AUDUSD: The Australian dollar found solid buying support on dips and pushed to two-month highs near 1.0450 before edging slightly weaker. There were gains for global equity markets and a recovery in commodity prices which helped underpin the Australian currency. There were some further expectations of an underlying shift in reserves into the Australian dollar, especially with a lack of confidence in other major currencies and the currency moved to a four-month high above 1.04 against the US currency.
The Reserve Bank was more confident surrounding the growth outlook in the latest minutes which also provided relief for the currency with reduced expectations of further near-term interest rate cuts. There were still important uncertainties surrounding the Chinese economy which restrained buying to some extent.
We expect a range for today in AUDUSD rate of 1.0300 to 1.0400 (The Australian dollar will find it difficult to sustain any further significant advances given unease surrounding domestic and regional growth trends.)
STAND ASIDE
EURUSD: The Euro-zone crisis will continue to dominate in the short-term. There will be some relief if there is agreement on Spain’s support package for the banking sector. Nevertheless, the underlying rend in bond yields will remain extremely important and the widening divergence within the markets suggests that underlying stresses are increasing as capital flows out of peripheral economies. Unless this trend can be reversed, there will be a very high risk of terminal stresses within the Euro area and growing pressure for a split. This speculation may perversely help underpin the Euro with volatility set to increase. If the Euro area does hold together, there will be pressure for a more aggressive ECB stance.
We expect a range for today in EURUSD rate of 1.2100 to 1.2200 (Last week, we shorted the pair at 1.2285, the pair is now at 1.2120, hit both target at 1.2215 and 1.2165)
We set BUY STOP for EURUSD at 1.2155
Stop loss at 1.2115
Target at 1.2215 and 1.2265
USDJPY: There has been further evidence of a slowdown within the US economy with a series of generally disappointing data, especially for retail sales. Federal Reserve Chairman Bernanke also took a generally downbeat tone in his congressional testimony which will increase speculation that the Fed will move to sanction additional quantitative easing. Global considerations will remain very important and the US currency should still gain protection from fears surrounding the international outlook. Defensive demand for the dollar is liable to be enhanced by reduced pressure for reserve diversification away from the US currency.
We expect a range for today in USDJPY rate of 78.00 and 79.00
STAND ASIDE
