Forex US Review – Euro falls on debt crisis concerns

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EURUSD turned around in the US session snapping a three day advance. The euro pared all gains against the dollar due month-end and quarter end re-positioning as investors began to square positions ahead of month- and quarter-end. Very few investors want to hold on to long euro positions as there is still uncertainty over the euro zone crisis and what will happen with Greece. Investors would prefer to wait in the sidelines to see if there will be some positive news by the end of the week. EU and IMF inspectors return to Greece on Thursday to decide whether Athens has done enough to secure a new batch of aid vital to avoid bankruptcy. Also the German parliament will vote on Thursday on widening the scope of the European Financial Stability Facility (EFSF) bailout fund. EURUSD fell to a session low of 1.3549 from an open price of 1.3672.

 

GBPUSD was on the back foot of the EURUSD pair and took direction from the euro in the absence of domestic fundamental data. As risk sentiment dampened, sterling was sold off against the safer and more liquid dollar. Additionally, the British pound is under pressure due to speculation that the Bank of England resorts to more monetary easing at their next meeting. GBPUSD fell to a low of 1.5569 from 1.5670.

 

The Canadian dollar weakened further against its U.S. counterpart for a second day as riskier assets remained vulnerable to doubts over the ability of European policy makers to stem a debt crisis that threatens to trigger a global recession. The commodity-linked Canadian loonie was further weighed down by falling crude oil prices. Oil is Canada’s main export and lost over $3 a barrel in New York trading, falling to USD 80.90.

 

The Japanese yen is finding support from safe-haven bids especially against a weak euro amid a risk averse environment. Investors turn to the safer yen to protect their assets until they are more sure about the situation in Europe and the progress being made to resolve the debt crisis. UERJPY fell to 103.49 from 104.47. USDJPY remains range bound for over a week now between 76.90 and 76.10.

 

Gold fell almost $60 a troy ounce in New York today as investors take profit after gaining over $145 on Monday and Tuesday. The precious metal fell to $1,598.47 in the session from $1,657 open price. Investors are being cautious until there is a clearer picture on the European debt crisis. A stronger dollar makes gold prices fall as the two traditionally have an inverse relationship.