AUDUSD: Remarks by U.S. Federal Reserve Chairman Ben Bernanke that policy makers have some stimulus tools still open to them helped the Australian dollar rally against the greenback in quiet Asian trade Monday
In Australia, building approvals numbers, retail trade and capital expenditure plans are all down for release ahead of the central bank’s monthly board meeting next week, when it is expected to hold rates steady at 4.75%. If the numbers show any signs of sharp deterioration, analyst’s expectations of a rate cut by year end will likely grow, with swaps traders pricing in some 128 basis points of easing over the next year.
The two speed Australian economy will likely be in full view this week. We expect Australian retail sales to be weak reflecting consumer caution while we expect capital spending to be strong reflecting the mining boom.
We expect a range for today in AUDUSD rate of 1.0620 to 1.0720 (We expect the pair to continue to head north. Yesterday, we test the strength of the pair with our 30 pips stop loss. We will short the pair once it above 1.0700 levels, and target 1.0630 and 1.05800
EURUSD: the euro held steady above the $1.45 level against the dollar despite comments by International Monetary Fund Managing Director Christine Lagarde, who warned that some European banks need to be recapitalized. The single currency continues to ignore ongoing uncertainty surrounding the second bailout for troubled Greece, as market participants instead remain fixated on developments in the U.S.
Historically euro zone governments have taken very different approaches to tax and spending, one of the root causes of the sovereign debt crisis now endangering the currency bloc. The 2008 financial crisis brought wide recognition of the need for more coordination of economic policy.
We expect a range for today in EURUSD rate of 1.4450 to 1.4530 (Yesterday, we shorted the pair at 1.4490, with stop loss at 1.4460, we continue to hold our short position, target remain the same at 1.4430 and 1.4380.)
USDJPY: the other traditional safe-haven currency, the yen, traded sideways against the dollar at around Y76.65 despite further steps announced by the Japanese government to help exporters and small firms that are suffering from the super-strong yen. The yen was also not affected by Finance Minister Yoshihiko Noda’s success in the ruling Democratic Party of Japan’s leadership contest.
The fund lowered its forecast for expansion of U.S. gross domestic product this year to 1.6% from a 2.5% view issued in June, and lowered its outlook for next year to 2% from 2.7%
We expect a range for today in USDJPY rate of 76.30 to 77.20 (We set order to buy at 76.30, stop loss at 75.80, and target at 76.80 and 77.10. Alternatively, we set to short at 77.20, stop loss at 77.80 and target at 76.80 and 76.50)
