Risk aversion is back!
- The Dollar surged higher throughout the day as safe haven flows helped out the world's reserve currency. Stock markets around the world fell over 2% on a combination of US growth downgrades and renewed Euro zone banking concerns. In the US we saw June's Trade Balance fall to -49bn from -42bn previously. The DJIA fell -265 points and the S&P -31 points closing at 1089. Following the Fed rate decision on Tuesday market participants concluded that the Federal Reserve will leave the size of their balance sheet stable and will not move for further QE. The market had aggressively oversold the USD in the past few weeks and a rapid reassessment caused the EURUSD to a low of 1.2832 from 1.33 highs on Friday.
- The Euro was the worst hit currency in the market falling 3 big figures as news emerged that some Irish banks that had passed the stress test would need capital from the Irish Government. Sovereign spreads widened following the news and a bout of Euro selling gripped the market. Coupled with the USD buy backs following the QE reassessment we witnessed the plunge in the world's most liquid pair. EURUSD traded with a low of 1.2828 and a high of 1.3162 before closing at 1.2880. Looking ahead, June Industrial Production is forecast at 0.7% vs. 0.9% previously.
Currency to watch out for: EURUSD & USDJPY
- § The EURUSD pivot point is at 1.2830 with a preference to enter into Long positions at 1.2840
- § The USDJPY pivot point is at 84.80 with a preference to enter Long positions at 84.80
Today's calendar and market movers:
- § Euro Zone Industrial Production for June is forecasted at 0.7%
- § US Jobless continuous claims for the week expected at 4.53 mio
- § Japan Tankan DI for August
- US equities closed negative yesterday with the S&P500 at -2.82% and the DJIA at -2.49%. The European bourses were mixed with the FTSE down -2.44% the DAX and the CAC closing at -2.10% and -0.41% respectively. The NIKKEI and the HSI at the time of writing is -0.86% and -1.44% respectively.