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Overall, the euro and the swissy traded side-ways during the overnight session, being unable to develop and sustain a trend. However, the other major currencies, like the pound, aussie and cad advanced compared to the dollar, as the equity markets traded deep into the green. The big question ahead is, however, is whether the currency market can move higher without the euro, something that could not happen recently, due to the increased weight it has in the dollar index. Probably this conjecture will come to a test during the 8:30am EDT U.S. Retail Sales reports, which are likely to have a crucial influence in the FX market.
The Euro (Eur/Usd) had a 40-pip side-ways range during the overnight session, as the pair failed to break above an intra-day channel developed on Monday, and, at the same time, above a trend-line that connects the Jul 01 09 and the Jul 09 09 highs. Moreover, the euro failed to follow the other major currencies, which posted relatively strong gains compared to the dollar during the overnight session.
A report showed that industrial production increased in May in the Euro-area for the first time over the last nine months, but still, the actual number was smaller than market’s expectations. At the same time, a German ZEW survey showed that the economic sentiment weakened for the month of July..
The Pound (Gbp/Usd) rose 80 pips since the Tuesday session started, something that helped the pair break above the trend-line that connects the Jun 30 09 and the Jul 07 09 highs. Ahead, the next major resistance area for the pound will be 1.6379, where the 20-day moving average can be found. Moreover, the pair topped a few days ago around the same region, bouncing from the resistance area.
During the European session, a report showed that the U.K. CPI fell to 1.8% in June, for the first time printing below the BoE’s target since 2007. However, the same report also showed that inflation is still a problem in the U.K., having considerable higher values than in the Euro-area or in the U.S.
The Aussie (Aud/Usd) gained approximately 50 pips throughout the overnight market, moving in-line with the major currencies. However, despite this, the aussie still has not found enough momentum to break above the 50-day moving average, which acted as a resistance over the last few days of trading.
The Cad (Usd/Cad) moved side-ways during the Asian session, but the pair started heading lower after the London open, extending the declines seen in the previous day of trading. Moreover, during the European session, the cad looked resilient to any sign of dollar strength, moving lower for most of the session. For now, the cad is testing the support trend-line that held the pair since early June.
The Swissy (Usd/Chf) spent an important part of the overnight session testing the neutral pivot point (1.0840) and at the same time, the 20-day moving average. However, the swissy has failed so far to break, as the major currencies strengthened against the dollar on Tuesday.
The Yen (Usd/Yen) swung around the 93.00 area during the overnight session, not being able to develop a trend. The 93.00 area represents an important price point for the pair, which acted as resistance over the last few days of trading. On Wednesday, the BoJ is expected to maintain the 0.10% policy rate, but have an upbeat forecast for the Japanese economy.
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