Wednesday, July 13, 2011

Market Afternoon Overview - 13 July 2011

Previous session overview

The dollar added to its losses Tuesday after Federal Reserve Chairman Ben Bernanke's prepared testimony in front of Congress was released. 

Bernanke's statement reiterated recent comments that U.S. growth remains modest so far in 2011. He said the central bank expects the economy to improve during the second half of the year, but it remains at the ready to ease monetary policy if growth remains slow.

The euro rose to USD1.4074 from about USD1.4047 just before the testimony was released. The dollar was at JPY79.17 from about JPY79.26. 

Stronger demand for riskier assets undermined the dollar's safe-haven appeal Wednesday, which fell to a new record low against the Swiss franc. 

The dollar fell as low as CHF0.8265. The euro continued its recovery from Tuesday's record low against the Swiss currency, however, trading around CHF 1.1645.

The Canadian dollar gained early Wednesday after strong China GDP and a better than expected bond auction in Italy brightened investor sentiment, sparking a rally in riskier assets. The U.S. dollar fell to CAD0.9633 from CAD0.9665 late Tuesday. The Canadian dollar, seen as a barometer of global risk, strongly tracks stocks, oil and economic releases from U.S., which accounts for nearly three quarters of the country's exports.

Market expectation

Traders said that beneath the surface investors were still nervous about Europe's debt crisis. That has helped support safe-havens such as gold, which also set a new record on Wednesday.

GBPUSD immediate resistance lies at resistance at USD1.5990 (day high), and above here, USD1.6040 (Jul 11 high) and USD1.6080 (Jul 8 high). On the downside, immediate support lies at USD1.5900 (day lows), and below here, USD1.5775/00 (Jul 12 lows), and USD1.5745 (Jan 25 lows).

The immediate outlook is mixed, according to technical analysts, with key levels at USD15900 and USD1.6000.A break above USD1.6000 might target USD1.6050 and only a strong break above USD1.6050 will ease the downside pressure. On the other hand, a strong break below USD1.5900 might take it down once again to USD1.5800-5770.

Today USDCAD has dropped around 60 pips from it´s opening price, appearing to find modest support around the technical barrier ahead of the North American session. If the USDCAD manages to break past that level, expect further critical levels to present themselves at CAD0.9564 (Daily Low Jul 8), CAD0.9524 (21-Day Lower Bolli) and CAD0.9513 (Daily Low May 11). Above, resistance is placed at CAD0.9646 (Hourly High Jul 13), CAD0.9693 (100-Day MA) and CAD0.9780 (61.8% of CAD0.9564 -CAD0.9914), report analysts.