Hypo Real Estate Bank Is First To Fail EU Stress Tests!
The EURUSD initially traded from 1.2860 to 1.2992 following strong demand that emerged from Asian central banks and sovereign buyers. This rally took place despite a Moody's downgrade of Ireland which gave opportunity for many to buy the dips. As the session went on however we saw fierce protection at the 1.3000 levels as some large option barriers remain. Later in the session we saw Hungary and the IMF fail to agree on some terms regarding their loan agreement which rattled the markets for a while and the 1.30000 barrier looked increasingly difficult to break. Focus this week will remain on the upcoming stress tests due on Friday. Already we know the Hypo Real Estate Bank in Germany is the first to fail the banking stress tests as it does not have enough capital to withstand another slowdown.
In the US yesterday we saw stocks gain 0.6% on the day as bargain hunting took hold. Corporate earnings both in the US and in Europe were fairly positive at first, however as the session went on IBM released its earnings which disappointed the markets and stocks failed to sustain their gains and closed at 0.6% on the day. The next significant USD event will be Fed Chairman Bernanke's semiannual report to congress tomorrow. The expectation is that he will be rather dovish on the US economic outlook which could significantly weigh on the USD and it maybe the event risk that can push the EURUSD above the 1.3000-1.3020 barriers. Overall price action for the USDJPY on the day was between 87.20 - 86.61.
Currency to watch out for: EURUSD & USDJPY
The EURUSD pivot point is at 1.293 with a preference to enter into Long positions at 1.294
The USDJPY pivot point is at 86.65 with a preference to enter Lomg positions at 86.75
Today's calendar and market movers:
GBP Public sector Net Borrowing expected at 13.2 Bn
USD Building Permits a expected at 0.57m
CAD BOC overnight rate expected at 0,75%
Equity Markets:
US equities closed positively yesterday with the S&P500 at 0.60% and the DJIA at 0.56%. The European bourses were negative with the FTSE down -0.20% the DAX and the CAC closing at -0.52% and -0.40% respectively. The NIKKEI and the HSI at the time of writing is -1.24% and 1.37% respectively.
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