EU Morning Report

European Bank stress tests failed to support the euro

  • The US dollar dropped against the safe haven Swiss franc and Japanese yen and steadied against high yielding currencies such as the Aussie and the euro. On Friday, Consumer Price Index revealed that inflation rose in June adding strength on the view that additional stimulus is not likely. Versus the Swiss franc, the greenback plummeted to 0.8040 from 0.8191. Against the Japanese yen, the dollar edged as low as 78.95 from 79.27.
  • The euro edged lower against the dollar during the Asian session after the European Banks stress tests failed to ease fears over the eurozone debt crisis. The tests showed that 8 out of 90 banks failed, but the tests did not factor the possibility of a Greek default. Focus now turns to the EU summit scheduled for Thursday. Against the dollar, the single currency edged as low as 1.4115 from 1.4270. Against the dollar, the euro dipped to 1.4051 from 1.4188. Versus the safe haven Swiss franc, the single currency shed 2% dropping to a record low at 1.1363 from 1.1598 on heightened risk aversion.  
  • The Australian dollar dipped against the greenback today falling as low as 1.0582 from 1.0745 traded on Friday. The Aussie is also under pressure after Westpac Bank forecasted that interest rates in Australia will be cut in the near future. Aussie's neighbor, the Kiwi rose on higher than expected inflation data raising speculation that interest rates may rise this year.
  • Oil prices jumped to 97.70 dollars a barrel today from 95.20. Gold edged higher to a new record high at 1598.10 dollars an ounce from 1575.81. Silver also rose to 39.95 dollars an ounce from 37.85.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4175 with a preference to enter Short positions at 1.4155
  • § The USDJPY pivot point is at 78.85 with a preference to enter Long positions at 78.90
  • § The OIL pivot point is at 96.70 with a preference to enter Long positions at 96.70
  • § The Gold pivot point is at 1575 with a preference to enter Long positions at 1575                        

Today's calendar and market movers:

  • § US Housing Market Index in July is forecast to rise to 14

Equity Markets:                                           

US equities were positive on Friday with the S&P500 trading up 0.56% and the DJIA up 0.34%. The European bourses were mixed with the FTSE trading down -0.06%, the DAX up 0.07% and the CAC down -0.66%. The NIKKEI and the HSI at the time of writing are trading up 0.39% and 0.20% respectively.

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