EUR/USD
Remains positive while projected support at 1.4283 holds. Successfully defending 1.4283 would prompt a recovery back to Friday's marginal high at 1.4440, which shields the wave equality target at 1.4458. This 1.4458 target needs to be met in order to validate the recovery off the July 18 higher low at 1.4014. Failure to keep 1.4283 intact would damage the wave structure, and create scope for weakness to the July 21 low at 1.4138.
GBP/USD
Edges towards the 1.6348 upside target, as GBP bulls remain in control. The push into fresh five-week highs opens the wave equality target at 1.6415, which needs to be met in order to validate the short-term rally off the July 12 reaction low at 1.5783. Solid support lies at 1.6175, and only a move below projected support at 1.6151 would concern GBP bulls.
USD/JPY
Resistance at 78.60 and 78.70 is likely to cap upside risk, despite the strong recovery off Monday's Asian session low at 78.12. The main threat remains to the downside, and a break below 78.36 and 78.22 would bring the four-month low at 78.12 back into focus. Regaining ground above 78.70 would provide respite, opening 79.03.
AUD/USD
The bullish AUD tone remains intact while projected support at 1.0794 holds. AUD bulls are on course for meeting important wave equality targets at 1.0907 and 1.0924, which would become achievable on a break above Friday's 1.0877 high. Only a sustained break below 1.0794 would question the positive AUD outlook, exposing 1.0735.
FOREX FOCUS
Financial Armageddon will probably be avoided. But, that won't necessarily be good news for the dollar. On the contrary, protracted negotiations on raising the U.S. debt ceiling could well increase the threat of a ratings downgrade at the same time talk of further U.S. monetary easing is likely to return. In other words, neither fiscal nor monetary forces will be working in the dollar's favor for the foreseeable future. Hopes had been high before last weekend that President Obama was close to hammering out a deal with the Republicans on raising the debt ceiling and allowing the Treasury to continue raising money. But, with the talks now in tatters and the August 2 default deadline drawing closer, it looks increasingly likely the two sides will only come up with a short-term compromise that will keep the Treasury solvent but postpone any tough decision on spending cuts and tax increases until next year. The problem then, of course, is that negotiations could prove even more difficult as they will be taking place just as the two parties start their campaigns for the next presidential election. This will hardly put the U.S. in a good light and with credit agencies likely to keep their threat of a U.S. downgrade alive, Washington could well find it has to offer a weaker dollar and higher Treasury yields to keep foreigners buying its debt. So, the fiscal stresses that have overshadowed the dollar for the last few months could actually intensify if Congress fails to find a longer-term debt solution.
EUROPE
Lingering concerns over the Greek rescue deal and the worryingly glacial pace of U.S. debt-ceiling negotiations knocked investor sentiment during European hours Monday, giving the Swiss franc and Japanese yen a boost. The franc hit an all-time high against the dollar of CHF0.8021, while the dollar dropped to another post-intervention low of Y78.06 against the yen, as rattled traders flocked toward traditional safe havens. Gold climbed to a fresh record high of $1,623.49 per troy ounce, while European equities fell from the open, led down by financial stocks. "It's quite a choppy start to the week and this is set to continue with plenty of big data events on the horizon," said Ian Stannard, senior currency strategist at Morgan Stanley. Although the euro lost ground against the franc, it traded broadly sideways against the dollar as traders weighed up the U.S. fiscal troubles and the Greek bailout package.
ASIA
Asian currency markets took the U.S. debt impasse largely in stride Monday, but the euro slid late in the session when Greece was downgraded to near-default status. Democrats and Republicans missed a deadline they had set for themselves for a deal to raise the debt ceiling -- and avoid default -- in time for Asian markets to open. But while the dollar weakened, traders seemed if anything bored with the exercise: data from EBS indicate activity among major currencies were barely half their average levels of the past 30 sessions. Asian currency markets still expect "that something will get cobbled together," said Adrian McGowan, head of Asia-Pacific trading at Barclays Capital in Singapore. But late in the session, Moody's slashed Greece by three notches to Ca, a cut above default, on expectations that the latest bailout will force "substantial economic losses" on private creditors.
WORLD
Initial euphoria over Europe's solution to Greece's debt crisis wore off Friday in New York, sending the euro lower against major currencies as markets questioned whether the fundamental outlook for troubled euro-zone countries had really changed. On Thursday, European Union leaders reached a comprehensive solution to the Hellenic republic's distressed debt situation, amid fears that Greece's woes could spread to larger European economies such as Spain and Italy. In particular, analysts welcomed plans to expand the scope of the European Financial Stability Facility (EFSF), a funding vehicle that is a linchpin of Europe's efforts to rescue debt-laden countries. But many market observers say that the devil remains in the details, many of which are still hazy at best. While the broadening of the EFSF's powers appears sufficient to handle Greece's immediate needs, analysts harbored doubts about whether it could contend with the country's long-term financing needs--and if it could manage a bailout of Italy and Spain, the euro zone's third and fourth largest economies, respectively. The assets of both countries have recently been a target of jittery investors.
Selasa, 26 Juli 2011
Jumat, 22 Juli 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Thursday's strength brings the wave equality target at 1.4458 into the immediate picture. And while projected support at 1.4283 holds, the structure of the bull wave from Monday's 1.4014 low creates scope for 1.4498 and 1.4592 on concerted EUR strength. Corrective weakness will attract support while above 1.4283, and only below there would concern EUR bulls.
GBP/USD
Scope for more GBP gains to 1.6348 have been created, following Thursday's push into fresh five-week highs. However, GBP bulls need to meet the wave equality target at 1.6415, in order to validate the short-term rally off the July 12 reaction low at 1.5783. Solid support lies at 1.6175, and only below projected support at 1.6144 would leave GBP bulls bewildered.
USD/JPY
A new trading range has been established between 78.22 and 79.00, but the overall tone remains USD bearish. Resistance at 78.74 protects the 79.00 level, and while the latter caps, USD bears will look to test support at 78.43. However, the strong recovery off Friday's Asian session low at 78.22 suggests the range floor will remain intact. Only a sustained break above 79.00 would put USD bulls in control, opening 79.32.
AUD/USD
Pushes into fresh ten-week highs above 1.0804, to clear the path for the resistance cluster at 1.0924. The four-week bull channel resistance line lies at 1.0974 during Friday's current session, and the May 2 reaction high at 1.1014 is effectively back within striking distance. Corrective weakness will attract support while above 1.0750, and downside risk is limited.
FOREX FOCUS
European Union leaders may have bought the euro some time but they haven't brought it a solution. The single currency may well have a comfortable summer. After many months of market tension, politicians as well as markets players will be only too glad to head for the beaches now that a second bail out for Greece has finally been negotiated. But, come the autumn, the real test of the EUR159 billion bailout that the leaders have just cobbled together for Greece will take place. The details of private sector involvement, the reaction of credit rating agencies, the impact on the borrowing costs of other peripheral euro zone debtors should all be a lot more clear by then. And investors will probably not like what they see. Greece won't be any happier accepting austerity measures linked to the rescue package and the fiscal independence of euro zone members that led to the debt crisis in the first place will be as strong as ever. There is little doubt that EU leaders have removed the immediate risk of debtor default that has been haunting the market for so long. Their agreement to expand the public sector contribution to Greece as well as rope in private sector lenders has certainly improved the chances that Athens will be able to resolve its debt issues in the longer-term. The relief over the last-minute deal has been expressed right across global markets with bond prices falling, stock markets rallying, the cost of peripheral debt tumbling and the euro itself rising by about 2% against the dollar. The reaction, however, can hardly be described as euphoric. It is more a case of markets giving the deal the benefit of the doubt. Just look at the euro. It may have rallied to a high of nearly $1.4450 after the package was announced in Brussels but this didn't even put the currency it in the upper end of the $1.3837-$1.4940 trading range that has existed for the last few months. This hardly looks as if euro bulls are getting carried away. Of course, the euro's performance is very much a matter of degree. Short positioning in the currency hasn't been that high and a reminder this week of the economic problems facing even the core countries in the euro zone may well have tempered enthusiasm. Friday's sharp fall in Germany's Ifo survey of business sentiment may even have cast doubt over whether the European Central Bank's decision to raise interest rates earlier this month was such a good idea. Some analysts suggest that as the summer lull gains pace and trading levels decline, there is a chance that the single currency will drift up to the top of the trading range. But, even if that happens, it will only be a matter of time before reality over the deal kicks back in. As questions over its implementation rise, so could confidence in the euro once again fall, with the single currency still struggling to take its place as one of the world's major reserve currencies that can seriously compete with the dollar.
EUROPE
The euro clung to overnight gains in European trade Friday and the Australian dollar hit a two-month high against the dollar as an easing in euro-zone debt worries nudged investors into putting on riskier currency bets. The euro remains just above $1.44 against the dollar, keeping much of its gains from Thursday, when the euro zone's leaders announced a new Greek bailout and an overhaul of its rescue fund package for fiscally frail member states. "The outcome of yesterday's [euro-zone] summit came in at the upper range of our optimistic expectations, with [euro-zone] leaders announcing a series of comprehensive measures to support Greece and to stabilise the euro zone as a whole," was Credit Agricole's reading of the matter. And judging by the initial market reaction, with shares mostly higher and peripheral euro-zone government bond spreads tightening, that seems to be the overall view. "It is a genuine relief rally," said Neil Mellor, strategist at Bank of New York Mellon. Fitch Ratings said the private sector involvement in the Greek deal will constitute a "restrictive default" once the bond exchange takes place, but that was widely expected. Even so, many questions remain, he added, pointing to the size of the rescue fund and the potential for further debt problems. "The contagion risk is quelled for a while but it is not going to go away. Greece will need greater debt forgiveness," Mellor said. Joerg Kraemer, economist at Commerzbank believes the euro zone has bought Greece enough time, at least until the end of 2014. But the crisis will only go away if weaker states consolidate their budgets and restructure their economies in order to become competitive, he added. So the euro still faces tough tests if the headlines turn bad again. "The upside for the euro, notably against the dollar, will be constrained by its already elevated level which will leave it vulnerable should any bad news materialise," said Daragh Maher at Credit Agricole.
ASIA
The euro on Friday held onto most of its gains made overnight on news of a comprehensive bailout package for Greece, but doubts about a long-term solution for the euro zone's debt problems made traders in Asia wary of pushing the single currency higher. The EUR159 billion bailout "went beyond market expectations," BNP Paribas said in a research note, calling the agreement "a major step towards stabilizing the markets and a resolution of the debt crisis." At 0445 GMT, the euro was at $1.4390 after it jumped to $1.4440 in late U.S. trade on Thursday on the back of the bailout announcement. Against the yen, the euro was at Y113.12 from Y112.98. Leaders of the 17 euro zone member countries agreed to enhance the European Financial Stability Facility, giving the bailout fund more flexibility in its purchases and allowing it to buy sovereign debt in the secondary market if deemed necessary. The European Central Bank can also accept Greek bonds as collateral for its fund provision even if Greece is placed on selective default by rating agencies. Traders were, however, cautious about the euro's prospects ahead. "The euro is likely to react negatively when rating agencies actually put Greece into default", said Yoshiko Takayasu, manager of foreign exchange sales at Royal Bank of Canada in Tokyo. "Given this, the euro is unlikely to have a firm footing above $1.4500," she said. Yuji Saito, director at Credit Agricole in Tokyo, said the bailout was "far from a fundamental solution." "There is doubt over whether the bailout is large enough to cover other countries when contagion spreads," he said. The dollar firmed against the yen in Asian trading despite worries over the showdown between the White House and congressional Republicans over raising the U.S. debt ceiling, as buying from importers and concerns over possible yen-selling intervention lifted the greenback higher.
WORLD
The euro rose sharply Thursday as plans for a new Greek bailout and overhaul of the euro zone's rescue fund assuaged fears about possible contagion. Market participants' hope that European leaders are close to finalizing a package to give Greece a second bailout and reduce liquidity risks in countries like Spain and Italy helped push the euro more than 1% higher against the dollar. The common currency also surged against safe havens like the yen and Swiss franc, though the long-term impact for the euro is still uncertain. "It's more of a temporary relief rally," Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J., said of the euro's big gains Thursday. Just announcing a draft of a plan appears to be a major step forward for the euro zone, which has consistently delayed reaching a deal to support Greece. The appearance of progress has been supportive for the euro. "If we have a deal and a plan--even with any problems or imperfections that it might have--it's a sign that we're not going to get a breakup and [euro-zone] leaders will do whatever it takes to solve these problems," said Greg Anderson, strategist at Citigroup. Over the long term, questions remain about whether the euro zone's bailout fund, the European Financial Stability Facility, will be expanded and how ratings agencies would treat a potential debt restructuring in Greece. Ratings agencies have said in recent months that a distressed Greek debt restructuring could be considered a default. Euro-zone governments outlined a new aid package for Greece and an overhaul of the rescue fund that aims to reduce the debt burdens of Greece, Portugal and Ireland, according to the draft proposal. The overhaul would extend loan maturities and lower interest rates for heavily indebted euro-zone countries.
Thursday's strength brings the wave equality target at 1.4458 into the immediate picture. And while projected support at 1.4283 holds, the structure of the bull wave from Monday's 1.4014 low creates scope for 1.4498 and 1.4592 on concerted EUR strength. Corrective weakness will attract support while above 1.4283, and only below there would concern EUR bulls.
GBP/USD
Scope for more GBP gains to 1.6348 have been created, following Thursday's push into fresh five-week highs. However, GBP bulls need to meet the wave equality target at 1.6415, in order to validate the short-term rally off the July 12 reaction low at 1.5783. Solid support lies at 1.6175, and only below projected support at 1.6144 would leave GBP bulls bewildered.
USD/JPY
A new trading range has been established between 78.22 and 79.00, but the overall tone remains USD bearish. Resistance at 78.74 protects the 79.00 level, and while the latter caps, USD bears will look to test support at 78.43. However, the strong recovery off Friday's Asian session low at 78.22 suggests the range floor will remain intact. Only a sustained break above 79.00 would put USD bulls in control, opening 79.32.
AUD/USD
Pushes into fresh ten-week highs above 1.0804, to clear the path for the resistance cluster at 1.0924. The four-week bull channel resistance line lies at 1.0974 during Friday's current session, and the May 2 reaction high at 1.1014 is effectively back within striking distance. Corrective weakness will attract support while above 1.0750, and downside risk is limited.
FOREX FOCUS
European Union leaders may have bought the euro some time but they haven't brought it a solution. The single currency may well have a comfortable summer. After many months of market tension, politicians as well as markets players will be only too glad to head for the beaches now that a second bail out for Greece has finally been negotiated. But, come the autumn, the real test of the EUR159 billion bailout that the leaders have just cobbled together for Greece will take place. The details of private sector involvement, the reaction of credit rating agencies, the impact on the borrowing costs of other peripheral euro zone debtors should all be a lot more clear by then. And investors will probably not like what they see. Greece won't be any happier accepting austerity measures linked to the rescue package and the fiscal independence of euro zone members that led to the debt crisis in the first place will be as strong as ever. There is little doubt that EU leaders have removed the immediate risk of debtor default that has been haunting the market for so long. Their agreement to expand the public sector contribution to Greece as well as rope in private sector lenders has certainly improved the chances that Athens will be able to resolve its debt issues in the longer-term. The relief over the last-minute deal has been expressed right across global markets with bond prices falling, stock markets rallying, the cost of peripheral debt tumbling and the euro itself rising by about 2% against the dollar. The reaction, however, can hardly be described as euphoric. It is more a case of markets giving the deal the benefit of the doubt. Just look at the euro. It may have rallied to a high of nearly $1.4450 after the package was announced in Brussels but this didn't even put the currency it in the upper end of the $1.3837-$1.4940 trading range that has existed for the last few months. This hardly looks as if euro bulls are getting carried away. Of course, the euro's performance is very much a matter of degree. Short positioning in the currency hasn't been that high and a reminder this week of the economic problems facing even the core countries in the euro zone may well have tempered enthusiasm. Friday's sharp fall in Germany's Ifo survey of business sentiment may even have cast doubt over whether the European Central Bank's decision to raise interest rates earlier this month was such a good idea. Some analysts suggest that as the summer lull gains pace and trading levels decline, there is a chance that the single currency will drift up to the top of the trading range. But, even if that happens, it will only be a matter of time before reality over the deal kicks back in. As questions over its implementation rise, so could confidence in the euro once again fall, with the single currency still struggling to take its place as one of the world's major reserve currencies that can seriously compete with the dollar.
EUROPE
The euro clung to overnight gains in European trade Friday and the Australian dollar hit a two-month high against the dollar as an easing in euro-zone debt worries nudged investors into putting on riskier currency bets. The euro remains just above $1.44 against the dollar, keeping much of its gains from Thursday, when the euro zone's leaders announced a new Greek bailout and an overhaul of its rescue fund package for fiscally frail member states. "The outcome of yesterday's [euro-zone] summit came in at the upper range of our optimistic expectations, with [euro-zone] leaders announcing a series of comprehensive measures to support Greece and to stabilise the euro zone as a whole," was Credit Agricole's reading of the matter. And judging by the initial market reaction, with shares mostly higher and peripheral euro-zone government bond spreads tightening, that seems to be the overall view. "It is a genuine relief rally," said Neil Mellor, strategist at Bank of New York Mellon. Fitch Ratings said the private sector involvement in the Greek deal will constitute a "restrictive default" once the bond exchange takes place, but that was widely expected. Even so, many questions remain, he added, pointing to the size of the rescue fund and the potential for further debt problems. "The contagion risk is quelled for a while but it is not going to go away. Greece will need greater debt forgiveness," Mellor said. Joerg Kraemer, economist at Commerzbank believes the euro zone has bought Greece enough time, at least until the end of 2014. But the crisis will only go away if weaker states consolidate their budgets and restructure their economies in order to become competitive, he added. So the euro still faces tough tests if the headlines turn bad again. "The upside for the euro, notably against the dollar, will be constrained by its already elevated level which will leave it vulnerable should any bad news materialise," said Daragh Maher at Credit Agricole.
ASIA
The euro on Friday held onto most of its gains made overnight on news of a comprehensive bailout package for Greece, but doubts about a long-term solution for the euro zone's debt problems made traders in Asia wary of pushing the single currency higher. The EUR159 billion bailout "went beyond market expectations," BNP Paribas said in a research note, calling the agreement "a major step towards stabilizing the markets and a resolution of the debt crisis." At 0445 GMT, the euro was at $1.4390 after it jumped to $1.4440 in late U.S. trade on Thursday on the back of the bailout announcement. Against the yen, the euro was at Y113.12 from Y112.98. Leaders of the 17 euro zone member countries agreed to enhance the European Financial Stability Facility, giving the bailout fund more flexibility in its purchases and allowing it to buy sovereign debt in the secondary market if deemed necessary. The European Central Bank can also accept Greek bonds as collateral for its fund provision even if Greece is placed on selective default by rating agencies. Traders were, however, cautious about the euro's prospects ahead. "The euro is likely to react negatively when rating agencies actually put Greece into default", said Yoshiko Takayasu, manager of foreign exchange sales at Royal Bank of Canada in Tokyo. "Given this, the euro is unlikely to have a firm footing above $1.4500," she said. Yuji Saito, director at Credit Agricole in Tokyo, said the bailout was "far from a fundamental solution." "There is doubt over whether the bailout is large enough to cover other countries when contagion spreads," he said. The dollar firmed against the yen in Asian trading despite worries over the showdown between the White House and congressional Republicans over raising the U.S. debt ceiling, as buying from importers and concerns over possible yen-selling intervention lifted the greenback higher.
