Forex Market Bulletin, July 20, 2011

Pulse of the Market

·      Greenback took no notice of budget movement, earnings and suffers for risk rally

·      Euro unpredictably steady in spite of Portugal surprise slit and rising Greece uncertainty

·      BoE rate decision has been a non-event for the Sterling for a number of months now

·      Australian Dollar ragged among a rally in capital markets and dovish turn from RBA

The U.S Dollar ended yesterday’s trading session on a mixed note. With only 2 more days until President Obama’s deadline, lawmakers in Washington are working quickly to reach a deal that would avoid driving the U.S Dollar to fresh lows and trigger sharp volatility across the financial market. Yesterday Moody’s placed 5 out of 15 Aaa states on review for downgrade, reminding everyone about the susceptibility of the U.S sovereign debt rating. Meanwhile the latest U.S economic reports modestly contributed to the rally. Housing starts jumped 14.6 percent last month while building permits rose 2.5 percent. As in recent months, these housing markets numbers have been extremely volatile, yet the rebound is however encouraging especially when investors are taking a break from the selling. Existing home sales are scheduled for release today and a rebound is also expected after the sharp decline in May. The Single Currency traded slightly higher yesterday. Unfortunately continued concerns about the European sovereign debt crisis have prevented the EUR/USD from enjoying the same gains as other high yielding currencies. Euro failed to hold onto all of its gains after German Chancellor Merkel told investors not to get their hopes up for a spectacular solution to the European sovereign debt crisis tomorrow. The IMF also threw cold water on the EUR/USD rally by warning about the danger of contamination and the consequences of a default. There is no question that the European sovereign debt crisis is a tough one to solve and the chance of it going away anytime soon. The economic sentiment portion of the German ZEW survey fell from -9 to -15 while the current situation component increased to 90.6 from 87.6. The British Pound strengthened against the U.S Dollar and Euro as risk flows returned to the market. There was no U.K economic data from the U.K yesterday but the Bank of England will release the minutes from their most recent monetary policy meeting today. Also on the docket today is nationwide consumer confidence. The market expects a 51 reading following 55 from May as consumer are feeling the squeeze from inflation. The Japanese Yen weakened against all the majors except for the Swiss Franc. With debt talks on both sides of the Atlantic seemingly reach closer to resolution, investors picked up risky asset putting downward pressure on the Yen.

Time(GMT)	Economic Release	IMP	Actual	Forecast	Prior
05:00	Japan Leading Index (MAY)	Medium			99.8
06:00	German Producer Prices (MoM) (JUN)	Low		0.0%	0.0%
08:30	Bank of England Minutes	High
14:00	Euro Zone Consumer Confidence (JUL)	Medium		-10.2	-9.8
14:00	U.S Existing Home Sales (JUN)	Medium		4.90M	4.81M
14:30	Canada Monetary Policy Report	High
23:01	U.K Nationwide Consumer Confidence	Medium		49	55

Euro

The Single Currency gained to the 1.4200 level in yesterday’s trading session on the back of the positive sentiment change and some progress on the second Greece Bailout plan ahead of tomorrow’s EU Summit. German ZEW was poor falling to -15.1 against -9 previously. Overall, the EUR/USD traded with a low of 1.4068 and a high of 1.4216 before closing the day around 1.4150 in the New York session.

Yen

The Japanese Yen found support under 79.00 Yen and finished near the highs of the recent range on strong cross buying. AUD/JPY reclaimed the 85.00 Yen level with the 200 point gain in the Dow Jones providing the fuel for the rise. Overall, the USD/JPY traded with a low of 78.81 and a high of 79.26 before closing the day around 79.17 in the New York session.

British Pound

The British Pound rallied with the rest of the risk currencies but found resistance at last week’s high near 1.6180. The market is volatile with news coming from both directions lately and providing plenty of trading opportunities between 1.5900-1.6200. Overall, the GBP/USD traded with a low of 1.6040 and a high of 1.6176 before closing the day at 1.6122 in the New York session.

Canadian Dollar

The Canadian Dollar strengthened to its highest level against the U.S Dollar in two and a half months yesterday after the Bank of Canada indicated more firmly than before that it was closer to raising interest rates with the domestic economy seen growing at a healthy pace. Overall, USD/CAD traded with a low of 0.9480 and a high of 0.9600 before closing the day at 0.9499 in the New York session.

