AUDUSD: The Australian dollar was sharply lower late Monday, despite a run of positive domestic data that brought into question the steep Reserve Bank of Australia interest-rate cuts currently priced in by traders.
Dramatic political developments in Europe at the weekend–with the election of a Socialist President, Francois Hollande, in France and a stinging rejection by voters of the country’s two incumbent parties in Greece–weighed on growth currencies like the Australian dollar as investors worried they could spur fresh debt woes for the European Union.
We expect a range for today in AUDUSD rate of 1.0150 to 1.0270 (We bought AUDUSD at 1.0155)
We set BUY STOP for AUDUSD at 1.0155
Stop loss at 1.0155 (from 1.0100)
Target at 1.0210 and 1.0260
EURUSD: The European Commission hinted Monday that it could give Spain further leeway to meet budgetary deficit objectives given a deteriorating economy and troubled banking system.
Madrid has already been given leeway by euro-zone partners to reduce its deficit this year to 5.3% of gross domestic product–as against the 4.4% of GDP initially decided, from the 8.5% logged last year.
But it still has to hit the target of 3% next year–the notional EU limit flouted by most since the financial crisis–and many economists already forecast Spain to fail as it struggles under deep recession, sky-high unemployment, and a rake of bad debt slewing around its banks.
We expect a range for today in EURUSD rate of 1.300 TO 1.3130 (We set limit BUY order for EURUSD at 1.3080)
STAND ASIDE
USDJPY: Deutsche Bank cut its yen forecasts Monday, saying the uptrend for the Japanese currency “is over” based on valuations and a shift in the Bank of Japan’s monetary policy, with the yen set to weaken through next year.
The world’s biggest currency-dealing bank raised its end-year dollar forecast to Y82 from Y75 and its end-2013 forecast to Y90 from Y85. Around 0610 GMT the dollar was at Y79.79.
The bank said dollar/yen has fallen to 20% below the level suggested by purchasing power parity, and while it has overshot by more than that in the past, this is likely the limit of the overshoot for this cycle.
We expect a range for today in USDJPY rate of 79.80 to 80.70
We BUY USDJPY at 80.30 (continued to hold)
Stop loss at 79.60
Target at 80.70-90