WORLD
The euro rose sharply Thursday as plans for a new Greek bailout and overhaul of the euro zone's rescue fund assuaged fears about possible contagion. Market participants' hope that European leaders are close to finalizing a package to give Greece a second bailout and reduce liquidity risks in countries like Spain and Italy helped push the euro more than 1% higher against the dollar. The common currency also surged against safe havens like the yen and Swiss franc, though the long-term impact for the euro is still uncertain. "It's more of a temporary relief rally," Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J., said of the euro's big gains Thursday. Just announcing a draft of a plan appears to be a major step forward for the euro zone, which has consistently delayed reaching a deal to support Greece. The appearance of progress has been supportive for the euro. "If we have a deal and a plan--even with any problems or imperfections that it might have--it's a sign that we're not going to get a breakup and [euro-zone] leaders will do whatever it takes to solve these problems," said Greg Anderson, strategist at Citigroup. Over the long term, questions remain about whether the euro zone's bailout fund, the European Financial Stability Facility, will be expanded and how ratings agencies would treat a potential debt restructuring in Greece. Ratings agencies have said in recent months that a distressed Greek debt restructuring could be considered a default. Euro-zone governments outlined a new aid package for Greece and an overhaul of the rescue fund that aims to reduce the debt burdens of Greece, Portugal and Ireland, according to the draft proposal. The overhaul would extend loan maturities and lower interest rates for heavily indebted euro-zone countries.
Rabu, 06 Juli 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Resistance at 1.4500 will look to cap the corrective recovery off 1.4395. Tuesday's weakness left Monday's 1.4580 high as a potential bull failure, and EUR bears will be looking to extend the setback below 1.4395 to test the important intraday higher low at 1.4325. A break below 1.4325 is required to confirm the bull failure at 1.4580. Regaining ground above 1.4500 would provide respite, but only above 1.4553 would re-open the 1.4580 high.
GBP/USD
Gyrates within a 1.6139/1.5993 range, as the near-term direction becomes uncertain once again. However, GBP bears would appear to have the upper hand, and are expected to defend the 1.6139 high. A push below 1.5993 would bring the focus back onto the late June reaction lows at 1.5911, threatening a downtrend extension to 1.5852 and towards the 1.5675 area. Only above 1.6139 would negate the bearish GBP outlook, opening 1.6225.
USD/JPY
Remains on course for more gains towards 81.50, despite the setback during Wednesday's Asian hours. While support at 80.73 holds, a return to Tuesday's high at 81.19 is expected, opening 81.27 and the resistance cluster between 81.40 and 81.50. Only below Monday's low at 80.54 would cause a technical breakdown, exposing the June 30 low at 80.26.
AUD/USD
The recovery off 1.0664 is on course for more gains to 1.0757 and the July 1 high at 1.0791. Keeping the important 1.0615 support level protected is behind this latest upwave, and the recent completion of a medium-term bull wedge keeps the underlying tone positive for AUD. A push through 1.0791 would open the May 11 lower high at 1.0890. Only a reversal below 1.0664 would negate the bullish AUD outlook.
FOREX FOCUS
Little is going to stop the pound from melting now. In short, concern over the U.K. economic recovery is about to intensify and speculation over further monetary easing is likely to increase while market support for other major currencies, such as the dollar and the euro, is about to rise. Britain's ruling coalition may be facing criticism about its fiscal discipline but recent data suggest that the impact of public spending cuts and tax increases may be even deeper than initially anticipated. Hopes that the economy will start to recover from sluggish growth of 0.5% in the first quarter have been dashed by recent figures, with economists predicting a slowdown to only 0.3% or less growth in the second quarter. The growing threat of public-sector strikes, as the government attempts to bring salaries and pensions more in line with the private sector, is only likely to undermine market sentiment, especially if the government is seen backing down on key issues that threaten fiscal reform. The fact that the global recovery is also faltering isn't helping the country's growth prospects, given the U.K.'s high dependence on exports. If anything, the resulting decline in global commodity prices is helping to quell fears of stagflation and could mean the Bank of England will be more comfortable introducing more monetary easing if needed. The latest purchasing managers' index for the country's service industries confirmed such a trend this week. Although the activity index proved stronger than expected, the pricing index fell quite markedly, suggesting that inflation pressures are subsiding and recent strong rises in the consumer price index will be reversed as expected. Although the service sector of the economy may have proved slightly more buoyant, the manufacturing and construction sectors remained very soft, reinforcing calls for more monetary easing through a second dose of quantitative easing, or QE2. In a global context, this is the last thing the pound needs. Although the U.S. recovery remains uncertain as well, the Fed has essentially ruled out another dose of quantitative easing and the prospects for the dollar are steadily improving. Similarly, the euro's recent gains against the pound have been subdued, given that the risk of a Greek debt default has remained high and investors have been very selective in their purchases of the single currency. However, hopes that tensions will subside while details of a second Greek bailout are negotiated over the next few months means that the euro could find some support. If so, then the pound could find itself facing a hot and unpleasant summer as yield differentials move against it and the euro and the dollar find more investor support at its expense.
EUROPE
The euro fell heavily in European trading hours as London traders took a grim view of news late Tuesday that a key ratings agency had downgraded Portuguese government bonds to junk status, with an interest-rate rise from China adding to the pressure as it hit risky bets across the board. After some respite in sleepy Asian trading conditions, the euro sank by as much as 0.9% from its highest point of the day against the dollar, to hit a low of $1.4335 by 1035 GMT. It made similar losses against the Swiss franc, sterling, and the yen. The 0.25 percentage-point interest-rate rise by the People's Bank of China has been expected for a while, but the timing was a surprise. It boosted demand for U.S. dollars and Swiss francs, in a typical flight to safe retreats, and also dented the Australian dollar, as traders bet that the Asian giant is engineering a steady slowdown. But the Aussie found support around $1.0669 against the greenback, after a 0.25% fall. The four-notch downgrade to Portugal by Moody's Investors Service Inc. was also, in many ways, no surprise. "[The ratings agencies] are lagging reactions and just adding to market volatility," said Pierre Lequeux, head of currency management at Aviva Investors. But it served as a warning that the euro-zone debt crisis doesn't end with Greece. "There was a feeling that once we get a second package for Greece, we can all move on and focus on the U.S. fiscal situation, laying the groundwork for a rally in the euro against the dollar. But this is a reminder that it's not just a Greece story, it's Portugal as well. Spanish and Italian yields are also rising," said Daragh Maher, a currencies analyst at Credit Agricole in London.
ASIA
The euro recovered slightly against the dollar in Asia Wednesday from overnight falls, but the gains were limited before the European Central Bank's policy-setting meeting Thursday and U.S. June jobs data due Friday. Fears of sovereign debt contagion in the eurozone were rekindled by Moody's Investors Service downgrading of Portugal's ratings, but traders in Tokyo refrained from making aggressive moves ahead of upcoming events. "The gains (in the euro) were within the scope of position adjustments ahead of this week's two major events," said Akira Hoshino, chief manager at the foreign exchange trading department of Bank of Tokyo-Mitsubishi UFJ. At 0450 GMT, the euro was at $1.4451 from $1.4426 late New York Tuesday, according to EBS via CQG. The dollar was at Y80.85 from Y81.10, while the euro was at Y116.84 from Y116.92. The U.K. pound was at $1.6080 from $1.6053. The dollar was at CHF0.8398 from CHF0.8408. Traders said a 25-basis point hike in key short-term interest rates by the ECB is almost certain and the focus is on whether the ECB chief will indicate further rate hikes later this year. MUFG's Hoshino said the ECB could "maintain a vigilant stance" on inflation, although the ECB probably won't clarify the timing of the next rate hike. Hoshino also noted there would be limited room for the euro to rally much, as he expects the pair to move in a $1.400 to $1.4500 range for the time being.
WORLD
The euro slid Tuesday after ratings agency Moody's downgraded Portugal to "junk" status, adding to deepening worries over the euro zone's financial health. Last week's optimism that the Greek debt crisis was moderating was also shaken this week when Moody's Investors Service and Standard & Poor's issued warnings. Moody's said banks that roll over Greek debt may face impairment charges and S&P said a French plan may put Greece in "selective default." "The sovereign debt crisis in Europe has not significantly diminished, even with the latest aid package to Greece. This will continue to keep pressure on the euro," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "Given the continued weakness in the European economy, Portugal's finances remain under great stress," Baumohl added. The euro will likely remain weak over the next few months because of the perception that the European Union has essentially kicked the can down the road a bit further with respect to Greece, Baumohl said. Euro-zone finance ministers authorized the next EUR12 billion tranche of last year's European Union-International Monetary Fund bailout over the weekend, enabling Greece to make a debt payment later this month. Adding to the weight on the euro and other higher-yielding currencies, Moody's stated that China could be carrying significantly more troubled loans than first thought, stirring worries about Chinese economic growth. Yet the prospect of higher euro-zone interest rates may play in the single currency's favor later in the week, some traders said.
Resistance at 1.4500 will look to cap the corrective recovery off 1.4395. Tuesday's weakness left Monday's 1.4580 high as a potential bull failure, and EUR bears will be looking to extend the setback below 1.4395 to test the important intraday higher low at 1.4325. A break below 1.4325 is required to confirm the bull failure at 1.4580. Regaining ground above 1.4500 would provide respite, but only above 1.4553 would re-open the 1.4580 high.
GBP/USD
Gyrates within a 1.6139/1.5993 range, as the near-term direction becomes uncertain once again. However, GBP bears would appear to have the upper hand, and are expected to defend the 1.6139 high. A push below 1.5993 would bring the focus back onto the late June reaction lows at 1.5911, threatening a downtrend extension to 1.5852 and towards the 1.5675 area. Only above 1.6139 would negate the bearish GBP outlook, opening 1.6225.
USD/JPY
Remains on course for more gains towards 81.50, despite the setback during Wednesday's Asian hours. While support at 80.73 holds, a return to Tuesday's high at 81.19 is expected, opening 81.27 and the resistance cluster between 81.40 and 81.50. Only below Monday's low at 80.54 would cause a technical breakdown, exposing the June 30 low at 80.26.
AUD/USD
The recovery off 1.0664 is on course for more gains to 1.0757 and the July 1 high at 1.0791. Keeping the important 1.0615 support level protected is behind this latest upwave, and the recent completion of a medium-term bull wedge keeps the underlying tone positive for AUD. A push through 1.0791 would open the May 11 lower high at 1.0890. Only a reversal below 1.0664 would negate the bullish AUD outlook.
FOREX FOCUS
Little is going to stop the pound from melting now. In short, concern over the U.K. economic recovery is about to intensify and speculation over further monetary easing is likely to increase while market support for other major currencies, such as the dollar and the euro, is about to rise. Britain's ruling coalition may be facing criticism about its fiscal discipline but recent data suggest that the impact of public spending cuts and tax increases may be even deeper than initially anticipated. Hopes that the economy will start to recover from sluggish growth of 0.5% in the first quarter have been dashed by recent figures, with economists predicting a slowdown to only 0.3% or less growth in the second quarter. The growing threat of public-sector strikes, as the government attempts to bring salaries and pensions more in line with the private sector, is only likely to undermine market sentiment, especially if the government is seen backing down on key issues that threaten fiscal reform. The fact that the global recovery is also faltering isn't helping the country's growth prospects, given the U.K.'s high dependence on exports. If anything, the resulting decline in global commodity prices is helping to quell fears of stagflation and could mean the Bank of England will be more comfortable introducing more monetary easing if needed. The latest purchasing managers' index for the country's service industries confirmed such a trend this week. Although the activity index proved stronger than expected, the pricing index fell quite markedly, suggesting that inflation pressures are subsiding and recent strong rises in the consumer price index will be reversed as expected. Although the service sector of the economy may have proved slightly more buoyant, the manufacturing and construction sectors remained very soft, reinforcing calls for more monetary easing through a second dose of quantitative easing, or QE2. In a global context, this is the last thing the pound needs. Although the U.S. recovery remains uncertain as well, the Fed has essentially ruled out another dose of quantitative easing and the prospects for the dollar are steadily improving. Similarly, the euro's recent gains against the pound have been subdued, given that the risk of a Greek debt default has remained high and investors have been very selective in their purchases of the single currency. However, hopes that tensions will subside while details of a second Greek bailout are negotiated over the next few months means that the euro could find some support. If so, then the pound could find itself facing a hot and unpleasant summer as yield differentials move against it and the euro and the dollar find more investor support at its expense.
EUROPE
The euro fell heavily in European trading hours as London traders took a grim view of news late Tuesday that a key ratings agency had downgraded Portuguese government bonds to junk status, with an interest-rate rise from China adding to the pressure as it hit risky bets across the board. After some respite in sleepy Asian trading conditions, the euro sank by as much as 0.9% from its highest point of the day against the dollar, to hit a low of $1.4335 by 1035 GMT. It made similar losses against the Swiss franc, sterling, and the yen. The 0.25 percentage-point interest-rate rise by the People's Bank of China has been expected for a while, but the timing was a surprise. It boosted demand for U.S. dollars and Swiss francs, in a typical flight to safe retreats, and also dented the Australian dollar, as traders bet that the Asian giant is engineering a steady slowdown. But the Aussie found support around $1.0669 against the greenback, after a 0.25% fall. The four-notch downgrade to Portugal by Moody's Investors Service Inc. was also, in many ways, no surprise. "[The ratings agencies] are lagging reactions and just adding to market volatility," said Pierre Lequeux, head of currency management at Aviva Investors. But it served as a warning that the euro-zone debt crisis doesn't end with Greece. "There was a feeling that once we get a second package for Greece, we can all move on and focus on the U.S. fiscal situation, laying the groundwork for a rally in the euro against the dollar. But this is a reminder that it's not just a Greece story, it's Portugal as well. Spanish and Italian yields are also rising," said Daragh Maher, a currencies analyst at Credit Agricole in London.
ASIA
The euro recovered slightly against the dollar in Asia Wednesday from overnight falls, but the gains were limited before the European Central Bank's policy-setting meeting Thursday and U.S. June jobs data due Friday. Fears of sovereign debt contagion in the eurozone were rekindled by Moody's Investors Service downgrading of Portugal's ratings, but traders in Tokyo refrained from making aggressive moves ahead of upcoming events. "The gains (in the euro) were within the scope of position adjustments ahead of this week's two major events," said Akira Hoshino, chief manager at the foreign exchange trading department of Bank of Tokyo-Mitsubishi UFJ. At 0450 GMT, the euro was at $1.4451 from $1.4426 late New York Tuesday, according to EBS via CQG. The dollar was at Y80.85 from Y81.10, while the euro was at Y116.84 from Y116.92. The U.K. pound was at $1.6080 from $1.6053. The dollar was at CHF0.8398 from CHF0.8408. Traders said a 25-basis point hike in key short-term interest rates by the ECB is almost certain and the focus is on whether the ECB chief will indicate further rate hikes later this year. MUFG's Hoshino said the ECB could "maintain a vigilant stance" on inflation, although the ECB probably won't clarify the timing of the next rate hike. Hoshino also noted there would be limited room for the euro to rally much, as he expects the pair to move in a $1.400 to $1.4500 range for the time being.
WORLD
The euro slid Tuesday after ratings agency Moody's downgraded Portugal to "junk" status, adding to deepening worries over the euro zone's financial health. Last week's optimism that the Greek debt crisis was moderating was also shaken this week when Moody's Investors Service and Standard & Poor's issued warnings. Moody's said banks that roll over Greek debt may face impairment charges and S&P said a French plan may put Greece in "selective default." "The sovereign debt crisis in Europe has not significantly diminished, even with the latest aid package to Greece. This will continue to keep pressure on the euro," said Bernard Baumohl, chief global economist with the Economic Outlook Group. "Given the continued weakness in the European economy, Portugal's finances remain under great stress," Baumohl added. The euro will likely remain weak over the next few months because of the perception that the European Union has essentially kicked the can down the road a bit further with respect to Greece, Baumohl said. Euro-zone finance ministers authorized the next EUR12 billion tranche of last year's European Union-International Monetary Fund bailout over the weekend, enabling Greece to make a debt payment later this month. Adding to the weight on the euro and other higher-yielding currencies, Moody's stated that China could be carrying significantly more troubled loans than first thought, stirring worries about Chinese economic growth. Yet the prospect of higher euro-zone interest rates may play in the single currency's favor later in the week, some traders said.
Selasa, 05 Juli 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
More weakness is expected towards 1.4456 and last Friday's low at 1.4436, after Monday's doji candle neutralised the short-term uptrend. The sharp setback off Tuesday's Asian session high at 1.4553 protects Monday's 1.4580 high, and a break below 1.4456 would leave the 1.4580 high as a potential near-term bull failure, exposing downside risk to the 1.4408 area. A 1.618 Fibonacci extension target lies just above 1.4408. Regaining ground above 1.4492 would provide temporary respite, but only keeping 1.4456 intact, combined with a break above 1.4553, would open the range high at 1.4580 once more.
GBP/USD
The setback off 1.6139 is eyeing a return to the intraday bull pennant low at 1.5987. The corrective rally to 1.6139 has fallen significantly shy of the 1.6192 upside target, and further weakness below 1.5987 would leave the late June reaction lows at 1.5911 vulnerable. A recovery above 1.6092 would provide respite, but only above 1.6139 would negate the bearish GBP outlook.
USD/JPY
The recent highs at 81.15 and 81.27 are likely to come under threat, following the strong recovery off 80.54. A USD bull wave towards the 82.00 level is expected this week, as the action is part of a nine-week bear pennant continuation pattern. Resistance at 81.50 needs to be surpassed in order to open the 82.00 target. Corrective USD weakness is limited to the 80.85 area, and only below 80.54 would negate the bullish outlook.
AUD/USD
Corrects lower towards 1.0615, as weakness off the July 1 high at 1.0791 extends. However, with the 50% Fibonacci retracement level of the 1.0391/1.0791 rally providing backup support at 1.0591, corrective downside risk is limited. A recovery above 1.0710 is required to lift the tone, and threaten further gains towards 1.0749 and the 1.0791 high.
FOREX FOCUS
There is now little doubt that the European Central Bank will raise its interest rates again at its next meeting Thursday. Taking full advantage of the lull in tensions over Greece, the ECB is widely expected to raise rates by another 25 basis points to 1.50% in an undisguised effort to re-establish its hawkish credentials and prove its independence to markets. However, this could be a move the ECB regrets. Certainly, by still pouring liquidity into euro-zone banks, the ECB is effectively ensuring that they won't be afflicted by the rise in its repo rate. On that score at least, some economists reckon that higher rates at this stage won't be that damaging. However, there is growing evidence that a rate rise will come just as euro-zone growth slows, inflation pressures subside and, instead of falling, tensions over Greece start to rise again. For some time now, the debt problems of the currency bloc's peripheral members have been seen as a potential threat to the strong growth in core euro-zone countries. The latest measures of manufacturing activity have largely proved this, with new orders slowing and even prices easing back. On Monday, data showed that producer prices in the region fell for the first time in 20 months in May, reflecting the overall decline in global commodity prices that has taken place in recent weeks. Higher food and energy prices, which may have justified the ECB's hawkishness a few months ago, are now in a major retreat as global demand fails to live up to expectations. Although Simon Derrick, a senior strategist at Bank of New York Mellon, steps back from suggesting that we face a similar collapse to 2008, he does point to the 35% fall in wheat prices since their peak in February; the 21% decline in the price of corn futures from its recent high; a 30% fall in the price of silver since the start of May and the collapse in the Baltic Dry Index [which is a measure of trade activity] to half the level it reached last September. In other words, the ECB will be raising interest rates just when the market no longer needs them.
EUROPE
The dollar was broadly higher and the Swiss franc gained during European hours Tuesday as overnight fears about China's latent credit risks continued to reverberate and as euro-zone economic data disappointed. The pound was also a climber after surprisingly positive service-sector data. After the Greece-inspired relief rally, investors pared risky bets and flocked to safe-haven currencies such as the Swiss franc and, to a lesser extent, the dollar. Overnight, Moody's Investors Service said a Chinese government agency may have understated banks' loans to local governments by RMB3.5 trillion ($540.7 billion), warning that the scale of such loans could pose a threat to China's banking system. Euro-zone data failed to cheer traders with activity in the euro zone's private sector posting its weakest growth in more than a year and a half. Meanwhile, retail sales in the 17-country currency bloc slumped in May, likely reflecting a squeeze on real incomes and fears of unemployment. Another interest rate rise from the European Central Bank on Thursday is nonetheless still expected, which helped to steady the euro. That, as well as continued recycling of dollar reserves by Asian central banks continues to underpin the single currency. It was a slightly different story with sterling. A string of weak data and reports of mounting job losses and retailer closures has weighed on the pound in recent weeks so a small positive surprise in the June services purchasing managers' index caught traders unawares. The pound shot up against both the euro and the dollar as traders reversed negative bets. Sterling rose to as high as $1.6128 against the dollar while the euro slipped back below GBP0.90 against the pound.
