AUDUSD: Australian Treasurer Wayne Swan insisted Saturday the country’s economy was strong following a slump in consumer confidence and retail spending that left some analysts predicting an interest rate cut.
Strong Asia-driven demand for its mining exports helped Australia emerge from the global downturn as the only advanced economy to dodge recession but high interest rates and offshore debt worries are rattling the public.
Consumer confidence slumped 8.3% this month to recession levels. Australia’s economy suffered its worst contraction in 20 years in the first three months of 2011 after flood and cyclone emergencies damaged mines and crops, with growth shrinking 1.2% on-quarter.
Major Banks tipping the Reserve Bank would likely begin slashing interest rates to buoy confidence, tipping a 25-point cut in December to 4.50% and further reductions to 3.75% by the end of 2012.
We expect a range for today in AUDUSD rate of 1.0540 to 1.0660 (We set a limit BUY order at 1.0540, stop loss at 1.0480, target at 1.0620-80)
EURUSD: Sovereign debt exposure to their own government helped drag down Greek banks in Friday’s stress tests conducted by European regulators of the EU’s banking sector, with two banks failing the tests and even those that passed disclosing significant sovereign liabilities.
Greek default as a consequence of euro-zone efforts to prop up the country’s battered economy, but that private-sector involvement in a new aid package is crucial. European Central Bank has criticized those efforts, fearing that if ratings agencies view the program as even a “selective” default, it could deeply unsettle financial markets.
Euro-zone leaders are preparing to meet in Brussels on Thursday to set the broad outlines for a new aid package for Greece. Merkel said the summit would only be worthwhile if leaders can agree to a concrete outline for that new program.
We expect a range for today in EURUSD rate of 1.04040 to 1.4150 (We continue to expect the pair further south and possible heading toward 1.4050 and 1.4000. We stay out the market for now)
USDJPY: US Confidence in the economy will remain fragile in the short-term with fresh concerns over the outlook for consumer spending, especially after the much weaker than expected employment report released at the end of last week.
US currency can still gain some net support on defensive grounds, particularly with the Euro-zone extremely vulnerable, but the dollar will find it difficult to advance very far.
There will be concerns over the Asian growth outlook which will tend to curb selling pressure on the Japanese currency and the dollar is not well placed to gain on yield grounds. There will also be the potential for capital repatriation from Europe given stresses within the European financial sector. There will be increased concerns over competitiveness. It will be very difficult to gain G7 backing for intervention, but there will certainly be speculation over Bank of Japan action which will deter speculative yen buying.
We expect a range for today in USDJPY rate of 79.50 to 79.50 (We continue to set limit BUY order for USDJPY at 78.50, stop loss at 77.70, target at 80.15 to 80.35)
