AUDUSD: The Australian dollar was higher late Wednesday amid rising optimism that Greece’s parliament will approve austerity measures needed to steer the country clear of bankruptcy.
A clash of wills between Australia’s central bank and broad swathes of the country’s business community could intensify in coming months as interest rates likely are raised another notch.
It has become the norm at about this stage of the economic cycle to begin heaping scorn on the Reserve Bank of Australia as it takes steps to cool off economic activity and preserve the integrity of its inflation target of 2%-3%. Interest rates in Australia already are among the highest in the developed world after the RBA raised rates seven times since late 2009.
We expect a range for today in AUDUSD rate of 1.0610 to 1.0730 (Yesterday we place a short and it hit our stop loss for 60 pips. The pair might head toward 1.0720-40 regions, before it can head down. We have to carefully watch the Greece judgment day.)
EURUSD: The European Commission risked the wrath of the EU’s biggest economies on Wednesday by unveiling a proposal for a minimum 5% real-term increase in its total spending plans for the 2014-20 period. In budget proposals that quickly drew fire from the U.K., the European Commission also opted to push for a EUR30 billion financial transactions tax that the commission hopes to see in place by 2018.
The commission’s proposals come to the backdrop of austerity drives by a number of EU nations and the economic crisis in Greece. Last December, the five biggest contributors to the EU’s budget urged a freeze on spending in real terms. Instead, the EU’s executive proposed big increases in spending on infrastructure, research and development, education, climate change and poorer regions. It called for a modest increase in spending for on the Common Agricultural Policy system of subsidies, a move that will assuage France.
We expect a range for today in EURUSD rate of 1.4320 to 1.4470 (Yesterday, we place a short trade at 1.4445, and our target was 1.4330, it hit our target and fall further down toward 1.4318 and move back to where it was. We carefully watch whether the pair has any resistance at 1.4450-70 areas, if it could break through, will head toward 1.4600-30. Other than that, it will drop back to 1.4300 or 1.4260. If you wish to replace a short trade, make sure stop loss just around 1.4470 levels)
USDJPY: Credit ratings on government entities closely tied to the U.S. government will move in lockstep with changes made to the sovereign rating, Moody’s Investors Service said late Wednesday.
The ratings agency stressed that their latest report does not change the likelihood of a U.S. sovereign ratings downgrade from the warning first issued on June 2.
Then, Moody’s said it expected to put the U.S. on review for a possible ratings cut if Congress fails to make progress on increasing the debt ceiling by mid-July. Any subsequent technical default in early August would result in an actual downgrade, most likely to double-A status, Moody’s said.
Entities with strong links to the U.S. as a sovereign include many state and local governments that currently hold triple-A ratings. They “could be vulnerable to credit pressure where sovereign credit linkages are potentially strong. Moody’s added that U.S. corporations, financial institutions and structured finance transactions not associated with the U.S. sovereign rating would generally not be affected to a one- or a two-notch sovereign downgrade because the credit linkages to the U.S. government are “sufficiently weak.”
We expect a range for today in USDJPY rate of 80.30 to 81.00 (Yesterday, we place a Short trade at 81.05, our target was 80.70-30, the pair went further down toward 80.55, we closed at 80.65. We expect the pair to move further south and possible heading back toward 80.00 regions.)
