Tuesday, January 25, 2011

Irish crisis focus sees Euro off of 2 month high

Today's European session sees the Euro continue its earlier
session's decline against the Dollar as it pared a further 50 pips
off of last week's gains to trade at 1.3540 by mid-session before
pulling back up to trade at around 1.3595. The Euro is currently
trading a little over its 50% Fibonacci retracement level of its
November 5th to January 10th decline. The EURUSD pair has within the
past 2 weeks gained over 740 pips in a period which saw the pair rally
from a trough of 1.2869 to a peak of 1.3640 – a level that was
reached at the opening of today's Asian session. However since then
the pair has been on a steady decline, backing off of the 2 month high
to drop a little over 0.7% on the day, as political friction in
Ireland brought back into focus uncertainties for the indebted Euro
zone countries. This weekend's resignation of Prime Minister Brian
Cowan from Head of Ireland's Republican Party, Fianna Fail, has seen
the country plunge into political turmoil as it tries to pass a budget
bill to access an EU and IMF bailout.

The Sterling has been easing against the Dollar in today's sessions
as it continues to decline a further 40 pips in the European session
bringing the Cable to a low of 1.5919. The Sterling experienced rapid
selling in today's sessions which has left some investors thinking
whether the fragile UK economy can justify the Sterling's recent
gains against the greenback as its January rally appears to come to a
halt. Today's decline saw the sterling move further from last
Tuesday's 8 week high of1.6058 and move back down towards its 61.8%
Fibonacci retracement level at 1.5932, of its November 5th to December
28th decline. Investors are now anticipating the UK's GDP, which is
scheduled to come out tomorrow at 09:30 GMT, for a further indication
on the GBPUSD pair's due movement.

The Euro appears to have taken a pause against the Sterling from its
recent gains as the EURGBP pair oscillates around the 0.8508
throughout the European session with an oscillatory range of not much
more than 20 pips. The pair has been on the rise the past week with
the Euro rallying over 170 pips from a trough of 0.8330 to rise and
peak at 0.8529 earlier in today's Asian session. Some investors
believe that the recent incline of the cross pair is due to the single
currency drawing support from the easing Euro Zone debt worries
following the successful bond auctions of Spain and Portugal and tough
talk on keeping inflation in check from European Central Bank Chief
Jean-Claude Trichet.

The USDCHF pair opened up today's European session on an incline,
gaining a little over 20 pips to trade on a daily high of 0.9622
before beginning a steep descent to bring the pair back down to a low
of 0.9553, a few pips under today's open, and trade around the
0.9558 level. The Swiss currency's recent strengthening, which
peaked on the last day of 2010 when the USDCHF pair dropped to 0.9298,
has placed a lot strain on the country's exporters, which have been
recently given some comfort as the Swiss government last week
announced that it may extend some measures it adopted during the
financial crisis.

The USDJPY pair has been sluggishly inclining throughout today's
European session, following on from its 25 pip gain in the Asian
session as it bounces back to recoup its recent losses incurred on
Friday. The Bank of Japans interest rate decision, due to be announced
tomorrow, is an eagerly anticipated economic event which may see
volatile movement between the pair, should the actual figure come
above/below its expected value of 0.1%.
Source: Fxstreet.com

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