AUDUSD: The Australian dollar rallied sharply Thursday as Moody’s decision to put its U.S. debt rating on review for possible downgrade hampered that country’s currency at the benefit of most others.
The move in the Australian dollar was particularly noteworthy in that it was accompanied by gains for Australian bond prices. Typically, given the risk-sensitive nature of Australia’s currency, the country’s bonds and currency move in opposite directions.
Still, some of the big rally in the Australian dollar late in New York action that continued early in Asia stalled as the session wore on, with significant risks upcoming in Europe and technical factors at play.
We expect a range for today in AUDUSD rate of 1.0670 to 1.0770 (Australian dollar reverse from an intraday high of US$1.0797. At 0620 GMT, the Australian dollar was at US$1.0737, up from US$1.0634 late Wednesday. Yesterday, we suggested closing out the trade at 1.0770 levels. We would prefer to stay out of this level; we expect the pair continued to further south, 1.0670 and then 1.0630 ranges)
EURUSD: The International Monetary Fund issued a dire warning about the poor state of Europe’s banks Thursday, just a day before officials plan to release details on how well banks there are suited to withstand financial shocks. The IMF said Europe’s banks remain insufficiently funded and it is “critically important to put in place and immediately publicize credible plans” to deal with failing banks.
European officials are still negotiating exactly how it plans to finance an estimated 104 billion euro ($147 billion) funding gap for Athens. Uncertainty, exacerbated by political divisions within the euro zone, is continuing to roil Europe’s sovereign-debt markets. The crisis is now threatening to target one of the continent’s largest economies, Italy. Ministers were scheduled to meet Friday at an emergency summit on Greece’s debt crisis, but now appear to be delaying it until next week as officials continue to squabble over how to include private bondholders in the program.
Although IMF officials publicly say they expect the latest round of stress tests to be more vigorous than previous analyses, privately some fund officials expressed skepticism they will prove effective enough to drive the full recapitalization that is needed.
We expect a range for today in EURUSD rate of 1.4050 to 1.4200 (Look like we missed out a shorted trade by 15 pips, we set to short at 1.4290, the pair reached high 1.4275, currently sitting at 1.4145, we expect the pair continue to head further south toward 1.4000-40 and possible reverse back. We stay out of the market today)
USDJPY: The U.S. Treasurys market’s pivotal global role as a safe refuge for foreign investors could be diminished if the U.S. defaults on a debt payment and loses its cherished triple-A credit rating.
Some bond-fund managers warn that ebbing confidence among foreign investors–a key source of funding for the U.S. government–could push up borrowing costs for U.S. consumers and businesses and would undermine the dollar’s status as the world’s premier reserve currency over the longer term.
Foreign investors own about 50% of the $9.31 trillion of marketable U.S. government securities outstanding, according to Treasury Department data.
The political impasse on a deficit-reduction deal, which is key for lawmakers to raise the nation’s debt ceiling, has dragged on for months even as the clock ticks toward an Aug. 2 deadline. On Wednesday, two major credit-rating agencies warned that the U.S. triple-A rating would be downgraded should the country default on debt payments next month.
We expect a range for today in USDJPY rate of 78.80 to 79.45 (Yesterday, our limit order was 78.50; we bought the pair at that level and closed out at 79.20, booked 70 pips. The pair reaches low/high was 78.47/79.54. We expect the pair might move further north toward 80 levels, if you intend to hold, trial stop loss to entry level to protect your trade.)
