AUTOREFRESH 
ForexLive US wrap-up: Euro flies, catching market off-guard
- Strong earnings reports boost risk appetites, catch market short EUR/USD after Portugal downgrade.
- US trade deficit widens to $42.3 bln in May
- Uncertainty over what stress test results to be published on July 23
- German banks said to pass stress test; sources
- Greek sovereign debt to take 23% haircut in stress test
- Fitch downgrades Spain’s Banco Popular
- Spain asks EU to extend bank recapitalization plan
- Fed’s Rosengren frets over deflation in WSJ
- Fed’s Hoenig; Growth less robust than though but should still hike rates
- US sells $21 bln 10-year notes at 3.119%; bid to cover 3.09
- S&P 500 closes up for 6th straight session; up 1.5% to 1095
- US 10-year note climbs 7 bp to 3.12%; oil up 3% to $77.25
Risk-on.
That’s pretty much all you need to know today, but in the process of soaking up risk assets across the markets, traders did some serious technical damage to the EUR/USD downtrend. In fact, they broke it and are closing above it. Trendline resistance came in at 1.2677 today and we jumped above that level and soon after,trend highs at 1.2723, reaching 1.2739 as London scrambled to square up. Many in the market were caught on the wrong foot by the rally, having sold earlier in the day on the downgrade of Portugal. Heavy selling from a Middle Eastern account helped cool the rally a touch in the afternoon.
USD/JPY fell victim to profit-taking this morning despite the uptick in risk appetite. USD/JPY just couldn’t rally, prompting longs to offload a portion of their positions, dropping USD/JPY to 88.02 before it stabilized. It rallied after the wash-out and ends the day at 88.50. EUR/JPY edged up to 112.50.
Cable benefited from firm CPI data this morning in the UK. Inflation remains stubbornly high despite slack resource utilization. While the BOE probably won’t hike, it sure won’t resort to any further QE anytime soon.
Commodity currencies rallied during the US session but in somewhat muted fashion. It feels as though the market may have built up a pretty significant long position in commodity plays.
Strong Intel earnings could keep the market humming overnight…
Is there a eur/cad etf? Ive searched high and low, called up currencyshares, all to no avail.
Here’s “risk appetite” scenario for Wednesday:
Equities will rally in Asia on a strong, sixth consecutive upday in the US, so Euro stocks will follow Asia higher and of course NY will jump on the “trend” following London. This will be followed by the Fed minutes which will send stocks to new late afternoon highs. EUR, GBP and JPY will rally strongly closing at the daily highs
Asian will then open higher … repeat as necessary.
Dear Jamie
I just wanted to let you know that your comments for the EUR/USD trade was very helpful and your day-to-day analysis of the different currencies are excellent.
Thank you very much for your time
–Dave
Thanks again, Jamie- you guys rock!
David, you could do a pairs trade in FXE versus FXC… I don’t know of a single ETF…Why not trade spot?
Hi Jamie….you got the action again !!
Hey Dave always appreciate the wisdom imparted..I’m puzzled by cable however. Today after lower than expected consumer confidence number the price immediately went up which seems contradictory in the least. I also discovered that the S&P along with the Dow AND the USD index all hit resistance in the form of trend lines and the S&P also coming to the bottom of the ichimoku cloud..I wonder if a second failure at the 38.2% retracement level (5240) today along with the aforementioned scenario’s would actually believe it or not put a lid on cable here and a possible lid on the whole risk trade. Is that to wacky to even consider right now? Even gbp/jpy has been looking quite sideways for weeks now.
Hi S-J, I have to say that I believe the risk-on move has further to go imo. I have had the view since the S&P bounce off 1020 ish; I am looking for a final test in the next week or so during the earnings season of 1131; I thinbk this fibo level could be the expected top which will reverse the market , having shaken a lot of shorts out by then. An upside break of 1131 may change the game plan for a while and inspoire a bit more confidence. I think rthis is why most of the news from anywhere in the last couple of weeks has been ignored. I agree with Sean this morning that a bullish continuation will drag cable with it
I’m right there with you on 1130, David. There’s a very good chance, that stock prices fail right in this area, as well. From a daily technical standpoint. I’m not calling that, but it wouldn’t surprise me. It’s funny how the markets forget about macro stuff so easily, when earnings appear to be roaring, but little do they know, they’re at peak. That I am calling. I’m going to wait around and get some other stuff done. While waiting on rallies to die out, to sell. Good luck and goodnight, traders!
hey thanks Dave and yeah Michael I’ve just become skeptical with any news making sense anymore..seems the market is obsessed with earnings of times gone by. Mr Market always looks for an excuse to be noticed
I suppose i had thought the technical break below 1035 would bring a more substantial correction lower to 1000 or even lower…i guess only in a double dip scenario now.
All of the contrarian indicators, have been out in full force, these past few days. Dow 14,000, yearly lows are in, housing has bottomed, profits are booming,etc. I’ve never been this bearish. Excluding the poor macro “global” economics, these guys just make it easier to bearish. No since in paying attention to macros, when these guys start speaking up. Just head in the opposite direction of these guys, and you’ll be good. And folks wonder why there 401k’s, are chopped like suey.
S-J, I still think in the wash up of this, after the earnings reporting season, that it will rear its head and be part of the reversal process; I am old school and always consider the market positioning…if it’s already heavily short and talking end-of-world as it seemed to be recently, you have to wonder what can drive it further…if not the short-covering will follow regardless
thats true..short covering seems to have been a regular visitor since the downtrend started.