ASIA
The dollar gained against the euro and the yen in Asia Tuesday as concerns about a possible Chinese interest rate hike reduced investor risk appetite, while expectations that U.S. multinational firms may bring their overseas profits home added to the dollar's strength. The People's Bank of China said in a statement Monday that inflationary pressures "are still high" while the economy continues to grow at a steady and relatively fast pace. On Tuesday, two local papers interpreted the PBOC's statement to mean that a hike in interest rates could be imminent. A Moody's Investors Service report on Monday said that Chinese banks may be facing bigger problems with municipal loans. This news also put downward pressure on the euro. "The currency market was overly optimistic last week and a correction is now taking place after these reports," said Kuniyuki Hirai, a manager at the foreign exchange trading department at Bank of Tokyo-Mitsubishi UFJ. A fall in Tokyo and Shanghai stock prices also made traders wary of buying the euro, he added. A Bloomberg report that a corporate tax holiday on foreign profits being debated by Congress may help strengthen the dollar, traders said. Firms may use a proposed reduction in tax on repatriated profits to bring back as much as $700 billion to create jobs and spur investment, Bloomberg cited a study by the Congressional Joint Committee on Taxation as saying. "It may be used as a trump card for Obama administration ahead of the U.S. Presidential vote next year. And if it is implemented, this could mark an end to a weak dollar policy in the U.S.," says Yuji Saito, foreign exchange market director at Credit Agricole in Tokyo.
WORLD
The U.S. dollar was modestly lower in holiday-thinned trade Monday as the euro brushed aside concerns triggered by Standard & Poor's warning on Greece's debt. Standard & Poor's warning that a debt rollover plan for Greece would be akin to a default rattled markets and negated the positive momentum seen after euro-zone ministers approved funding for Greece this past weekend. Late Monday, the euro was at $1.4541 from $1.4528 late Friday, according to EBS via CQG. The dollar was at Y80.77 from Y80.86, while the euro was at Y117.47 from Y117.45. The U.K. pound was at $1.6090 from $1.6067. The dollar was unchanged at CHF0.8475. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.254 from about 74.298. "There's been very little movement today. I wouldn't expect the euro to fall too far with the possibility of an ECB rate hike later in the week," said Shaun Osborne, chief FX strategist at TD Securities in Toronto. European Central Bank President Jean-Claude Trichet had said the bank was "strongly vigilant" on inflation, which many see as the ECB's willingness to increase rates even in the midst of a debt crisis. "We'll look at the ECB's language surrounding the decision," Osborne said. The tone of the market was broadly more positive toward risky assets, but some market participants said the swing of optimism last week that was sparked by Greece's agreement to austerity measures likely will fade away, with the markets more likely to look intently at economic data coming out of China and the U.S. this week.
More weakness is expected towards 1.4456 and last Friday's low at 1.4436, after Monday's doji candle neutralised the short-term uptrend. The sharp setback off Tuesday's Asian session high at 1.4553 protects Monday's 1.4580 high, and a break below 1.4456 would leave the 1.4580 high as a potential near-term bull failure, exposing downside risk to the 1.4408 area. A 1.618 Fibonacci extension target lies just above 1.4408. Regaining ground above 1.4492 would provide temporary respite, but only keeping 1.4456 intact, combined with a break above 1.4553, would open the range high at 1.4580 once more.
GBP/USD
The setback off 1.6139 is eyeing a return to the intraday bull pennant low at 1.5987. The corrective rally to 1.6139 has fallen significantly shy of the 1.6192 upside target, and further weakness below 1.5987 would leave the late June reaction lows at 1.5911 vulnerable. A recovery above 1.6092 would provide respite, but only above 1.6139 would negate the bearish GBP outlook.
USD/JPY
The recent highs at 81.15 and 81.27 are likely to come under threat, following the strong recovery off 80.54. A USD bull wave towards the 82.00 level is expected this week, as the action is part of a nine-week bear pennant continuation pattern. Resistance at 81.50 needs to be surpassed in order to open the 82.00 target. Corrective USD weakness is limited to the 80.85 area, and only below 80.54 would negate the bullish outlook.
AUD/USD
Corrects lower towards 1.0615, as weakness off the July 1 high at 1.0791 extends. However, with the 50% Fibonacci retracement level of the 1.0391/1.0791 rally providing backup support at 1.0591, corrective downside risk is limited. A recovery above 1.0710 is required to lift the tone, and threaten further gains towards 1.0749 and the 1.0791 high.
FOREX FOCUS
There is now little doubt that the European Central Bank will raise its interest rates again at its next meeting Thursday. Taking full advantage of the lull in tensions over Greece, the ECB is widely expected to raise rates by another 25 basis points to 1.50% in an undisguised effort to re-establish its hawkish credentials and prove its independence to markets. However, this could be a move the ECB regrets. Certainly, by still pouring liquidity into euro-zone banks, the ECB is effectively ensuring that they won't be afflicted by the rise in its repo rate. On that score at least, some economists reckon that higher rates at this stage won't be that damaging. However, there is growing evidence that a rate rise will come just as euro-zone growth slows, inflation pressures subside and, instead of falling, tensions over Greece start to rise again. For some time now, the debt problems of the currency bloc's peripheral members have been seen as a potential threat to the strong growth in core euro-zone countries. The latest measures of manufacturing activity have largely proved this, with new orders slowing and even prices easing back. On Monday, data showed that producer prices in the region fell for the first time in 20 months in May, reflecting the overall decline in global commodity prices that has taken place in recent weeks. Higher food and energy prices, which may have justified the ECB's hawkishness a few months ago, are now in a major retreat as global demand fails to live up to expectations. Although Simon Derrick, a senior strategist at Bank of New York Mellon, steps back from suggesting that we face a similar collapse to 2008, he does point to the 35% fall in wheat prices since their peak in February; the 21% decline in the price of corn futures from its recent high; a 30% fall in the price of silver since the start of May and the collapse in the Baltic Dry Index [which is a measure of trade activity] to half the level it reached last September. In other words, the ECB will be raising interest rates just when the market no longer needs them.
EUROPE
The dollar was broadly higher and the Swiss franc gained during European hours Tuesday as overnight fears about China's latent credit risks continued to reverberate and as euro-zone economic data disappointed. The pound was also a climber after surprisingly positive service-sector data. After the Greece-inspired relief rally, investors pared risky bets and flocked to safe-haven currencies such as the Swiss franc and, to a lesser extent, the dollar. Overnight, Moody's Investors Service said a Chinese government agency may have understated banks' loans to local governments by RMB3.5 trillion ($540.7 billion), warning that the scale of such loans could pose a threat to China's banking system. Euro-zone data failed to cheer traders with activity in the euro zone's private sector posting its weakest growth in more than a year and a half. Meanwhile, retail sales in the 17-country currency bloc slumped in May, likely reflecting a squeeze on real incomes and fears of unemployment. Another interest rate rise from the European Central Bank on Thursday is nonetheless still expected, which helped to steady the euro. That, as well as continued recycling of dollar reserves by Asian central banks continues to underpin the single currency. It was a slightly different story with sterling. A string of weak data and reports of mounting job losses and retailer closures has weighed on the pound in recent weeks so a small positive surprise in the June services purchasing managers' index caught traders unawares. The pound shot up against both the euro and the dollar as traders reversed negative bets. Sterling rose to as high as $1.6128 against the dollar while the euro slipped back below GBP0.90 against the pound.
ASIA
The dollar gained against the euro and the yen in Asia Tuesday as concerns about a possible Chinese interest rate hike reduced investor risk appetite, while expectations that U.S. multinational firms may bring their overseas profits home added to the dollar's strength. The People's Bank of China said in a statement Monday that inflationary pressures "are still high" while the economy continues to grow at a steady and relatively fast pace. On Tuesday, two local papers interpreted the PBOC's statement to mean that a hike in interest rates could be imminent. A Moody's Investors Service report on Monday said that Chinese banks may be facing bigger problems with municipal loans. This news also put downward pressure on the euro. "The currency market was overly optimistic last week and a correction is now taking place after these reports," said Kuniyuki Hirai, a manager at the foreign exchange trading department at Bank of Tokyo-Mitsubishi UFJ. A fall in Tokyo and Shanghai stock prices also made traders wary of buying the euro, he added. A Bloomberg report that a corporate tax holiday on foreign profits being debated by Congress may help strengthen the dollar, traders said. Firms may use a proposed reduction in tax on repatriated profits to bring back as much as $700 billion to create jobs and spur investment, Bloomberg cited a study by the Congressional Joint Committee on Taxation as saying. "It may be used as a trump card for Obama administration ahead of the U.S. Presidential vote next year. And if it is implemented, this could mark an end to a weak dollar policy in the U.S.," says Yuji Saito, foreign exchange market director at Credit Agricole in Tokyo.
WORLD
The U.S. dollar was modestly lower in holiday-thinned trade Monday as the euro brushed aside concerns triggered by Standard & Poor's warning on Greece's debt. Standard & Poor's warning that a debt rollover plan for Greece would be akin to a default rattled markets and negated the positive momentum seen after euro-zone ministers approved funding for Greece this past weekend. Late Monday, the euro was at $1.4541 from $1.4528 late Friday, according to EBS via CQG. The dollar was at Y80.77 from Y80.86, while the euro was at Y117.47 from Y117.45. The U.K. pound was at $1.6090 from $1.6067. The dollar was unchanged at CHF0.8475. The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.254 from about 74.298. "There's been very little movement today. I wouldn't expect the euro to fall too far with the possibility of an ECB rate hike later in the week," said Shaun Osborne, chief FX strategist at TD Securities in Toronto. European Central Bank President Jean-Claude Trichet had said the bank was "strongly vigilant" on inflation, which many see as the ECB's willingness to increase rates even in the midst of a debt crisis. "We'll look at the ECB's language surrounding the decision," Osborne said. The tone of the market was broadly more positive toward risky assets, but some market participants said the swing of optimism last week that was sparked by Greece's agreement to austerity measures likely will fade away, with the markets more likely to look intently at economic data coming out of China and the U.S. this week.
Senin, 04 Juli 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The 1.4600 level is within striking distance, as EUR bulls look to maintain their dominance. While projected support at 1.4492 limits the scope for corrective weakness, the main threat is for a push into fresh four-week highs above 1.4580, opening 1.4600 and two wave equality targets at 1.4664 and 1.4672. Only a push below 1.4456 would concern EUR bulls, exposing Friday's low at 1.4436.
GBP/USD
The recent consolidation phase between 1.5974 and 1.6117 is likely to be resolved to the upside. GBP bull pressure is building on Friday's high at 1.6095, and a push higher is threatened, opening 1.6117 and 1.6192. Failure to force a break through 1.6095 would extend the consolidation phase, and prompt weakness towards 1.5974/87.
USD/JPY
Weakness towards 80.64 is expected, following the sharp setback off 81.15. A large bull pennant continuation pattern is being formed on the 60-minute chart, suggesting there is scope for further weakness towards 80.50 and projected support at 80.38, protecting the pennant low at 80.26. Regaining ground above 80.94 is required to lift the tone, and re-open Friday's high at 81.15.
AUD/USD
The probe above 1.0776 paves the way for more AUD gains towards 1.0867 and the May 11 lower high at 1.0890. Last week's strength completed an eight-week bull wedge, and a sustained break above 1.0776 would attract a fresh wave of gains that have the May 2 reaction high at 1.1014 as a longer-term target. Corrective weakness will attract support while above 1.0620, but downside risk is limited.
FOREX FOCUS
Is the Swedish krona becoming the new Swiss franc? One of the more remarkable moves over the past few days as Greece agreed to take its austerity medicine and tensions in financial markets started to ease has been a shift out of that traditional safe haven, the Swiss franc, in favor of that far more niche Scandinavian, the Swedish krona. On the surface, this certainly looks plausible. International investors are willing to take on more risk and the Swedish economy certainly looks like a good bet. Its recent recovery has been strong and the Riksbank is poised to raise interest rates again on July 5. By comparison, the Swiss economy has been showing signs of stalling and any plans for the Swiss National Bank to raise its interest rates have been put into abeyance. So, the argument runs, with global risk sentiment recovering there is no need to keep your money in the lower-yielding franc after all. But there are at least two reasons why this argument is flawed. First, the recovery in global risk sentiment will probably prove to be limited. Greece may have said it will swallow its austerity medicine but its lenders are still having a lot of trouble convincing each other how to provide a bailout that doesn't look like a default. As a result, the risk of contagion to other euro-zone peripherals remains high and support for the euro itself has hardly been overwhelming. Hopes that the U.S. recovery is picking up steam has also contributed to the improved mood in the international investment community. But this too could all evaporate just as easily if new data fail to live up to the expectations of the optimists. All that aside, Sweden itself is providing reasons for players who are jumping on the krona bandwagon to be cautious. Like Switzerland, Sweden is a highly open economy, dependent on export growth to keep its recovery going. So, just like Switzerland, Sweden is finding that the recent stumble in global demand is taking its toll. On Friday, Switzerland discovered that industrial activity was slowing even more than expected, with the country's latest purchasing managers' index tumbling to 53.4 from 59.2. The problem is that similar data from Sweden were just about as bad. Its index fell to 52.9 from 56.1, taking it well below the long-term average of 55 and bringing warnings from economists that industrial activity could be contracting, with the PMI index under 50, by the autumn. Therefore, what has looked as an attractive "risk-on" trade for investors relaxing over Greece could well start to look more like a short-term end-month, end-half-year play that will unwind again in the Swiss franc's favor as the second half of the year gets underway.
EUROPE
The euro steadied against the dollar in European hours Monday, holding above $1.45 as some of the fresh Greek angst generated by Standard & Poor's Corp. faded and traders looked ahead to a possible euro-zone interest rate rise. Standard & Poor's had warned that a debt rollover plan for Greece could amount to a default, spooking currency markets in Asian hours. But the effect was fleeting, with activity slowing and U.S. markets set to remain shut due to a public holiday. Adrian Schmidt, a currencies strategist at Lloyds Bank, said the opinion of rating agencies was less of a factor for now. "It (the S&P's warning) remains a headwind, but there is some uncertainty about rating agencies' treatment of any deal," he said. Separately, he believes a summer lull might be at hand as the vacation season starts in earnest. That was echoed by analysts at Citigroup who are advising their clients to bet on recent ranges holding, with a so-called double no-touch option that pays out as long as the euro holds between $1.5132 and $1.3868. "We intend to hold this position for a minimum of one month. However, at some point between the one month mark and the expiry (Oct 3)...we may close all or part of the trade if it is profitable," they said in a note Monday. Separately, the euro is also being propped up by expectations that the European Central Bank will lift interest rates Thursday. ECB chief Jean-Claude Trichet has flagged a rate increase by using the code words "strong vigilance" several times ahead of the rate decision. Over in the UK, the pound reacted little to news that activity in the U.K. construction sector grew at a slower pace in June. The U.K. construction purchasing managers' index fell to 53.6 from 54.0, survey compiler Markit Economics said. Schmidt at Lloyds said sterling is being propped up as investors pare back overly negative views on the currency's outlook.
ASIA
The euro fell against its counterparts in Asia on Monday after Standard & Poor's Ratings Services warned that a debt rollover plan for Greece could amount to a default, though traders said the common currency will remain supported by expectations that the European Central Bank will hike rates this week. In remarks released Monday afternoon in Tokyo, S&P said the rollover plan, a leading proposal for easing repayment terms on Greece's sovereign debt, would constitute a default under the ratings firm's criteria. The notice from S&P didn't alter Greece's rating, which remains at CCC after a June 13 downgrade. The euro had been up against its rivals before the remarks, but quickly relinquished its gains, dropping around 40 pips to fresh intraday lows at $1.4510 and Y117.12. The falls came amid thin trade that was expected to dry up even further later in the global day due to the U.S. July 4 holiday, dealers said. S&P's warning echoed views already heard in the market, so likely did not present a longer term threat to the common currency, they said. "This should be about it for the fall, as there's nothing really new in this statement," said Satoshi Okagawa, a senior FX dealer at Sumitomo Mitsui Banking Corporation. Traders said the euro has a positive bias this week ahead of the ECB meeting Thursday, at which the central bank is widely expected to raise its key policy rate to 1.50% from 1.25%. "The question now is whether the ECB will just raise rates this time and then hold, or whether inflation data will keep the pressure on for continued rate hikes," said Motonari Ogawa, a senior FX dealer at Barclays Bank.
WORLD
Surprising strength in the U.S. manufacturing sector supported the dollar against most major currencies Friday, but the euro held its ground as fears surrounding Greece's debt crisis ebbed. The Institute for Supply Management's June manufacturing index came in at 55.3, above the 51.8 forecast. This was its 23rd consecutive month of growth. The figure underscored how a weak dollar--which has only just recovered from a near three-year low it hit in May--has helped exports soar. Yet the global economic outlook remains uncertain. With jitters about Greece's debt crisis retreating to the background, investors are becoming more concerned about the pitched battle being waged in Washington over the $14.3 trillion debt ceiling and the yawning fiscal deficit. Analysts are warning about the repercussions to the global economy if a deal isn't reached by Aug. 2, which may trigger an unprecedented default on U.S. debt. Greece "is gone but not forgotten, [and] for the most part we are focused on the debt ceiling," said Jessica Hoversen, fixed-income and foreign-exchange analyst at MF Global. "Given that we don't have resolution on the debt ceiling, it's going to be hard for the dollar to rally on good data." Thin markets ahead of the July Fourth U.S. holiday made for sluggish trading. Most market participants were looking ahead to next week's full calendar of economic data, which include readings on the services sector and June payrolls. Late Friday, the euro was at $1.4531 from $1.4503 late Thursday, according to EBS via CQG. The dollar was at Y80.80 from Y80.56, while the euro was at Y117.47 from Y116.81. The U.K. pound was at $1.6085 from $1.6051. The dollar was at CHF0.8452 from CHF0.8407.
The 1.4600 level is within striking distance, as EUR bulls look to maintain their dominance. While projected support at 1.4492 limits the scope for corrective weakness, the main threat is for a push into fresh four-week highs above 1.4580, opening 1.4600 and two wave equality targets at 1.4664 and 1.4672. Only a push below 1.4456 would concern EUR bulls, exposing Friday's low at 1.4436.
GBP/USD
The recent consolidation phase between 1.5974 and 1.6117 is likely to be resolved to the upside. GBP bull pressure is building on Friday's high at 1.6095, and a push higher is threatened, opening 1.6117 and 1.6192. Failure to force a break through 1.6095 would extend the consolidation phase, and prompt weakness towards 1.5974/87.
USD/JPY
Weakness towards 80.64 is expected, following the sharp setback off 81.15. A large bull pennant continuation pattern is being formed on the 60-minute chart, suggesting there is scope for further weakness towards 80.50 and projected support at 80.38, protecting the pennant low at 80.26. Regaining ground above 80.94 is required to lift the tone, and re-open Friday's high at 81.15.
AUD/USD
The probe above 1.0776 paves the way for more AUD gains towards 1.0867 and the May 11 lower high at 1.0890. Last week's strength completed an eight-week bull wedge, and a sustained break above 1.0776 would attract a fresh wave of gains that have the May 2 reaction high at 1.1014 as a longer-term target. Corrective weakness will attract support while above 1.0620, but downside risk is limited.
