21 Jul 10 : Markets brace themselves ahead of Ben Bernanke's speech

The EURUSD yesterday started the session strong as speculation mounted on Ben Bernanke's testimony today. The talk on the street was of a dovish Ben and a downplay on US economic growth. This helped spark a selloff in the USD and the EURUSD traded to 1.3029 making a 2 month high. Part of the move was on the back of stop hunting however with no follow through. Asian supply came in at these levels and capped the gains in the pair gunned more stops on the downside below 1.2900 despite positive comments from the ECB on the EU and the stress test due on Friday. From the data front yesterday we had a very disappointing Housing starts report dropping over -5% for the month relative to the expectation of -2.7%. USDJPY price action on the day was between 87.56 - 86.72.



In the EU we had the weekly ECB refinancing auction which indicated an increased appetite for ECB financing ahead of the stress tests on Friday. Spanish, Irish and Greek auction this week and last went without incident and the Greek T-Bill yields are trading below the IMF 5% benchmark. Focus is firmly fixed on Friday's stress test results and the reaction of the market in terms of realism or not. We already know the Hypo Real Estate bank in Germany has failed the tests however Germany has promised to bail them out if needed. EURUSD price action on the day was between 1.3029 - 1.2840.



In the UK yesterday we saw a widening Public sector borrowing figure which disappointed the markets and reacted by selling the GBP from 1.5300. We also saw MPC member Posen made dovish comments and that there is a 50% chance of further policy loosening. By the end of the session the GBPUSD recovered back above 1.5300 on the back of a weak dollar. Ahead today we have MPC minutes and Retail sales.

The EURUSD pivot point is at 1.2835 with a preference to enter into Long positions at 1.2835
The USDJPY pivot point is at 86.90 with a preference to enter Long positions at 86.50
Today's calendar and market movers:

US equities closed positively yesterday with the S&P500 at 1.14% and the DJIA at 0.74%. The European bourses were negative with the FTSE down -0.17% the DAX and the CAC closing at -0.69% and -0.53% respectively. The NIKKEI and the HSI at the time of writing is -0.23% and 0.55% respectively