Forex US Review – Dollar liquidity is still favoured amid debt concerns

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EURUSD began New York trade at a high of 1.3541 after being lifted in the previous session following better than expected German business confidence data and Spain dissolved its parliament to call early elections in November with hopes the new government will deal with the country’s growing debt burden. Euro soon weakened throughout the US session as investors booked profits and speculators favoured the US dollar’s liquidity. Even if Greece is kept afloat, there is the issue of Spain and Italy and whether they can be bailed out (because they are much larger than Greece).

 

GBPUSD was on an uptrend in the US session bouncing to a high of 1.5567 on short covering as speculators expect the British currency to fall against the dollar on concerns a fragile UK economy could prompt the Bank of England to resort to more monetary easing, especially after comments from BoE policymaker Ben Broadbent made today.

 

The Canadian dollar weakened initially in the US session after having recovered from a one year low in the previous session. USDCAD rose to a session high of 1.0368 then fell back down as it seems to be forming a range. Crude oil has been fluctuating today and the loonie usually takes direction from commodities. Oil is Canada’s main export. The markets are not sure what direction to take as there seem to be mixed reports on tackling the euro zone debt crisis

 

EURJPY fell to 102.40 in New York trading, having fallen earlier to a decade low of 101.90. Investors are wary of pushing it too much lower given the possibility that the Bank of Japan may intervene, so the pair fluctuated between highs and lows in a tight range throughout the session. USDJPY has also been range bound since last week as investors wait on the sidelines for a more definitive action on tackling the euro zone debt crisis.

 

Gold recovered in New York to $1,625.68 after having tumbled down to $1,532 early this morning, hit by momentum selling and heavy liquidation by commodity hedge funds triggered by another sharp margin hike. Investment metals lately are not reacting to fundamentals but are rather emotionally driven. It is no longer about supply and demand but people wanting cash and thereby are liquidating gold.