EU Morning Report

Euro struggles as tensions in Egypt continue

Euro edges slightly higher at the start of a new week recovering some of its losses made due to the deadly protests in Egypt. Risk aversion in the currency markets is high as investors fear that this political uncertainty could spill in other countries and create Middle East instability. Euro shed more than 1% versus the US dollar as investors tend to abandon risky assets for safer bets such as the US dollar. The single currency fell as low as 1.3571 from 1.3744 against the dollar. Today the pair appears steadier trading slightly higher at 1.3621. Investors focus turns to Europe's Consumer Price Index released later today hoping to have a clearer view about inflation and the possibility of a rate hike.

The US dollar, franc and Japanese Yen are broadly firmer supported by a heightened risk aversion in the market. The euro dipped against a strong Swiss franc and the pair slid as low as 1.2779 from 1.2978. Against the Japanese Yen, the euro plummeted falling to 111.31 from 113.88.

The Australian dollar fell versus a safe dollar weighed by a high risk aversion while the country is recovering from the massive floods in Queensland. The Aussie fell to 0.9864 dollars from 0.9985. Today the pair recovered some of its losses to trade around 0.9940.

Oil jumped above 90 dollars a barrel as investors fear that the situation in Egypt could spread in the Middle East and hurt the supply of oil. Oil prices rose as high as 90.49 dollars a barrel from 84.79. Gold also jumped, as it is traditionally a safe haven bet and in uncertain environments the demand for the precious metal increases. Gold prices climbed as high as 1346.70 dollars an ounce from 1308.03.

Currency to watch out for: EURUSD & USDJPY

  • § The EURUSD pivot point is at 1.3535 with a preference to enter into Long positions at 1.3545
  • § The USDJPY pivot point is at 82.30 with a preference to enter Short positions at 82.25              

Today's calendar and market movers:

  • § Germany's Retail Sales in December is forecasted to gain 1.9%
  • § Europe's Consumer Price Index in January is forecasted to gain 2.4%
  • § Canada's Gross Domestic Product in November is forecasted to remain unchanged at 0.2%

Equity Markets:

US equities were negative on Friday with the S&P500 trading down -1.79% and the DJIA trading down -1.79%. The European bourses are also negative with the FTSE trading down -1.40%, the DAX trading down -0.74% and the CAC down -1.41%. The NIKKEI and the HSI at the time of writing are trading down -1.18% and -1.12% respectively.

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