Daily FX Report

The USD touched record low versus the EUR at 1.6040 on Tuesday

Wed, Jul 16 2008, 07:42 GMT
by Varengold Bank Research Team

Varengold Wertpapierhandelsbank AG


Good morning from rainy Hamburg. After we told you about the great sunny whether here last month, typical Hamburg climate is coming back. Yesterday, traders with long USD positions must have felt like the weather here: bad. Today, European inflation data will be released, but the market has already priced in its predictions, so we do not expect big moves. Have a nice day, and good luck trading!

Market review

The Bank of Canada held interest rates unchanged at 3 percent on Tuesday, as expected. However, concerns were expressed that inflation could rise above 4 percent for the first time since 2003, as commodity price hikes continue to outpace expectations. Despite flagging inflation as the one development that has taken it by surprise, the central bank did not make any of future interest rate hikes. The CAD gained about 0.5 % against the USD yesterday, and closed over the 1-even level.

The USD touched record low versus the EUR at 1.6040 on Tuesday on persistent fears over the health of US financial institutes, with Federal Reserve Chairman Ben Bernanke giving a grim assessment of the sector. The currency later rebounded as oil prices tumbled. In the late afternoon in New York, the EUR was little changed at 1.5897. Against the JPY, the USD lost 1.3 percent and closed the Tuesday at 104.14.

The AUD’s strength increased to a recent high over the past quarter, as commodity markets were largely untroubled by growing fears over slower growth. Australian’s constantly improving terms of trade are oversetting slowing demand, and proving to be a significant headache for the RBA amidst attempts to control inflation. In contrast, the NZD has regained trade competitiveness as the currency faltered on weak data.

EUR/GBP

The EUR/GBP is currently in a long term upward triangle. This triangle has existed since the beginning of May and has been constantly bouncing between the upper and lower bounds. In the last two days, the GBP made such strong gains that it touches the under line. Now could be the turning point that leads to a growth in the GBP.

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USD/JPY

The USD/JPY lost yesterday because of the drop in the USD. That led to a break through the support of 105.5, which prepares the way down to the next support at 102.51. The break was significantly influenced by the situation of the US mortgage lenders, which makes it hard to say if this is a new trend or a short move.

image 2

Published on  Wed, Jul 16 2008, 07:53 GMT

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