Stress Test Results Questioned but Euro Still Higher

The U.S. Dollar is also under pressure this morning. TheEuro is continuing its rally after the stress tests failed to reveal anyserious surprises. The British Pound is soaring, backed by positive economicdata and good news regarding its stress tests. Finally, demand for higher riskis helping to drive commodity-linked currencies higher.

The U.S. Dollar is also under pressure this morning. TheEuro is continuing its rally after the stress tests failed to reveal anyserious surprises. The British Pound is soaring, backed by positive economicdata and good news regarding its stress tests. Finally, demand for higher riskis helping to drive commodity-linked currencies higher.

Traders continue to question the stringency of the Europeanbank stress tests but this news has failed to trigger any selling pressure.Famous investor Jimmy Rogers told CNBC.com Monday that the stress tests werejust a public relations exercise and weren’t tough enough. Some analystscontinue to doubt that only seven of 91 European Union banks failed the test.This figure was even better than rumors circulating two weeks ago, calling forat least eleven to fail.

The point receiving the biggest criticism was the fact thata sovereign debt default in Europe had notbeen taken into consideration in the criteria of the test. Although the head ofthe Committee of European Banking Supervisors told CNBC that sovereign exposureof banks taking the test had been disclosed, other factors such as currencymarkets, pension funds, and fiscal problems in the U.S. had not been factored into thestress analysis.

Last week’s testimony by Fed Chairman Bernanke, calling fora weaker economy coupled with better than expected economic data from Europe is helping to keep pressure on the Dollar. Tradersare starting to believe that interest rates will remain low in the U.S., while the possibility of a hike in ratesin Europe and the Pacific Rim remains strong.

This morning there is only one economic report. At 10 a.m.Eastern Time, the U.S.will report New Home Sales. The consensus is looking for an increase of 6.7percent from a month earlier. Although this seasonally adjusted figure isexpected to be higher than the slow pace from May, the market remains weak nowthat potential buyers can no longer get federal tax credits.

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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