Tuesday, 20 Jul 2010

Euro Lower Despite Rise in Equities

The euro was trading lower versus the dollar, off from a 10-week high as the outcome of European bank stress tests weigh on the market.

The EUR/USD was trading at 1.2890 near the end of the New York trading session following a drop from an opening day price of 1.2961. The pair had reached as high as 1.3027 in today's trading. The GBP/USD was higher at 1.5280 from an opening day price of 1.5253. Spot crude oil was higher at $77.85 and spot gold was unchanged at $1191. The Dow Jones Industrial Average staged a late session rally, trading nearly 0.75%.

Traders worry that the euro has been overbought in the recent bullish correction and is due for a downturn. European bank stress tests are due to be released at the end of the week and could spook the market into a repeat of the mass selling of the euro that took place during the European fiscal crisis.

Technical studies for the EUR/USD show falling momentum and the slow stochastic oscillator is providing a bearish signal. The next support level for the pair is the upper channel line on the daily chart at 1.2875. An upside target is the 38.2% Fibonacci retracement level from the long term bearish trend at 1.3110.