EU Morning Report

Focus turns to the European Banks stress tests

  • The US dollar steadied today recovering some of its losses made after rating agency Moody's warned that the United States may lose its Aaa credit rating. Fed Chairman Ben Bernanke commented about the US economy during his testimony to the Congress and said that additional monetary stimulus is not an option for the Federal Reserve at this point. Yesterday, economic data revealed that Retail Sales rose by more than expected in June however Producer Price Index showed lower than expected figures. Initial Jobless Claims also supported the dollar after showing a decrease to 405K. Against the Japanese yen, the dollar rebounded from a four-month low at 78.46 to trade as high as 79.60 on fears that the Bank of Japan will step in the currency markets and sell the yen. Versus the Swiss franc, the greenback rose to 0.8199 after it dipped to a record low at 0.8082.
  • The euro edged lower against the dollar during the US session and investors' focus now turns to the European Banks stress tests. Against the dollar, the single currency edged as low as 1.4115 from 1.4270.   
  • The Australian dollar dipped against the greenback today falling as low as 1.0685 from 1.0786. Worries about the eurozone debt crisis and results by European Bank stress tests weigh on the Aussie. Sterling firmed near a three week high against the dollar at 1.6176 from 1.6094. Against the euro, sterling dipped to 0.8754 from 0.8831 as fears about the UK economy raised speculation that interest rates may remain at low levels for an extended period of time.
  • Oil prices plummeted to 94.52 dollars a barrel today from 98.86. Gold edged higher to a new record high at 1594.00 dollars an ounce from 1578.80. Silver rose to 39.34 dollars an ounce from 37.97.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4110 with a preference to enter Long positions at 1.4110
  • § The USDJPY pivot point is at 78.85 with a preference to enter Long positions at 78.90
  • § The OIL pivot point is at 95.00 with a preference to enter Long positions at 95.00
  • § The Gold pivot point is at 1570 with a preference to enter Long positions at 1570                    

Today's calendar and market movers:

  • § US Empire State Manufacturing Index in July is forecast to rise to 4.50
  • § US Consumer Price Index in June is forecast to fall by 0.1%
  • § US Industrial Production in June is forecast to gain 0.4%
  • § US Consumer Sentiment Index in July is forecast to rise to 72.5

Equity Markets:                                              

US equities were negative on Thursday with the S&P500 trading down -0.67% and the DJIA down -0.44%. The European bourses were also negative with the FTSE trading down -1.01%, the DAX down -0.73% and the CAC down -1.11%. The NIKKEI and the HSI at the time of writing are trading up 0.07% and -0.26% respectively.

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