AUDUSD: The Australian dollar sunk and bonds rallied Tuesday as a U.S. budget committee failed to reach a U.S. deficit-cutting plan.
The development capped a risk-off global session that saw euro-zone yields and funding costs climb, with stocks across the world facing selloffs. In Australia, the news was particularly detrimental to the local currency, which slid to its lowest level since Oct. 10 against the U.S. dollar.
While the currency sank, Australian bonds rallied, particularly on the short end of the curve. The risk-off sentiment was a boon to short-dated debt across the world, especially in countries perceived as having strong economic fundamentals, such as Australia.
We expect a range for today in AUDUSD rate of 0.9770 to 0.9880
BUY at the market price for AUDUSD at 0.9830 ranges
Stop loss at 0.9760
Target at 0.9880
EURUSD: Europe’s sovereign-debt crisis is fast accelerating into economists’ worst nightmare: a new financial meltdown that reverberates around the globe and a decade-long recession for the euro zone. Earlier this month, world leaders at a summit of the Group of 20 industrialized and developing nations asked the IMF to create the new credit line to help bolster the fund’s crisis management.
The new lines could ostensibly used for countries such as those in Eastern Europe that are facing the fallout of the sovereign-debt crisis in Greece, or even core nations such as Italy or Spain that vow to strengthen their economic policies.
Although The International Monetary Fund said Tuesday it approved two new lending tools that can better help countries cope with economic crisis.
A country can now borrow up to ten times its contributions to the IMF to help pay its bills.
We expect a range for today in EURUSD rate of 1.3420 to 1.3550
Set LONG at 1.3420
Stop loss at 1.3360
Target at 1.3470, 1.3550
USDJPY: The U.S. Federal Reserve outlined plans for annual tests of the financial strength of the largest U.S. banks, including their ability to withstand a European financial shock.
When the stress tests are complete, the Fed said it will publicly disclose its estimates of bank revenue and losses and estimates of bank capital ratios for the 19 largest firms.
The Fed said the banks would have to test their ability to withstand a scenario of a new recession beginning at the end of this year, with an increase in unemployment to above 13% in early 2013 and “a sizable shortfall in U.S. economic activity and employment, accompanied by a notable decline in global economic activity.”
We expect a range for today in USDJPY rate of 76.80 to 77.70 (We bought one below 77.00 levels and one at 77.15 – Continued to hold our trades)
Long USDJPY at 77.00 ranges (Bought last week)
Stop loss at 76.50
Target at 77.70, 78.30
