MORNING BRIEFING: Euro defends its support, Bernanke testimony being eyed

[RTFX-Trading]

MORNING BRIEFING: Euro defends its support, Bernanke testimony being eyed

[B][I][U]What’s new:[/U][/I][/B]
Canada: BoC raises 25bp
Asia: Asian indices up but Nikkei still in the red
JPY: strengthens against the USD
EUR/USD: Correction of latest highs, Euro support still expected to remain fairly stable till stress tests
United States: Bernanke testimony to congress in focus
[B][I][U]
Today:[/U][/I][/B]
[IMG]http://www.rtfx.com/images/news/CAL210710.gif[/IMG]


[B][I][U]Rates in Asia and Indices: [/U][/I][/B]
EURUSD: 1.2912 - 1.2874.
USDCHF: 1.054 - 1.0495.
GBPUSD: 1.5319- 1.5230.
EURJPY: 112.84 – 112.11.
USDJPY: 87.51 – 87.07.
DowJones: 10’229.96 +0.74%
NASDAQ: 2'222.49 +1.10%
S & P 500: 1'083.48 +1.14%
Nikkei: 9’278.83 -0.23%
Shanghai: 2'535.39 +0.26%
Gold: $ 1'189.70
Crude Oil: $ 77.81


[B][I][I][U]Comments:
[/U][/I][/I][/B]
Yesterday the Bank of Canada raised rates by 25bp to 0.75%, the move was in line with expectations. BoC however cautioned that any future hikes might be gradual, given domestic and global recovery were slower than they had previously forecast. The hawkish stance in putting up the rate contrasts sharply with this dovish statement.

We had mixed performance from Asia equity indices again, most Asian indices were in the green, but Japan’s Nikkei was again in the red. The Nikkei’s negative performance may be attributable to renewed doubts over the US Economic recovery and also on worries brought about by a stronger Yen. The USD/JPY traded lower as fears of a US slowdown triggered a reduction of long US Dollar positions.

The EUR/USD experienced a correction yesterday, as investors were wary that Euro support had been pushed too far for the time being. The pair traded without a clear trend till the time of writing ranging between 1.2874-1.2912 for the day. Given the upcoming stress tests markets are not too comfortable with big short Euro positions so that should keep Euro support fairly stable, at least till Friday – but at the same time pushing Euro support to new highs is fairly unlikely.

With regards to the EUR/USD, RTFX TraderTip quotes resistance lying at 1.2992/1.3104 while support lies at 1.2804/1.2728.

In the meantime markets eagerly wait for Fed Chairman Ben Bernanke’s semi-annual testimony before congress later today – investors will be trying to pick anything that might give insight on future monetary accommodation.


Good day,


Rudolf Muscat

Trading desk

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