Dollar gets sold off overnight against EUR, GBP and CHF, rises vs Yen and other risk trade currency pairs
Monday, July 20th, 2009
The move into the risk trades dominated overnight with the EURUSD, GBPUSD USDCHF gaining while the dollar gained against the Yen as buying interest in the Yen crosses buoyed that pair.
In news, the UK Rightmove Home Price index showed a gain of 0.6% for July after falling in June by -0.4%. This 5th gain in the last 6 months and suggests the housing market is bottoming. UK Mortage Approvals also showed an increase to 51,100 from 45,000 in May. Overall leading climbed to 4.7 billion pounds from 4.3 billion in May. This data also suggests that lending/housing is on the rebound in the UK.
In the Eurozone, there was a press report that Germany is considering a bank rescue type plan similar to the US TARP program. This was later denied. Also, German Finance Ministers was reported as saying GDP in the 2nd quarter might be better than expected with exports stabilizing and consumption likely contributing to gains. In the US, CIT appeared to have secured $3 billion in last-minute rescue financing. The deal should keep the firm out of bankruptcy court. In the WSJ it is reported that the Fed’s lending programs are slowing dramatically. The unwind plan is happening naturally with the lower needs. The worry may now focus on the debt burden left behind and added costs to fund like health care reform.
From the currency end, the news has helped stocks, and commodities overnight. Oil is up over a $1.00 to $64.50 and Gold is up. This helped the commodity currency pairs like the AUD, NZD and the Canadian dollar.
From a technical perspective, the EURUSD moved above the trendline resistance on the daily chart at the 1.4151 level, the high from last week at the 1.4165 and the July 1st high at 1.4200. Look for support against low corrective levels on the intraday 5 minute chart at the 1.4210 level and the 1.4190 level (38.2% retracement). The pair is currently in a consolidating area between 1.4210 and 1.4248.
The GBPUSD is moving back toward the 1.6600 area which was a difficult area throughout the month of June.
In June the price moved above the level on a number of occassions, reaching highs of 1.6661, 1.6620 and 1.6600 and 1.6743, but the highest close was only 1.6589 (see chart below). The high today has reached 1.6549.
On the shorter term intraday chart, the market used the 100 bar moving average as support early on, and moved higher off the support. The pair has intraday support off a trendline that comes in at the 1.6523 level currently. A move below this level could target consolidative support down to the 1.6483 area. The 100 bar MA is further below at 1.6470 currently and moving higher.
