Sunday, July 24, 2011

Calm Ahead of a US Debt Storm?

With huge rallies in the Euro as well as risk earlier in New York on the back of the culmination of the Euro Zone summit on Greece, Asia saw an unapologetically slow session to end the week. Now that the Euro Zone finance ministers have seemingly caged the dragon, the “crisis” spotlight will switch to the ongoing debt problems in the good old’ USA where an agreement on a debt ceiling still seems out of reach. After hitting two week highs near 1.4435 late in the New York day, the EUR/USD pair has been oppressively quiet as it settled into a sideways strut just under the 1.4400 big figure. Across the majors the scene was similarly sleep inducing with the AUD/USD in a 20 pip range from 1.0820 to 1.0840 and the GBP/USD contained between 1.6320 and 1.6295 on the day.

Looking at the yen crosses the song remains the same with 20 to 30 pip ranges and a sideways walk into the weekend. USD/JPY actually displayed a bit of a pulse as it saw 78.40 and 78.70 on the day. The usual comments out of Japanese Prime Minister Noda stating that one sided currency moves will not be tolerated fell on deaf ears. The lone dissenter to the catatonic session was the NZD/USD which saw a wave of profit taking knock it down from 0.8630 to 0.8585, aided by the New Zealand Prime Minister labeling his currency as “overvalued”. The pair was buoyant however, and saw itself pushing for fresh highs near 0.8635 as London began the day.

Ahead in the London session, German IFO business climate data will be the lone piece of top tier data on the schedule while traders may look ahead to New York for the possibility of comments on progress in debt ceiling talks. Also be aware that due to the terms of the Greek agreement pertaining to the redistribution of debt to longer maturity dates credit agencies will likely label the nation in selective or temporary default at some point in the near future. Have a great weekend….

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