Currency Updates:
U.S. Dollar Trading (USD) in an interesting day of trade we saw US stock markets hit new 2012 highs before profit taking reversed the direction aggressively lower. The failure on the topside has led many analysts to issue notes warnings of a possible correction and this could have flow on to effects to the FX markets with risk off trade. No such effect has been seen on the EUR/USD and Gold so far however with both breaking higher overnight. Looking ahead, July Existing Home Sales forecast at 4.52mn vs. 4.37mn. July FOMC Minutes from the last meeting also released.
The Euro (EUR) the EUR/USD finally broke resistance overnight to fresh rally highs above 1.2450 on the back of falling Spanish and Italian debt yields and talk Germany was relaxing its demands with regards to Greece Debt restructuring. The next big level is 1.2500 and the bears will be waiting to see whether the rally has legs before selling into this break higher.
The Japanese Yen (JPY) USD/JPY was kept to the sidelines with action on the other majors and the Yen crosses the main story overnight. EUR/JPY obviously did well up to new rally highs above Y99 before easing slightly in the Asian session today as Japanese traders took profit.
The Sterling (GBP) the GBP/USD broke with the EUR/USD surging to 1.5800 before finding resistance and easing back with US stocks. The outlook is mixed with the Pound strong technically but if US stocks move lower then the Pound will likely follow. The EUR/GBP cross moved back to 0.7900 and will be watching closely to see if the two majors are decoupling.
Australian Dollar (AUD) was volatile rallying up to 1.0520 before reversing with the US stocks and ending on a weak footing. So far in Asia the selling has continued and accelerated as BHP the world’s largest miner cut profit forecasts and halted expansion on falling Chinese demand. Looking ahead, main event risk this week for Asia is Thursday’s HSBC China PMI release.
Oil & Gold (XAU) XAU/USD gold soared on ECB Bond buying talk with is equivalent to US QE and could devalue the Euro. OIL/USD soared to $97.50 before easing as profit takers took control of the market. Traders will be watching the FOMC minutes and Chinese PMI tomorrow for more clues on the health of the Global economy.
