Wednesday, July 20, 2011

German Chancellor Merkel and French President Sarkozy: Greek aid Solution

Previous session overview
Euro fell below the mention level and accelerated the decline and retreated further from the highs to USD1.4170. The pair was able to hold above the USD1.4170 zone and after the release of US housing data rose back to USD1.4200.

German Chancellor Merkel has adopted a skeptical tone this week on the possibility for a long-term Greek aid solution. Merkel and French President Sarkozy will seek a common line on a New Greek aid program and broader euro-zone reforms when they meet Wednesday ahead of a meeting of the bloc's leaders in Brussels. 

Potential good news on euro-zone debt front is making precautionary credit lines available, enabling the EFSF fund to lend to banks and to buy directly in the secondary market.

In the market the Yen is trading with mix results so far on Wednesday, most crosses are not far from today's opening levels. US Dollar rebounded at the lows and trimmed losses but the upside was capped below JPY79.00. In the last hours the pair remained steady moving in a small range between JPY78.80 and JPY78.95/00.

The Canadian dollar rose to a fresh 11-week high Wednesday, extending gains made after Bank of Canada kept rates unchanged and after some risk sentiment turned positive. 

The U.S. dollar was trading at CAD0.9478, after hitting a low of CAD0.9456, from CAD0.9499 late Tuesday.
Market expectation
Investors will look for Bank of Canada Governor Mark Carney's press conference for the fine print behind the central bank's decision and changes to the monetary policy text, leading most analysts to believe a rate increase would happen sooner than previously thought.

Market is also watching closely on US debt ceiling talks, which show fresh signs of progress.

According to analysts JPY support is seen at around JPY78.60 levels while resistance is seen at JPY79.89 levels (21 days daily EMA). Yen Exporters are suggested to book exposure at current levels and Importers can cover above JPY80.50 levels.

Dealers say that initial support for EURUSD lies at the USD1.4170 levels, where the 20-day moving average is located, while possible deeper reversal needs to be contained at USD1.4130 to maintain near-term bulls. They point out that to the upside, the pair is looking to USD1.4281, the July 14 high and key near-term resistance, break here to signal fresh phase higher and open USD1.4373/90, 07 July high / main trend line resistance.