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.

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