Forex Market Updates & Commentary

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• EURUSD breaks above the resistance. 1.4373 next target area for the pair
• Fitch says Irish situation marginally better since April
• Canada Ivey PMI Improves
• The UK NIESR GDP Estimate comes in at 0.1% for June
• Trichet keeps to the script EURUSD moves up in post speech trade to test Midpoint level
• Charting the Majors with James Chen – Webinar at 9:30 AM U.S. ET “ON AIR NOW”
• Traders Course Lesson 14- Putting it all together Part 2 TODAY 4:00PM
• ECB’s Trichet on the Wires
• Highlights of Trichet comments in chronological order.
• Jobless Claims Better with ADP News, Canada Housing Also Up
• Trichet press conference awaited
• The ADP data better is good news for the US employment
• US ADP Payrolls Rise to 157K
• The EURUSD holds the 61.8% retracement.
• The NY Morning Forex Commentary is available for viewing

EURUSD breaks above the resistance. 1.4373 next target area for the pair Posted: 07 Jul 2011 07:37 AM PDT The next target  is the 1.4373 level which is the 61.8% of the move down from yesterdays NY peak.  It is also is a corrective peak from yesterdays trade (see chart below). On the downside a move back below the 1.4340 would be indicative of a potential top in place.  The EURUSD has been squeezing higher post the Trichet speech. Above that level the 1.4386 to 91 are resistance. The 1.4386 level is the 50% retracement of the move doen from the July 5th high price.  (see chart below).  The EURUSD has risen quite smartly from the 1.4263 100 day MA level.  I would expect some consolidation /profit taking against these levels

Fitch says Irish situation marginally better since April Posted: 07 Jul 2011 07:28 AM PDT Probably no further shockd in Irish Banking Greek events not sufficient to alter view on Ireland Does not think Ireland to default.

Canada Ivey PMI Improves Posted: 07 Jul 2011 07:02 AM PDT PMI index came in at 68.2 vs expectations fo 67.5 and down a touch from the 69.1 reading last month. Purchasers Index   59.9 vs 65.5 3-mo. average       61.1 vs 65.5 Employment           56.0 vs 56.6 Inventory                 53.9 vs 54.3 Supplier Delivery   46.9 vs 38.9 Prices                        61.1 vs 67.1

The UK NIESR GDP Estimate comes in at 0.1% for June Posted: 07 Jul 2011 07:01 AM PDT This is down from 0.5% in May They expect growth to remain slow Expect no change in BOE policy

Trichet keeps to the script EURUSD moves up in post speech trade to test Midpoint level Posted: 07 Jul 2011 06:59 AM PDT The ECB’s mandate is to control inflationary expectations. As such, the head of the ECB sees monetary policy as being accomodative. He sees inflationary expectations as still a risk.  He is uncommitted to future policy action. He sees the roles of the governments to take care of the fiscal issues. If they do, they will enjoy growth, employment and resiliency (like Germany). The market took the comments as somewhat more upbeat (or not dovish) and as a result, the price has moved higher. The range during the speach was 81 pips (from 1.4221 to 1.4303). This is in line with the last meeting where the range was also about 80 pips. The 1.4363, 100 day MA played a role in the action as it held support after the spike move to the 1.4303 (see chart below).  The price is now testing the 1.4339 level which is the midpoint of the move up from the June 27th low to the July 4th high (see chart below).  This level should find some selling interest at least initially.  On the downside now the 1.4303-10 level will be eyed as support by intraday traders. Staying above the level will be a clue that the market covering from the short move, may now take charge.

Charting the Majors with James Chen – Webinar at 9:30 AM U.S. ET “ON AIR NOW” Posted: 07 Jul 2011 06:20 AM PDT Please join us today (Thursday, July 7) at 9:30 AM U.S. ET for FXDD’s Charting the Majors with James Chen. This free webinar will feature the current technical outlook on the major currency pairs in an interactive and educational session. Please click here to register: https://www1.gotomeeting.com/register/750307057 .

Traders Course Lesson 14- Putting it all together Part 2 TODAY 4:00PM Posted: 07 Jul 2011 06:00 AM PDT Join Greg Michalowski and Shawn Powell for the power hour of Forex Traders Course 14- “Putting it all together Part 2″ Thursday 4:00PM with Greg Michalowski and Shawn Powell – Register now

ECB’s Trichet on the Wires Posted: 07 Jul 2011 05:37 AM PDT Says: Rate increase warranted on upside price risks Monetary liquidity remains ‘ample’ Price stability important for growth Interest rates remain ‘low’ Recent economic data show deceleration Uncertainty ‘remains elevated’ Monetary policy stance remains accommodate ECB will monitor very closely all developments All non-standard measures are temporary Recent Data show ‘continued’ GDP expansion in Q2 Euro-region growth may slow in second quarter Positive underlying momentum remains in place Risks to growth outlook ‘broadly balanced’ Financial market tensions among growth risks Further gains of energy costs among growth risks Inflation to stay clearly above 2% in coming months

