AUDUSD: The Australian dollar slid under the weight of another stock market sell-off in the U.S., but pared some of its losses late in Asia action Thursday.
Australian bonds rallied hard on both ends of the curve, reflecting a global push into safer assets. Setting off the move was heightened worries about the debt situation in Europe as well as about U.S. growth prospects, which saw the Dow Jones Industrial Average plunge 519.83 points, or 4.62%.
However, the sell-off in risk assets abruptly turned around late in Asian morning trade as the daily fix of the yuan saw the Chinese central bank guiding its currency for the third time this week to a level stronger than market participants had expected. This led to a rally in regional stocks and U.S. stock futures that took risk currencies like the Australian dollar with it.
This despite a surprisingly weak jobs report locally that saw Australia’s unemployment rate for July rise to 5.1% from 4.9% the month before.
We expect a range for today in AUDUSD rate of 1.0270 to 1.0400 (The Aussie are moving toward 1.0350 as we mentioned yesterday. The pair will have a minor resistance at 1.0380 and possible sent back down toward 1.0200 ranges)
EURUSD: Major foreign central banks didn’t tap a facility with the Federal Reserve designed to provide short-term dollar funding to banks in the latest week, even as euro-zone banks found it difficult to borrow in dollar-based money markets.
The fact that no transaction from the Fed’s currency swap line–which it set up with the European Central Bank and others during the 2008 financial crisis to ease dollar scarcity–could be a sign that financing challenges for euro-zone banks, though exacerbated, aren’t spinning out of control.
Worried about the contagion from the euro-zone’s sovereign debt crisis have heightened in recent days. Stocks of big banks in France, Spain and Italy have sold off due to their large exposure to bond holdings in Greece and several other euro-zone nations.
We expect a range for today in EURUSD rate of 1.4120 to 1.4300. (As our view yesterday that the pair likely to hit north, we set limit to buy at 1.4060-1.4120 ranges, stop loss 60 pips, and target at 1.4210, 1.4260 and 1.4310)
USDJPY: The size of the U.S. Federal Reserve’s balance sheet inched up in the latest week as the central bank maintained a large portfolio of assets following the end of its economic stimulus.
The Fed’s asset holdings in the week ended Aug. 10 grew slightly to $2.876 trillion, from $2.871 trillion a week earlier, it said in a weekly report Thursday. The Fed’s holdings of U.S. Treasury securities grew to $1.645 trillion on Wednesday, from $1.641 trillion a week earlier.
The Fed’s portfolio has more than doubled since the financial crisis as the central bank bought mortgage and government bonds to keep interest rates very low and spur the economy. A program to buy $600 billion in U.S. Treasurys ended in June.
Central bankers met this week and decided they would keep rates near zero into 2013. The economy, beset with high unemployment, has slowed sharply this year despite the stimulus.
We expect a range for today in USDJPY rate of 76.50 to 77.20 (we continue to hold our trade where we bought at 76.80 with stop loss at 76.20 and target at 77.20, 77.80 and 78.20)
