 A better than expected new home sales release helped to spur gains in US equities which pushed up higher yielders at the expense of the greenback. The EUR/USD tested its one-week high at the 1.30 level. |
 This week market attention is poised to turn to U.S. economic data, which include second-quarter gross domestic product on Friday. The rest of the week is full of releases as well, with new home sales released today, the Case-Schiller house prices and consumer confidence on Tuesday, durable goods and the Fed’s Beige Book on Wednesday. The week ends with second-quarter GDP, Chicago Purchasing Managers Index and final University of Michigan-Reuters consumer confidence on Friday. |
 The day’s big event was the release of Euro-zone bank stress tests, which were set out to gauge whether Europe’s banking sector has sufficient capital, if the economy suffered another more severe shocks than the financial crisis. The results showed 7 banks needed more capital, but questions remain about if the criteria used was too lenient. |
 Coming into this week the talk in currency markets was the Euro-zone bank stress tests and their results. The final tally was one German and one Greek bank failing, as well as 5 banks from Spain. Still, the market may decide that the test was too lenient and question the credibility of the results. The EUR therefore came under pressure in the immediate reaction to the results. |
 Economic optimism returned on Thursday, supporting risk-prone currencies against the dollar and yen. Stocks, commodities and interest rates rose on better-than-expected economic and corporate earnings reports. Federal Reserve Chairman Ben Bernanke told Congress that “we are ready and we will act if the economy does not continue to improve” and reassured investors that further stimulus would be there if needed. US June existing-home sales declined less than anticipated; May FHFA house prices rose for a third consecutive month; and the June LEI fell marginally less than expected. |
 The euro and others gained sharply against the dollar Thursday after better-than-expected euro-zone and U.S. economic data boosted investor sentiment toward riskier assets. US equities were higher as US companies releases some strong earnings, which only further propelled currencies like the Aussie and Loonie. |
 The Euro broke a spell of weakness against the Dollar as it found support from better than expected manufacturing and services data in the form of the flash version of purchasing mangers indexes and a reading on industrial new orders. US stocks moved to their highest this week as a collection of companies topped earnings estimates, raised their forecasts or did both. That helped power gains by risk sensitive commodity currencies like the AUD and CAD. |
 • The dollar and yen gained on Wednesday. Federal Reserve Chairman Ben Bernanke said in testimony to the Senate Banking Committee that the Federal Open Market Committee did not have any immediate plan to bolster the economic recovery despite what he called an “unusually uncertain” outlook. Bernanke said the Fed policy makers “expect continued moderate growth, a gradual decline in the unemployment rate, and subdued inflation over the next several years.” |
 Fed chairman in testimony before Congress said the economic outlook was “unusually uncertain” and that the Fed was prepared to take additional action if needed. But Bernanke did seem concerned about draining liquidity as opposed to providing further stimulus, which gave his speech while dovish on the economy a hawkish feel in terms of monetary policy. Risk aversion jumped as US stocks fell, helping to boost the Dollar against higher-yielders like the Canadian and Australian Dollars. |
FX at Important Technical Levels
Featured \ Hans Nilsson \ 7:23 PM EDT \ July 26th, 2010The dollar fell and risk appetite rose on Monday, pushing interest rates and equity prices higher. June US new home sales beat estimates and FedEx raised its earnings forecast on rising demand for international express shipments. Federal Reserve Bank of Philadelphia President Charles Plosser said he sees no need for more monetary stimulus.