Highlights of Trichet comments in chronological order. Posted: 07 Jul 2011 05:34 AM PDT EURUSD at the 1.4246 level as Trichet begins press conference. The 61.8% retracement of the EURUSD move up from the May low to the June high comes in at 1.4248. The 100 day MA is at 1.4263. These are key levels to eye. Increase rates by 25 BP Upside risk to price stability Monetary liquidity remains ample Monetary policy remains accomodative Uncertainty remains elevated Monitor inflationary  developments very closely Non standard are temporary Growth may slow in 2nd quarter. 1st quarter growth was due to special factors Activity is expected to be dampened as there are adjustments in various sectors Favorable business confidence is upside risk Oil, Financial Market tensions and global imbalances are risks Inflation is expected to stay above 2% Important to prevent second round effects Inflation expectations must remain anchored Risk to inflation remains to the upside 8:41 AM ET: The EURUSD has moved lower, falling to 1.4221. Resistance at 1.4248 and 1.4263 now. 8 Weaker banks must increase capital and efficiency (retain earnings) Underlying pace is to gradually recover while monetary liquidity remains ample Interest rates remain low/monetary policy stance remains accommodative Euro area countries must follow fiscal targets Countries must stick to fiscal plans 8:46 AM ET: EURUSD trades at 1.4255. Approaches 100 day MA at 1.4263 as Q&A begins CPI ranges are used to capture the uncertainty The projections incorporate interest rate increases Always focuced on delivering price stability No pre-commitments rates. The goal is price stability. Not incorporating any interest rates this year until that time when they signal that rates will increase in one months time Trichet suspend rating requirement for Portugal (this is similar to Ireland and Greece). The ECB will accept collatoral for loans to banks 8:53 AM ET. EURUSD moves higher on the suspension of Portugal rating requirement.  Price moves to 1.4291 on the expectation that it keeps the Portugal banks in business.  The market is interpreting this as good news. It may be kicking the can down the road as the higher yields that Portugal have, will make debt rollover more difficult. ECB opposed to selective default It is the responsibility of Governments to speak to private creditor issue with regard to Greece (in reference to French Plan) If inflation expectations increase, this would be translated to higher interest rates for all countries 9:04 AM ET.  EURUSD back down to 1.4266. No apparent reason other than the swings up and down from volatility.  100 day MA is at 1.4263. This once again will be followed by the market. Ireland (and periphery countries) are benefitting from credibility of the ECB Important that Ireland and other periphery countries applies programs The decision was unanimous German has lower unemployment now then before crisis German has growth, jobs and resiliency The reinforcements of governments is extremely important ECB is in charge of price stability.  The countries are responsible for fiscal issues. 9:12 AM ET: The EURUSD holds support against the 100 day MA at the 1.4263 level on the dip back down. Markets are slowing down as press conference winds down. The downside bias has been tempered a bit by the move back above the 1.4263 level. The low since the speech has been 1.4221, the high has been 1.4303 or 82 pips.  1.4262 is the midpoint (1 pip from the 100 day MA) ECB opposed to Credit Event, Selective Default (not sure what that means to be honest.  Does it mean they will do all they can to stop a Selective Default?) Need to reflect on rating agencies on a global level Its clear that there’s pro-cyclicality in ratings Small group of rating agencies is not desirable. ECB calls to avoid default (this clarifies opposed to default. The ECB and the EU should do all it can to avoid default). Italy fiscal measures going in the right direction (personal view) Sending message to all countries that being ahead of the curve is good and rewarded by more growth and job creation Engage in structural reforms in countries is welcome and being ahead is important. ECB is called to make monetary policy for 330 million people and price stability. The responsibility on fiscal policy is on the governments Following the bailout programs with the banks as that is a concern of the ECB (to provide liquidity) Did not decide on a series of interest rate increases today. This is in line with pre-commited doctrine. Even in the situation when they use the term stong vigilance. It still is not pre-committed. Economic activity is less impressive now. The ECB will follow the result of the bank stress tests very very carefully. They are due out next week. 8:46 AM ET. The Q&A ends at 9:43 The EURUSD is at 1.4286 – above the midpoint of the price action which had a low of 1.4221 and a high of 1.4301 and the 100 day MA at the 1.4263 level today.

Jobless Claims Better with ADP News, Canada Housing Also Up Posted: 07 Jul 2011 05:32 AM PDT US Jobless Claims:  Survey: 420K    Actual: 418K Prior: 428K    Revised:  432K US Continuing Claims:  Survey: 3700K    Actual:  3681K Prior: 3702K   Revised: 3742K CA New House Price Index MoM :  Survey: 0.2%    Actual: 0.4% Prior: 0.3% CA New House Price Index YoY:  Survey: 1.7%    Actual: 1.9% Prior: 1.9%

Trichet press conference awaited Posted: 07 Jul 2011 05:31 AM PDT The highlights will be posted as they are said (refresh the page)

The ADP data better is good news for the US employment Posted: 07 Jul 2011 05:30 AM PDT The better than expected ADP report is good news for the US and has kept the pressure on the EURUSD. The EURUSD has stalled around the 61.8% retracement.  The market will be watching if Trichet signals more of a delay in the tightening. The Initial Claims come in at 418 k vs 420 k.  The Continuing Claims come in at 3681K vs 3700K

US ADP Payrolls Rise to 157K Posted: 07 Jul 2011 05:16 AM PDT ADP Employment Change:  Survey: 70K   Actual: 157K Prior: 38K June vs May 2011 ADP Employment:  108,677 vs 108,520 Level Change:  157 vs 36 USD/JPY Trading higher on the news.

The EURUSD holds the 61.8% retracement. Posted: 07 Jul 2011 05:15 AM PDT Going into Trichet the 1.4248 level is the 61.8% of the move up from the end of May low to the June 2011 high. Should Trichet comments come out more bearish for the EURUSD (delay the next tightening bias indefinitely) a move below would be bearish. The bond yields on the 5 year notes of Portugal have soared this week and are getting closer to the high Greece yields. This is not good for the EU with a likely bailout on the back of the inability to rollover maturing debt.  Spain yields are still within their range but near the top of their range.

The NY Morning Forex Commentary is available for viewing Posted: 07 Jul 2011 05:06 AM PDT

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