Tuesday, July 19, 2011

Market Morning Review - Will Yesterday's Moves Continue

Coming Up Today (all times GMT)
  • GBP MPC Minutes (8:30)
  • USD Existing Homes Sales (14:00)
  • CAD BoC Policy Report (14:30)
  • CAD BoC Press Conference (15:15)
Forex pairs responded to the global rally in equities yesterday, as the dollar and yen sold off in favor of riskier currencies. Headlining the move was the AUDUSD which rose to a high of 1.0750, nearly 200 pips above its Monday lows. 

The question among Forex traders today is whether yesterday’s move has legs or was it the result of bargain hunting and short covering. As such, will be watching this morning’s lows; if they hold it could lead to another round of buying momentum today.


Taking advantage of the overall fall in the dollar yesterday, the EURUSD twice traded back above 1.4200 before settling around the 1.4150 level. Looking ahead, Forex traders will be watching the 1.4200 level closely. If the pair once again trades above 1.4200 and succumbs to selling, it will reveal that traders are selling into the EURUSD’s strength, and could send some buyers to the sidelines. On the other hand, a break above yesterday’s highs could easily drag the momentum buyers aboard and cause a potential move to 1.4300.

Support/Resistance 1.4105/1.4220


The GBPUSD continues to be one of the more resilient pairs around. Just when it looks like it is bound for a huge fall it manages to trade higher. This is occurring even as speculative selling levels have been increasing. As such, with MPC Minutes due out today, Forex traders will be expecting another volatile session in the pair. Traders will be keeping a close eye on inflation rhetoric. Any mention of worry regarding the UK’s high inflation could spur a move higher in the GBPUSD, as Forex traders will most likely interpret the statement to mean a rate hike is likely sooner than later. However, if the BoE once again fails to deliver any semblance of a “hawkish” tone, we could easily see the GBPUSD fall back towards 1.6000.

Support/Resistance 1.6090/1.6200

Published: 20 July, 2011
written by: Ron Finberg , Analyst Markets.com