AUDUSD: The Australian dollar was locked in a narrow range Thursday in Asia trading, awaiting more direction and developments on the euro zone debt issues.
The Aussie was volatile overnight, initially rallying during U.S. trading and then sinking as Fitch warned about the credit quality of six large U.S. banks.
But in Asia trading, the Australian dollar calmed down as little news out of Europe settled trading. After reaching a low of US$1.0017 in the early afternoon in Sydney, the Australian dollar gained steadily for much of the late afternoon.
We expect a range for today in AUDUSD rate of 0.9970 TO 1.0080 (We continued to hold the pair where we bought at 1.000)
Bought AUDUSD at 1.0000 ranges
Stop loss at 0.9930
Target at 1.0070, 1.0130
EURUSD: The focus remained on the events of Europe overnight with global markets concentrating on the contagion element of the crisis that just won’t take no for an answer. The Euro fell to near 6 week lows of 1.3421 against the greenback but managed to regain some composure as the European Central Bank began ramping up the purchasing of Italian debt.
Italian 10yr yields dropped through 7 percent – an encouraging sign for market participants. Nevertheless, the artificial lowering of debt costs is largely seen as unsustainable in its current scale – it appears unlikely to be sustained given the barrage of negativity spilling from the region. Earlier, debt auctions in Spain and France also drew negative attention with respective yields considerably higher than recent Auctions.
We expect a range for today in EURUSD rate of 1.3400 to 1.3550 (Yesterday, we set the pair at 1.3415, the pair drop low 1.3421 before it move up to 1.3460 ranges)
Set Long for EURUSD at 1.3415 ranges
Stop loss at 1.3370
Target at 1.3470, 1.3550
USDJPY: A key US short-term funding market for banks is showing some signs of growing stress due to fears about the euro zone’s sovereign debt crisis.
These pressures, one of the first signs that the crisis across the Atlantic has moved to U.S. shores, were seen in the sharply higher cost incurred for obtaining funding on the last day of this year when the transactions are backed by mortgage-backed securities.
Traders in the securities repurchase markets, or repo, market noted that the spread between rates on funds backed by MBS and those involving Treasury bond collateral were now at wide levels and that this widening effect had taken root well before it normally does as the market prepares for traditional year-end shortages known as the “turn.” The repo market allows banks to borrow cash with securities as collateral or lend out cash to obtain securities.
We expect a range for today in USDJPY rate of 76.80 to 77.70 (We bought one below 77.00 level and one at 77.15)
Long USDJPY at 77.00 ranges (Currently holding two trades)
Stop loss at 76.50
Target at 77.70, 78.30