FOREX FOCUS
Is the Swedish krona becoming the new Swiss franc? One of the more remarkable moves over the past few days as Greece agreed to take its austerity medicine and tensions in financial markets started to ease has been a shift out of that traditional safe haven, the Swiss franc, in favor of that far more niche Scandinavian, the Swedish krona. On the surface, this certainly looks plausible. International investors are willing to take on more risk and the Swedish economy certainly looks like a good bet. Its recent recovery has been strong and the Riksbank is poised to raise interest rates again on July 5. By comparison, the Swiss economy has been showing signs of stalling and any plans for the Swiss National Bank to raise its interest rates have been put into abeyance. So, the argument runs, with global risk sentiment recovering there is no need to keep your money in the lower-yielding franc after all. But there are at least two reasons why this argument is flawed. First, the recovery in global risk sentiment will probably prove to be limited. Greece may have said it will swallow its austerity medicine but its lenders are still having a lot of trouble convincing each other how to provide a bailout that doesn't look like a default. As a result, the risk of contagion to other euro-zone peripherals remains high and support for the euro itself has hardly been overwhelming. Hopes that the U.S. recovery is picking up steam has also contributed to the improved mood in the international investment community. But this too could all evaporate just as easily if new data fail to live up to the expectations of the optimists. All that aside, Sweden itself is providing reasons for players who are jumping on the krona bandwagon to be cautious. Like Switzerland, Sweden is a highly open economy, dependent on export growth to keep its recovery going. So, just like Switzerland, Sweden is finding that the recent stumble in global demand is taking its toll. On Friday, Switzerland discovered that industrial activity was slowing even more than expected, with the country's latest purchasing managers' index tumbling to 53.4 from 59.2. The problem is that similar data from Sweden were just about as bad. Its index fell to 52.9 from 56.1, taking it well below the long-term average of 55 and bringing warnings from economists that industrial activity could be contracting, with the PMI index under 50, by the autumn. Therefore, what has looked as an attractive "risk-on" trade for investors relaxing over Greece could well start to look more like a short-term end-month, end-half-year play that will unwind again in the Swiss franc's favor as the second half of the year gets underway.
EUROPE
The euro steadied against the dollar in European hours Monday, holding above $1.45 as some of the fresh Greek angst generated by Standard & Poor's Corp. faded and traders looked ahead to a possible euro-zone interest rate rise. Standard & Poor's had warned that a debt rollover plan for Greece could amount to a default, spooking currency markets in Asian hours. But the effect was fleeting, with activity slowing and U.S. markets set to remain shut due to a public holiday. Adrian Schmidt, a currencies strategist at Lloyds Bank, said the opinion of rating agencies was less of a factor for now. "It (the S&P's warning) remains a headwind, but there is some uncertainty about rating agencies' treatment of any deal," he said. Separately, he believes a summer lull might be at hand as the vacation season starts in earnest. That was echoed by analysts at Citigroup who are advising their clients to bet on recent ranges holding, with a so-called double no-touch option that pays out as long as the euro holds between $1.5132 and $1.3868. "We intend to hold this position for a minimum of one month. However, at some point between the one month mark and the expiry (Oct 3)...we may close all or part of the trade if it is profitable," they said in a note Monday. Separately, the euro is also being propped up by expectations that the European Central Bank will lift interest rates Thursday. ECB chief Jean-Claude Trichet has flagged a rate increase by using the code words "strong vigilance" several times ahead of the rate decision. Over in the UK, the pound reacted little to news that activity in the U.K. construction sector grew at a slower pace in June. The U.K. construction purchasing managers' index fell to 53.6 from 54.0, survey compiler Markit Economics said. Schmidt at Lloyds said sterling is being propped up as investors pare back overly negative views on the currency's outlook.
ASIA
The euro fell against its counterparts in Asia on Monday after Standard & Poor's Ratings Services warned that a debt rollover plan for Greece could amount to a default, though traders said the common currency will remain supported by expectations that the European Central Bank will hike rates this week. In remarks released Monday afternoon in Tokyo, S&P said the rollover plan, a leading proposal for easing repayment terms on Greece's sovereign debt, would constitute a default under the ratings firm's criteria. The notice from S&P didn't alter Greece's rating, which remains at CCC after a June 13 downgrade. The euro had been up against its rivals before the remarks, but quickly relinquished its gains, dropping around 40 pips to fresh intraday lows at $1.4510 and Y117.12. The falls came amid thin trade that was expected to dry up even further later in the global day due to the U.S. July 4 holiday, dealers said. S&P's warning echoed views already heard in the market, so likely did not present a longer term threat to the common currency, they said. "This should be about it for the fall, as there's nothing really new in this statement," said Satoshi Okagawa, a senior FX dealer at Sumitomo Mitsui Banking Corporation. Traders said the euro has a positive bias this week ahead of the ECB meeting Thursday, at which the central bank is widely expected to raise its key policy rate to 1.50% from 1.25%. "The question now is whether the ECB will just raise rates this time and then hold, or whether inflation data will keep the pressure on for continued rate hikes," said Motonari Ogawa, a senior FX dealer at Barclays Bank.
WORLD
Surprising strength in the U.S. manufacturing sector supported the dollar against most major currencies Friday, but the euro held its ground as fears surrounding Greece's debt crisis ebbed. The Institute for Supply Management's June manufacturing index came in at 55.3, above the 51.8 forecast. This was its 23rd consecutive month of growth. The figure underscored how a weak dollar--which has only just recovered from a near three-year low it hit in May--has helped exports soar. Yet the global economic outlook remains uncertain. With jitters about Greece's debt crisis retreating to the background, investors are becoming more concerned about the pitched battle being waged in Washington over the $14.3 trillion debt ceiling and the yawning fiscal deficit. Analysts are warning about the repercussions to the global economy if a deal isn't reached by Aug. 2, which may trigger an unprecedented default on U.S. debt. Greece "is gone but not forgotten, [and] for the most part we are focused on the debt ceiling," said Jessica Hoversen, fixed-income and foreign-exchange analyst at MF Global. "Given that we don't have resolution on the debt ceiling, it's going to be hard for the dollar to rally on good data." Thin markets ahead of the July Fourth U.S. holiday made for sluggish trading. Most market participants were looking ahead to next week's full calendar of economic data, which include readings on the services sector and June payrolls. Late Friday, the euro was at $1.4531 from $1.4503 late Thursday, according to EBS via CQG. The dollar was at Y80.80 from Y80.56, while the euro was at Y117.47 from Y116.81. The U.K. pound was at $1.6085 from $1.6051. The dollar was at CHF0.8452 from CHF0.8407.
Jumat, 01 Juli 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Resistance in the 1.4550 resistance area is likely to face renewed pressure, after keeping support at 1.4447 intact. A nine-week bear resistance line lies at 1.4550, but the series of higher lows on the 60-minute chart suggests there is scope for a push higher towards 1.4606. Failure to force a break above 1.4550 would concern EUR bulls, although only a reversal below 1.4467 would prompt a deeper setback towards 1.4375 and 1.4325.
GBP/USD
A consolidation phase between 1.5974 and 1.6117 is underway. This week's recovery off 1.5911 neutralised the bear tone, and GBP bulls will attempt to keep their new-found hopes alive by pushing above the 1.6117 high. However, only above 1.6117 would put GBP bulls in control of the near-term, opening 1.6213 and the June 22 lower high at 1.6262. A setback below 1.6008 is required to question the positive near-term outlook for GBP, exposing 1.5974.
USD/JPY
The recovery off Thursday's low at 80.26 has room to extend towards 81.00. Keeping the important support level at 80.20 intact underpins this rally, but Tuesday's reaction high at 81.27 still dominates the overall USD bear tone. A reversal below 80.41 would upset the positive near-term USD outlook, exposing 80.26 and 80.20.
AUD/USD
More gains towards the June 3 reaction high at 1.0776 are expected, as AUD bulls look to extend the powerful short-term uptrend. Wednesday's strength completed an eight-week bull wedge, and a push above 1.0776 would attract fresh gains towards the May 11 reaction high at 1.0890. Loss of 1.0674 would provide temporary respite, but good support lies at 1.0590 to limit the scope for corrective weakness.
FOREX FOCUS
Emerging markets are about to emerge a little more. And much of that is due to Greece. The country's final acceptance of further austerity measures has gone some way to remove the threat of an immediate debt default and help global risk sentiment to recover. However, the threat of a euro-zone default hasn't gone away and investors are going to remain wary about the financial crisis for many months to come. Meanwhile, recent concerns about the global slowdown should also start to fade, with stronger manufacturing activity in many major economies lifting hopes that a double-dip recession will be avoided. Global equity markets are rebounding form recent lows, global bond yields are on the up and even prices in many commodity markets appear to have stopped their recent slide. The New Zealand dollar's rally to a new post-float record against its U.S. counterpart after the news from Greece illustrated the renewed appetite for risk. But, it isn't only emerging markets that will benefit this time around. Strong fiscal fundamentals, evidence that inflation is under control, and a desire by investors to steer clear of the default risks in the euro zone and the debt ceiling debate in the U.S. all put emerging currencies back on the 'to buy' list. Jerome Booth, head of research at Ashmore Investment Management, which has about $60 billion under management in emerging economies, put it this way: "In terms of the largest macro-economic risks--depression, sovereign defaults, systemic banking crises, or a dollar crash --we expect emerging markets to be collectively much safer than the euro zone or US." Julian Jessop, chief international economist at Capital Economics, is also looking for emerging markets to outperform the markets in the more developed world, especially now that the central banks of many of these countries have stopped raising interest rates and removed the risk of a hard landing.
EUROPE
Currency markets were in volatile form Friday in European trading as sentiment swung on seemingly conflicting euro-zone headlines and as the post-Greek euphoria was offset by weak economic data. The euro broke above $1.4550 against the dollar in early trade, before succumbing to renewed trader nervousness after a meeting of euro-area finance ministers due Sunday was changed into a Saturday conference call. This prompted some in the market to fret over whether much would get done in the quest for the holy grail of a Greek debt rollover and bailout. The single currency regained the lost ground as subsequent reports encouraged traders to believe again that a deal might be near, but then slipped back as Standard & Poor's warned Italy's weak economic growth outlook represented a risk to the debt-reduction plan. Overall the session saw a continuation of the broadly positive attitude seen during Asian trading toward riskier currencies like the Australian dollar and Swedish krona and by more unwinding of safe-haven Swiss franc bets.
ASIA
The yen fell against the dollar and euro on Friday in Asia after the Bank of Japan's June tankan survey showed a deeper-than-expected drop in business sentiment in the aftermath of the March 11 disaster. Dealers said the dollar could rise further if U.S. manufacturing data later in the global day help to soothe worries about the state of the U.S. economy. The tankan survey's headline diffusion index plummeted to minus 9 from plus 6 in the March survey, worse than expectations for minus 7 and falling into negative territory for the first time in five quarters. Improved risk appetite due to receding worries over Europe's debt crisis was another reason behind the weakness in the safe-haven yen, dealers said. The Nikkei 225 Stock Average, which tends to benefit from increased risk appetite, was 0.53% higher as of 0450 GMT. Investors think the passage of an austerity package by the Greek parliament increases the likelihood that the European Union and the International Monetary Fund will provide aid to Athens at a meeting next week. U.S. economic data on Thursday also provided a risk-positive factor, with the headline figure in a closely watched survey of Chicago-area purchasing managers at 61.1 in June, higher than 56.6 in May and beating forecasts for 53.0. "The data helped to lessen investors' pessimism toward the U.S. economic outlook," said Masafumi Yamamoto, chief Japan strategist at Barclays Capital. Market participants will keep paying attention to U.S. economic indicators to gauge whether the current slowdown in U.S. economic momentum is long-lasting or temporary.
WORLD
Greece's Parliament voted "yes" for austerity Thursday and currency investors in turn voted for the euro. Greece's Parliament approved legislation implementing a crucial five-year, EUR28.4 billion austerity plan, giving the country a green light to receive fresh aid from its international creditors. "A lot of the price action today in the euro was driven by ... relief that there are no further hiccups in Greece," said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch. "Greece will move to the back of the stage and interest-rate differentials will be the big driver." The European Central Bank is widely expected to raise its key policy rate at next week's meeting for the second time this year, while the Federal Reserve has maintained its ultra-loose monetary policy. The euro soared in New York to a two-week high against the classic haven Swiss franc as investors unwound their short-euro positions. The common currency, also supported by month-end flows, rose more than a cent intraday against the dollar, and hit a three-week high against the Japanese yen. Stronger-than-expected U.S. manufacturing activity in June, according to the closely watched Chicago Business Barometer, also helped give the euro and general risk sentiment a boost. With Greece worries gradually drifting to the sidelines, the euro could see further upside, analysts said. "I wouldn't be surprised if we eventually started to get back ... toward the
[$1.47]-level," said David Watt, strategist with RBC Capital Markets. Markets now await a July 3 meeting of euro-zone finance ministers, who are expected to approve their share of Greece's next funding tranche.
Resistance in the 1.4550 resistance area is likely to face renewed pressure, after keeping support at 1.4447 intact. A nine-week bear resistance line lies at 1.4550, but the series of higher lows on the 60-minute chart suggests there is scope for a push higher towards 1.4606. Failure to force a break above 1.4550 would concern EUR bulls, although only a reversal below 1.4467 would prompt a deeper setback towards 1.4375 and 1.4325.
GBP/USD
A consolidation phase between 1.5974 and 1.6117 is underway. This week's recovery off 1.5911 neutralised the bear tone, and GBP bulls will attempt to keep their new-found hopes alive by pushing above the 1.6117 high. However, only above 1.6117 would put GBP bulls in control of the near-term, opening 1.6213 and the June 22 lower high at 1.6262. A setback below 1.6008 is required to question the positive near-term outlook for GBP, exposing 1.5974.
USD/JPY
The recovery off Thursday's low at 80.26 has room to extend towards 81.00. Keeping the important support level at 80.20 intact underpins this rally, but Tuesday's reaction high at 81.27 still dominates the overall USD bear tone. A reversal below 80.41 would upset the positive near-term USD outlook, exposing 80.26 and 80.20.
AUD/USD
More gains towards the June 3 reaction high at 1.0776 are expected, as AUD bulls look to extend the powerful short-term uptrend. Wednesday's strength completed an eight-week bull wedge, and a push above 1.0776 would attract fresh gains towards the May 11 reaction high at 1.0890. Loss of 1.0674 would provide temporary respite, but good support lies at 1.0590 to limit the scope for corrective weakness.
FOREX FOCUS
Emerging markets are about to emerge a little more. And much of that is due to Greece. The country's final acceptance of further austerity measures has gone some way to remove the threat of an immediate debt default and help global risk sentiment to recover. However, the threat of a euro-zone default hasn't gone away and investors are going to remain wary about the financial crisis for many months to come. Meanwhile, recent concerns about the global slowdown should also start to fade, with stronger manufacturing activity in many major economies lifting hopes that a double-dip recession will be avoided. Global equity markets are rebounding form recent lows, global bond yields are on the up and even prices in many commodity markets appear to have stopped their recent slide. The New Zealand dollar's rally to a new post-float record against its U.S. counterpart after the news from Greece illustrated the renewed appetite for risk. But, it isn't only emerging markets that will benefit this time around. Strong fiscal fundamentals, evidence that inflation is under control, and a desire by investors to steer clear of the default risks in the euro zone and the debt ceiling debate in the U.S. all put emerging currencies back on the 'to buy' list. Jerome Booth, head of research at Ashmore Investment Management, which has about $60 billion under management in emerging economies, put it this way: "In terms of the largest macro-economic risks--depression, sovereign defaults, systemic banking crises, or a dollar crash --we expect emerging markets to be collectively much safer than the euro zone or US." Julian Jessop, chief international economist at Capital Economics, is also looking for emerging markets to outperform the markets in the more developed world, especially now that the central banks of many of these countries have stopped raising interest rates and removed the risk of a hard landing.
EUROPE
Currency markets were in volatile form Friday in European trading as sentiment swung on seemingly conflicting euro-zone headlines and as the post-Greek euphoria was offset by weak economic data. The euro broke above $1.4550 against the dollar in early trade, before succumbing to renewed trader nervousness after a meeting of euro-area finance ministers due Sunday was changed into a Saturday conference call. This prompted some in the market to fret over whether much would get done in the quest for the holy grail of a Greek debt rollover and bailout. The single currency regained the lost ground as subsequent reports encouraged traders to believe again that a deal might be near, but then slipped back as Standard & Poor's warned Italy's weak economic growth outlook represented a risk to the debt-reduction plan. Overall the session saw a continuation of the broadly positive attitude seen during Asian trading toward riskier currencies like the Australian dollar and Swedish krona and by more unwinding of safe-haven Swiss franc bets.
ASIA
The yen fell against the dollar and euro on Friday in Asia after the Bank of Japan's June tankan survey showed a deeper-than-expected drop in business sentiment in the aftermath of the March 11 disaster. Dealers said the dollar could rise further if U.S. manufacturing data later in the global day help to soothe worries about the state of the U.S. economy. The tankan survey's headline diffusion index plummeted to minus 9 from plus 6 in the March survey, worse than expectations for minus 7 and falling into negative territory for the first time in five quarters. Improved risk appetite due to receding worries over Europe's debt crisis was another reason behind the weakness in the safe-haven yen, dealers said. The Nikkei 225 Stock Average, which tends to benefit from increased risk appetite, was 0.53% higher as of 0450 GMT. Investors think the passage of an austerity package by the Greek parliament increases the likelihood that the European Union and the International Monetary Fund will provide aid to Athens at a meeting next week. U.S. economic data on Thursday also provided a risk-positive factor, with the headline figure in a closely watched survey of Chicago-area purchasing managers at 61.1 in June, higher than 56.6 in May and beating forecasts for 53.0. "The data helped to lessen investors' pessimism toward the U.S. economic outlook," said Masafumi Yamamoto, chief Japan strategist at Barclays Capital. Market participants will keep paying attention to U.S. economic indicators to gauge whether the current slowdown in U.S. economic momentum is long-lasting or temporary.
WORLD
Greece's Parliament voted "yes" for austerity Thursday and currency investors in turn voted for the euro. Greece's Parliament approved legislation implementing a crucial five-year, EUR28.4 billion austerity plan, giving the country a green light to receive fresh aid from its international creditors. "A lot of the price action today in the euro was driven by ... relief that there are no further hiccups in Greece," said Paresh Upadhyaya, head of Americas G10 FX strategy at Bank of America Merrill Lynch. "Greece will move to the back of the stage and interest-rate differentials will be the big driver." The European Central Bank is widely expected to raise its key policy rate at next week's meeting for the second time this year, while the Federal Reserve has maintained its ultra-loose monetary policy. The euro soared in New York to a two-week high against the classic haven Swiss franc as investors unwound their short-euro positions. The common currency, also supported by month-end flows, rose more than a cent intraday against the dollar, and hit a three-week high against the Japanese yen. Stronger-than-expected U.S. manufacturing activity in June, according to the closely watched Chicago Business Barometer, also helped give the euro and general risk sentiment a boost. With Greece worries gradually drifting to the sidelines, the euro could see further upside, analysts said. "I wouldn't be surprised if we eventually started to get back ... toward the
[$1.47]-level," said David Watt, strategist with RBC Capital Markets. Markets now await a July 3 meeting of euro-zone finance ministers, who are expected to approve their share of Greece's next funding tranche.
Kamis, 30 Juni 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The bounce off support at 1.4325 brings the focus onto the 1.4540/50 resistance area. The push into fresh three-week highs above 1.4449 recovery strengthens the 1.4325 higher low, and a bear channel resistance line at 1.4550 this week is within striking distance, protecting 1.4606. Only a setback below 1.4429 would concern EUR bulls and expose the 1.4325 higher low.
GBP/USD
The push above 1.6094 creates scope for further gains to the June 22 lower high at 1.6262. This week's lows at 1.5911 have become a potential near-term bear failure, meaning the origin of that bear wave at 1.6262 will become the focus of attention, having neutralised the GBP bear trend for now. Only a reversal below 1.5960 would bring the focus back onto the 1.5911 lows.
