Another bout of risk appetite in the wake of the late yesterday earnings result from Intel should keep the USD and JPY under pressure against most other currencies, particularly the commodity correlating and emerging nation units. Intel reported better-than-expected sales (reporting 12% jump in sales in Q2 vs Q1) and said that consumers in Asia had led the charge -- particularly China -- more than making up for slack corporate demand. This news should set the tone in Europe. Meanwhile, there are some interesting releases out today. In the U.S., the FOMC minutes will be a focal point for today, which will be scrutinized for insights on the Fed's decision not to increase its asset purchases at the June 23/24 policy meeting. We don't expect any surprises here, and believe the Fed chose to hold steady based upon the improvement in economic and financial conditions, and diminished worries over the threat of deflation. Such a tone could further raise risk appetite in markets. The U.S. also has CPI, industrial production the Empire State manufacturing data and weekly mortgage figures, which are likely to be mixed in outcome. Europe releases include eurozone June CPI and U.K. June claimant and May average earnings figures. Ahead, China GDP data due on Thursday and the earnings reports from Google, JP Morgan and IBM, also due tomorrow, loom.
EUR-USD was buoyed early on amid the broad rise in risk appetite. Stop losses above 1.4020 triggered the move higher, which also saw technical resistance at 1.4045-50 give way. European interbank names and momentum funds were tipped on the way up, while an Asian sovereign name was noted at the 1.4070 highs and could be option related, according to sources. The persistent range bound activity forced implied volatility to its lowest levels since September 2008, with the 1-wk trading down to 10% and the 1-mth opened at 11.5/11.8%. On Monday and Tuesday there were reports of good sellers of short dated contracts, with strikes at 1.3800 and 1.4100-20 dealing. However, with the curve dealing at trend lows and spot edging towards the top end of the range it may not take too much impetus to inject fresh volatility in to the market. In fact, one name already took advantage of the low gamma today and paid up the 1-wk from 10% to 10.60% in good in anticipation of a run above 1.4120. Elsewhere, option strikes of note today include 1.4000 and 1.4100 maturities.
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