Wednesday 8 July 2015

8th July 2015 Currency markets, news and analysis

Forex Market Commentary  



Almost in defiance the Euro currency has been able to prop itself up today for 3 important reasons:

1. Bonds traders are already resigned to a relaunch of the old Drachma as Greece pulls out of the Euro currency and because of the strength of Germany and France collectively the whole trading community is well aware that the ECB can mightily increase its Q.E program and flush the entire system with cheap credit. The Referendum victory for the present Greek government has not really changed anything but turned Greece more into a financial outcast. The whole world will get over the blip as the ECB forces its strength and reassures markets of it's quality.

2. The Fed is in a qaundary; not because of any growing threats to it's economic growth and its target paramaters of 2% core inflation and 5% unemployment; but because of the situation emerging in China which can easily spread into a global equities and bond market crisis. Quite simply put the Fed is obligated to carry China with cheap credit and attempt to hold down rates to 25 basis points only for the foresee able future. This dampens prospects of the USD marching on and helps EUR/USD from a possible retreat to the 1.05 region. ECB strength will translate into initial EUR/ USD devaluation to near the 1.05 but expect the single currency climb once again to the 1.12 region should the situation in China worsen

 3. China; the situation is becoming alarming. In early trading Thursday morning th Shanghai Composite Index in mainland China has already fallen more than 3 % in the first half hour of trading but rising again 1.4% to 3,555.69 at the time of reporting thus demonstrating nervous volatility in the Asian markets. The Shanghai composite lost 5.9 % on Wednesday and is now down more than a whopping 30 percent since its peak on June 12 this year.

US equities were in trouble yesterday but more to do with technical reasons since European equities held well today with Euro Stoxx 50 up at + 0.67% to close at 3309. The Dow dropped 261 points to close at 17515.42. The New York Stock Exchange halted trading late today Wednesday morning at 11.30am because of technical glitches. The NYSE resumed trading at 3:10 p.m to close at a loss and so the drop in the Dow can be taken as misleading and not representative of anguish over the situation in Greece. However there is huge concern for US corporates over the Chinese situation. Please read on Bloomberg here - 

 http://www.bloomberg.com/news/articles/2015-07-08/u-s-index-futures-tumble-with-asian-equities-as-miners-decline
What is certain is that volatility will increase with trader uncertainty looking at China rather than Greece as a determining factor in the markets. Chinese companies need access to US financial markets and investors and cheap credit. A dramatic loss in confidence would plunge China into a knock on effect in the US treasury market where its presence at auction is greatly needed. A slump could alos translate into lower crud eoil prices in the 50-55 Dollar range. read on Reuters today the report on the Oil bounce at the 50-55 dollar range - 



Always look to support and resistance band lines as the key to understanding in the long and short term where prices are converging. Professional technical traders use 50 day and 200 day medium and slow moving averages as fundamental cornerstones for interpreting the direction of price action.


USDX
US Dollar
96.128     -0.087 -0.11%
Support 93.653 Resistance 97.343
Forward 1 year - 95.943. Low growth positive line.

EUR  
1.107475     +0.000405 +0.04%
Support   1.08430  Resistance 1.15030
Forward 1 year - 1.13770.  Low growth positive line

Crude Oil  
2.50     +0.85 +1.64%
Support 51.32   Resistance  55.78
Forward 1 year - 61.31. Low growth positive line.

Gold
1157.615     -0.310 -0.03%
Support  1,150.5     Resistance 1,174.3
Forward 1 year  -  1,186.2 Low growth line.




Pieter Bergli - DeLoren Trust Holdings

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