USD/JPY
Upgrades the setback off 81.27 to expose projected support at 80.20. The push below 80.55 has left Tuesday's high at 81.27 stranded, and a break below 80.20 would leave 81.27 as a potential bull failure high, exposing the June 22 higher low at 80.01. Keeping 80.20 intact would prompt a recovery back to the 80.66 area, but only above there would stabilise the falling USD.
AUD/USD
The push above 1.0717 puts AUD bulls in control, and paves the way for more gains to the important June 3 lower high at 1.0776. A push above 1.0776 is required to confirm Monday's 1.0391 low as a bear failure, and create room another wave of AUD bull pressure towards the May 11 reaction high at 1.0890. Congestion between 1.0606 and 1.0645 will look to cushion corrective weakness, but downside risk is limited.
FOREX FOCUS
Greece's austerity vote will soon look like nothing more than a minor distraction. With debt financing costs still rising and the European Central Bank likely to continue raising interest rates next week, the risk of a payment default by Greece or another peripheral euro-zone country will continue to increase. Pitched battles on the streets of Athens and the narrowest of votes in the Greek parliament may have grabbed headlines in recent days as the country struggles to convince the world that it is serious about repaying its debts. However, the scale of the debt problem engulfing the euro zone continues to grow, with the international investor community still voting with its feet. More and more are walking away or demanding either higher returns or more costly insurance premiums for holding euro-zone debt. While the market's focus has been on Greece, with that country's own yield spreads and credit default swaps narrowing on hopes that Greek members of parliament would see sense, the spreads and prices of other peripherals such as Portugal and Ireland have continued to widen. And there is little reason why that widening should stop. For a start there is little assurance that plans to roll over Greek debt are going to be successful. On paper, proposals for a voluntary negotiation of the terms and maturities, like those of the so-called Brady bonds for Latin American debtors in the 1980s, may look promising. But in practice the whole exercise looks doomed with many, including the ECB's executive board member Juergen Stark, warning this would still be a de facto default by Greece. And a de facto default by Greece means one thing: credit rating agencies, as at least one has promised already, will start downgrading peripheral euro-zone debtors in general.
EUROPE
In European trading hours Thursday, the dollar fell against the yen, weighed down by a stronger euro and partially on selling by Japanese exporters for the end-of-the-month closing of books, dealers said. The euro was stronger against the dollar, up at $1.4484. However, although the situation in Greece and prospects of an imminent rate hike by the ECB helped the euro, Germany's jobless data caused the single currency to pare gains.
ASIA
The euro rose above $1.4500 to a three-week high in Asia Thursday after the Greek parliament's passage Wednesday of new austerity measures appeared to make a near-term default unlikely. Buying by overseas investors led the common currency higher, with stop-loss buying orders around $1.4450 accelerating the gains. The euro touched $1.4519, its highest since June 10. Expectations for the European Central Bank to raise interest rates at a meeting next Thursday are also helping the euro, dealers said. Assuming Greece passes legislation later in the global day to implement the austerity bills, the euro could trend higher in the coming sessions, they said. Dai Sato, a senior vice president of the foreign exchange division of Mizuho Corporate Bank, said the euro could climb as high as $1.4700 in the near term. The possibility that Greece will avoid default soon is "making people optimistic in the near term, although people are pessimistic (about the Greek situation) over the longer term," Sato said. Gains in Chinese and other regional share markets also buoyed sentiment toward risk-sensitive currencies such as the euro, dealers said. Other gainers included the New Zealand dollar, which marked a fresh post-float high against the dollar at $0.8313.
WORLD
Investors bid up the euro Wednesday in New York after Greek lawmakers ignored violent protests in the streets and passed an austerity bill that kept alive a second round of bailout funding from European authorities. The euro traded above $1.4400 to two-week highs versus the dollar as that vote reduced the chances of an imminent Greece debt default. The focus now shifts to a vote Thursday to put the measures in motion and to a Sunday meeting of euro-zone finance ministers to plan the second bailout. But investors seemed to be encouraged by European officials' signals on this meeting as well. Greece's approval of new austerity measures is an important step for the country and for the stability of the euro as a whole, German Chancellor Angela Merkel said in Berlin. "We may see a little bit more of this rally" with the euro following the first Greece vote, said Scott Ainsbury, who helps manage about $8.5 billion in currency at New York-based hedge fund FX Concepts. The vote at least seemed to cap the Greece problem for now. But he cautioned against extrapolating too much from Wednesday's common currency move.
The bounce off support at 1.4325 brings the focus onto the 1.4540/50 resistance area. The push into fresh three-week highs above 1.4449 recovery strengthens the 1.4325 higher low, and a bear channel resistance line at 1.4550 this week is within striking distance, protecting 1.4606. Only a setback below 1.4429 would concern EUR bulls and expose the 1.4325 higher low.
GBP/USD
The push above 1.6094 creates scope for further gains to the June 22 lower high at 1.6262. This week's lows at 1.5911 have become a potential near-term bear failure, meaning the origin of that bear wave at 1.6262 will become the focus of attention, having neutralised the GBP bear trend for now. Only a reversal below 1.5960 would bring the focus back onto the 1.5911 lows.
USD/JPY
Upgrades the setback off 81.27 to expose projected support at 80.20. The push below 80.55 has left Tuesday's high at 81.27 stranded, and a break below 80.20 would leave 81.27 as a potential bull failure high, exposing the June 22 higher low at 80.01. Keeping 80.20 intact would prompt a recovery back to the 80.66 area, but only above there would stabilise the falling USD.
AUD/USD
The push above 1.0717 puts AUD bulls in control, and paves the way for more gains to the important June 3 lower high at 1.0776. A push above 1.0776 is required to confirm Monday's 1.0391 low as a bear failure, and create room another wave of AUD bull pressure towards the May 11 reaction high at 1.0890. Congestion between 1.0606 and 1.0645 will look to cushion corrective weakness, but downside risk is limited.
FOREX FOCUS
Greece's austerity vote will soon look like nothing more than a minor distraction. With debt financing costs still rising and the European Central Bank likely to continue raising interest rates next week, the risk of a payment default by Greece or another peripheral euro-zone country will continue to increase. Pitched battles on the streets of Athens and the narrowest of votes in the Greek parliament may have grabbed headlines in recent days as the country struggles to convince the world that it is serious about repaying its debts. However, the scale of the debt problem engulfing the euro zone continues to grow, with the international investor community still voting with its feet. More and more are walking away or demanding either higher returns or more costly insurance premiums for holding euro-zone debt. While the market's focus has been on Greece, with that country's own yield spreads and credit default swaps narrowing on hopes that Greek members of parliament would see sense, the spreads and prices of other peripherals such as Portugal and Ireland have continued to widen. And there is little reason why that widening should stop. For a start there is little assurance that plans to roll over Greek debt are going to be successful. On paper, proposals for a voluntary negotiation of the terms and maturities, like those of the so-called Brady bonds for Latin American debtors in the 1980s, may look promising. But in practice the whole exercise looks doomed with many, including the ECB's executive board member Juergen Stark, warning this would still be a de facto default by Greece. And a de facto default by Greece means one thing: credit rating agencies, as at least one has promised already, will start downgrading peripheral euro-zone debtors in general.
EUROPE
In European trading hours Thursday, the dollar fell against the yen, weighed down by a stronger euro and partially on selling by Japanese exporters for the end-of-the-month closing of books, dealers said. The euro was stronger against the dollar, up at $1.4484. However, although the situation in Greece and prospects of an imminent rate hike by the ECB helped the euro, Germany's jobless data caused the single currency to pare gains.
ASIA
The euro rose above $1.4500 to a three-week high in Asia Thursday after the Greek parliament's passage Wednesday of new austerity measures appeared to make a near-term default unlikely. Buying by overseas investors led the common currency higher, with stop-loss buying orders around $1.4450 accelerating the gains. The euro touched $1.4519, its highest since June 10. Expectations for the European Central Bank to raise interest rates at a meeting next Thursday are also helping the euro, dealers said. Assuming Greece passes legislation later in the global day to implement the austerity bills, the euro could trend higher in the coming sessions, they said. Dai Sato, a senior vice president of the foreign exchange division of Mizuho Corporate Bank, said the euro could climb as high as $1.4700 in the near term. The possibility that Greece will avoid default soon is "making people optimistic in the near term, although people are pessimistic (about the Greek situation) over the longer term," Sato said. Gains in Chinese and other regional share markets also buoyed sentiment toward risk-sensitive currencies such as the euro, dealers said. Other gainers included the New Zealand dollar, which marked a fresh post-float high against the dollar at $0.8313.
WORLD
Investors bid up the euro Wednesday in New York after Greek lawmakers ignored violent protests in the streets and passed an austerity bill that kept alive a second round of bailout funding from European authorities. The euro traded above $1.4400 to two-week highs versus the dollar as that vote reduced the chances of an imminent Greece debt default. The focus now shifts to a vote Thursday to put the measures in motion and to a Sunday meeting of euro-zone finance ministers to plan the second bailout. But investors seemed to be encouraged by European officials' signals on this meeting as well. Greece's approval of new austerity measures is an important step for the country and for the stability of the euro as a whole, German Chancellor Angela Merkel said in Berlin. "We may see a little bit more of this rally" with the euro following the first Greece vote, said Scott Ainsbury, who helps manage about $8.5 billion in currency at New York-based hedge fund FX Concepts. The vote at least seemed to cap the Greece problem for now. But he cautioned against extrapolating too much from Wednesday's common currency move.
Rabu, 29 Juni 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The recovery off 1.4102 is approaching key resistance levels at 1.4413 and 1.4442. However, the structure of the bull wave from 1.4102 suggests there is scope for more gains towards the 1.4471 area. Tuesday's higher low at 1.4237 needs to hold in order to keep the near-term tone bullish for EUR, and only below there would turn the situation negative, exposing 1.4168.
GBP/USD
The corrective rally has room to extend to the 1.6079 area. Keeping support at 1.5911 intact still leaves the 1.5901 downside target unmet, and therefore at risk of becoming a significant bear failure. However, only a sustained break above projected resistance at 1.6094 would concern GBP bears at this stage. The wider bear threat still weighs, and a push below 1.5954 would expose the 1.5911 lows, exposing 1.5859.
USD/JPY
The push higher is targeting key resistance at 81.48. A 1.618 Fibonacci extension target lies just below there, at 81.40, and a fresh wave of USD bull pressure will be required to force a break higher towards 81.77. There is scope for downside consolidation back to the 80.66 area, but only below 80.66 would undermine the bullish USD outlook, which is protected by 80.93.
AUD/USD
The strong recovery off 1.0391 is looking to extend to the 1.0592/1.0603 resistance area. The push above 1.0551 opens the 1.618 Fibonacci extension target at 1.0592, which lies close the June 24 lower high at 1.0603, and these levels combined should create an upside boundary for the near-term. A fresh wave of AUD bull pressure is required to force a break through 1.603, strengthening the 1.0391 low and opening lower highs at 1.0653 and 1.0717. Corrective weakness will attract support while above 1.0478, and only below there would suggest a return to the 1.0391 low is on the cards.
FOREX FOCUS
AUD/JPY is extending the strong recovery off 84.06 and is within striking distance of the June 15 peak at 86.40. In conjunction with the significant recovery in AUD/USD, an across-board basing process appears to underway for AUD. A push above 86.40 would leave Monday's 84.06 low as a bear failure, and attract further gains towards the June 1 lower reaction high at 87.62. Pivotal support for the short-term lies in the 85.00 area, which is protected by 85.55. AUD/JPY is at 86.05.
EUROPE
A cautiously optimistic tone prevailed in European trading hours Wednesday as the euro modestly strengthened ahead of Greece's parliamentary vote on crucial austerity measures. The 17-country currency edged above $1.44 against the dollar, but still lost a little ground against the Swedish krona due to nagging concerns related to the vote on a EUR28 billion ($40 billion) program of spending cuts and tax increases that Greece has promised its international creditors. "Today is Greece or bust," said Richard Cochinos, a foreign exchange strategist at Bank of America Merrill Lynch. To a large extent, market participants expect parliament to be able to pass the crucial austerity package shortly after 1100 GMT. If the package is rejected, the negative reaction could be quite violent, market participants say. "There is a bit of asymmetry going into the outcome with upside potential for the euro relatively small and the downside large," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole in London. Even if Greece's vote is passed as expected, the risks will not totally be removed.
ASIA
The euro was steady against the dollar Wednesday in Asia as investors awaited the outcome of a key Greek vote on austerity package due later in the day. Greece's parliament is expected to start voting around 1100 GMT on a EUR28 billion ($40 billion) program of spending cuts and tax increases the country has promised to its international creditors. Gains in most Asian stock markets also helped maintain market risk-sentiment, providing some support for the higher-yielding euro, dealers said. Japan's Nikkei Stock Average rose 1.1% while South Korea's Kospi Composite gained 1.3%. The market has largely factored in passage of the crucial austerity package by the parliament, dealers said. For that reason, if the package is rejected, market risk-sentiment will likely deteriorate sharply, prompting investors to sell off the euro and move into the safety of the greenback, dealers said. If the austerity package passes, the euro will likely remain rangebound versus the dollar, with investor focus shifting to another phase of the Greek rescue program, dealers said.
WORLD
The euro rose Tuesday in New York on investors' growing hopes that Greece would pass austerity measures and avoid defaulting on its debt, while German banks agreed to consider rolling over some Greek government bonds. Despite rioting in Athens, Greece's parliament is expected to vote for crucial austerity measures Wednesday. Approval is needed for any future assistance for the country. Another supportive factor for the euro was German banks agreeing in principle to consider rolling over about $10 billion in Greek government debt, provided there are assurances that the terms of the deal won't be seen by ratings agencies as putting Greece into default. Optimism on Greece boosted the commodity-linked and growth-sensitive Australian dollar, which soared by nearly 1% versus the U.S. dollar. The U.S. dollar in turn rose against the yen, surging to a four-week high after Treasury yields hit session highs following poor demand for safe-haven five-year Treasury notes at auction. "The short version of it is that those who needed to hedge a Greek risk have long done it and some are looking to put some risk back which ever way they do it," said Sebastien Galy, currency strategist at Societe Generale in London
The recovery off 1.4102 is approaching key resistance levels at 1.4413 and 1.4442. However, the structure of the bull wave from 1.4102 suggests there is scope for more gains towards the 1.4471 area. Tuesday's higher low at 1.4237 needs to hold in order to keep the near-term tone bullish for EUR, and only below there would turn the situation negative, exposing 1.4168.
GBP/USD
The corrective rally has room to extend to the 1.6079 area. Keeping support at 1.5911 intact still leaves the 1.5901 downside target unmet, and therefore at risk of becoming a significant bear failure. However, only a sustained break above projected resistance at 1.6094 would concern GBP bears at this stage. The wider bear threat still weighs, and a push below 1.5954 would expose the 1.5911 lows, exposing 1.5859.
USD/JPY
The push higher is targeting key resistance at 81.48. A 1.618 Fibonacci extension target lies just below there, at 81.40, and a fresh wave of USD bull pressure will be required to force a break higher towards 81.77. There is scope for downside consolidation back to the 80.66 area, but only below 80.66 would undermine the bullish USD outlook, which is protected by 80.93.
AUD/USD
The strong recovery off 1.0391 is looking to extend to the 1.0592/1.0603 resistance area. The push above 1.0551 opens the 1.618 Fibonacci extension target at 1.0592, which lies close the June 24 lower high at 1.0603, and these levels combined should create an upside boundary for the near-term. A fresh wave of AUD bull pressure is required to force a break through 1.603, strengthening the 1.0391 low and opening lower highs at 1.0653 and 1.0717. Corrective weakness will attract support while above 1.0478, and only below there would suggest a return to the 1.0391 low is on the cards.
FOREX FOCUS
AUD/JPY is extending the strong recovery off 84.06 and is within striking distance of the June 15 peak at 86.40. In conjunction with the significant recovery in AUD/USD, an across-board basing process appears to underway for AUD. A push above 86.40 would leave Monday's 84.06 low as a bear failure, and attract further gains towards the June 1 lower reaction high at 87.62. Pivotal support for the short-term lies in the 85.00 area, which is protected by 85.55. AUD/JPY is at 86.05.
EUROPE
A cautiously optimistic tone prevailed in European trading hours Wednesday as the euro modestly strengthened ahead of Greece's parliamentary vote on crucial austerity measures. The 17-country currency edged above $1.44 against the dollar, but still lost a little ground against the Swedish krona due to nagging concerns related to the vote on a EUR28 billion ($40 billion) program of spending cuts and tax increases that Greece has promised its international creditors. "Today is Greece or bust," said Richard Cochinos, a foreign exchange strategist at Bank of America Merrill Lynch. To a large extent, market participants expect parliament to be able to pass the crucial austerity package shortly after 1100 GMT. If the package is rejected, the negative reaction could be quite violent, market participants say. "There is a bit of asymmetry going into the outcome with upside potential for the euro relatively small and the downside large," said Daragh Maher, deputy head of global foreign exchange strategy at Credit Agricole in London. Even if Greece's vote is passed as expected, the risks will not totally be removed.
ASIA
The euro was steady against the dollar Wednesday in Asia as investors awaited the outcome of a key Greek vote on austerity package due later in the day. Greece's parliament is expected to start voting around 1100 GMT on a EUR28 billion ($40 billion) program of spending cuts and tax increases the country has promised to its international creditors. Gains in most Asian stock markets also helped maintain market risk-sentiment, providing some support for the higher-yielding euro, dealers said. Japan's Nikkei Stock Average rose 1.1% while South Korea's Kospi Composite gained 1.3%. The market has largely factored in passage of the crucial austerity package by the parliament, dealers said. For that reason, if the package is rejected, market risk-sentiment will likely deteriorate sharply, prompting investors to sell off the euro and move into the safety of the greenback, dealers said. If the austerity package passes, the euro will likely remain rangebound versus the dollar, with investor focus shifting to another phase of the Greek rescue program, dealers said.
WORLD
The euro rose Tuesday in New York on investors' growing hopes that Greece would pass austerity measures and avoid defaulting on its debt, while German banks agreed to consider rolling over some Greek government bonds. Despite rioting in Athens, Greece's parliament is expected to vote for crucial austerity measures Wednesday. Approval is needed for any future assistance for the country. Another supportive factor for the euro was German banks agreeing in principle to consider rolling over about $10 billion in Greek government debt, provided there are assurances that the terms of the deal won't be seen by ratings agencies as putting Greece into default. Optimism on Greece boosted the commodity-linked and growth-sensitive Australian dollar, which soared by nearly 1% versus the U.S. dollar. The U.S. dollar in turn rose against the yen, surging to a four-week high after Treasury yields hit session highs following poor demand for safe-haven five-year Treasury notes at auction. "The short version of it is that those who needed to hedge a Greek risk have long done it and some are looking to put some risk back which ever way they do it," said Sebastien Galy, currency strategist at Societe Generale in London
Selasa, 28 Juni 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The recovery off 1.4102 is showing signs of fatigue on the approach to key resistance at 1.4360/85. This resistance area protects both the June 22 reaction high at 1.4442, and the projected resistance line of a bear pennant continuation pattern at 1.4413. A push below 1.4250 would attract fresh EUR bear pressure back to the intraday higher low at 1.4168.
GBP/USD
The downside target at 1.5901 is still within striking distance, despite Monday's corrective rally. There is scope for more downside as GBP bears target the downwave equality target at 1.5859 as a minimum objective, and concerted weakness would pave the way for 1.5752 and 1.5675. Regaining ground above 1.6011 would provide temporary respite, but corrective upside risk is limited to 1.6094.
USD/JPY
The focus remains on the June 15 reaction high at 81.08, as USD bulls regain control of the short term. The probe above 80.80 keeps the 13-day uptrend line intact, and a break above 81.08 would pave the way for the 1.618 Fibonacci extension target at 81.40. Significant resistance lies at 81.48. Support at 80.60 has become pivotal for the short term, but only a sustained break below 80.48 would concern USD bulls.