Australian Dollar

The Australian shrugged off weakness in Asian session on the back of neutral RBA minutes to track the stock markets and break back above 1.0735. The RBA has dropped the need to raise rates at some stage from their minutes this month with a more balanced view of the economy which had shown some signs of slowing in recent months. Overall, the AUD/USD traded with a low of 1.0598 and a high of 1.0740 before closing the day at 1.0731 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 38 and lies below the neutral zone. Overall, the cross has gained 0.44%.

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 41 reading and lies below the neutral zone. The pair has gained 0.60%.

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 46 reading and lies below the neutral region. The pair has gained 1.35%.

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 41 reading and lies below the neutral region. The pair has lost 0.16%.

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 bearish tone. The RSI is above 41 and lies below the neutral region. The pair has gained 1.23%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.3925	1.3997	1.4073	1.4145	1.4221	1.4293	1.4369
USD/JPY	78.45	78.63	78.90	79.08	79.35	79.53	79.80
GBP/USD	1.5913	1.5977	1.6049	1.6113	1.6185	1.6249	1.6321
USD/CHF	0.8041	0.8096	0.8168	0.8223	0.8295	0.8350	0.8422
USD/CAD	0.9333	0.9406	0.9453	0.9526	0.9573	0.9646	0.9693
EUR/JPY	110.20	110.67	111.35	111.82	112.50	112.97	113.65
GBP/JPY	125.95	126.37	127.01	127.43	128.07	128.49	129.13
CHF/JPY	94.36	95.04	95.54	96.22	96.72	97.40	97.90
AUD/JPY	82.88	83.31	84.13	84.56	85.38	85.81	86.63
EUR/GBP	0.8698	0.8727	0.8750	0.8779	0.8802	0.8831	0.8854
EUR/CHF	1.1382	1.1448	1.1555	1.1621	1.1728	1.1794	1.1901
GBP/CHF	1.2911	1.3005	1.3147	1.3241	1.3383	1.3477	1.3619

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

Forex Market Bulletin July 2011

Pulse of the Market

·      Greenback demonstrated mixed progress across majors as debt troubles persist

·      Single Currency stabilizes as crises headlines recede, ECB reports no bond purchases

·      Canadian Dollar investors will look to BoC pronouncement to direct rate outlook

·      Australian Dollar stumbled after RBA minutes report restrained GDP outlook

The U.S Dollar ended yesterday’s trading session higher against all of the major currencies with the exception of the Japanese Yen against which it held steady for the second trading day in a row. The U.S debt confrontation may be front and center this week, but the desire for safety has still driven investors towards the Greenback. President Obama has given Congress until Friday to reach a deal on raising the debt ceiling. If lawmakers fail to agree on a deficit reduction package by that time, even the Greenback’s safe haven status may not be able to save the U.S Dollar. Rating agencies already warned that the U.S will lose its esteemed AAA rating if the debt ceiling is not increased.  If the debt ceiling is increased by August 2nd, the U.S would avoid a downgrade by the top 3 rating agencies. The latest TIC report showed foreign investors selling Dollars for the first time in 11 months. Demand for U.S Dollars fell by $67.5B in May, which was the first negative print since June 2010 and the largest sale of U.S Dollars since July 2009. The Euro ended the session lower against the U.S Dollar. Even though the traded lower against the Greenback, the currency’s recovery during the second half of the trading session reflects a significant shift in sentiment. There was no clear driver for the twist in the market aside from the Greek Finance Minister’s comment that a European debt deal could be reached on Thursday. With the EU stress tests failing to stabilize the market, a special summit will be held on the 21st to come up with a new rescue plan for Greece and to take a big step towards ending the sovereign debt crisis. No major Euro Zone economic reports were released yesterday but the German ZEW survey and investor sentiment is due for release today. The British Pound traded lower against both the U.S Dollar and the Euro. According to the Right move House Price Index, asking prices in the U.K dropped by an average of 1.6 percent in July. With an inflation rate at more than double the Bank of England’s target, U.K economic recovery is losing momentum. With no economic data on the docket today, the movement of the British Pound would still hinge on the risk flow in the market. The Japanese Yen strengthened against all the major currencies as risk aversion drove investors to safer assets. The European sovereign debt crisis and possible U.S credit downgrade are big uncertainties in the market that could have devastating after-effects.

