Appetite for US Dollar increases on Hungary

Posted on June 6, 2010 by larry | No Comments

Most of the weeks dramatic action was reserved for Friday.
The bad news for equity markets and the Euro began with some strange comments from Hungary. The prime ministers official spokesman said the economy was in a grave situation and that default on its debt was possible.
The comments ignited fears that a debt crisis could be beginning in Eastern Europe. In a mirror image of Greece it appears that previous economic data had been falsified by the previous government. Hungary of course is not a member of the Euro so its currency the Florint can take some of the strain. However, this was easily enough to unsettle markets.
Close on the heels of this came the much awaited US employment data.The job growth not only came in lower than expected at 431,000 in May but more importantly showed that of those jobs just a paltry 41,000 was in the private sector.
These events left equity markets much weaker the Dow closing some 3% lower to 9930. The Euro fell to a four year low against the US Dollar closing at 1.1970 and 110 against a slightly stronger yen.
The Swiss Franc surged again against the Euro closing under the 1.40 level with the Swiss National Bank fighting a losing battle.
To add further woes to the Euro the Iranian State Television said the central bank had begun the process of reducing their holdings of Euro Reserves from 55% to 20-25%. This was reportedly going to US dollars and gold.Thus far according to their reports some 15 Billion of 45 Billion Euros have been sold. All in all some own goal for a country previously trying to cock a snoop at the US.Dollar.

Technically nothing has changed over the week. The equity markets remain very vulnerable to further sell offs with the Dow possibly targeting 9430 level now. This if it happens increases the likelihood that the forex markets will continue to sell the Euro lower. There remains good resistance between 1.1650 and the 1.1209 ( Key Fibonacci level). A break of the latter technically would signal an attack at the parity level for Euro /US dollar.

Thus far we have heard nothing from the G20 and that leads one to believe that we are in for more of the same over the coming days and weeks.Please do let us know if their is anything on the horizon to change sentiment…………..Now where did I put the can opener

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