AUD/USD
A decisive push below 1.0441 is underway, which exposes a support cluster between 1.0325 and 1.0250. Two 1.618 Fibonacci extension targets lie just above former range highs at 1.0250, where this bear wave is likely to find a significant long-term base. Regaining ground above 1.0539 is required to lift the tone.
FOREX FOCUS
The path of true love is never smooth, as the yen is about to find out. For many months, the Japanese currency has worked its charms, wheedling its way into the heart of the international investment community even as Japan itself suffered from a devastating earthquake and tsunami. Through all the ups and downs, the market's affection remained strong with investors preferring the yen against many other major currencies in times of global uncertainty. Signs are, however, that this is all falling apart even though the Japanese economy itself is staging a much more robust recovery from the earthquake than expected. The shift in affections is evident in the yen's performance against the Swiss franc, that other great safe haven love that investors tend to turn to. In recent months, the franc has risen steadily against the yen, showing that the Japanese currency is steadily losing its ranking in the safe haven stakes. It all appears to be part of a larger shift in affections as the market adjusts to the latest concerns about the global recovery and inflationary pressures. The timing for the yen might be ironic, given that new retail sales indicate that consumption has rebounded sharply and should soon return to pre-earthquake levels once supply constraints have eased. Industrial production figures and the latest Bank of Japan Tankan survey this week will also contribute to the view that the worst for the Japanese economy is over. However, this good news on the recovery isn't expected to translate into higher rate expectations, given the ongoing fiscal and political problems facing Japan. The currency strategy team at Commerzbank put it this way: "The yen cannot expect any support on the interest front, as the central bank cannot afford a vicious circle of rising interest rates leading to the increased probability of defaults and thus higher interest rates. As a result it will keep interest rates low and eventually that will have an effect on the yen."
EUROPE
Greece continued to hold currency markets in thrall in European trade Tuesday, as overnight buying interest in the euro faded, while the pound sagged as weak economic data rubbished the case for higher interest rates. With Greece on a 48-hour general strike, ahead of Wednesday's parliamentary vote on the strict budgetary measures upon which a crucial bailout depends, the single currency gave back some of its overnight gains as attention switched to the eleventh-hour struggle to stave off a Greek default. The euro was pretty much stuck in the $1.42s against the dollar while making some headway against the beleaguered pound for reasons more to do with the sombre outlook for the U.K. economy. The Swiss franc, the star turn of the past few weeks, continued to have another good outing. Over in Greece, embattled Prime Minister George Papandreou wants lawmakers to approve plans to cut spending by EUR28.6 billion by 2015. At the same time, Greek central bank governor Giorgos Provopoulos has waded into the debate, saying that taxpayers are at their limits. The battle lines are drawn but You-Na Park, strategist at Commerzbank, said she expects Papandreou to win through. "It will pass through. Doesn't look like there is any other way and that may spark a relief rally for the euro," she said, but added that any gains aren't likely to be big. After all the medium-term outlook for Greece won't be resolved and the amount of private sector participation is still undecided.
ASIA
The euro held steady against the dollar and the yen in Asia Tuesday as growing optimism that Greece will approve a package of austerity measures Wednesday prodded traders to refrain from making fresh bets. Earlier in the day, short covering that triggered stop-loss purchases above 1.4300 sent the single currency as high as $1.4330. But the gains were eroded later due to the absence of fresh news related to the Greek debt crisis. Positive news regarding Greece overnight and a rebound in the stock market are making it tough to sell the euro against the dollar," said Kuniyuki Hirai, manager at the foreign exchange trading department of Bank of Tokyo-Mitsubishi UFJ. European governments said Monday they want private creditors to roll over as much as EUR30 billion of Greek government bonds that come due by 2014. The proposal drafted by French banks and insurers calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. Furthering the credibility of that plan, the European Central Bank said it is receptive to the French proposal on Greece, if it is voluntary. Traders in Tokyo said that with the situation turning for the better, all eyes are now on Wednesday's parliamentary vote on a EUR28 billion package of austerity measures in Greece.
WORLD
Investors' optimism about the prospect of a broad plan with European Union guarantees to roll over Greek debt that could involve private creditors and diminish the chance of default helped boost the euro Monday in New York. European governments have said they want private creditors to roll over as much as EUR30 billion worth of Greek government bonds that come due by 2014. The proposal drafted by French banks and insurers calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. Furthering the credibility of that plan, the European Central Bank said it is receptive to the French proposal on Greece, if it is voluntary. Hopes that an austerity plan could pass in the Greek Parliament later this week also gave the currency support. "There is optimism on Greece" at the start of this new week, said Kathy Lien, director of currency research at GFT Forex in New York. There is a broad sense that most parties in the euro zone, and inside Greece itself, know what is at stake and won't let Greece fail. "Euro bears were covering today on optimism that [the likely passage of the austerity plan] is going to be positive for the euro," said Phil Streible, senior market strategist at Lind-Waldock in Chicago. The thinking now is that the euro could next head to $1.4300-$1.4325, he predicted. But the euro will then be susceptible as that good news wanes and more troubles present themselves, said Streible. To that end, "I was selling $1.48 August calls today and putting in orders for $1.40 September puts," for the euro, he said.
The recovery off 1.4102 is showing signs of fatigue on the approach to key resistance at 1.4360/85. This resistance area protects both the June 22 reaction high at 1.4442, and the projected resistance line of a bear pennant continuation pattern at 1.4413. A push below 1.4250 would attract fresh EUR bear pressure back to the intraday higher low at 1.4168.
GBP/USD
The downside target at 1.5901 is still within striking distance, despite Monday's corrective rally. There is scope for more downside as GBP bears target the downwave equality target at 1.5859 as a minimum objective, and concerted weakness would pave the way for 1.5752 and 1.5675. Regaining ground above 1.6011 would provide temporary respite, but corrective upside risk is limited to 1.6094.
USD/JPY
The focus remains on the June 15 reaction high at 81.08, as USD bulls regain control of the short term. The probe above 80.80 keeps the 13-day uptrend line intact, and a break above 81.08 would pave the way for the 1.618 Fibonacci extension target at 81.40. Significant resistance lies at 81.48. Support at 80.60 has become pivotal for the short term, but only a sustained break below 80.48 would concern USD bulls.
AUD/USD
A decisive push below 1.0441 is underway, which exposes a support cluster between 1.0325 and 1.0250. Two 1.618 Fibonacci extension targets lie just above former range highs at 1.0250, where this bear wave is likely to find a significant long-term base. Regaining ground above 1.0539 is required to lift the tone.
FOREX FOCUS
The path of true love is never smooth, as the yen is about to find out. For many months, the Japanese currency has worked its charms, wheedling its way into the heart of the international investment community even as Japan itself suffered from a devastating earthquake and tsunami. Through all the ups and downs, the market's affection remained strong with investors preferring the yen against many other major currencies in times of global uncertainty. Signs are, however, that this is all falling apart even though the Japanese economy itself is staging a much more robust recovery from the earthquake than expected. The shift in affections is evident in the yen's performance against the Swiss franc, that other great safe haven love that investors tend to turn to. In recent months, the franc has risen steadily against the yen, showing that the Japanese currency is steadily losing its ranking in the safe haven stakes. It all appears to be part of a larger shift in affections as the market adjusts to the latest concerns about the global recovery and inflationary pressures. The timing for the yen might be ironic, given that new retail sales indicate that consumption has rebounded sharply and should soon return to pre-earthquake levels once supply constraints have eased. Industrial production figures and the latest Bank of Japan Tankan survey this week will also contribute to the view that the worst for the Japanese economy is over. However, this good news on the recovery isn't expected to translate into higher rate expectations, given the ongoing fiscal and political problems facing Japan. The currency strategy team at Commerzbank put it this way: "The yen cannot expect any support on the interest front, as the central bank cannot afford a vicious circle of rising interest rates leading to the increased probability of defaults and thus higher interest rates. As a result it will keep interest rates low and eventually that will have an effect on the yen."
EUROPE
Greece continued to hold currency markets in thrall in European trade Tuesday, as overnight buying interest in the euro faded, while the pound sagged as weak economic data rubbished the case for higher interest rates. With Greece on a 48-hour general strike, ahead of Wednesday's parliamentary vote on the strict budgetary measures upon which a crucial bailout depends, the single currency gave back some of its overnight gains as attention switched to the eleventh-hour struggle to stave off a Greek default. The euro was pretty much stuck in the $1.42s against the dollar while making some headway against the beleaguered pound for reasons more to do with the sombre outlook for the U.K. economy. The Swiss franc, the star turn of the past few weeks, continued to have another good outing. Over in Greece, embattled Prime Minister George Papandreou wants lawmakers to approve plans to cut spending by EUR28.6 billion by 2015. At the same time, Greek central bank governor Giorgos Provopoulos has waded into the debate, saying that taxpayers are at their limits. The battle lines are drawn but You-Na Park, strategist at Commerzbank, said she expects Papandreou to win through. "It will pass through. Doesn't look like there is any other way and that may spark a relief rally for the euro," she said, but added that any gains aren't likely to be big. After all the medium-term outlook for Greece won't be resolved and the amount of private sector participation is still undecided.
ASIA
The euro held steady against the dollar and the yen in Asia Tuesday as growing optimism that Greece will approve a package of austerity measures Wednesday prodded traders to refrain from making fresh bets. Earlier in the day, short covering that triggered stop-loss purchases above 1.4300 sent the single currency as high as $1.4330. But the gains were eroded later due to the absence of fresh news related to the Greek debt crisis. Positive news regarding Greece overnight and a rebound in the stock market are making it tough to sell the euro against the dollar," said Kuniyuki Hirai, manager at the foreign exchange trading department of Bank of Tokyo-Mitsubishi UFJ. European governments said Monday they want private creditors to roll over as much as EUR30 billion of Greek government bonds that come due by 2014. The proposal drafted by French banks and insurers calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. Furthering the credibility of that plan, the European Central Bank said it is receptive to the French proposal on Greece, if it is voluntary. Traders in Tokyo said that with the situation turning for the better, all eyes are now on Wednesday's parliamentary vote on a EUR28 billion package of austerity measures in Greece.
WORLD
Investors' optimism about the prospect of a broad plan with European Union guarantees to roll over Greek debt that could involve private creditors and diminish the chance of default helped boost the euro Monday in New York. European governments have said they want private creditors to roll over as much as EUR30 billion worth of Greek government bonds that come due by 2014. The proposal drafted by French banks and insurers calls for half of the proceeds from maturing Greek bonds to be reinvested in 30-year Greek bonds. Furthering the credibility of that plan, the European Central Bank said it is receptive to the French proposal on Greece, if it is voluntary. Hopes that an austerity plan could pass in the Greek Parliament later this week also gave the currency support. "There is optimism on Greece" at the start of this new week, said Kathy Lien, director of currency research at GFT Forex in New York. There is a broad sense that most parties in the euro zone, and inside Greece itself, know what is at stake and won't let Greece fail. "Euro bears were covering today on optimism that [the likely passage of the austerity plan] is going to be positive for the euro," said Phil Streible, senior market strategist at Lind-Waldock in Chicago. The thinking now is that the euro could next head to $1.4300-$1.4325, he predicted. But the euro will then be susceptible as that good news wanes and more troubles present themselves, said Streible. To that end, "I was selling $1.48 August calls today and putting in orders for $1.40 September puts," for the euro, he said.
Senin, 27 Juni 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
The June 16 reaction low at 1.4073 is likely to face renewed pressure. EUR bear momentum is on the increase, and a break below 1.4073 is expected, exposing 1.4055 and 1.3989 initially. However, a push below 1.4073 would also create longer-term scope for 1.3850 and 1.3818 this week. Only a recovery above 1.4224 would question the bearish EUR outlook, which is protected by 1.4185.
GBP/USD
The downside target at 1.5901 is within striking distance, but there is more scope to the downside. GBP bears are targeting the downwave equality target at 1.5859 as a minimum objective, and concerted weakness would pave the way for 1.5752 and 1.5675. Regaining ground above 1.6044 would provide temporary respite, but corrective upside risk is limited.
USD/JPY
The focus is on the June 15 reaction high at 81.08, as USD bulls regain control of the short term. The probe above 80.80 keeps the twelve-day uptrend line intact, and a break above 81.08 would pave the way for the 1.618 Fibonacci extension target at 81.40. Significant resistance lies at 81.48. Support at 80.50 will look to cushion corrective weakness, and only below 80.29 would prompt a return to Friday's low at 80.13.
AUD/USD
A decisive push below 1.0441 is underway, which exposes a support cluster between 1.0325 and 1.0250. Two 1.618 Fibonacci extension targets lie just above former range highs at 1.0250, where this bear wave is likely to find a significant long-term base. Regaining ground above 1.0506 is required to provide respite, but only above 1.0603 would lift the tone.
FOREX FOCUS
Even euro speculators are starting to lose their nerve. For some time now, speculative positions in the single currency have remained fairly strong, suggesting that there was still some confidence in the euro project. However, new data from the International Monetary Market in Chicago shows that in the week to last Tuesday, there was a sharp run down in exposure to about 16% of open interest from as much as 40% in early 2011. Of course, there are still some brave souls hanging in there but they may well have fled since that survey nearly a week ago as market tensions over a Greek bail out continue to rise. The next test for euro supporters will be the vote this Wednesday by Greek parliamentarians on a 5-year austerity program. At the moment, the government is expected to secure a victory even though it has such a small 5-member majority that could be reduced even further by dissention. The terms of the package have attracted wide criticism, including claims by the country's own central bank governor that spending isn't being cut enough and tax evasion remains too high. This suggests that even if Prime Minister George Papandreou does win, popular backing for the measures will be weak and their implementation will become a problem. In the meantime, all the other problems will come to the fore. For a start, there is the negotiations over a restructuring of private sector bonds. French bank proposals to roll over as much as 70% of their holdings may have attracted some positive market comment over the weekend but it remains to be seen if the eventual roll over can be achieved without triggering a so-called 'credit event' call from the debt rating agencies. In other words, the rating agencies will call the roll over what it is--a default--and the subsequent downgrade of ratings will create further financial havoc. The importance of those ratings was evident late last week when Moody's pointed out just how vulnerable Italian banks are to a cut in Italy's debt rating. Bank shares plummeted, stories of deposit withdrawals abounded and Italy found that its yield spreads were being pushed to new record highs as investors demanded even more of a return. Later this week, euro supporters could also get a nasty reminder that economics isn't playing on their side either when the latest flash estimate for euro zone inflation is released Thursday.
EUROPE
The euro enjoyed a modest rebound in European morning trade Monday as hopes grew of a deal to rollover Greek government debt, ahead of a crucial Greek austerity vote, but investor confidence remains distinctly fragile. In Asian hours, heightened risk aversion boosted the dollar across the board and pushed the European currency to a fresh all-time low against the Swiss franc of CHF1.1808. Insuring European sovereign debt against default also became more expensive, with the iTraxx SovX Western Europe credit default swaps index hitting a new record high and Italy pulling off a successful two-year bond auction, but at a higher cost. Currency traders nonetheless welcomed weekend news that French banks have proposed a plan to reinvest half of the proceeds from maturing Greek government bonds into buying 30-year bonds issued by the embattled country. The German Finance Ministry later said private sector suggestions were welcomed. The positive attitude to private sector participation in a Greek credit event, a particularly thorny issue that has slowed down progress toward a new bailout package for Greece, helped lift the single currency to a session high against the dollar of $1.4219, despite lingering skepticism. "The market is taking comfort from the news coming from banks, but risk indicators are still giving out negative signals and we would view any rebound in the euro as a selling opportunity," said Ian Stannard, a currency strategist at Morgan Stanley in London. A pivotal factor just around the corner is Greece's budget vote, scheduled for Wednesday morning. While a positive outcome would support the currency in the short-term, currency analysts cautioned that the debt saga remains far from resolved. "Even if the Greek vote passes, we'll probably only get three months of stability followed by renewed problems as it becomes clear that the country is failing to meet its commitments," said Geoffrey Yu, director of FX strategy, at UBS AG in London.
ASIA
The dollar broadly strengthened against major currencies in Asia on Monday as jitters over this week's parliamentary votes in Greece on a EUR28 billion package of austerity measures heightened traders' risk aversion, prompting them to buy the greenback. Falling stock and commodity prices, coupled with global growth concerns, also added to uncertainty in the currency market, leading traders to trim their holdings of riskier currencies such as the euro, the U.K. pound, and the Australian dollar. The greenback also gained against its safe-haven rivals such as the yen and the Swiss franc. "It was rare to" see such a big move during Asian trading hours on Monday, said Makoto Noji, senior currency strategist at SMBC Nikko Securities. Uncertainty over this week's Greek votes and falls in global share prices "prompted short-covering for the dollar, while the euro is besieged by various negative factors," he added. At 0500 GMT, the euro was at $1.4123 from $1.4192 late Friday in New York, according to figures from EBS. It earlier tumbled to as low as $1.4102. The U.K. pound stood at $1.5922, after falling to a near five-month low of $1.5913, from $1.5967. The dollar was at CHF0.8374 from CHF0.8328. "A risk-averse mood has extended from last week, with an eye on falling stock and commodity prices and Greece's debt problems," said Yoshio Yoshida, a trader at Mizuho Trust and Banking Co. "Those factors have worked in favor of dollar buying, although trading could be a wild ride this week," he added.
WORLD
Euro-zone debt worries reached Italy on Friday as contagion fears pushed the euro to an all-time low against the Swiss franc. The common currency fell as low as CHF1.1844 against the safe-haven franc over fears the Greek sovereign crisis was gaining a greater foothold outside the country's borders and in the region's banking system. Trading in Italian bank shares was suspended due to high volatility in Milan after ratings agency Moody's Investors Service said it was considering downgrading the creditworthiness of a group of the country's banks. Italy's sovereign 10-year yield spread over German bunds reacted by climbing to 213 basis points--the widest since the birth of the euro in January 1999. "There are concerns over contagion since Italy's economy is very weak and also over the lack of transparency in the banking sector," Peter Rosenstreich, associate director and chief market analyst with Switzerland's Swissquote Bank SA, said. "Without a total and credible solution to the Greek and [European Union] sovereign debt crisis, all EU nations are susceptible to sudden exodus of confidence and capital."
The June 16 reaction low at 1.4073 is likely to face renewed pressure. EUR bear momentum is on the increase, and a break below 1.4073 is expected, exposing 1.4055 and 1.3989 initially. However, a push below 1.4073 would also create longer-term scope for 1.3850 and 1.3818 this week. Only a recovery above 1.4224 would question the bearish EUR outlook, which is protected by 1.4185.
GBP/USD
The downside target at 1.5901 is within striking distance, but there is more scope to the downside. GBP bears are targeting the downwave equality target at 1.5859 as a minimum objective, and concerted weakness would pave the way for 1.5752 and 1.5675. Regaining ground above 1.6044 would provide temporary respite, but corrective upside risk is limited.
USD/JPY
The focus is on the June 15 reaction high at 81.08, as USD bulls regain control of the short term. The probe above 80.80 keeps the twelve-day uptrend line intact, and a break above 81.08 would pave the way for the 1.618 Fibonacci extension target at 81.40. Significant resistance lies at 81.48. Support at 80.50 will look to cushion corrective weakness, and only below 80.29 would prompt a return to Friday's low at 80.13.
AUD/USD
A decisive push below 1.0441 is underway, which exposes a support cluster between 1.0325 and 1.0250. Two 1.618 Fibonacci extension targets lie just above former range highs at 1.0250, where this bear wave is likely to find a significant long-term base. Regaining ground above 1.0506 is required to provide respite, but only above 1.0603 would lift the tone.
