The NY session started out extremely well for the risk trade and pretty poorly for the US dollar. Equities rocketed higher and the S&P posted a new high close for the year at 976, adding more than 2.3%. Better earnings ahead of the bell coupled with more upbeat initial jobless claims and housing starts in the US led the rally. However, the euphoria hit a wall once the NY stock market closed. Earnings from a couple of large tech and credit card companies were disappointing and this saw the USD better bid on the follow. The reality is that while bottom-line earnings continue to come in better, the top-line numbers remain extremely weak.

The price action in risk sent EUR/USD for a ride. The pair squeezed up to a session high of 1.4291 only to get crushed towards the 1.4140 area as the poor US earnings hit the tapes. USD/JPY remained better supported and after rallying from a 94.40 session open, closed at 94.92. The rub here is that the pair failed to close above the 200-day sma which sits at 95.15 now and was tested multiple times. EUR/JPY ended the session unchanged by 134.30 but not before rocketing to a 135.63 session high. The relationship between this cross and risk assets has been phenomenal and we expect it to continue to track the price action in equities near-term.

The Canadian dollar was one of the few that managed to hold on to gains against the greenback. Not only was the currency helped by the more than 2% rally in oil prices, but the BOC's Monetary Policy Report brought some bullish news as well. The bank upgraded the 2010 GDP forecast significantly and did not materially sound more aggressive in terms of their caution on Canadian dollar strength. USD/CAD squeezed down to a session low of 1.0841 before recovering towards the 1.0900 area ahead of the close. The 1.0800 level was where the pair was trading the last time the BOC announced concern about CAD strength (more forcefully than this time around) and should be good support here.

Upcoming Economic Data Releases (Asia Session) prior expected

  • 7/24 4:30 GMT JN  All Industry Activity Index (MoM)  MAY  2.60%  0.90%