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
