Thursday, July 14, 2011

Market Afternoon Overview - 14 July 2011

Previous session overview

The dollar added to its gains against the yen and pared losses against the euro Thursday after Federal Reserve Chairman Ben Bernanke said the central bank is not currently prepared to take further action on the economy. 

Bernanke's comments in front of the Senate dampen any recent growing expectations that the Fed would embark on a new bond-buying program to help stimulate the economy. In recent days Bernanke had said the door was open for further easing measures, but Thursday's statement appears to shut the door on any near-term possibilities of another round of bond buying. 

The euro was at USD1.4201 from about USD1.4236 just before Bernanke made the comments. The dollar was at JPY79.14 yen from about JPY79.04. 

Jobless claims fell by 22,000 to 405,000 last week, better than the 415,000 economists had forecast.

The producer price index fell by 0.4% in June, more than the 0.2% drop that was forecast as energy prices fell. Excluding volatile food and energy costs, producer prices rose 0.3%, more than the 0.2% increase expected.

The Canadian dollar touched a session high early Thursday after U.S. retail sales for June rose unexpectedly. 

The U.S. dollar slid to an intraday low of CAD0.9550 from CAD0.9583 late Wednesday. 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

Attention Thursday is likely to focus on the high-stakes negotiations between the White House and congressional leaders over raising the debt ceiling. The Treasury Department has said policy makers must act to increase the borrowing authority by Aug. 2 or risk a default on government obligations.

For USDCHF on the upside, immediate resistance lies at CHF0.8200 (intra-day level), and above here, CHF0.8280 (previous lows) and CHF0.8330 (Jul 13 high).

The overall bias however, remains strongly bearish, according to technical analysts, aiming to CHF0.8000 and 0.7900. Corrective action on extremely overextended hourly studies is seen preceding fresh weakness, with CHF0.8000, then CHF0.7900 levels in focus, as wider picture outlook remains firmly bearish.