95.69	95.99	96.35	96.65	97.01
AUD/JPY	83.26	83.74	84.30	84.78	85.34	85.82	86.38
EUR/GBP	0.8706	0.8734	0.8782	0.8810	0.8858	0.8886	0.8934
EUR/CHF	1.1449	1.1529	1.1641	1.1721	1.1833	1.1913	1.2025
GBP/CHF	1.3093	1.3161	1.3235	1.3303	1.3377	1.3445	1.3519

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