Pulse
of the Market
·
S&P restated it may cut the U.S debt
rating if a deal doesn’t address the U.S long term debt burden
·
Single Currency investors demonstrated modest
interest in another Greek downgrade
·
British Pound gearing up for the foremost
major market mover in weeks
·
Australian Dollar meditate on risk appetite
inclination against rate outlook
The
Greenback ended yesterday’s trading session on a mixed note. Lawmakers in
Washington are working hard to reach a deal to raise the debt ceiling but the
talks have hit with Republicans and Democrats continuing to bump heads. The
persistent weakness of the U.S Dollar suggests that investors are bracing for
the worst by reducing their overall exposure to Greenbacks. The U.S Dollar has
fallen to an all time low against the Swiss Franc and Japanese Yen. Even though
it is believed that U.S government is engaging in an open dialogue with rating
agencies every step of the way, it is becoming clearer that the U.S may not be
able to avoid a downgrade. A default could be avoided but unless Congress
passes a $4 trillion deficit reduction plan by August 2nd, every other
alternative could prompt a reaction by rating agencies. In 1979, the government
was unable to make its payments on some Treasury bills. In other words, the U.S
Treasury defaulted back in 1979 and the conditions then were very similar to
the conditions now. The Euro ended the session almost unchanged considering the
fact that Moody’s became the second rating agency to downgrade Greek debt from
Ca to Caa1. European policymakers have managed expectations well and their
warning that a temporary default would occur prepared investors properly.
However the main reason why the EUR/USD firmed is because the currency is
benefitting from U.S debt concerns. The August 2nd deadline is quickly
approaching and no deal is on the table. The biggest beneficiaries of this
uncertainty are the Swiss Franc and the Japanese Yen. Risk aversion and
anti-Dollar sentiment propelled the Franc and the Yen sharply higher as
investors look at these two currencies as the last remaining safe havens. The
British Pound weakened against both the U.S Dollar and the Euro as economic
data from the U.K caused investors to push rate hike expectations out even
further. U.K mortgage approvals rose “slightly” in June the British Bankers’
Association said. U.K house prices fell 0.1 percent in July as the downward
trend continues. The key focus is on today’s advance second quarter GDP
release. The Japanese Yen strengthened against all the major currencies as risk
aversion came back to the market. The Yen usually benefits when investors shift
out of riskier assets including stocks and emerging markets, especially the
Greenback as the debt ceiling battle continues.
Time(GMT)
|
Economic Release
|
IMP
|
Actual
|
Forecast
|
Prior
|
00:00
|
Australia Conference Board Leading Index (MAY)
|
Medium
|
0.1%
|
||
04:00
|
U.K Nationwide House Prices s.a. (MoM) (JUL)
|
Low
|
-0.2%
|
0.0%
|
|
06:00
|
Switzerland UBS Consumption Indicator (JUN)
|
Medium
|
1.91
|
||
06:00
|
German GfK Consumer Confidence Survey (AUG)
|
Medium
|
5.6
|
5.7
|
|
08:30
|
U.K Gross Domestic Product (YoY) (2Q)
|
High
|
0.8%
|
1.6%
|
|
13:00
|
U.S S&P/Case-Shiller Home Price Index (MAY)
|
Low
|
138.84
|
||
14:00
|
U.S Consumer Confidence (JUL)
|
High
|
57.9
|
58.5
|
The
Single Currency was well supported in yesterday’s trading session even with
stocks down as the market is wary of buying the U.S Dollar while the debt
debate rages on in Washington. Moody's downgraded Greece once again and warned
of investor losses from the EU rescue plan. Overall, the EUR/USD traded with a
low of 1.4324 and a high of 1.4405 before closing the day around 1.4376 in the
New York session.
Yen
The
Japanese Yen remained favored and the USD/JPY remained pressured testing 78.00
Yen but holding and closing slightly higher off the level. AUD/JPY and EUR/JPY
are struggling while the USD/JPY remains under pressure but stock markets will
direct the majority of the movement. Overall, the USD/JPY traded with a low of
78.04 and a high of 78.54 before closing the day around 78.26 in the New York
session.
