AUDUSD: Sweeping risk aversion sent the Australian dollar sharply lower in Asian trade Wednesday as investors fret over the global economy and after weak domestic retail sales numbers fuelled bets for a rate cut in coming months.
Australian retail sales fell 0.1% to a seasonally adjusted A$20.54 billion in June from A$20.57 billion in May. Australia’s services sector continued to contract in July, with retail and wholesale trade the weakest areas, a performance gauge produced by an industry group published Wednesday shows.
Improving activity in accommodation, cafes, transport and property wasn’t enough to offset a sluggish consumer, with retailers complaining of cautious demand and a rush to take advantage of a surging exchange rate by buying cheaper product offshore online.
We expect a range for today in AUDUSD rate of 1.0690 to 1.0800 (The pair currently have a minor support at 1.0690, fail to support will head further toward 1.0570. Alternatively, will head toward 1.0800 then 1.0850.0)
EURUSD: Euro-zone governments have begun discussing a change to their permanent sovereign rescue fund that could raise the currency bloc’s total rescue loan capacity to nearly EUR1 trillion
It’s far from clear whether crucial governments such as Germany and the Netherlands, which have resisted committing more money to the euro zone’s emergency funds, will back the proposal.
Rescue loans to Greece, Portugal and Ireland will likely eat up around EUR200 billion of the EFSF’s planned EUR440 billion lending capacity by the end of June 2013. Add the EUR500 billion ESM capacity to what’s left from the EFSF, and there should be over EUR700 billion available to lend to Italy and Spain.
We expect a range for today in EURUSD rate of 1.4280 to 1.4420 (We set to short the pair at 1.4420, stop loss at 1.4480, target at 1.4330 to 1.4280)
USDJPY: Standard & Poor’s finds itself the center of attention Wednesday as it remains the lone major ratings company that hasn’t said ruled on its credit rating for the U.S. following Tuesday’s debt deal.
S&P, which along with Moody’s Investors Service put the U.S. government on a review for possible downgrade last month, was seen during the fractious debate over the debt ceiling as taking the most aggressive position of the ratings firms. In particular, it raised the prospect of a downgrade, when it repeatedly said that at least $4 trillion in deficit reduction was needed for the U.S. government to get its fiscal house in order.
The key question on many market participants’ minds is whether that shortfall will compel the firm to strip the U.S. of its coveted “AAA” rating or whether it will wait for further developments in defining the austerity measures before acting.
We expect a range for today in USDJPY rate of 76.80 to 77.40 (We still remain the same view that the pair likely to move sideways.)