Time(GMT)	Economic Release	IMP	Actual	Forecast	Prior
01:30	Australia Reserve Bank's Board July Minutes	High
09:00	German ZEW Survey (Economic Sentiment) (JUL)	High		-12.5	-9.0
09:00	Euro Zone ZEW Survey (Economic Sentiment) (JUL)	Medium			-5.9
12:30	Canada Leading Indicators (MoM) (JUN)	Medium		0.8%	1.0%
12:30	U.S Building Permits (JUN)	Medium		595K	609K
12:30	U.S Housing Starts (JUN)	Medium		575K	560K
13:00	Bank of Canada Rate Decision (JUL 19)	High		1.00%	1.00%

Euro

The Single Currency hit lows in yesterday’s European session before stock markets rebounded and hope grew an EU meeting on Thursday will announce an immediate package to support Greece. The market is still very cautious of a contamination in the Debt crisis with Spain/Italy still under pressure and Portugal/Ireland wanting more assistance. Overall, the EUR/USD traded with a low of 1.4013 and a high of 1.4130 before closing the day around 1.4113 in the New York session.

Yen

The Japanese Yen continued to do very little against the Dollar with most of the action on the crosses which are being sold on rallies in the risk averse environment. The levels are close to BOJ intervention after the Earthquake and could find more conduct or character that is right and virtuous from Japanese officials. Overall, the USD/JPY traded with a low of 78.94 and a high of 79.17 before closing the day around 79.02 in the New York session.

British Pound

The British Pound was a distinguished underperformer with EUR/GBP rebounding and British Pound dropping below the 1.6100 level after the recent rally ran out of steam. The outlook is very mixed with more range trading expected until the Bank of England's monetary policy outlook is more clearly outlined. Overall, the GBP/USD traded with a low of 1.6003 and a high of 1.6127 before closing the day at 1.6055 in the New York session.

Canadian Dollar

The Canadian Dollar weakened against its U.S counterpart yesterday as fears of sovereign debt default in Europe and the United States undercut commodity prices and the market awaited an interest rate announcement by the Bank of Canada today. The Loonie is associated with risky assets because of Canada’s heavy reliance on commodity exports for economic growth. Overall, USD/CAD traded with a low of 0.9538 and a high of 0.9634 before closing the day at 0.9593 in the New York session.

Australian Dollar

The Australian Dollar was pushed lower with the Euro in risk off trading in Asian and European session and rebounded aggressively with Gold breaking above $1600 and the U.S Dollar coming under pressure. AUD/NZD hit multi month lows as the New Zealand Dollar outperforms on strong Inflation and rate hike expectations. Overall, the AUD/USD traded with a low of 1.0559 and a high of 1.0653 before closing the day at 1.0606 in the New York session.

Euro-Yen

EUR/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The RSI is above 35 and lies below the neutral zone. Overall, the cross has lost 0.28%.

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 38 reading and lies below the neutral zone. The pair has lost 0.51%.

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 39 reading and lies below the neutral region. The pair has lost 0.36%.

Euro-Sterling

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish and MACD is also issuing a bearish signal. The RSI is above 41 reading and lies below the neutral region. The pair has gained 0.24%.

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The RSI is above 30 and lies below the neutral region. The pair has gained 0.10%.

Appendix

Daily Pivot Points
			Trading Range
Contract	S3	S2	S1	Pivot	R1	R2	R3
EUR/USD	1.3924	1.3968	1.4041	1.4085	1.4158	1.4202	1.4275
USD/JPY	78.69	78.81	78.92	79.04	79.15	79.27	79.38
GBP/USD	1.5872	1.5938	1.5996	1.6062	1.6120	1.6186	1.6244
USD/CHF	0.8027	0.8064	0.8119	0.8156	0.8211	0.8248	0.8303
USD/CAD	0.9447	0.9492	0.9543	0.9588	0.9639	0.9684	0.9735
EUR/JPY	109.81	110.22	110.88	111.29	111.95	112.36	113.02
GBP/JPY	125.71	126.18	126.53	127.00	127.35	127.82	128.17
CHF/JPY	95.08	95.77	96.20	96.89	97.32	98.01	98.44
AUD/JPY	82.75	83.13	83.47	83.85	84.19	84.57	84.91
EUR/GBP	0.8639	0.8671	0.8730	0.8762	0.8821	0.8853	0.8912
EUR/CHF	1.1301	1.1352	1.1445	1.1496	1.1589	1.1640	1.1733
GBP/CHF	1.2926	1.2981	1.3054	1.3109	1.3182	1.3237	1.3310

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