FOREX FOCUS
Even euro speculators are starting to lose their nerve. For some time now, speculative positions in the single currency have remained fairly strong, suggesting that there was still some confidence in the euro project. However, new data from the International Monetary Market in Chicago shows that in the week to last Tuesday, there was a sharp run down in exposure to about 16% of open interest from as much as 40% in early 2011. Of course, there are still some brave souls hanging in there but they may well have fled since that survey nearly a week ago as market tensions over a Greek bail out continue to rise. The next test for euro supporters will be the vote this Wednesday by Greek parliamentarians on a 5-year austerity program. At the moment, the government is expected to secure a victory even though it has such a small 5-member majority that could be reduced even further by dissention. The terms of the package have attracted wide criticism, including claims by the country's own central bank governor that spending isn't being cut enough and tax evasion remains too high. This suggests that even if Prime Minister George Papandreou does win, popular backing for the measures will be weak and their implementation will become a problem. In the meantime, all the other problems will come to the fore. For a start, there is the negotiations over a restructuring of private sector bonds. French bank proposals to roll over as much as 70% of their holdings may have attracted some positive market comment over the weekend but it remains to be seen if the eventual roll over can be achieved without triggering a so-called 'credit event' call from the debt rating agencies. In other words, the rating agencies will call the roll over what it is--a default--and the subsequent downgrade of ratings will create further financial havoc. The importance of those ratings was evident late last week when Moody's pointed out just how vulnerable Italian banks are to a cut in Italy's debt rating. Bank shares plummeted, stories of deposit withdrawals abounded and Italy found that its yield spreads were being pushed to new record highs as investors demanded even more of a return. Later this week, euro supporters could also get a nasty reminder that economics isn't playing on their side either when the latest flash estimate for euro zone inflation is released Thursday.
EUROPE
The euro enjoyed a modest rebound in European morning trade Monday as hopes grew of a deal to rollover Greek government debt, ahead of a crucial Greek austerity vote, but investor confidence remains distinctly fragile. In Asian hours, heightened risk aversion boosted the dollar across the board and pushed the European currency to a fresh all-time low against the Swiss franc of CHF1.1808. Insuring European sovereign debt against default also became more expensive, with the iTraxx SovX Western Europe credit default swaps index hitting a new record high and Italy pulling off a successful two-year bond auction, but at a higher cost. Currency traders nonetheless welcomed weekend news that French banks have proposed a plan to reinvest half of the proceeds from maturing Greek government bonds into buying 30-year bonds issued by the embattled country. The German Finance Ministry later said private sector suggestions were welcomed. The positive attitude to private sector participation in a Greek credit event, a particularly thorny issue that has slowed down progress toward a new bailout package for Greece, helped lift the single currency to a session high against the dollar of $1.4219, despite lingering skepticism. "The market is taking comfort from the news coming from banks, but risk indicators are still giving out negative signals and we would view any rebound in the euro as a selling opportunity," said Ian Stannard, a currency strategist at Morgan Stanley in London. A pivotal factor just around the corner is Greece's budget vote, scheduled for Wednesday morning. While a positive outcome would support the currency in the short-term, currency analysts cautioned that the debt saga remains far from resolved. "Even if the Greek vote passes, we'll probably only get three months of stability followed by renewed problems as it becomes clear that the country is failing to meet its commitments," said Geoffrey Yu, director of FX strategy, at UBS AG in London.
ASIA
The dollar broadly strengthened against major currencies in Asia on Monday as jitters over this week's parliamentary votes in Greece on a EUR28 billion package of austerity measures heightened traders' risk aversion, prompting them to buy the greenback. Falling stock and commodity prices, coupled with global growth concerns, also added to uncertainty in the currency market, leading traders to trim their holdings of riskier currencies such as the euro, the U.K. pound, and the Australian dollar. The greenback also gained against its safe-haven rivals such as the yen and the Swiss franc. "It was rare to" see such a big move during Asian trading hours on Monday, said Makoto Noji, senior currency strategist at SMBC Nikko Securities. Uncertainty over this week's Greek votes and falls in global share prices "prompted short-covering for the dollar, while the euro is besieged by various negative factors," he added. At 0500 GMT, the euro was at $1.4123 from $1.4192 late Friday in New York, according to figures from EBS. It earlier tumbled to as low as $1.4102. The U.K. pound stood at $1.5922, after falling to a near five-month low of $1.5913, from $1.5967. The dollar was at CHF0.8374 from CHF0.8328. "A risk-averse mood has extended from last week, with an eye on falling stock and commodity prices and Greece's debt problems," said Yoshio Yoshida, a trader at Mizuho Trust and Banking Co. "Those factors have worked in favor of dollar buying, although trading could be a wild ride this week," he added.
WORLD
Euro-zone debt worries reached Italy on Friday as contagion fears pushed the euro to an all-time low against the Swiss franc. The common currency fell as low as CHF1.1844 against the safe-haven franc over fears the Greek sovereign crisis was gaining a greater foothold outside the country's borders and in the region's banking system. Trading in Italian bank shares was suspended due to high volatility in Milan after ratings agency Moody's Investors Service said it was considering downgrading the creditworthiness of a group of the country's banks. Italy's sovereign 10-year yield spread over German bunds reacted by climbing to 213 basis points--the widest since the birth of the euro in January 1999. "There are concerns over contagion since Italy's economy is very weak and also over the lack of transparency in the banking sector," Peter Rosenstreich, associate director and chief market analyst with Switzerland's Swissquote Bank SA, said. "Without a total and credible solution to the Greek and [European Union] sovereign debt crisis, all EU nations are susceptible to sudden exodus of confidence and capital."
Jumat, 24 Juni 2011
FXPRO INTRADAY SNAPSHOT
EUR/USD
The corrective recovery off 1.4125 is tackling resistance at 1.4285. However, with layers of resistance looming at 1.4330 and 1.4360, scope for corrective gains are limited. Wednesday's bull failure high at 1.4442 continues to dominate the daily chart and Thursday's low at 1.4125 remains vulnerable, which will become the focus on a break below 1.4195.
GBP/USD
Corrects higher off 1.5939, but with upside risk limited to 1.6122, the main threat remains to the downside. Renewed GBP bear pressure is expected on 1.5939, and there is scope for an extension lower towards targets at 1.5901 and 1.5859. Resistance at 1.6066 and 1.6100 protect the 1.6122 barrier.
USD/JPY
Thursday's cap at 80.80 keeps the action within a short-term bear pennant continuation pattern. Bear pressure is building on support at 80.34, and a push below there would bring Wednesday's 80.01 low back into the picture. Loss of 80.34 would also leave the 80.80 high as a near-term bull failure. Regaining ground above 80.64 is required to suggest a return to the 80.80 high is on the cards, protecting the important June 15 reaction high at 81.08.
AUD/USD
Stages a recovery off 1.0455, and a push above resistance at 1.0552 is expected. The pace of the three-week downtrend is slowing, and a break above 1.0552 would open the important 1.0630/51 projected resistance area. However, AUD bulls need to force a break through 1.0651 in order to gain control. A push below 1.0478 is required to re-expose the 1.0455 low, threatening a downtrend extension to 1.0441 and towards 1.0325.
FOREX FOCUS
Inflation is concentrating minds from Washington to Beijing. But that doesn't mean global risk sentiment will improve. On the contrary, recent comments from China, as well as the International Energy Agency's highly unusual decision to release crude oil stocks, both smack of a certain amount of desperation. Let's look at China first. Premier Wen Jiabao's claim that inflation has been vanquished will certainly come as a surprise to all those who, both inside and outside the country, have been looking for tighter monetary policy as well as further gains in the yuan itself. However, Wen's comments may reflect a greater reality about the state of the Chinese economy and the rapidly growing fears that the housing market is about to implode. Up until now, fighting inflation may have been the primary priority, especially given the damage that higher prices pose to the government's popularity. But, if recent economic data, including the latest manufacturing activity numbers this week, continue to point to a slowdown, Beijing's priorities might be changing. By claiming an inflation victory, Wen will reduce expectations of tighter policy and take some of the pressure off the housing market. This could make the headline of a well-timed piece of research by Societe Generale: "Chinese Construction Bubble: Preparing For A Potential Burst", look even more prescient. For financial markets, it is the coincidence of Wen's remarks with the IEA's announcement that have proved particularly unsettling. Although the prospects for the U.S. as well as the global economy are not looking as good as they once were, there is a growing fear that the recent rise in energy prices has gone too far and that inflation has become too entrenched.
EUROPE
The dollar rallied against other currencies in late Friday-morning trade in Europe on Italian bank credit concerns, reversing earlier losses after robust German business confidence gave investors renewed hope that a slowdown in the global economy would pass after weak data this week. The abrupt reversal in currency trader sentiment came after trading in leading Italian bank stocks was suspended after these fell sharply. The development followed a warning from Moody's Investors Service late Thursday that it may cut the credit ratings of 16 Italian banks. It also added to wider euro-zone debt concerns in the wake of 11th-hour efforts to stave off a default in Greece, even as hopes grew that the euro zone would muddle through following overnight news that Greece had reached an agreement with the International Monetary Fund and the European Union on a five-year austerity program. "There are still substantial uncertainties because the new Greek packages come with additional conditionality, including another EUR5 billion in extra fiscal cuts which will be difficult to get through parliament," said Hans Redeker, head of global currency strategy at Morgan Stanley.
ASIA
The euro rose against the dollar in Asia Friday as multinational efforts to tame crude prices and inflationary pressure prompted investors to think that central banks may refrain from policy tightening for now. The International Energy Agency said Thursday its 28 members including the U.S. have agreed to release 60 million barrels of oil from strategic reserves to boost supplies ahead of the peak summer driving season. As a result of Libyan conflict earlier this year, crude output has declined and pushed up oil prices. That added to already-high inflationary pressure in emerging countries such as China and Brazil, making investors speculate that authorities may tighten monetary policy at a faster pace to curb prices even at the expense of cooler share markets. The IEA announcement instantly sent oil prices down to a four-month low and eased the speculation, contributing to gains in Asian share markets. Japan's Nikkei Stock Average was up 0.8% and China's Shanghai Composite Index was 1.8% higher as of 0450 GMT. The euro often becomes strong when share markets are upbeat due to a high yields that euro-denominated assets have. That was indeed the case in Asia. "We may see the euro briefly touching $1.43," said Hideki Amikura, a senior dealer at Nomura Trust and Banking. Still, Amikura and other Tokyo dealers say the euro's upside potential is limited because Greece's debt problems are not over yet and a slowdown in the European economy has been seen recently.
WORLD
The euro had been beaten down so much by global growth and Greece debt concerns Thursday in New York that news of a widely expected accord helped significantly pare its losses. Greece's agreement with the International Monetary Fund and the European Union on a five-year austerity program isn't a long-term solution to Greece's credit woes. The program also still has to survive in Greece's parliament. The austerity agreement was necessary so that Greece's parliament would have something to vote on. But the news was enough to lift the euro to $1.4264 from an intraday low of $1.4125. "It's a (factor) of how jumpy the market is. In order to vote on an austerity package, you have to have" an actual austerity proposal, said David Watt, senior currency strategist at RBC Capital Markets in Toronto. "Anything that might look like a bit of news, the market will react to it. The market is skittish and that doesn't always help." That said, support for an austerity plan is vital to a second bailout package for the laid-low country, and is integral to euro-zone officials' desire to avoid a complicated and messy debt restructuring. But this doesn't mean the problems are over for the once high-flying euro, said analysts, especially if global growth shows continued signs of slowing
The corrective recovery off 1.4125 is tackling resistance at 1.4285. However, with layers of resistance looming at 1.4330 and 1.4360, scope for corrective gains are limited. Wednesday's bull failure high at 1.4442 continues to dominate the daily chart and Thursday's low at 1.4125 remains vulnerable, which will become the focus on a break below 1.4195.
GBP/USD
Corrects higher off 1.5939, but with upside risk limited to 1.6122, the main threat remains to the downside. Renewed GBP bear pressure is expected on 1.5939, and there is scope for an extension lower towards targets at 1.5901 and 1.5859. Resistance at 1.6066 and 1.6100 protect the 1.6122 barrier.
USD/JPY
Thursday's cap at 80.80 keeps the action within a short-term bear pennant continuation pattern. Bear pressure is building on support at 80.34, and a push below there would bring Wednesday's 80.01 low back into the picture. Loss of 80.34 would also leave the 80.80 high as a near-term bull failure. Regaining ground above 80.64 is required to suggest a return to the 80.80 high is on the cards, protecting the important June 15 reaction high at 81.08.
AUD/USD
Stages a recovery off 1.0455, and a push above resistance at 1.0552 is expected. The pace of the three-week downtrend is slowing, and a break above 1.0552 would open the important 1.0630/51 projected resistance area. However, AUD bulls need to force a break through 1.0651 in order to gain control. A push below 1.0478 is required to re-expose the 1.0455 low, threatening a downtrend extension to 1.0441 and towards 1.0325.
FOREX FOCUS
Inflation is concentrating minds from Washington to Beijing. But that doesn't mean global risk sentiment will improve. On the contrary, recent comments from China, as well as the International Energy Agency's highly unusual decision to release crude oil stocks, both smack of a certain amount of desperation. Let's look at China first. Premier Wen Jiabao's claim that inflation has been vanquished will certainly come as a surprise to all those who, both inside and outside the country, have been looking for tighter monetary policy as well as further gains in the yuan itself. However, Wen's comments may reflect a greater reality about the state of the Chinese economy and the rapidly growing fears that the housing market is about to implode. Up until now, fighting inflation may have been the primary priority, especially given the damage that higher prices pose to the government's popularity. But, if recent economic data, including the latest manufacturing activity numbers this week, continue to point to a slowdown, Beijing's priorities might be changing. By claiming an inflation victory, Wen will reduce expectations of tighter policy and take some of the pressure off the housing market. This could make the headline of a well-timed piece of research by Societe Generale: "Chinese Construction Bubble: Preparing For A Potential Burst", look even more prescient. For financial markets, it is the coincidence of Wen's remarks with the IEA's announcement that have proved particularly unsettling. Although the prospects for the U.S. as well as the global economy are not looking as good as they once were, there is a growing fear that the recent rise in energy prices has gone too far and that inflation has become too entrenched.
EUROPE
The dollar rallied against other currencies in late Friday-morning trade in Europe on Italian bank credit concerns, reversing earlier losses after robust German business confidence gave investors renewed hope that a slowdown in the global economy would pass after weak data this week. The abrupt reversal in currency trader sentiment came after trading in leading Italian bank stocks was suspended after these fell sharply. The development followed a warning from Moody's Investors Service late Thursday that it may cut the credit ratings of 16 Italian banks. It also added to wider euro-zone debt concerns in the wake of 11th-hour efforts to stave off a default in Greece, even as hopes grew that the euro zone would muddle through following overnight news that Greece had reached an agreement with the International Monetary Fund and the European Union on a five-year austerity program. "There are still substantial uncertainties because the new Greek packages come with additional conditionality, including another EUR5 billion in extra fiscal cuts which will be difficult to get through parliament," said Hans Redeker, head of global currency strategy at Morgan Stanley.
ASIA
The euro rose against the dollar in Asia Friday as multinational efforts to tame crude prices and inflationary pressure prompted investors to think that central banks may refrain from policy tightening for now. The International Energy Agency said Thursday its 28 members including the U.S. have agreed to release 60 million barrels of oil from strategic reserves to boost supplies ahead of the peak summer driving season. As a result of Libyan conflict earlier this year, crude output has declined and pushed up oil prices. That added to already-high inflationary pressure in emerging countries such as China and Brazil, making investors speculate that authorities may tighten monetary policy at a faster pace to curb prices even at the expense of cooler share markets. The IEA announcement instantly sent oil prices down to a four-month low and eased the speculation, contributing to gains in Asian share markets. Japan's Nikkei Stock Average was up 0.8% and China's Shanghai Composite Index was 1.8% higher as of 0450 GMT. The euro often becomes strong when share markets are upbeat due to a high yields that euro-denominated assets have. That was indeed the case in Asia. "We may see the euro briefly touching $1.43," said Hideki Amikura, a senior dealer at Nomura Trust and Banking. Still, Amikura and other Tokyo dealers say the euro's upside potential is limited because Greece's debt problems are not over yet and a slowdown in the European economy has been seen recently.
WORLD
The euro had been beaten down so much by global growth and Greece debt concerns Thursday in New York that news of a widely expected accord helped significantly pare its losses. Greece's agreement with the International Monetary Fund and the European Union on a five-year austerity program isn't a long-term solution to Greece's credit woes. The program also still has to survive in Greece's parliament. The austerity agreement was necessary so that Greece's parliament would have something to vote on. But the news was enough to lift the euro to $1.4264 from an intraday low of $1.4125. "It's a (factor) of how jumpy the market is. In order to vote on an austerity package, you have to have" an actual austerity proposal, said David Watt, senior currency strategist at RBC Capital Markets in Toronto. "Anything that might look like a bit of news, the market will react to it. The market is skittish and that doesn't always help." That said, support for an austerity plan is vital to a second bailout package for the laid-low country, and is integral to euro-zone officials' desire to avoid a complicated and messy debt restructuring. But this doesn't mean the problems are over for the once high-flying euro, said analysts, especially if global growth shows continued signs of slowing
Kamis, 23 Juni 2011
FXPRO INTRADAY SNAPSHOT
EUR/USD
The setback off 1.4442 is significant, and likely to extend down to 1.4191. The 1.4442 high has already become a potential near-term bull failure, and a push below 1.4283 would pave the way for more weakness to the intraday lower high at 1.4191. Confirmation of a bull failure will have to wait until the 1.4191 low is broken. There is scope for a recovery to the 1.4365/50 area, but only above 1.4405 would suggest a return to 1.4442 is possible.
GBP/USD
The 1.6000 level is under threat for the first time since April, following Wednesday's wide-ranging bearish outside day. A break below support at 1.5997 is expected to expose the Mar. 28 higher low at 1.5937, and meeting downside targets at 1.5901 and 1.5859 is the immediate threat. Corrective gains are limited to 1.6201, which is protected by 1.6150.
USD/JPY
The setback off Thursday's Asian session high at 80.65 will look to establish a new range floor above 80.33. Wednesday's late strength keeps the psychologically-important 80.00 level intact, and while support at 80.33 holds, the range high at 80.65 will come under fresh USD bull pressure. The important June 15 high at 81.08 lies above 80.65.
AUD/USD
Resistance at 1.0653 has put the June 16 low at 1.0478 back under threat. The short-term downtrend is still intact, if somewhat indecisive, and a push below 1.0513 would expose 1.0478 and the May 25 reaction low at 1.0441. A recovery above 1.0625 is required to question the bearish AUD outlook, opening 1.0653.
FOREX FOCUS
Counting on a dollar rally just now could be expensive. Yes, a recovery in the U.S. currency is more than likely underway. But, with the U.S. Federal Reserve downgrading its forecast for the U.S. economy and with the risks of a U.S. default remaining high, few investors will want to start placing bets just yet. The immediate concerns over the dollar stem from the FOMC meeting this week and Fed Chairman Ben Bernanke's confirmation that U.S. growth is going through a "soft patch." As he had hinted previously, Bernanke suggested that market liquidity would be preserved but, with inflation pressures on the rise, the central bank has no intention of replacing its QE2 measures with a QE3 when they run out at the end of June. The dollar may have taken a little comfort from this but U.S. Treasury yields suggest that there is little market expectation for an early move to tighten monetary policy. Yields on 10-year Treasurys, which traded up at 3.01% right after the FOMC meeting and Bernanke's press conference, have since fallen back to about 2.96%, nearly as low as the 2.95% level seen just before the meeting started. Some market watchers have suggested that the dollar's post-FOMC bounce may well have had more to do with position-covering rather than any new lease of dollar support. This isn't surprising, not only because the dollar will remain of limited attraction with yields remaining under 3% but because Congressional wrangling over a new U.S. debt ceiling still leaves the country open to default. If a solution isn't reached by August 2, when 'extraordinary measures' for funding the U.S. deficit run out, the U.S. Treasury will essentially have no more money and the U.S. government won't have the authority to raise any more either.
