Monday, July 11, 2011

Market Afternoon Overview - July 11, 2011

Previous session overview
Euro zone debt concerns rattled markets Monday, sending the euro and other riskier assets sharply lower as traders sought safety. 

The euro fell 1.4% against the dollar to trade near the USD1.40 level, and hit a record low against the Swiss franc and a multi-month low against the yen. Other risk assets like stocks and commodities followed the common currency lower as traders became more conservative. 

Global economic growth worries were also driving trading lower as disappointment from Friday's U.S. employment report seeped into a new week. 

Fears that debt problems are spreading throughout perceived weaker members of the euro zone are raising, especially in Italy, a country that so far has avoided a bailout.

The euro fell to USD1.4051 from about USD1.4263 late Friday. The common currency fell to CHF1.1735 from CHF1.1932, hitting a new record low of CHF1.1694 earlier in the session. 

The euro was down to JPY113.07 from JPY114.96. It was at its lowest level against the yen since March.

The Canadian dollar was weaker early Monday with investors choosing to pare risk from their portfolios on renewed euro zone worries. 

The U.S. dollar gained to CAD0.9686 from CAD0.9631 late Friday.
Market expectation
European leaders are now considering allowing Greece to default on some of its bonds as part of a new bailout plan for the troubled country, according to a Financial Times report. Such a plan could also coincide with the abandonment of the rollover plan.

GBPUSD support at USD1.5912 finally gives way, and the spot spikes lower to a fresh five month low at USD1.5889. Analysts say a daily close below the March low of USD1.5937 will validate this downside break, and target the 55-week moving average at USD1.5905, and eventually, the USD1.5500 area.

If the EURJPY extends further below its recently notched minimum, further support levels could appear at JPY110.61 (Daily Low Mar 18), JPY109.64 (Hrly Lows Mar 17) and JPY109.29 (Hrly Low Mar 17). In the unlikely case of a reversal, resistance is placed at JPY114.09 (200-Day MA), JPY114.71 (Hrly High Jul 11) and JPY115.00 (Psychological Level), report technical analysts.