Afternoon Forex Overview

Daily Forex Fundamentals | Written by Dukascopy Swiss FX Group | Jul 06 09 14:29 GMT |

The Dollar opened the week on a strong foot. EURUSD started trading near the high of 1.3995 this morning in Asia, before Dollar buyers pushed the pair down to reach a low of 1.3880 at midday in Europe. Cable followed, but the move was amplified as the pair shed over 200 points from the 1.6328 top to fall as low as 1.6097. Main reason for the Pound's underperformance can be found in the market's growing worries that the British financial bailout efforts are falling short on expectations after recent data suggests that none of the major UK banks have been making use of the government guarantees since April. The Japanese Yen was the strongest currency this morning with USDJPY shedding close to 100 pips from the day's high at 96.10. Heavy selling of EURJPY and GBPJPY contributed to the move, after traders reduced their long positions in the crosses. Views that the pre-summer rally in EURJPY ran out of steam ahead of the critical 140 level and that a deeper correction may be on hand, was the driving factor. Market expectation Both, the EURUSD and GBPUSD are currently trading at the lowest levels of the past few weeks. Over the course of the last 10 trading days, failure by the Pound and the Euro to rise up to higher levels has come with a reduction of bullish strategies. We have also noticed a number of major market making banks that have lowered their positive currency forecast in favor of a stronger US currency this summer. Key economic data this week include trade balance in the US and Europe as well as industrial production. The market will particularly be interested to see whether the situation in Europe shows any sign of additional weakness. The 1st quarter GDP estimate may underline the negative development, although we judge that the data is too �old' and should have only limited impact to the current situation. The Swiss Franc is likely to remain under pressure. As recent SNB action has shown, keeping EURCHF cross above the psychological 1.50 mark is a declared task by the Nationalbank. Since intervening on June 24th, EURCHF has shed roughly 50% of the gains made on that day, in order to keep some upside momentum officials may consider additional intervention rather sooner than later. The JPY has been the strongest performing currency over the past few days. With a USDJPY low of 94.70 today, the pair has reached levels last seen in May. Strong support is seen at 93.85, a possible break through that level may trigger additional stop-loss selling and drive the pair to the year's low at 87.30. Dukascopy Swiss FX Group Legal disclaimer and risk disclosure This overview can be used only for informational purposes. Dukascopy SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.