Euro Bank Stress Tests Released

Written by Anthony Darvall

U.S. Dollar Trading (USD) the dollar continued to struggle in the 'risk on' environment with US stocks extending the week's gains to over 4%. The release of the EU bank stress results did not fault the good mood with most of the action seen in the hours beforehand. In US stocks, DJIA +102 points closing at 10424, S&P +8 points closing at 1102 and NASDAQ +23 points closing at 2269. Looking ahead, June New Home Sales forecast at 317k vs. 300k previously.

The Euro (EUR) was sharply lower in Europe on concerns the Bank stress tests were not tough enough. Helping support though was the release of strong German July IFO at 106 vs. 101 forecast. When the release of the bank stress tests caused little alarm (7/91 failed) and US stocks rallied the Euro was bought up back above 1.2900. EUR/USD traded with a low of 1.2794 and a high of 1.2967 before closing at 1.2909. Looking ahead, European Traders have first reaction to Stress Tests.

The Japanese Yen (JPY) the Yen was the weakest currency in the market being sold off aggressively against the USD and the AUD when risk appetite picked up another notch and support held at Y86.30. The outlook is still clouded with further gains for the major requiring a pick-up in US data. Overall the USDJPY traded with a low of 86.75 and a high of 87.52 before closing the day around 87.30 in the New York session. UPDATE June Trade Balance at 687bn vs. 700bn forecast.

The Sterling (GBP) had a very strong day on the back of surprisingly strong Q2 GDP figures. Expectations were poor after the Greece Debt Crisis in May but the figures of 1.1% vs. 0.6% forecast were well received. EUR/GBP dropped below 0.8400 and Cable broke to near month highs above 1.5400. Overall the GBP/USD traded with a low of 1.5255 and a high of 1.5449 before closing the day at 1.5420 in the New York session.

The Australian Dollar (AUD) did well in the risk on environment making solid gains against the Euro, USD and Yen. AUD/JPY was the best performing currency in the market last week up 4%. The key Psychological level at 0.9000 is under threat with Wednesday's CPI figures the potential catalyst for a test. Overall the AUD/USD traded with a low of 0.8897 and a high of 0.8970 before closing the US session at 0.8960.

Oil & Gold (XAU) Fell back after failing to hold above the $1200 level but found support at under $1190 to finish in familiar territory. Overall trading with a low of USD$1200 and high of USD $1185 before ending the New York session at USD$1190 an ounce. Finished roughly unchanged as traders consolidated the week's gains. WTI Oil Closed -$0.32 at $79.05 a barrel.

TECHNICAL COMMENTARY

Currency
Sup 2
Sup 1
Spot
Res 1
Res 2

EUR/USD
1.2480
1.2709
1.2910
1.3094
1.3416

USD/JPY
85.87
86.27
87.50
88.50
89.16

GBP/USD
1.4857
1.5125
1.5435
1.5472
1.5816

AUD/USD
0.8622
0.8738
0.8940
0.9077
0.9389

XAU/USD
1157.00
1175
1192
1218
1244.00

OIL/USD
75.00
78.00
79.05
80.00
82.50

Euro - 1.2910

Initial support at 1.2709 (July 15 low) followed by 1.2480 (July 6 low). Initial resistance is now located at 1.3094 (May 10 high) followed by 1.3416 (April 27 high)

Yen - 87.50

Initial support is located at 86.27 (July 16 low) followed by 85.87 (Nov 30 2009 low). Initial resistance is now at 88.50 (July 15 high) followed by 89.16 (July 12 high).

Pound - 1.5435

Initial support at 1.5125 (July 20 low) followed by 1.4857 (Jun 25 low). Initial resistance is now at 1.5472 (38.2% retrace of 1.6878-1.4231) followed by 1.5816 (Feb 17 high).

Australian Dollar - 0.8940

Initial support at 0.8738 (July 22 high) followed by the 0.8622 (June 8 high). Initial resistance is now at 0. 9077 (76.4% retrace of 0.9389-0.8067) followed by 0.9389 (April 12 high).

Gold - 1192

Initial support at 1175 (July 20 low) followed by 1157 (May 5 low). Initial resistance is now at 1218 (July 13 high) followed by 1244 (July 1 high).

Oil - 79.05

Initial support at 78.00 (Intraday Support) followed by 75.00 (Intraday Support). Initial resistance is now at 80.00 (Intraday Resistance) followed by 82.50 (Intraday Resistance).