AUDUSD: Australia’s economy is well placed due to its proximity to Asia to ride out the worst of the global slowdown, but the downside risks to the world growth are now more pronounced and the risk of contagion from a Greek default is significant. While Greece, Ireland and Portugal make up only a small part of the world economy, Swan warned a default would have consequences across the globe.
The Reserve Bank of Australia kept interest rates on hold at 4.75% and flagged a much more cautious assessment of the world economy, stemming from Europe’s debt crisis, Japan’s massive earthquakes and signs of a slowing U.S. economy.
Despite a somewhat fragile mood amongst investors the Australian dollar managed to push higher in a thin Asian session Wednesday as dealers await local jobs numbers due on Thursday.
With the odds on a near-term rate hike from the Reserve Bank of Australia diminishing, traders say a weak jobs number for June would effectively wipe out any lingering bets on a hike. Economists expect 15,000 jobs were created in June, keeping the unemployment rate steady at 4.9%.
We expect a range for today in AUDUSD rate of 1.0650 to 1.0730 (As mentioned yesterday that the pair likely to hit the ground. We avoid trading pair today and watch the unemployment data come out later on today to determine the direction)
EURUSD: Some International Monetary Fund officials–including executive directors on the Fund’s board–fear the Greece loan program will ultimately prove unsustainable.
Despite those concerns, the IMF board is expected to approve the next tranche of loans to Greece to stem the sovereign debt crisis from spilling over into the rest of the euro zone. The IMF’s new managing director, Christine Lagarde, the former French finance minister who helped to negotiate financing for Greece, said the sovereign debt crisis was her top priority and the board would consider the loan Friday.
Economists say the problem in Greece is not simply a matter of shoveling more money into the economy to keep it running. Simply put, many question whether Greece can ever grow enough to pay back all of its debt. Adding more debt–through the joint IMF and European loans that are expected to balloon in coming months–only delays a restructuring until European banks have enough cash on hand to bear the cost without failing.
We expect a range for today in EURUSD rate of 1.4250 to 1.4380 (As mentioned yesterday that the pair likely to hit 1.4330 and possible heading toward 1.4270. Due to Interest rate announce later in the day, the pair will have a little volatile. We expect the pair to move toward 1.4360 before rate decision, but then another wave might sent it down toward 1.4270 if the interest rate unchanged.)
USDJPY: President Barack Obama sidestepped a question Wednesday on whether the 14th amendment would allow the federal government to issue more debt if Congress refuses to raise the country’s legal borrowing limit, instead saying that he expects to strike a deal with lawmakers in the coming weeks.
While emerging market currencies and debt posted mixed results Wednesday as investors sought the safety of U.S. Treasurys and the dollar after a ratings downgrade for Portugal and an interest-rate hike in China.
Investors had a flood of difficult news to contend with. China’s central bank said Wednesday it will raise its benchmark deposit and lending rates by 25 basis points each, resurrecting worries about slower growth in that economy. In the U.S., data showed the nonmanufacturing sector expanding at a slower rate in June.
While emerging nations are still growing well relative to the developed world, there is some worry that a slowdown in global growth driven by the major economies might hurt them as well. Those concerns added to renewed euro-zone jitters, after Portugal received a blow on Tuesday as Moody’s Investors Service downgraded its sovereign-debt rating to junk status.
We expect a range for today in USDJPY rate of 80.60 to 81.20 (Yesterday, we shorted the pair at 81.10, we decide to close out the trade, those who wish to hold, please bring stop loss to entry level, and target between 80.70 to 80.30)
