Monday, August 1, 2011

Markets Morning Review : Bracing for More Volatility

Coming Up Today (all times GMT)

  • CHF Retail Sales (7:15)
  • GBP Construction PMI (8:30)
Forex volatility continues this morning as the AUD/USD has fallen nearly 60 pips to 1.0920 following no action at today’s RBA Rate Meeting. Surprisingly, the Australian Central Bank didn’t seem to concerned about rising inflation. Forex traders understood the bank’s comments to mean to no more rate hikes until at least late 2011.

Elsewhere, with a debt deal done in the US, Forex traders are watching the upcoming trading in Europe. Yesterday, Italian bank shares were crushed at liquidity fears swept the market. This caused cash to quickly leave the Euro in favor of the Franc and Yen. Specifically, the Swiss Franc hit all time highs against the Euro and Dollar. In early morning trading, the USDCHF and EURCHF which recovered somewhat from their lows yesterday have begun to trend lower once again. This selling is expected to intensify if European stock indexes fail to find support this morning.

EUR/USD

It was a tale of two trades yesterday as earlier EURUSD strength gave way to a huge swoon in the pair as it fell around 250 pips to a low of 1.4195. Currently, the EURUSD has been trading around 1.4250. As mentioned above, Forex traders are awaiting the opening of trading in Europe. If weakness continues, we could see another selloff in the EURUSD if its 1.4195 support fails to hold.

Support/Resistance 1.4195/1.4280

GBP/USD

Similar to pretty much everything else other than the Franc and Yen, the Pound was sharply lower against the Dollar yesterday. However, the GBPUSD did find support at its 1.6250 support level which indicates that buyers are willing to step in. As such, if 1.6250 holds once again today, we could see momentum traders return and another move back towards 1.6400.

Support/Resistance 1.6250/1.6400

Published: 2 August, 2011
written by: Ron Finberg , Analyst Markets.com