EUR/USD
After testing support in the 1.2520 region against the dollar in early Europe on Monday, a slide below this level triggered stop-loss selling with lows below the 1.2480 area.
There was an underlying lack of confidence in the EU Summit prospects which hampered sentiment with Germany continuing to insist that collectivisation of debt through Eurobond issuance was not on the agenda. Although there will be proposals for banking-sector union, there were expectations that these are long-term measures and would not be able to help defuse the chronic and increasingly acute banking-sector vulnerabilities.
Spain formally applied for a banking-sector bailout up to EUR100bn and Cyprus also submitted an application for support funds to underpin the banking sector as its credit rating was downgraded. There were still uncertainties whether the funding would come from the EFSF or ESM while Eurogroup head Juncker also indicated that there would be conditions attached to the support which increased uncertainty.
Markets overall continued to fret over the Spanish and Italian economic outlook, especially with domestic political tensions rising and there was a sharp rise in Italian and Spanish yields during the day which reversed declines seen on Friday.
The US new home sales was stronger than expected with a 7.6% monthly increase to an annual rate of 369,000 for May. Although the impact was limited, the data did maintain hopes that the housing sector was more stable. In contrast, there were strong expectations that the ECB would move to cut interest rates, potentially at the July council meeting, while there was also some speculation that there would need to be a third LTRO.
Yield expectations undermined the Euro and it struggled to secure more than a limited recovery as it fluctuated around 1.25 in Asia on Tuesday.
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 was unable to make any significant headway during the European session on Monday and there was stop-loss selling on a break below the 80 level and helped trigger a decline to lows below the 79.50 level.
The Japanese currency gained significant support from a fresh deterioration in risk appetite as European equity markets were subjected to selling pressure and there were renewed doubts surrounding the Euro. The dollar secured a tentative rebound after the European markets closed.
There was still some speculation that the Bank of Japan would consider additional measures to expand monetary policy. Political considerations were also significant with further speculation that the government could be forced into an early general election given the extent of opposition to an increase in the sales tax from Party members.
Sterling
Sterling was unable to make a move above 1,56 against the dollar in Europe on Monday and retreated to lows below 1.5550 during the European session as there was wider buying support for the US currency.
There was a decline in inflation expectations according to the latest YouGov survey and Bank of England Governor Miles stated that there would need to be at least an additional GBP50bn in quantitative easing to help support the UK economy.
Markets continued to expect additional Bank of England quantitative easing which had a negative influence on Sterling. The impact, especially on the Euro, was lessened by expectations that there would be additional monetary measures by the ECB and the UK currency edged towards the 0.8020 area during the day.
Swiss franc
The dollar maintained a firm tone in Europe on Monday and pushed to highs just above the 0.9620 level against the franc as the Euro was subjected to sustained selling pressure. The Euro dipped to lows below the 1.2010 level and remained generally under strain against the Swiss currency.
There were further concerns over capital-account leakage from the Euro-zone, especially with fresh tensions surrounding Spain and Italy. National Bank comments will remain under very close scrutiny in the short term, especially with no let up in underlying tensions.
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 remained under pressure during the European session on Monday and dipped to below the parity level against the US currency with a low just below 0.9970 as European equity markets retreated and risk appetite was generally fragile.
Selling pressure was contained and there was a recovery back to the parity region later in the US session. There was some support from expectations that the Australian currency would gain support from global reserve diversification into the currency as a refuge from Euro-zone fears.
