EU Morning Report

Dollar soars on poor data and heightened risk aversion

  • The euro plummeted yesterday and world equities turned negative as growing fears about the global economy as well as poor economic data weighed on the single currency. Rating agency Moody's surprised the markets today after the downgrade of eight Greek banks by two notches each and saying that their outlook remains negative. Greece outlined the new austerity measures to secure the next tranche of financial aid from the International Monetary Fund. Against the US dollar, the euro hit an eight-month low breaking below the 1.34 level to 1.3384 from 1.3584. Today, the pair edged higher on profit taking hitting 1.3566 but the pair remains vulnerable for further losses as uncertainty in the market remains. Versus the Japanese yen, the euro shed 2% dropping to 102.22 from 104.37.
  • The US dollar rallied against a basket of currencies after the Fed's Operation Twist move spurred a heightened demand for the safe haven currency. Escalating fears about the global economy and the eurozone debt crisis as well as a series of disappointing data pushed the euro and high yielding currencies lower. US Initial Jobless claims revealed an increase to 423K higher than market expectations. Also, PMI data from Germany and the eurozone disappointed investors by showing poor figures raising further concerns about slow growth in Europe.
  • The Australian dollar slid against the dollar as the Fed's Operation Twist move dampened investors' risk appetite. The pair shed 3.7% yesterday breaking below parity and hitting 0.9691 from 1.0071. The British Pound also declined versus the greenback falling to 1.5327 from 1.5503.
  • Oil prices shed 6.2% falling 79.66 dollars a barrel from 84.94. Gold slid to 1720.10 dollars an ounce from 1785.08. Silver also edged lower to 34.24 dollars an ounce today from 39.69, a decline of 13.7%. 

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.3575 with a preference to enter Short positions at 1.3565
  • § The USDJPY pivot point is at 76.55 with a preference to enter Short positions at 76.50
  • § The OIL pivot point is at 82.20 with a preference to enter Short positions at 82.20
  • § The Gold pivot point is at 1756 with a preference to enter Short positions at 1756                          

Today's calendar and market movers:

  • § No major economic news are expected today

Equity Markets:                                              

US equities were negative on Thursday with the S&P500 trading down -3.19% and the DJIA down -3.51%. The European bourses were also negative with the FTSE trading down -4.67%, the DAX down -4.96% and the CAC down -5.25%. The NIKKEI and the HSI at the time of writing are trading down -2.07% and -1.68% respectively.

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