A Dynamic Market
14-07-2011
Wednesday proved to be another day of volatility in the Forex markets as the EUR gained against the USD and other major currencies made their presence known. The EUR started off yesterday showing some signs of stability, but it was Fed Chairman Ben Bernanke who set off fireworks when he responded that if called upon the Federal Reserve could participate in another round of fiscal stimulus. Bernanke pointed out that he didn’t believe a QE3 would be needed, but did leave the door open. Also making news last night was the ratings agency, Moody’s, which warned it might review U.S. bonds if the current administration and Congress fail to come up with an agreement on the debt ceiling. And as the Americans displayed their ability to make investors uncomfortable, the European debt saga continues to roil also. Gold was taken to record highs on Wednesday as uncertainty brought out seekers of safe havens in droves. Gold as of this morning is near 1584.00 USD an ounce.
Economic data was light yesterday, but today the U.S. will release weekly Unemployment Claims and Retail Sales figures. Wall Street turned in a rather mixed session as investors failed to establish a solid direction. Tomorrow the U.S. will bring forth the Empire State Manufacturing Index and a Consumer Sentiment reading, along with Core CPI numbers. European data today will remain quiet, but tomorrow a new Stress Test on the health of European Banks will be issued. While some analysts believe the Stress Test will be a ‘whitewash’ regarding contagion and counterparty risk, the report should nonetheless prove interesting for investors who can read between the lines.
The GBP did gain on Wednesday. The Sterling still remains on the lower side of its range with the USD, but its improvement in value on Wednesday was interesting considering that the Claimant Count Change numbers from the U.K. proved less than inspiring. There will be no significant statistics from the U.K. today or tomorrow and it appears that the Sterling will continue to trade under a haze of EUR centric news, but traders should be weary for any hints of divergence.
The AUD found support and is now perched near the higher parts of its range. The AUD managed to break a few sessions of rather consolidated trading using record prices in Gold as impetus and the emerging news regarding the Federal Reserve in the States. The AUD is likely to test its range the next two trading days as uncertainty continues to dominate.
The JPY has moved to even stronger realms of value against the USD. The Yen has proven historically that it is a magnet for risk adverse Asian traders and its move this week highlights this. The question that will now be asked is if and whn the Bank of Japan will react to the JPY’s exaggerated move. Traders may be tempted to test the JPY with short term positions.
The broad markets continue to be a bastion of volatility. News from many corners has created nothing short of a dynamic environment that is challenging the best of traders. The questions that prevail today regarding European debt, the American political wrangling over its own debt, and the global economic outlook will find no quick answers. The Forex and Commodity markets will remain swift and continue to have the ability to turn on a dime with rampant shifting sentiment.
