AUDUSD: The Australian dollar has continued to trade in wide ranges as underlying capital flows and risk appetite remain extremely volatile. The currency briefly dipped to 14-month lows below 0.94 against the US dollar before recovering to near 0.98 as risk conditions stabilised.
The PMI data did show that the services-sector index remained above the 50 level for September, but there was a further contraction for the manufacturing and construction sectors. The latest retail sales data was stronger than expected.
Australian dollar volatility is likely to remain higher in the short-term. The international and domestic risk profile suggests further net losses are likely.
We expect a range for today in AUDUSD rate of 0.9700 to 0.9850 (We expect the pair to retreat to 0.9700.
Short at 0.9780
Stop loss at 0.9830
Target at 0.9730 and 0.9660 AND 0.9600
EURUSD: The Euro-zone leaders at least have some form of strategy to navigate the extremely turbulent waters, but the underlying outlook will remain extremely vulnerable in the short-term. The Eurowas subjected to further selling pressure during the week before staging a recovery as the currency resisted further losses and risk conditions stabilised.
Euro-zone leaders will look to bolster the banking sector in the short-term while keeping Greece afloat for a little longer. This strategy will be extremely dangerous, especially as there are already very important stresses within the banking sector. There will be strong pressure for the ECB to lower interest rates to underpin demand. There is still a high risk that Euro-zone leaders will not be able to contain the contagion effect, especially given the important political tensions.
There was a continuing lack of confidence in Greece with strong expectations of a medium-term default, especially after any decision on the next loan payment was delayed until November. The Greek government stated that it had enough funding until mid-November, but there were still strong expectations of a much bigger private-sector debt write-down as part of a repackaged rescue programme.
We expect a range for today in EURUSD rate of 1.3370 to 1.3530 (We properly see the EUR deep further down toward 1.3320-40 before further uptrend will be taken place.
Set limit BUY order at 1.3320
Stop loss at 1.3260
Target at 1.3360, 1.3420 and 1.3570
USDJPY: The short-term dollar outlook will continue to be influenced strongly by trends in risk appetite, the banking sector and degrees of confidence in the global economy. There is still likely to be a net flow of funds into the US currency, especially if emerging markets weaken further. There will continue to be a lack of confidence in the US fundamentals and there will be speculation over additional Federal Reserve quantitative easing if there is evidence of a further deterioration in growth. On a short-term view, the dollar should be able to maintain a firm tone given international credit-related stresses.
The globaloutlook will continue to have an important short-term yen impact. An underlying lack of confidence will continue to curb potential yen selling and there is also still the threat of capital repatriation as Japanese institutions move funds out of the Euro-zone. The dollar is not in a good position to gain strong yield support, especially with persistent speculation over further Federal Reserve quantitative easing. Equally, there will be the threat of intervention which will deter speculative buying. Stalemate could be the dominant short-term market feature with the dollar eventually gaining support.
We expect a range for today in USDJPY rate of 76.50 to 76.90 (We continued to hold our trade; we expect the pair to move side-way in short term.
Entry at 76.60
Stop loss at 76.10
Target at 76.90, 77.20 and 77.60
