EU Morning Report 

Risk appetite plummets after Moody's cut Japan's debt rating

  • The US dollar was under pressure against its major counterparts during the Asian session after Japan's downgrade by rating agency Moody's. The agency downgraded Japan's sovereign debt to Aa3 expressing concerns on large budget deficits and weak growth. Risk aversion in the market heightened and Asian equities erased gains as the market remembers the debt crisis in global economies. Yesterday, economic data disappointed the market after New Home Sales and Manufacturing Index revealed weaker than expected figures. Focus turns to Friday's speech by the Fed Chairman Ben Bernanke at the Jackson Hole. Investors around the world will be closely watching Bernanke's words and whether a third round of quantitative easing will be announced. Against the Japanese yen, the dollar fell to 76.53 today from 76.87 after the Japanese Finance Minister Yoshihiko Noda  announced that a 100 billion dollars credit line will be offered to companies to help them recover from the strong yen.
  • The euro edged lower against the dollar yesterday after former Fed Chairman Greenspan said that the euro is breaking down during a Washington forum. Eurozone Purchasing Manager Index figures were better than expected but failed to support the single currency. Further weighing on the euro was eurozone Consumer Confidence which plummeted to -17 while the market was expecting a fall to -12. The pair sharply fell to 1.4375 from 1.4499 and it was last traded at 1.4416. Versus the Swiss franc, the single currency is trading slightly higher hitting 1.1457 from 1.1314.  
  • Oil prices rebounded to 86.36 dollars a barrel from 83.38. Gold shed 4.6% edging lower to 1822.91 dollars an ounce from 1910.09. Silver shed 5.8% falling to 41.38 dollars an ounce from 43.92.

Currencies to watch out for: EURUSD & USDJPY  

  • § The EURUSD pivot point is at 1.4380 with a preference to enter Long positions at 1.4390
  • § The USDJPY pivot point is at 76.40 with a preference to enter Long positions at 76.45
  • § The OIL pivot point is at 83.75 with a preference to enter Long positions at 83.75
  • § The Gold pivot point is at 1870 with a preference to enter Short positions at 1870                         

Today's calendar and market movers:

  • § Europe Industrial New Orders in June is forecast to gain 0.5%
  • § US Durable Goods Orders in July is forecast to gain 2%
  • § US Housing Price Index in June is forecast to gain 0.2%

Equity Markets:                                               

US equities were positive on Tuesday with the S&P500 trading up 3.43% and the DJIA up 2.97%. The European bourses were also positive with the FTSE trading up 0.67%, the DAX up 1.07% and the CAC up 1.08%. The NIKKEI and the HSI at the time of writing are trading down -0.95% and -0.81% respectively.

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