Monday, August 22, 2011

Market Afternoon Overview - August 22, 2011

Previous session overview
Currency markets were relatively subdued during European trading hours Monday with the euro locked into a trading range against the dollar, while the yen held steady against the buck as traders braced for fresh action by Japan to tame the currency's strength. 

Japan's Finance Minister, who controls decisions on intervention, stepped up his rhetoric against the yen's strength Monday, saying recent "one-sided yen moves" have been accelerating. 

At 1046 GMT, the dollar was at JPY76.790 against the yen, compared with JPY76.54, while the euro was at JPY110.827 compared with JPY110.20. 

More broadly, the picture was mixed with the dollar losing ground against the commodity-linked currencies of Australia, New Zealand and Canada. 

Elsewhere, the euro was mostly higher across the board despite German Chancellor Angela Merkel repeating Sunday her rejection of collective euro bonds. 

The 17-country currency held onto gains against the Swiss franc amid ongoing concerns that the Swiss National Bank could announce further measures to counter currency strength. This might be working for now, but the market could lose patience soon and test the central bank's determination once again. 

At 1048 GMT, the euro was trading at USD1.4433 against the dollar, compared with USD1.4396 late Friday in New York. The pound was at USD1.64920 against the dollar, compared with USD1.6479 late Friday in New York. 

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 73.844 compared with 73.990 late Friday in New York.
Market expectation
Pound rally from USD1.6110 lows earlier in August was capped last week at USD1.6617 high on Monday and the pair is expected to remain consolidating at current levels for the next days, with upside attempts capped at USD1.6617 according to technical analysts.

EUR/USD resistance lies at USD1.4435/50 (session high/Aug 18/19 highs), and above here, USD1.4515 (Aug 17/Jul 27 highs) and USD1.4575 (Jul 3 high). On the downside, support levels lie at USD1.4345 (day low), and below here, USD1.4300/10 (intra-day level) and USD1.4260 (Aug 19 low). The pair's bias is positive from USD1.4260, according to analysts, with important resistance at USD1.4550/4580. Current rise from USD1.4260 low is absolutely intact and with the reliable intraday static support at USD1.4344 the bias is positive for a break beyond USD1.4394, towards USD1.4510. The resistance area around USD1.4550-4580 is likely to continue to hold for a reversal towards USD1.4260.