AUDUSD: The Australian dollar was higher late Friday after Reserve Bank of Australia Governor Glenn Stevens gave no hint of a policy shift toward emergency interest rates cuts, which continue to be priced in by financial markets.
In testimony to a government economics committee Stevens was instead measured saying there are reasons to be cautious about the world economy and added that inflation risks look more balanced. But at no time did Stevens prepare the way for cuts.
It is clear that the central bank has moved away from a tightening bias, however anyone calling for a rate cut by the RBA in September will no doubt now push out that call to October, although it seems the RBA’s wait-and-see mantra is still very much in play.
We expect a range for today in AUDUSD rate of 1.0515 to 1.0615 (We decide to short AUDUSD at 1.0588 ranges stop loss at 1.0620, target downside at 1.0535, 1.0480 and 1.0450.)
EURUSD: Investors abandoned the beleaguered euro last week, cutting their net long positions in the common currency by 62%, to just $0.5 billion, as of Aug. 23
Speculators held a net 2,539 contracts betting that the euro will strengthen against the dollar, the data showed.
The market in aggregate is pessimistic on the dollar’s outlook, with traders holding a net short position in the dollar against every major currency, totaling $17.7 billion. That bearish view has been a constant recently as a drumbeat of poor economic data out of the U.S. has added to the global worries about sovereign debts and fiscal problems in the developed world.
We expect a range for today in EURUSD rate of 1.4430 to 1.4520 (We short the pair at 1.4480 ranges, stop loss at 1.4560, target at 1.4430. 1.4380)
USDJPY: Central bankers don’t consider the risk of moral hazard a reason for inaction in the face of recession. But they recognize that their actions–including cutting interest rates, pumping money into the financial system or bailing out troubled banks–can produce undesired market volatility and even make some conservative investors pull back from markets that appear frightening, leaving trading to the risk-takers.
On the other hand, the yen which has continued to strengthen despite increasing attempts by the Japanese government to weaken it, investors kept their net long position essentially unchanged at $7.7 billion, or 47,139 contracts.
We expect a range for today in USDJPY rate of 76.20 to 77.00 (Last week, we did short the pair at 77.20 and decide to close out at 76.90. We now decide to set limit BUY order at 76.30, stop loss at 75.70, and target at 76.80 and 77.10)
