Daily Market Analysis: Currency Report

The EUR/USD is currently trading 1.3040, in a surprised show of strength today, the euro surged past the all important 1.30 level to reach a high of 1.3046 and has been able to sustain the 1.30 level. A boost in consumer confidence report filed today, a leading indicator that predicts consumer spending, and plays a major role in overall economic activity. Again, there have been promises of deal with creditors in Greece, but at this writing it is not clear if there is a deal or isn’t a deal, but the EU leadership seems to think that a deal is doable, has pushed the euro.

Aided by a successful German bond sale, the euro is showing confidence against the USD.

IMF Christine Laggard said euro zone governments should incorporate the region’s exiting bailout fund, the European Financial Stability Fund, into the European Stability Mechanism, increasing the size of the permanent bailout fund in order to restore investor confidence in the region.

I am not sure if the euro can sustain this pace. A sell position might be a smart move, selling on jumps up, as once this deal is done, the EU has to deal with Spain and Italy, which will only compound European pressures.

The EUR/USD pair shot straight up on Monday as the Greek debt talks are supposed to be doing fairly well behind the scenes. The “risk on” trade came back, and the EUR/USD rises as a result. The 1.30 level is a massive zone that will provide resistance, and we think that a break of that isn’t realized until we see the 1.31 closed above on the daily chart. We are waiting for just that to buy this market. On the other hand, the trend is down and we are willing to sell weak candles in this immediate area as it is with the trend.

The USD/CAD is currently trading 1.0088. The USD dropped today against all of its trading pairs. The greenback fell on news of a potential deal in Greece and positive reports from the EU meetings. The French Minister assured investors that an agreement was forth coming.

As the US dollar fell, commodity prices rose, pushing up Gold and Crude Oil giving strength to the Canadian Dollar.

Crude Oil surges over 1.50 to just under the 100.00 mark as the EU Ministers announced an immediate embargo on Iranian Oil and also froze all assets from the Central Bank of Iran.

As oil goes up so does the Twooie, they are partners in crime. A good deal of the GDP of Canada is based on its oil exports.

USD/CAD fell on Monday as the oil markets got a bit of a boost by the passing of sanctions by the EU on Iranian oil. Of course, this doesn’t really take effect until July 1, but none the less, there was a reaction to this in the oil pits.

The bullish case can still be made, but the bulls need to get it together fairly quick as time is running out. Of course, if the Iranian crisis gets worked out – this could be just the key for that to come about. Also, poor economic numbers can often push this pair higher as well, but it would have to be fairly significant judging by the behavior of the market lately.

The breakdown has us selling, and we would have to simply ignore the day to day fluctuations as we know this pair to be choppy 80% or more of the time. The fall would be with the trend, and while we don’t necessarily feel that it should happen – only broke traders spend much time arguing with the long-term trend. A break above the top of the “triangle” is what it would take to buy, or perhaps a hammer somewhere in this area would work as well.

Crude Oil is currently trading at 99.83 up almost 1.50 opening at 98.36 but reaching a high 100.23.

EU ministers today approved a boycott of Iranian oil to begin immediately. Crude oil had been falling for the past few days, after the rhetoric in the gulf area quieted down.

The European leaders also froze all assets of the Iranian central bank within the EU and banned precious metal trade with the Islamic Republic.

Another commentator noted that the ICE Futures Exchange, Brent oil futures for March delivery climbed 1.27% to trade at USD111.25 a barrel, up USD11.37 on its U.S. Counterpart. This over USD10.00 spread is near historic highs. The two contracts traditionally trade within 1.00 USD of each other.

The greenback dropped today against all its trading partners, exhibiting weakness, supported the rise in Crude Oil prices.

In a separate statement NATO officials stated that they would not allow the Straits of Hormuz to be closed or blockaded.

Gene McGillian of Tradition Energy explained to Bloomberg, “In the long term, the Chinese and Indians are going to continue buying from Iran, so the embargo is more of a reshuffle of the cards”, Thus giving Iran confidence. Iran will most assuredly turn up the rhetoric again, and force Crude prices to continue to climb over the 100.00 mark.

We are bearish more than anything else, and are looking to sell a sub-$98 close.