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.
