Daily FX Market Outlook by AceTrader-25-7-2011

Market Review – 25/07/2011 21:59 GMT

Dollar falls on U.S. debt ceiling impasse

The greenback tanked to a fresh lifetime low against the Swiss franc and hit a 4-month low versus the Japanese yen on Monday due to an impasse on raising the U.S. debt ceiling, spurring demand for the safe-haven currencies.

The greenback opened sharply lower against the Swiss franc and nose-dived to 0.8100 on dollar’s broad-based weakness together with active cross buying in chf (eur/chf tumbled from 1.1715 to 1.1518) due to worries over the U.S. debt ceiling . Despite dollar’s brief recovery to 0.8156 in Asian morning, renewed selling there pressured the pair and price tumbled below previous low of 0.8034 to a fresh lifetime low of 0.8021 in European session before stabilising.  
Versus the Japanese yen, although the greenback recovered fm 78.12 (NZ) to 78.56 in Asian morning on short-covering, renewed selling sent the pair to a new 4-month low of 78.06 in European morning but price later rebounded to 78.42 in NY morning due to cross selling of yen vs other currencies before retreating again.  
Although the single currency opened higher and climbed briefly to an intra-day high of 1.4417 (NZ) on dollar’s broad-based weakness due to continuing wrangling over U.S. debt ceiling, price edged lower to 1.4329 in European morning. Later, despite euro’s retreat from 1.4407 to 1.4325, buying interest above 1.4324 support lifted the single currency to 1.4394 in NY afternoon.  
Earlier in Asian midday, the single currency was pressured as Moody’s downgraded Greece to Ca from Caa1 with a developing outlook and Moody’s said the country still faced serious medium term solvency challenges.   
The British pound rose marginally above last Friday’s high of 1.6341 to 1.6345 in NZ due to dollar’s weakness. However, cable edged lower in tandem with euro and then weakened to 1.6262 in European morning before recovering to 1.6315 in NY afternoon.  
Data to be released on Tuesday include:  
New Zealand Exports, Imports , Trade balance (nzd) , Japan CSPI, China Leading Index, Germany Gfk consumer confidence, U.K. Nationwide hse prices, GDP, U.S. SnP/CS home price, Consumer confidence, Richmond Fed Manuf., New home sales.