Thursday, July 7, 2011

Forex Afternoon Overview - July 7, 2011

Previous session overview

The euro rebounded against other major currencies Thursday after European Central Bank President Jean-Claude Trichet announced the ECB's suspension of its minimum credit threshold for Portugal. 

The euro pared losses and spiked higher against the dollar to trade briefly above USD1.43, while it also recovered against the franc and hit the day's highs against the yen. At 1302 GMT, the euro was trading at USD1.4281 against the dollar. 

Trichet said the ECB would issue a press release on the treatment of Portuguese collateral "shortly". 

He reiterated that a credit event or a selective default in the euro zone must be avoided.

New claims for unemployment benefits dropped by 14,000 to a seasonally adjusted 418,000 in the week ended July 2. The decline is bigger than 3,000 forecast by economists.

The Canadian dollar hit session highs in early trade Thursday after stronger-than-expected U.S. payroll data lifted investor sentiment and raised the prospect of faster economic growth in the world's largest economy. 

The Canadian dollar, considered a barometer of risk, is tied strongly to growth in U.S., its largest trading partner, North American equities and crude, the country's largest export.

U.S. dollar slipped to CAD0.9595, off a low of CAD0.9589, and from CAD0.9653 late Wednesday.

Market expectation

AUDUSD hit a fresh high at USD1.0768, the strongest level since Monday's Asian session. To the upside, immediate resistance could be located at USD1.0790 (July 1 high) and above at USD1.0805 and USD1.0840 while support levels could be seen at USD1.0720, USD1.0700 and USD1.0650 (July 6 low).

The overall outlook remains bullish with strong Support near USD1.0660. An immediate break below this Support at USD1.0660 is not looking likely, dealers said. According to them USD1.0785 is a significant resistance level to be watched. Strong breaks above it will open doors for further rise to USD1.0900-USD1.1000.