EUROPE
A steady stream of bad news slammed the euro, and other currencies seen as risky bets in European trading hours. The dollar, yen and Swiss franc were among the chief beneficiaries in European currency trading Thursday as weak data in China and Europe added to nagging economic fears, hopes for further U.S. credit easing were dashed, and the unresolved Greek debt crisis rumbled on. "There are negative signals coming from all regions. Everywhere you turn, there's negative news," said Ian Stannard, a currencies analyst at Morgan Stanley in London. The pound hit record lows against the Swiss franc and New Zealand dollar, and fell below $1.60 against the dollar for the first time in almost three months as traders continued to put back their expectations for a U.K. interest rate rise. Meanwhile, the euro slipped below $1.425 against the buck due to concerns related to Greek efforts to tweak key austerity measures ahead of an all-important parliamentary vote next week. Although Federal Reserve Chairman Ben Bernanke late Wednesday did not completely rule out further bond purchases once the current round ends later this month, he indicated it was unlikely, spurring overnight demand for the buck that continued during the European morning session.
ASIA
The dollar slightly strengthened against major currencies in Asia Thursday as short-covering continued to kick in after U.S. Federal Reserve Chairman Ben Bernanke on Wednesday quashed speculation of any further credit easing. The greenback got a boost as traders who had gone short were forced to unwind their positions due to the dollar's upward momentum from the start of the session. But the dollar's rally fizzled out by midday after the completion of short-covering amid a lack of follow-through buyers. Some market participants had speculated that the Fed might signal a further credit easing since the U.S. economy has been faltering," said Etsuko Yamashita, chief economist at Sumitomo Mitsui Bank. "But the fact is it didn't. And the outcome induced short-covering," she added. While Bernanke didn't entirely rule out another round of bond purchases, he made it pretty clear such a move is unlikely. Bernanke also said there is no longer a risk of deflation. "Low risks of deflation effectively rule out further aggressive monetary stimulus," said David Rodriguez, quantitative strategist at DailyFX Research Desk, adding that "the dollar may continue to recover as the Fed wraps up its controversial purchases of U.S. government debt at the end of June."
WORLD
Federal Reserve Chairman Ben Bernanke Wednesday quashed speculation about another round of stimulative bond purchases, boosting the dollar. Speaking after the Federal Open Market Committee's policy statement was released, Bernanke did not say outright that further easing would never occur, but he made it pretty clear that such a move is highly unlikely. The current Treasurys purchase program -- known as QE2 and winding down at the end of this month -- sought to stimulate the U.S. economy by flooding the markets with dollars, a move that also diluted the dollar's value. The market took Bernanke's comments as a sign of "deep reluctance to go down the road of QE3," said Paresh Upadhyaya, director of G10 FX Strategy at Bank of America-Merrill Lynch in New York. Such a signal was dollar positive, Upadhyaya added. The euro gave up modest gains and the dollar strengthened to its session high against the yen during the news conference, the second such occasion Bernanke has taken questions from the media following a Fed policy meeting. The dollar had been trading in a narrow range against the euro heading into the news conference as the Fed's statement released before Bernanke spoke was little changed from its last statement. The Fed continues to expect economic growth will pick up later in the year, but that the Fed funds rate will remain at current historic lows indefinitely.
The setback off 1.4442 is significant, and likely to extend down to 1.4191. The 1.4442 high has already become a potential near-term bull failure, and a push below 1.4283 would pave the way for more weakness to the intraday lower high at 1.4191. Confirmation of a bull failure will have to wait until the 1.4191 low is broken. There is scope for a recovery to the 1.4365/50 area, but only above 1.4405 would suggest a return to 1.4442 is possible.
GBP/USD
The 1.6000 level is under threat for the first time since April, following Wednesday's wide-ranging bearish outside day. A break below support at 1.5997 is expected to expose the Mar. 28 higher low at 1.5937, and meeting downside targets at 1.5901 and 1.5859 is the immediate threat. Corrective gains are limited to 1.6201, which is protected by 1.6150.
USD/JPY
The setback off Thursday's Asian session high at 80.65 will look to establish a new range floor above 80.33. Wednesday's late strength keeps the psychologically-important 80.00 level intact, and while support at 80.33 holds, the range high at 80.65 will come under fresh USD bull pressure. The important June 15 high at 81.08 lies above 80.65.
AUD/USD
Resistance at 1.0653 has put the June 16 low at 1.0478 back under threat. The short-term downtrend is still intact, if somewhat indecisive, and a push below 1.0513 would expose 1.0478 and the May 25 reaction low at 1.0441. A recovery above 1.0625 is required to question the bearish AUD outlook, opening 1.0653.
FOREX FOCUS
Counting on a dollar rally just now could be expensive. Yes, a recovery in the U.S. currency is more than likely underway. But, with the U.S. Federal Reserve downgrading its forecast for the U.S. economy and with the risks of a U.S. default remaining high, few investors will want to start placing bets just yet. The immediate concerns over the dollar stem from the FOMC meeting this week and Fed Chairman Ben Bernanke's confirmation that U.S. growth is going through a "soft patch." As he had hinted previously, Bernanke suggested that market liquidity would be preserved but, with inflation pressures on the rise, the central bank has no intention of replacing its QE2 measures with a QE3 when they run out at the end of June. The dollar may have taken a little comfort from this but U.S. Treasury yields suggest that there is little market expectation for an early move to tighten monetary policy. Yields on 10-year Treasurys, which traded up at 3.01% right after the FOMC meeting and Bernanke's press conference, have since fallen back to about 2.96%, nearly as low as the 2.95% level seen just before the meeting started. Some market watchers have suggested that the dollar's post-FOMC bounce may well have had more to do with position-covering rather than any new lease of dollar support. This isn't surprising, not only because the dollar will remain of limited attraction with yields remaining under 3% but because Congressional wrangling over a new U.S. debt ceiling still leaves the country open to default. If a solution isn't reached by August 2, when 'extraordinary measures' for funding the U.S. deficit run out, the U.S. Treasury will essentially have no more money and the U.S. government won't have the authority to raise any more either.
EUROPE
A steady stream of bad news slammed the euro, and other currencies seen as risky bets in European trading hours. The dollar, yen and Swiss franc were among the chief beneficiaries in European currency trading Thursday as weak data in China and Europe added to nagging economic fears, hopes for further U.S. credit easing were dashed, and the unresolved Greek debt crisis rumbled on. "There are negative signals coming from all regions. Everywhere you turn, there's negative news," said Ian Stannard, a currencies analyst at Morgan Stanley in London. The pound hit record lows against the Swiss franc and New Zealand dollar, and fell below $1.60 against the dollar for the first time in almost three months as traders continued to put back their expectations for a U.K. interest rate rise. Meanwhile, the euro slipped below $1.425 against the buck due to concerns related to Greek efforts to tweak key austerity measures ahead of an all-important parliamentary vote next week. Although Federal Reserve Chairman Ben Bernanke late Wednesday did not completely rule out further bond purchases once the current round ends later this month, he indicated it was unlikely, spurring overnight demand for the buck that continued during the European morning session.
ASIA
The dollar slightly strengthened against major currencies in Asia Thursday as short-covering continued to kick in after U.S. Federal Reserve Chairman Ben Bernanke on Wednesday quashed speculation of any further credit easing. The greenback got a boost as traders who had gone short were forced to unwind their positions due to the dollar's upward momentum from the start of the session. But the dollar's rally fizzled out by midday after the completion of short-covering amid a lack of follow-through buyers. Some market participants had speculated that the Fed might signal a further credit easing since the U.S. economy has been faltering," said Etsuko Yamashita, chief economist at Sumitomo Mitsui Bank. "But the fact is it didn't. And the outcome induced short-covering," she added. While Bernanke didn't entirely rule out another round of bond purchases, he made it pretty clear such a move is unlikely. Bernanke also said there is no longer a risk of deflation. "Low risks of deflation effectively rule out further aggressive monetary stimulus," said David Rodriguez, quantitative strategist at DailyFX Research Desk, adding that "the dollar may continue to recover as the Fed wraps up its controversial purchases of U.S. government debt at the end of June."
WORLD
Federal Reserve Chairman Ben Bernanke Wednesday quashed speculation about another round of stimulative bond purchases, boosting the dollar. Speaking after the Federal Open Market Committee's policy statement was released, Bernanke did not say outright that further easing would never occur, but he made it pretty clear that such a move is highly unlikely. The current Treasurys purchase program -- known as QE2 and winding down at the end of this month -- sought to stimulate the U.S. economy by flooding the markets with dollars, a move that also diluted the dollar's value. The market took Bernanke's comments as a sign of "deep reluctance to go down the road of QE3," said Paresh Upadhyaya, director of G10 FX Strategy at Bank of America-Merrill Lynch in New York. Such a signal was dollar positive, Upadhyaya added. The euro gave up modest gains and the dollar strengthened to its session high against the yen during the news conference, the second such occasion Bernanke has taken questions from the media following a Fed policy meeting. The dollar had been trading in a narrow range against the euro heading into the news conference as the Fed's statement released before Bernanke spoke was little changed from its last statement. The Fed continues to expect economic growth will pick up later in the year, but that the Fed funds rate will remain at current historic lows indefinitely.
Rabu, 22 Juni 2011
FOREX INTRADAY SNAPSHOT
EUR/USD
Weakness towards 1.4287 is the immediate threat, following the setback off Wednesday's Asian session high at 1.4435. However, while projected support at 1.4287 holds, the short-term recovery off 1.4073 remains on track for the 1.4457 target. EUR bulls need to meet the 1.4457 target in order to validate the recovery off 1.4073. Loss of 1.4287 would undermine the positive EUR outlook, exposing Monday's low at 1.4191.
GBP/USD
Consolidates within a relatively tight 1.6167/1.6254 range, as the recovery off 1.6079 pauses for breath. At this stage, an upside resolution is the more likely, opening 1.6301 and threatening more gains to 1.6340 and 1.6440. A sustained break below 1.6167 would put GBP bears in control of the near-term, exposing Monday's low at 1.6109.
USD/JPY
Action has become rangebound between 80.01 and Monday's high at 80.37. However, last week's bear hammer candle puts USD bears in control, and while significant backup resistance lies at 80.48, the main threat is for a return to the lower end of the range. A downside resolution below 80.01 is be favored at this stage, exposing the June 8 reaction low at 79.69, and enhancing the longer-term threat for weakness to the 78.54 area. A recovery above 80.37 would provide temporary respite, but only a sustained break above short-term pivotal resistance at 80.48 would lift the tone, opening 80.67.
AUD/USD
Resistance at 1.0621 is expected to face renewed pressure, as the recovery off 1.0478 has room to extend. A push above 1.0621 would strengthen the 1.0478 low, and prompt further gains to the June 14 high at 1.0717. Only a reversal below 1.0532 would put AUD bears in control, exposing the 1.0478 low.
Forex Focus
Sterling hawks should be a dead, not a dying, breed. It is amazing how long the hawks have lasted as the U.K. has gone through the worst recession in decades and the global economy has continued to suffer convulsions from the global financial crisis. Even now, there are still two hawks on the Bank of England's monetary policy committee voting for higher interest rates. But, like those investors who have been buying the pound on a yield basis, these members are now looking very isolated as U.K. economic growth proves even more feeble than anticipated and U.K. price pressures have shown little sign of taking root. If anything, more evidence of this feeble recovery is likely to come. A pick-up in growth still looks many months away and the recent reversal in commodity prices will continue to extract some of the inflationary pressures many hawks had been worried about. The latest Bank of England minutes went a long way to argue just this point, noting that even the hawks recognized that "the growth outlook during the month had been weak." But, it is the issue of inflation that has really been dividing the hawks from the doves, with the former arguing that with the current 4.5% inflation expected to rise to 5% in the next month or two, price pressures will become entrenched. In other words, the central bank will have fallen behind the policy curve and the country would be left with the damaging legacy of long-term inflation. However, the minutes make it clear that there is little evidence of this. Inflation is not translating into higher wages and as commodity prices subside, the whole price pressure problem should prove transitory. If anything, the bank now suggests that the inflation rate will fall back under the 2% target and stay there. But, even more galling for hawks, has been the talk of more quantitative easing.
Europe
The euro got a fleeting lift Wednesday after embattled Greek prime minister George Papandreou's new cabinet got the required nod, with traders already looking to the next stumbling block in the still-unfolding Greek story while a downbeat pronouncement on the U.K. economy dented sterling. Greek members of parliament must pass stringent measures worth some EUR28 billion before Greece gets a EUR12 billion lifeline from the European Union. Approval must come by June 30 so that Greece is ready for the Eurogroup meeting scheduled for July 3. Much can happen by then. The confidence vote went along party lines as members of Papandreou's Panhellenic Socialist Movement (Pasok) were eager to stave off early elections but they may not be as quick to say 'yes' to the raft of tough measures given widespread public protests in Greece. The euro rose to as high as $1.4435 against the dollar after the parliamentary vote Tuesday, a one-week peak, but has since eased back to a touch under $1.44. While some prophets of doom see widening protests in Greece as a reason to doubt the resolve of Greek lawmakers, there is still a widespread belief in the market that Greece will pull through this battle.
Asia
The euro fell against the dollar and yen in Asia Wednesday as investors bet that European sovereign debt concerns will continue to buffet the common currency, with the Greek government's survival of a confidence vote that should help it avert the immediate worsening of its debt crisis offering only temporary relief. Short-term investors who had bid up the euro Tuesday ahead of the confidence vote in Prime Minister George Papandreou's administration sold the unit after the vote passed early Wednesday in Asia. Investors cashed in quickly on their bets because a longer term fix to Greece's sovereign debt problems remains unclear, dealers said. Dealers said the euro could regain ground later if European share markets follow most Asian bourses higher, and if the U.S. Federal Reserve's policy-making Open Market Committee sounds increasingly dovish at the end of a regular two-day meeting. But the currency likely won't top resistance around $1.4450, they said. It rose only to $1.4435 on a brief surge immediately after the Greek vote.
World
The euro pushed above $1.44 Tuesday in New York on investors' hopes the Greek government could survive intact, helping to contain the country's debt crisis over the near term. The session was fueled by expectations that Prime Minister George Papandreou's new cabinet would survive a confidence vote late in the New York day. "Nothing can be taken for granted in the rarefied atmosphere pervading Greece (riots, mass strikes, etc.), but the omens so far look good," said Willie Williams, director of FX institutional sales at Societe Generale. In addition, with the euro able to close above $1.4390, "[our] technical analysts don't see any key resistance until $1.4590-$1.4600 after that level," another good sign for the increasingly scrutinized common currency, he said. The common currency also was helped by a small sign that indicated Greece's troubles could be contained. Fitch Ratings' co-head of EMEA financial institutions, James Longsdon, said a sovereign default by Greece in isolation might not be a problem for big European banks, although a disorderly, more protracted event could be a different story.
Weakness towards 1.4287 is the immediate threat, following the setback off Wednesday's Asian session high at 1.4435. However, while projected support at 1.4287 holds, the short-term recovery off 1.4073 remains on track for the 1.4457 target. EUR bulls need to meet the 1.4457 target in order to validate the recovery off 1.4073. Loss of 1.4287 would undermine the positive EUR outlook, exposing Monday's low at 1.4191.
GBP/USD
Consolidates within a relatively tight 1.6167/1.6254 range, as the recovery off 1.6079 pauses for breath. At this stage, an upside resolution is the more likely, opening 1.6301 and threatening more gains to 1.6340 and 1.6440. A sustained break below 1.6167 would put GBP bears in control of the near-term, exposing Monday's low at 1.6109.
USD/JPY
Action has become rangebound between 80.01 and Monday's high at 80.37. However, last week's bear hammer candle puts USD bears in control, and while significant backup resistance lies at 80.48, the main threat is for a return to the lower end of the range. A downside resolution below 80.01 is be favored at this stage, exposing the June 8 reaction low at 79.69, and enhancing the longer-term threat for weakness to the 78.54 area. A recovery above 80.37 would provide temporary respite, but only a sustained break above short-term pivotal resistance at 80.48 would lift the tone, opening 80.67.
AUD/USD
Resistance at 1.0621 is expected to face renewed pressure, as the recovery off 1.0478 has room to extend. A push above 1.0621 would strengthen the 1.0478 low, and prompt further gains to the June 14 high at 1.0717. Only a reversal below 1.0532 would put AUD bears in control, exposing the 1.0478 low.
Forex Focus
Sterling hawks should be a dead, not a dying, breed. It is amazing how long the hawks have lasted as the U.K. has gone through the worst recession in decades and the global economy has continued to suffer convulsions from the global financial crisis. Even now, there are still two hawks on the Bank of England's monetary policy committee voting for higher interest rates. But, like those investors who have been buying the pound on a yield basis, these members are now looking very isolated as U.K. economic growth proves even more feeble than anticipated and U.K. price pressures have shown little sign of taking root. If anything, more evidence of this feeble recovery is likely to come. A pick-up in growth still looks many months away and the recent reversal in commodity prices will continue to extract some of the inflationary pressures many hawks had been worried about. The latest Bank of England minutes went a long way to argue just this point, noting that even the hawks recognized that "the growth outlook during the month had been weak." But, it is the issue of inflation that has really been dividing the hawks from the doves, with the former arguing that with the current 4.5% inflation expected to rise to 5% in the next month or two, price pressures will become entrenched. In other words, the central bank will have fallen behind the policy curve and the country would be left with the damaging legacy of long-term inflation. However, the minutes make it clear that there is little evidence of this. Inflation is not translating into higher wages and as commodity prices subside, the whole price pressure problem should prove transitory. If anything, the bank now suggests that the inflation rate will fall back under the 2% target and stay there. But, even more galling for hawks, has been the talk of more quantitative easing.
Europe
The euro got a fleeting lift Wednesday after embattled Greek prime minister George Papandreou's new cabinet got the required nod, with traders already looking to the next stumbling block in the still-unfolding Greek story while a downbeat pronouncement on the U.K. economy dented sterling. Greek members of parliament must pass stringent measures worth some EUR28 billion before Greece gets a EUR12 billion lifeline from the European Union. Approval must come by June 30 so that Greece is ready for the Eurogroup meeting scheduled for July 3. Much can happen by then. The confidence vote went along party lines as members of Papandreou's Panhellenic Socialist Movement (Pasok) were eager to stave off early elections but they may not be as quick to say 'yes' to the raft of tough measures given widespread public protests in Greece. The euro rose to as high as $1.4435 against the dollar after the parliamentary vote Tuesday, a one-week peak, but has since eased back to a touch under $1.44. While some prophets of doom see widening protests in Greece as a reason to doubt the resolve of Greek lawmakers, there is still a widespread belief in the market that Greece will pull through this battle.
Asia
The euro fell against the dollar and yen in Asia Wednesday as investors bet that European sovereign debt concerns will continue to buffet the common currency, with the Greek government's survival of a confidence vote that should help it avert the immediate worsening of its debt crisis offering only temporary relief. Short-term investors who had bid up the euro Tuesday ahead of the confidence vote in Prime Minister George Papandreou's administration sold the unit after the vote passed early Wednesday in Asia. Investors cashed in quickly on their bets because a longer term fix to Greece's sovereign debt problems remains unclear, dealers said. Dealers said the euro could regain ground later if European share markets follow most Asian bourses higher, and if the U.S. Federal Reserve's policy-making Open Market Committee sounds increasingly dovish at the end of a regular two-day meeting. But the currency likely won't top resistance around $1.4450, they said. It rose only to $1.4435 on a brief surge immediately after the Greek vote.
World
The euro pushed above $1.44 Tuesday in New York on investors' hopes the Greek government could survive intact, helping to contain the country's debt crisis over the near term. The session was fueled by expectations that Prime Minister George Papandreou's new cabinet would survive a confidence vote late in the New York day. "Nothing can be taken for granted in the rarefied atmosphere pervading Greece (riots, mass strikes, etc.), but the omens so far look good," said Willie Williams, director of FX institutional sales at Societe Generale. In addition, with the euro able to close above $1.4390, "[our] technical analysts don't see any key resistance until $1.4590-$1.4600 after that level," another good sign for the increasingly scrutinized common currency, he said. The common currency also was helped by a small sign that indicated Greece's troubles could be contained. Fitch Ratings' co-head of EMEA financial institutions, James Longsdon, said a sovereign default by Greece in isolation might not be a problem for big European banks, although a disorderly, more protracted event could be a different story.
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