AUDUSD: The Australian dollar was higher late Wednesday after U.S. President Barack Obama said overnight progress was being made on resolving an impasse in Washington over the U.S. debt ceiling
Strong U.S. corporate earnings reports also lifted sentiment in markets with Wall Street ending sharply higher Tuesday, with the mood flowing through to strengthen equities across Asia. Australian shares recorded their biggest one-day rise since Dec. 2.
More evidence of a slowdown in the Australian economy emerged Wednesday with a leading index of economic activity crashing to its lowest level since September 2009, growing at an annualized rate of just 1.6% in May compared with growth of 2.2% in April.
The index comes as financial markets cut expectations of a near-term rise in interest rates. The Reserve Bank of Australia said Tuesday it expects to cut its forecast for economic growth in 2011, highlighting soft consumer demand and a slow recovery for the coal industry from floods at the start of the year.
We expect a range for today in AUDUSD rate of 1.0690 to 1.0770 (We continue to set our short price at 1.0770, stop loss at 1.0850, target at 1.0690 to 1.0650)
EURUSD: Italy’s current account deficit narrowed to EUR5.1 billion in May compared to EUR5.5 billion in May 2010, the Bank of Italy said Wednesday.
For the 12 months ending in May, the euro zone’s third-largest economy ran a current account deficit of EUR60.9 billion, up from EUR36.1 billion in the same period a year earlier, the central bank said.
The deterioration in the 12-month figure stemmed entirely from a large trade deficit in goods, according to the central bank’s data. As Italy typically runs a trade surplus in manufactured goods that reflected the upward trend in the price of imported energy over the period.
Fears of unsustainable sovereign debt levels in some euro-zone countries have driven Italian government bond yields up in recent weeks. But the key short-term market yield on two-year Italian bonds declined to 4.1% in early Wednesday trading from 4.19% late Tuesday.
We expect a range for today in EURUSD rate of 1.4150 to 1.4235 (The pair currently testing its strength at the 1.4230 region. Fail to break through will be heading down toward 1.4150 and possible 1.4080. If you wish to place a Short trade at the current market price, stop loss should be apply 30 pips which is 1.4260)
USDJPY: Dollar/yen options eased slightly Wednesday in Asia amid little movement in the underlying spot rate and no signs of wild fluctuations in the near term.
Investors’ risk aversion has weakened after the U.S. made progress in its debt-ceiling negotiations Tuesday, reducing demand for options to hedge against sharp falls in the dollar/yen rate.
Still, caution before the European Union’s emergency debt crisis summit on Thursday has prevented volatilities from falling much. One-month option volatilities are unlikely to fall much below 9%
One market participant bought a one-week dollar-call/yen-put options contract at a strike price of Y80.00 and implied volatility of 8.8%, while another bought a three-week dollar-call/yen put option at Y80.00 with implied volatility of 9.0%.
We expect a range for today in AUDUSD rate of 78.50 to 79.00 (Since the spot rate has failed to move much, there was profit-taking on yen-call options. We set to entry LONG at 78.50, stop loss at 77.80, target at 79.10 toward 80.00)
