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Hawkish Jawnboning Launches Euro

The EURUSD popped off of the 1.2500 figure following hawkish comments in the overnight by European central bankers, leading the 106 pip move to the upside and ranking it as one of the days top market movers.  The hawkish suggestions were made by <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Belgium banker Quaden and backed by even hotter talk by Mersch as the two all but confirmed more rate hikes in the European Union.  Not only indicating that the European Central Bank is not committing to a fixed schedule of hikes, both reflected the tone that its constituents may see higher than 25 basis point decisions in the near term.  This coupled with news of the UAE boosting its reserves to reflect a 10 percent euro base and additional rumors of a trade basket crippled the dollar on the day.  However, dollar long sentiment still remains in the market following the continuation of widespread risk averse trading and repatriation of US dollars out of emerging market positioning.  With the push and pull of the market, range bound scenarios are looking very probable for the week as dealers and traders alike await the upcoming Federal Reserve decision.  Although pricing in an additional rate hike at this point, the market is now speculating on a possible 50 basis point rate hike this Thursday.  Next up for the Euro major is a look at the IFO business survey.  Positive results are widely expected following the lesser known Belgian business counterpart.

Rumorville

Offers are looking heavy at present with more selling pressure looking to provide a barrier at 1.2650 and 1.2680.  Corresponding stops are resting above the 1.2700 figure.  On the flip side, bids are coming in a little light at the 1.2535 and 1.2500.  This should keep the pair heading into the Asian session and provide for a longer intermediate barrier.

EURCAD

Cross Benefits From Major Bounce

With Euro strength on the day, the Canadian counter staged a good effort on the session but to no avail, losing 174 basis points against the European Euro.  Contributing to the crosss strength were hawkish comments in favor of a European Central Bank rate hike and tepid trading in commodities that led the Canadian component lower.  Notably, cross shorting in the major added to the loonies woes with seemingly no reprieve in the session.  However, positive for the Canadian component was an announced acquisition between the USs Phelps Dodge and the combination of Inco and Falconbridge.  A signal of further consolidation in the industry, the news sparked incremental bidding on speculation for increased loonie demand in the near term.  Now with summer creeping upon us, the lightened volume, in addition to Fed related hesitation, look to keep the cross pair volatile, but manageable.

Rumorville

Selling in the CAD major look to restrain any EURCAD upside potential in the near term, even as the Euro remains relatively bid.  Short side interest remains at the 1.1250 and 1.1275 figures with lighter interest above at 1.1290.  Bids dont come in to play until 1.1175 with stops relatively close by at 1.1150.

USDCHF

Swiss Retail Sales Soars For The Month

Swiss strength could be attributed to the days gains along with rather tepid US housing figures as the major pair declined 95 basis points, rounding out the top three movers on the day.  According to the report released this morning, adjusted real retail sales figures jumped in the month by 12.2 percent.  The climb was 75 percent above the consensus figure of 7 percent and trumps the decline seen in the previous month.  Retail sales dipped 6.8 percent in the prior report.  Now with consumers suggestively coming out with guns blazing, further speculation is surely to follow on higher rates as the economy continues to sport a whopping double digit surplus.  The figures added to rather lackluster housing data out of the US this morning.  According to the US Commerce Department, housing sales advanced 4.6 percent in the month of May to an annual pace of 1.234 million units.  However, prices of the average home dropped to $294,300 from an upwardly revised $302,000 in the previous month.  As a result, the dip is suggestive that although consumer demand for residential property remains strong, sellers have had to lower prices in order to attract further demand.  Considered rather soft, data later in the week, also expected to be released softer than expected, may add to near term bearishness as the Swiss economy roars on.