Forex Market Updates & Commentary

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• EURUSD moves down on a less accomodative Bernanke
• Bernanke says not prepared at this point to take action on the economy
• Bernanke says Fed Policy is highly accomodative
• Charting the Majors with James Chen – Webinar Rebroadcast
• IMF tells G-20 that risks of not resolving Greece Debt crisis are severe
• GBPUSD keeps bullish bias but momentum fades a touch
• Fitch downgrade Greek banks on Sovereign downgrade
• IMF and ECB’s Szekely, Masuch & Chopra on the Wires
• IMF Chopra says rating agencies may be overstating the risks in crisis
• Italy’s Senate Approves Austerity Measures in Confidence Vote
• Italy senate approve budget austerity package vote of confidence.
• EURUSD moves back into channel in early NY trade
• Selective 5 year bond yields for EU countries
• Germany’s Merkel: Greek deal is a precondition to a summit
• Better data, eases some pressure but focus on Washington

EURUSD moves down on a less accomodative Bernanke Posted: 14 Jul 2011 07:42 AM PDT Bernanke came out and started by saying there was ample accomodation and the Fed was not prepared to add additional accomodation at this point. Yesterday the market interpreted his outline of what the Fed could do as a clue that they were likely to ease (ie.. QE3) sooner rather than later.  The EURUSD has move below the trendline on the hourly chart at the 1.4195 level now and this level will be eyed as the volatile trade continues with the comments.  A move above this level could see the price squeeze toward the 1.4215 level. The low for the day comes in at 1.4153/56 (Far east and London Lows) and these are the next targets.  Yesterday the price closed at the 1.3979 level.

Bernanke says not prepared at this point to take action on the economy Posted: 14 Jul 2011 07:31 AM PDT Fiscal plan must look at long and the short run Important to bring down deficits Recovery is rather fragile Epicenter of problems are the housing market US default would trigger crisis Sees possible chaos due to default 1H weakness due to temporary factors Confidence is pretty low Consumers cautious

Bernanke says Fed Policy is highly accomodative Posted: 14 Jul 2011 07:29 AM PDT It will be curious to see if Bernanke tones down expectations of any near term QE3. The market interpreted his comments yesterday toward the idea it was not far away.  This led to the weaker dollar.

Charting the Majors with James Chen – Webinar Rebroadcast Posted: 14 Jul 2011 07:25 AM PDT Please click on the following link to access the rebroadcast of today’s Charting the Majors with James Chen. This webinar featured the current technical outlook on the major currency pairs in an interactive and educational session. Please click here to access: https://www1.gotomeeting.com/register/987902929 .

IMF tells G-20 that risks of not resolving Greece Debt crisis are severe Posted: 14 Jul 2011 07:14 AM PDT They add that, Lack of credible medium term fiscal plan in US and Japan also a concern More rapid macroeconomic policy tightening and demand rebalancing needed in some cases in g-20 economies

GBPUSD keeps bullish bias but momentum fades a touch Posted: 14 Jul 2011 06:56 AM PDT

Fitch downgrade Greek banks on Sovereign downgrade Posted: 14 Jul 2011 06:52 AM PDT This is consistent given the amount of sovereign debt Greeks banks hold. The ECB is supporting the banks by accepting the Greek debt as collateral for funds.

IMF and ECB’s Szekely, Masuch & Chopra on the Wires Posted: 14 Jul 2011 06:29 AM PDT Says: Irish fiscal program on track Tensions in bond markets have escalated Irish program cushioning it from market developments Irish six month deficit below targets in aid program Strong implementation needed to prevent contagion Ireland met all targets in review Masuch says no change on ECB stance on senior bonds Moody’s Irish downgrade linked to EU policy plans Contagion risk is pushing up irish spreads Ireland showing some signs of economic growth Irish debt is sustainable No need for Irish restructuring

IMF Chopra says rating agencies may be overstating the risks in crisis Posted: 14 Jul 2011 06:12 AM PDT It is no doubt that they are quicker to react and also more anticipatory of what “may” come.  The downgrade of Ireland was more because of their belief rollover of debt in 2013 would be difficult without an extension of bailout aid. Chopra also adds that Ireland is showing signs of economic growth and that Irish government has determination for fiscal plan.

Italy’s Senate Approves Austerity Measures in Confidence Vote Posted: 14 Jul 2011 06:11 AM PDT

Italy senate approve budget austerity package vote of confidence. Posted: 14 Jul 2011 06:09 AM PDT The EURUSD has moved to new NY highs at 1.4243 but runs into some selling/profit taking. The final passage of the austerity package is to take place tomorrow.  That package is to cut 40 billion of spending that will move Italy to a balanced budget by 2014. The proposed program is a combination of spending cuts and tax increases but also includes provisions for spending on R & D. It also includes provisions for the sale of some public assets.  The Italian Finance Minister Tremonte has been at odds with his boss, the Italian PM Berlusconi and that contributed to some of the pressure in Italy.  However, the quick action this week with speeding up the budget austerity package, will likely go a long way to allaying fears about Italy for the time being and could lead to some of the pressure in bond yields to be released.

EURUSD moves back into channel in early NY trade Posted: 14 Jul 2011 06:02 AM PDT The EURUSD moved below channel support buy has since moved back higher in the early NY trade.  The EURUSD remains supported by what is happening (or not happening) in Washington. Better US data failed to ignite any move to the upside this morning – so far at least.   There is some further support on the back of the likely passing of an austerity package in Italy today.  This should ease pressure further for Italy. The channel has bottom support around the 1.4186 level. The topside for this morning has room to reach the topside channel trendline. The better resistance comes in against the 200 hour MA (green line in the chart above). The level comes in at the 1.4257 level.  Twice today, the price tested the 200 hour MA and each time profit takers entered.  That does not mean it would happen this morning but the market can become a creature of habit and therefore some profit taking against the level could put a stop to the rally at least temporarily – with stops above. Looking at the daily chart, another key level to consider in today’s trading is the 100 day MA. In the Far East session last night the price tested this key moving average at the 1.4284 level (the high reached 1.4281).  At the time both the 100 day MA and the 200 hour MA were near the same area (1.4284 and 1.4279).  This was hard to resistance and sellers were happy to take profit against the leel (see chart below).

Selective 5 year bond yields for EU countries Posted: 14 Jul 2011 05:49 AM PDT This morning, the Irish finance minister was on the wires and said that experience tells us that when bond yields move above 7%, this is bailout territory. Today, Italy issued 5 year notes below the 5% yield. There was fear of a lack of support for the auction. The auction had enough support, aleving that fear. The chart above shows that Spain and Italy are both neck and neck near the 5% level currently.  Greece, Ireland and Portugal are off the map and will continue to have issues with funding their own debt absent an aid package.  Right now the focus remains on the US, however, as the debt ceiling and bickering continue to be the dominant news.  Nevertheless, one must be prepared to have the focus shift should there be a deterioration in the bond yields outlined above at some point.

Germany’s Merkel: Greek deal is a precondition to a summit Posted: 14 Jul 2011 05:41 AM PDT

Better data, eases some pressure but focus on Washington Posted: 14 Jul 2011 05:34 AM PDT The data can be characterized as somewhat better than expectations. Retail sales higher, Initial Claims lower, PPI showing signs of the commodity price declines. All pointing to perhaps the start of a rebound. However, the actions in Washington are still on center court within the financial markets. As a result, there is not much reaction to the data.

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