Daily FX Report

Good morning from wonderful Hamburg and welcome to the Varengold Daily FX Report. We have reached the end of a varied and volatile FX week. The ECB rate decision and the job data had intensive influence on the market. However, we expect calm Friday, because US markets will be closed in observance of the US Independence Day.

Markets review

The USD rallied on Thursday against a basket of currencies after payroll data suggested the US job market and economy are not as grim as many investors had feared. The June non-farm payrolls fell 62,000, the sixth straight month of declines and the longest losing period for the labor market since 2002. However, the market was so bearish that many strategists expected 100,000 job-losses, so the news was better than expected. The USD rose to session highs against the EUR at 1.5694, enjoying its largest single-day advance since June 10. The same is true for USD/JPY, currently up 0.9% at 106.78. The USD/CHF also increased 1.1% to 1.0253.

The ECB raised its key rate by a widely expected quarter point to 4.25%. In the following press conference Trichet repeated words 'no bias' very often. Trichet also said downside risks to the Euro zone economy persist. He was clearly trying to tell the market that the ECB is leaving the door open for any type of action upon how the economy and inflation unfolds. Trichet's comments cooled speculation for further rate hikes.

The Bank of Canada said on Thursday that high commodity prices will help Canada avoid a recession this year but a US economic slump and inflation risk will pull down economic growth to 1.4%. It also mentioned in a note that the CAD will stick near parity for the rest of the year.

Technical analysis

GBP/AUD

In June, the GBP/AUD broke through the upper line of the trend channel and stopped the decreasing trend. At the moment, the currency is trading close to the green trend line in a triangle formation with a strong resistance at 2.0889. A cross through the support level might be a sign for a new short development.

EUR/CAD

In March, the increasing trend in EUR/CAD stopped at the resistance at 1.6194. Afterwards the currency tried several times to climb over this level, but rebounded back to the support level at 1.5674. In July the upward trend was again too weak to cross the strong resistance. This might be a sign that the pair could slide back to the support level.

Pivot Points - Daily FX Support and Resistance Levels

Daily Calendar & Key FX Events

Varengold Bank

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