IG Markets - FX Focus 29 July 2010 - Jul 29 10 17:44 EDT
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IG Markets - FX Focus 29 July 2010
By Dan Cook, IG Markets
EUR/USD – The euro finally broke out of the tight range it was locked in over the last couple of days and has reached fresh new highs. The rise in the common currency was supported by a couple of good economic reports released during the European trading day. The German Unemployment Change figures showed that 20K workers fell off the registry of the unemployed during June and the overall Euro zone Economic Sentiment Index improved to a reading of 101.3. Following a day that saw negative US Durable Goods Order data and a less-than-optimistic Fed Beige Book report, the combination of euro strength, dollar weakness was no surprise. As the US trading day has move along though, some softness has been spotted in the euro. After testing the resistance zone of 1.3100 to 1.3110 twice, the euro has been backing off a bit. While I think this could still be a solid area that could stymie further upside potential, the reaction off this zone has not been overly convincing and the pair seems to be finding support near 1.3060 which could act as a launch pad to move higher. If a move higher does come and is forceful enough, the near term target could be around 1.3275; however, ahead of tomorrow’s US GDP numbers, I think it will be difficult for traders to commit to firmly either way.
GBP/USD – Sterling shrugged off some fairly negative economic data released earlier today to climb to levels not seen since February. In the UK, the Nationwide Home Price Index showed a 0.5% decrease in July which was followed-up by a Bank of England report which showed that Net Lending to Individuals had fallen substantially, registering only 600 million pounds. Even so, the overall dollar weakness and enhanced risk appetite based on generally positive corporate earnings reports kept the pound moving higher. The technicals in this pair though, really came into play today. After rising to the middle of the resistance zone mentioned yesterday between 1.5650 and 1.5670 the pound sold off for about 63 pips. One more run higher was made after what were once again ugly US Initial Unemployment Claims, but once again the pound faltered in the previously mentioned resistance zone, dropping rapidly for almost 80 pips. As we move into the latter part of the US trading day, and particularly ahead of the US GDP numbers tomorrow, I am leaving my overall S&R levels unchanged with resistance appearing between 1.5650 and 1.5670 and support coming into play between 1.5440 and 1.5450.
USD/CAD – Fairly negative economic reports out of both the US and Canada over the last couple of days has continued to keep the two North American dollars contained in a relatively tight trading range. Today specifically though has seen predominate US dollar strength after a couple of inflation related reports out of Canada indicated falling prices. Both the RMPI and IPPI missed expectations by reporting drops of 0.3% and 0.9%, respectively. Interestingly, the CAD has broken its correlation with the price of crude as most energy futures are posting gains for the day even while the loonie has been falling. This is probably a short term break in the correlation though as the underlying currency fundamentals, not oil counted more toward the value of the loonie today. Technically, this pair is still mired in a range between 1.0400 (tested 4 times in 2 days) and 1.0300 (test 3 times in 2 days). Any moves outside of this range may be capped with significant support levels being found about 50 pips on either side of this channel. With GDP data being reported for both economies tomorrow, both technical and fundamental traders will want to pay close attention to their risk levels.
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