Persistent Tensions Surrounding the Italian and Spanish Economies

by

EUR/USD

The Euro was unable to make a fresh challenge on resistance levels above 1.24 against the dollar on Wednesday and generally drifted lower during the day with a test of short-term support levels, although net ranges were narrow.

The German economic data provided no significant support for the Euro-zone with imports and exports declining for July while there was a 0.9% decline in industrial production for the month. Germany's credit rating was affirmed at AAA by Fitch which provided some degree of support while there were downgrades from Italy and Spain according to a minor ratings agency.

The troika announced that it would spend all September in Greece assessing the situation and there were further tensions ahead of the August 20th scheduled payment to the ECB amid some expectations that Greece could be forced to default or be forced into covert ECB support.

There were persistent tensions surrounding the Italian and Spanish economies as behind the scenes discussions on sovereign bailouts continued. There were further suggestions that Spain would not accept a bailout if further conditions were imposed. The elements of blackmail evident in the discussions are unlikely to provide significant Euro support. There were still expectations that the ECB would move to bond buying in September once the German constitutional court has ruled and this continued to provide net Euro support during a Summer lull.

The Euro found support on dips to the 1.2330 area before moving higher again with consolidation the general theme. There was a rise in yields at the latest US Treasury auction and investor demand also faded which suggests that defensive demand for Treasuries and the dollar has eased slightly. The Euro edged higher during the Asian session on Thursday with no fresh incentives.

jobman_080912_1.jpg

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Yen

The dollar found support close to the 78.25 area against the yen on Wednesday and moved higher later in the US session. There was an underlying improvement in risk appetite which helped curb yen buying and the dollar also gained support from a widening in the US Treasury yield gap over Japanese bonds to a two-month high.

There was speculation that the yen would gain net support during the month from bond redemptions and this continued to provide underlying support for the Japanese currency.

The Bank of Japan left policy unchanged at the latest monetary meeting which provided a small yen boost given expectations that there could be a move to relax policy further. There was a 5.6% recovery in machinery orders for July following a 14.8% decline previously.

Sterling

Sterling drifted weaker in early Europe on Wednesday, although there was no test of support in the 1.5550 region.

As expected, there was a downgrading of growth and inflation forecasts in the latest Bank of England inflation report with 2012 growth now expected to be around zero compared with 0.8% previously. The bank remained generally pessimistic over the outlook and also expressed major uncertainty surrounding the outlook given the Euro-zone outlook.

Bank Governor King stated that the bank would be ready to take further monetary action if necessary. He also stated that the potential benefits of an interest rate cut would be more than offset by the potential negative effects, especially as it would be a considerable burden for some financial institutions.

Markets had already priced in a downgrading of forecasts and the comments in downplaying the possibility of an interest rate cut were significant in pushing Sterling higher. It peaked close to 1.5670 with the Euro weakening back through the 0.79 level.

Swiss franc

The dollar found support below 0.97 against the franc on Wednesday and peaked close to 0.9750, but was unable to sustain the advance while the Euro remained trapped close to the 1.2010 level during the day.

National Bank policies remained an important focus amid some persistent speculation that the minimum Euro level could eventually have to be abandoned if intervention activity was forced higher. Euro-zone developments will inevitably be watched very closely during the next few days as uncertainty remains extremely high.

jobman_080912_2.jpg

Source: VantagePoint Intermarket Analysis Software

Call now and you will be provided with FREE recent forecasts
that are up to 86% accurate* 800-732-5407
If you would rather have the recent forecasts sent to you, please go here

Australian dollar

The Australian dollar found support below 1.0550 against the US currency on Wednesday and pushed higher to a peak around 1.0580 in lacklustre trading conditions with solid selling interest on rallies.

The labour-market data was slightly stronger than expected with a 14,000 increase for July following a 28,300 increase the previous month with unemployment edging lower to 5.2%. The Chinese growth data was slightly weaker than expected with industrial production growth slowing to 9.2% from 9.5% and the Australian dollar was unable to sustain a move above the 1.06 level following the data.

Tags:

0 Comments

Join In on this conversation, post a comment below.
No comments yet... Be the first to comment.

About the Author

Formerly Editor-in-Chief of Futures Magazine, Darrell has been writing about financial markets for more than 35 years and has become an acknowledged authority on derivative markets, technical analysis and various trading techniques.

Raised on a farm near the tiny southeastern Nebraska town of Virginia, Jobman graduated from Wartburg College in Iowa in 1963. He began his journalistic career as a sportswriter for the Waterloo (Iowa) Courier for several years before going into the Army. He served with the 82nd Airborne Division and as an infantry platoon leader with the Manchus in the 25th Infantry Division, including nine months in Vietnam in 1967-68, earning the Silver Star and Bronze Star.

After military service, Jobman returned to the Courier, where he became farm editor in early 1969. He was introduced to futures markets when he wrote a column about how speculators were ruining farm prices and was “corrected” by Merrill Oster. That led to writing assignments for Oster and then a full-time position in 1972, where Jobman participated in the founding of Professional Farmers of America and associated newsletters.

When Oster purchased Commodities Magazine in 1976, Jobman was named editor and later became editor-in-chief of Futures Magazine when the name was changed in 1983 during one of the biggest growth periods for new markets and new trading instruments in futures history. He was an editor at Futures until 1993, when he left to become an independent writer/consultant.

Since 1993, he has written, collaborated, edited or otherwise participated in the publication of about a dozen books on trading, including The Handbook on Technical Analysis. He has also written or edited articles for several publications and brokerage firms as well as trading courses and educational materials for Chicago Mercantile Exchange and Chicago Board of Trade. He also served as editorial director of CME Magazine.

Jobman and his wife, Lynda, live in Wisconsin, and spend a lot of time visiting with a daughter and three grandchildren also in Wisconsin, and a son and granddaughter in Florida.

Membership is Free. Join Now in less than 5 seconds! Alternatively Join or Sign In here.