AUDUSD: The Australian dollar surged Friday, at one point hitting its highest level in more than a month, as investor confidence grew after European leaders introduced an outline of a plan to contain the region’s debt crisis.
Still, the Australian dollar gains did reverse somewhat as the session wore on, with the currency still dependent on an upcoming interest rate decision by the country’s central bank. Economists were largely split on what the Reserve Bank of Australia would do on Tuesday, with a weak reading on inflation earlier in the week giving the bank scope to cut rates.
We expect a range for today in AUDUSD rate of 1.0620 to 1.0735
Short position at 1.0700 (previously set to short at)
Stop loss at 1.0750
Target at 1.630, 1.0560, 1.0500
EURUSD: Emerging markets are unlikely to contribute cash to help bail out Europe without a stronger commitment that the European Central Bank will be used to contain the euro-zone debt crisis.
Euro-zone officials plan to create a new bailout facility, a special-purpose vehicle they hope could be funded by sovereign wealth funds, country loans and private markets as one of the ways to stem their debt crisis.
The freed up cash means that the largest European economy’s ratio of debt to gross domestic product is expected to drop from 83.7% to 81.1%.
We expect a range for today in EURUSD rate of 1.4060 TO 1.4220
Short at 1.04200 ranges
Stop loss at 1.4250
Target at 1.4130, 1.4060
USDJPY: Speculative investors more than doubled their bets that the yen will appreciate against the dollar, effectively daring the Japanese government to make good on its threats to sell the yen and weaken the currency.
Traders bet a net $8.9 billion that the yen will rise, or 54,279 contracts, as of Oct. 25. That was a 104% increase from the prior week according to the Commodity Futures Trading Commission’s weekly report on the commitments of traders, released Friday.
The market’s yen positioning indicates traders don’t think the government’s strident attacks on the yen’s strength will have much impact on the exchange rate. The Japanese government has threatened to intervene in currency markets again to drive down the yen, although its prior attempts this year have not been successful in containing the currency’s rise.
We expect a range for today in USDJPY rate of 75.70 to 76.40 (We continued to hold our trade, since we last bought at 76.20)
We bought the pair at 76.20
Stop loss at 75.30
Target at 76.60, 76.90, 77.20