British
Pound
The
British Pound continued to pivot the 1.6300 level while the investors pushed
pause waiting for Greece and U.S debt clarification. EUR/GBP grinded higher
after testing 0.8800 and is well supported on the strong EUR/USD movements of
late. Overall, the GBP/USD traded with a low of 1.6261 and a high of 1.6327 before
closing the day at 1.6275 in the New York session.
Canadian Dollar
The
Canadian Dollar finished stronger against its U.S counterpart in yesterday’s
trading session, within sight of last week's 3-1/2 year high, as a stalemate in
U.S debt talks boosted Canada's flight to safety status. The Canadian currency
capped a second straight weekly gain on July 22 on speculation the nation’s
central bank will raise interest rates at least once this year. Overall, USD/CAD
traded with a low of 0.9433 and a high of 0.9523 before closing the day at 0.9466
in the New York session.
Australian Dollar
The Australian
Dollar was under pressure due to weakness in stocks but tracked Gold and Euro
higher in the U.S session on the broad U.S weakness. Second quarter PPI was
strong as expected at 0.8% Q/Q. Tomorrow’s CPI numbers will be very important
to the central banks interest rate decision. Overall, the AUD/USD traded with a
low of 1.0794 and a high of 1.0876 before closing the day at 1.0843 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 also issuing
a bullish stance. The RSI is above 45 and lies below the neutral zone. Overall,
the cross has lost 0.12%.
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 42 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 bullish and MACD is indicating
a bearish stance. The RSI is above 49 reading and lies below the neutral
region. The pair has lost 0.25%.
Euro-Sterling
This cross is trading above 14, 100 and
below 50 days moving average. Fast stochastic is indicating a bullish and MACD
is issuing a bearish signal. The RSI is above 51 reading and lies above the neutral
region. The pair has gained 0.23%.
Sterling-Swiss
This cross is trading above below 14,
50 and 100 days moving average. Fast stochastic is issuing a bearish stance and
MACD is indicating a bullish tone. The RSI is above 35 and lies below the neutral
region. The pair has lost 1.61%.
Appendix
Daily Pivot Points
|
|||||||
Trading Range
|
|||||||
Contract
|
S3
|
S2
|
S1
|
Pivot
|
R1
|
R2
|
R3
|
EUR/USD
|
1.4251
|
1.4287
|
1.4332
|
1.4368
|
1.4413
|
1.4449
|
1.4494
|
USD/JPY
|
77.52
|
77.78
|
78.02
|
78.28
|
78.52
|
78.78
|
79.02
|
GBP/USD
|
1.6182
|
1.6222
|
1.6248
|
1.6288
|
1.6314
|
1.6354
|
1.6380
|
USD/CHF
|
0.7864
|
0.7942
|
0.7999
|
0.8077
|
0.8134
|
0.8212
|
0.8269
|
USD/CAD
|
0.9335
|
0.9384
|
0.9425
|
0.9474
|
0.9515
|
0.9564
|
0.9605
|
EUR/JPY
|
111.03
|
111.52
|
112.02
|
112.51
|
113.01
|
113.50
|
114.00
|
GBP/JPY
|
126.03
|
126.56
|
126.97
|
127.50
|
127.91
|
128.44
|
128.85
|
CHF/JPY
|
95.01
|
95.57
|
96.33
|
96.89
|
97.65
|
98.21
|
98.97
|
AUD/JPY
|
83.69
|
84.05
|
84.46
|
84.82
|
85.23
|
85.59
|
86.00
|
EUR/GBP
|
0.8758
|
0.8777
|
0.8804
|
0.8823
|
0.8850
|
0.8869
|
0.8896
|
EUR/CHF
|
1.1298
|
1.1408
|
1.1495
|
1.1605
|
1.1692
|
1.1802
|
1.1889
|
GBP/CHF
|
1.2790
|
1.2923
|
1.3019
|
1.3152
|
1.3248
|
1.3381
|
1.3477
|
Sources:
News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)
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