Previous session overview

The euro is up slightly against the dollar Monday, gaining only modest support from the results of last week's European bank stress tests.

Investors are relieved to find that the results of the tests, released Friday, included no new calamities. The euro didn't soar on the outcome of the tests, but it didn't plummet either. The dollar was lower early Monday, with the yen, euro and U.K. pound posting slight gains.

Forex investors didn't find anything scary enough in EU bank stress tests to cause them to sell off the euro, but nothing encouraging enough to prompt a major rally, either. EURUSD has now given back intraday gains and has returned to late Fri levels. So far yen has been the global session's winner, up on both the euro and dollar. EURUSD trades at USD1.2921 from USD1.2918 late Fri in NY. EURJPY down at JPY112.30 from JPY112.98 while USDJPY at JPY86.90 from JPY87.45.

European officials hope the tests, which just seven of the European Union's 91 major banks failed, will ease worries about the health of the EU economy and its banks, unlock bank funding markets and encourage investors to buy bank bonds.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 82.314, from 82.475.

Market expectation

The euro, at USD1.2932, if it takes out USD1.2970 daily resistance, would be going for USD1.3033, which is the current high for the uptrend since mid-June. New uptrend highs would be the signal for a test of USD1.3100. If trades are stopped below USD1.2856 expect a dip to test USD1.2726.

The U.S. economic calendar will be closely eyed this week, in light of Federal Reserve Chairman Ben Bernanke's remarks last week that the U.S. economy is heading for a period of "unusual uncertainty." His comments, before Congress, follow a string of disappointing economic indicators.

Disclaimer: the data made available by Dukascopy Bank SA is for informational purposes only. Publication of this data by Dukascopy Bank SA does not constitute provision of investment advice and Dukascopy Bank SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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