AUDUSD: Australian banks will continue to retain some of the interest-rate cuts by the Reserve Bank of Australia, or even increase lending rates independent of any RBA rate action, in order to reduce pressure on net interest margin caused by higher funding costs.
Funding costs are likely to remain high in historical terms during 2012, which means the weighted-average cost of funding is likely to continue to rise, putting further downward pressure on NIMs.
We expect a range for today in AUDUSD rate of 1.0250 to 1.0350 (Yesterday, we place a limit BUY AUDUSD at 1.0250)
We bought AUDUSD at 1.0250 (continued to hold)
Stop loss at 1.0210 (from 1.0190)
Target at 1.0370 and 1.0420
EURUSD: The European Central Bank borrowed new dollars from the Federal Reserve during the week ended May 2, but also allowed a portion of prior loans to roll off, the Federal Reserve Bank of New York reported Thursday.
The ECB tapped the swap facility for $6.332 billion in new dollar borrowings, while $11.046 billion in prior loans matured. The new loans were taken in two tranches: $5.199 billion in a 84-day borrowings at a rate of 0.64%, and $1.132 billion in seven-day loans at the same rate.
Since the program was re-opened, it’s been little used before euro-zone fears perked up again over the past few months. Many market participants look to the program as a barometer of tension in the broader funding market, and sudden bouts of borrowings is often interpreted as a sign of financial stress.
We expect a range for today in EURUSD rate of 1.3100 TO 1.3180 (Yesterday, the pair drop low to 1.3095 before crawling back toward 1.3150 ranges)
We set limit BUY order for EURUSD at 1.3080
Stop loss at 1.3030
Target at 1.3140 and 1.3180
USDJPY: The Fed established these currency swap lines to ensure the Bank of Canada, Bank of England, Bank of Japan, European Central Bank and the Swiss National Bank have access to dollar liquidity during times of heightened funding stress. Sovereign debt problems prompted the creation of this program as fears rose about European banks’ ability to access short-term funding.
The facility was re-introduced in May 2010, and originally set to run out at the beginning of August last year. In June, the program was extended to last through Aug. 1, 2012.
We expect a range for today in USDJPY rate of 80.00 to 80.70
We BUY USDJPY at 80.30 (continued to hold)
Stop loss at 79.60
Target at 80.70-90
