AUDUSD: The Australian dollar was sharply weaker late Friday caught up in a global market maelstrom fanned by a massive fall in U.S. stocks Thursday amid fears the U.S. economy is slowing quickly.
Australian 3-year government bond prices posted their biggest one-day rise since 1991 as investors rushed en masse to the safety of risk free assets. Australian stocks fell 4%, the biggest drop in two and half years.
The RBA could move to cut interest rates if global debt markets become dislocated and/or global equity markets drop sharply, pulling commodity prices lower
Earlier Friday, the RBA announced it had cut Australia’s growth forecasts for 2011 but it expects the economy to spring back in 2012. The economy is expected to grow by 2.0% in 2011 (year average) compared to its forecast in May of 3.25% growth. Inflation is expected to remain a nagging problem, lurking at or above 3.0% for some year.
We expect a range for today in AUDUSD rate of 1.0350 to 1.0480 (Last week, we bought the pair at 1.0430 ranges, the pair reaches high at 1.0520, those who have not sold out, should consider entry at the current level 1.0380 ranges, with stop loss at 1.0320, target upside at 1.0430, 1.0480 and possible 1.0640)
EURUSD: The European Central Bank said Sunday that it would “actively” renew euro zone bond purchases after Italy and Spain announced new measures and reforms to bolster their economies.
The ECB governing council welcomed additional steps by Rome and Madrid and said it considered their “decisive and swift implementation by both governments as essential in order to substantially enhance the competitiveness and flexibility of their economies, and to rapidly reduce public deficits.”
Fears of a global meltdown, which some see as potentially worse than the collapse in late 2008, sent vacationing European leaders into a flurry of phone calls Sunday between Berlin, London, Paris and Washington.
We expect a range for today in EURUSD rate of 1.4250 to 1.04430 (Last Friday, we suggest went long at 1.4060 ranges with target at 1.4200. The pair went right up at 1.4430 before know back to 1.4300 levels. At this stage, we would prefer to short rather than long, we set limit order to short at 1.4430, stop loss at 1.4490, target at 1.4330, 1.4280 and 1.4240)
USDJPY: For the first time since rating the U.S. 70 years ago, Standard & Poor’s on Friday cut the nation’s triple-A rating to AA+, citing a rising debt burden and political risk. The move came days after Congress agreed measures to raise the nation’s debt ceiling and implement new spending cuts.
Economists fear that if the U.S. economy slides back into recession, policy makers won’t have the fire power in the budget or through interest rates to bring it back to life. The prospect of a sustained slowdown in the U.S. would have consequences for Europe which is in the midst of its own debt crisis.
We expect a range for today in USDJPY rate of 78.00 to 80.00 (Bullish outlook: we expect the pair heading north even though the rate has been cut. We strongly believe the pair should head 79 and possible 80 within this week)
