Forex Market Updates & Commentary

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• EURUSD tests 200 hour MA at 1.4507
• US Wholesale Inventories Slide, Revision Better
• Greece bailout targeting up to 120 billion Euros
• Trichet: Possible rate hike in July. NO Comment
• EURUSD moves sharply lower. Did you expect it?
• “In a mode for rate hike at next meeting but never precommitted”: Trichet
• EURUSD trades in volatile fashion. Moves sharply lower.
• Trichet upward pressure on inflation
• Canada Merchandise Trade Falls, House Price Index Higher
• Moody’s says Greek default would lift risk for Ireland/Portugal
• US Trade Deficit Narrows as Jobless Claims Continue to Rise
• USDCHF surges higher and now USDCHF falls back down
• The NY Morning Forex Commentary for June 9th is available for viewing
• ECB Leaves Interest Rate at 1.25%
• ECB keeps rates unchange. Trichet comments awaited at 8:30 AM ET: EURUSD

EURUSD tests 200 hour MA at 1.4507 Posted: 09 Jun 2011 07:02 AM PDT The EURUSD moved a touch higher on the back of a larger than expected bailout for Greece (is it good or bad …. I wonder) and now tests the 200 hour MA at the 1.4507 level.  A move above opens the door for further corrective possibility. The 1.4544 level is the 38.2% of the days sharp move lower.

US Wholesale Inventories Slide, Revision Better Posted: 09 Jun 2011 07:00 AM PDT Wholesale Inventories: Survey: 1.0%   Acutal: 0.8%     Prior: 1.1%   Revised: 1.3 EUR/USD Trading at 1.45 the figure.

Greece bailout targeting up to 120 billion Euros Posted: 09 Jun 2011 06:48 AM PDT 30 billion from private sector 30 billion from privitization (selling of public assets) 60 billion from EU and IMF sources This is higher than prior estimates which were around 90 billion euros

Trichet: Possible rate hike in July. NO Comment Posted: 09 Jun 2011 06:37 AM PDT When the market expects something to happen – like “strong vigilance”= rate rise – and then it is not confirmed, the market tends not to like it. This is danger from using words consistently.  The Fed has backed themselves in a corner by using the words “extended period of time”.

EURUSD moves sharply lower. Did you expect it? Posted: 09 Jun 2011 06:19 AM PDT If I told you there would be weaker Initial Claims. Trichet used the code word “strong vigilance” and raise growth and inflation forecasts.  Most would think the EURUSD would have benefitted. It did not. The EURUSD initiallly rose but then came off hard.   Trichet did say that the ECB will keep up full allotment in refi operations. This may suggest that although rate increase may be forthcoming, the fear of the risks from problems requires continued support.  The “new” dual mandate of inflation containment and support for the weak perhaps is where they are going. Is it right or is it wrong?  The market is voting that this type of policy stance is perhaps ambiguous and may be “bad” overall (lower growth will eventually lead to lower inflation anyway) as a result the EURUSD is being sold. From a technical perspective (and the technicals showed the way), the EURUSD more or less held below the underside of the trendline on the topside, and then fell below the 100 hour MA (blue line in the chart above). That opened the door for a technical move down and indeed it did. The price fell below the low for the week at 1.4557 – extending the weeks range. We were looking for that extension. Shortly thereafter it fell below the  38.2% of the last signficant move higher at 1.4552.  It has now also fallen below the 50% retracement AND the 200 hour MA at the 1.4507 area.   The next target is the 1.4555-63 area below. Look for resistance at the 1.4507 level (200 hour MA – green line in the chart above).

“In a mode for rate hike at next meeting but never precommitted”: Trichet Posted: 09 Jun 2011 05:55 AM PDT They decide when they judge it is necessary to anchor price stability. Not signalling any pace of rate hikes.

EURUSD trades in volatile fashion. Moves sharply lower. Posted: 09 Jun 2011 05:48 AM PDT Trichet signalled strong vigilance in his comments. This has signalled a rate increase in futue meetings. THe EURUSD moved higher intially but has since moved sharply lower breaking below the lows fo rhte week and heads for the 200 hour MA at the 1.4503 level.

Trichet upward pressure on inflation Posted: 09 Jun 2011 05:34 AM PDT Policy stance is accomodative Strong vigilance needed to contain upside price risk ECB will act in firm and timely manner ECB to secure firm anchoring of price expectations All non standard measures are temporary in nature ECB will do all that is needed on inflation Fixed rate tender at full allotment Important to look through the GDP volatility Domestic demand to support economic growth Activity to be expected to be hurt by balance sheet adjustemnt 2011 growth upgraded 1.5 to 2.3% vs 1.3 vs 2.1%. 2012 GDP 0.6 to 2.8% vw 0.8% and 2.8% earlier.  Growth risks include financial market tension and higher energy prices and possible correction of global imbalances Inflation to stay above 2% over the coming months Of paramount importance to avoid second round effects Inflation for 2011 2.5-2.7% vs 2.0 -2.6% 2012 see inflation 1.1-2.3% vs 1.0-2.4%

Canada Merchandise Trade Falls, House Price Index Higher Posted: 09 Jun 2011 05:32 AM PDT Canada Int'l Merchandise Trade:    Survey:  0.6B   Actual: -0.9B   Prior: 0.6B Canada New House Price Index(YoY):    Survey: 1.8%    Actual: 1.9%    Prior:  1.9% Canada New House Price Index(MoM):    Survey: 0.1%    Actual: 0.3%    Prior:  0.0%

Moody’s says Greek default would lift risk for Ireland/Portugal Posted: 09 Jun 2011 05:32 AM PDT Hard to imagine voluntary participation in current Greek debt mkt Large default would be disruptive 50% of CAA1 rated countries have defaulted in the past Expects EU to continue to provide liquidity support

US Trade Deficit Narrows as Jobless Claims Continue to Rise Posted: 09 Jun 2011 05:31 AM PDT Jobless Claims:   Survey: 419K   Actual: 427K  Prior: 422K   Revised: 426K Continuing Claims:   Survey: 3700K  Actual: 3676K   Prior: 3711K   Revised: 3747K Trade Balance:   Survey: $-48.8M  Actual: $-43.7M   Prior: $-48.8M   Revised: $-46.8B

USDCHF surges higher and now USDCHF falls back down Posted: 09 Jun 2011 05:19 AM PDT The USDCHF moved above resistance earlier today as defined by the 100 hour MA and the trendline resistance. Price surged higher and tested the 38.2% retracement level in the process. The price has now rotated back down – falling below the 0.8385 level (another level developed over the last few days). The fall has moved back to the 100 hour MA at the 0.8361 level. Focus will be on the EURUSD as Trichet comments scroll on the newswires. For those trading the USDCHF, the 100 hour MA will continue to be the focus.

The NY Morning Forex Commentary for June 9th is available for viewing Posted: 09 Jun 2011 05:02 AM PDT

ECB Leaves Interest Rate at 1.25% Posted: 09 Jun 2011 04:45 AM PDT The ECB announces that it will leave the current interest rate of 1.25% the same.

ECB keeps rates unchange. Trichet comments awaited at 8:30 AM ET: EURUSD Posted: 09 Jun 2011 04:45 AM PDT The EURUSD trades at the 100 hour MA at the 1.4618 level.  The market will be paying attention to language such as “strong vigilance” or “rates are appropriate”

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