AUDUSD: The Australian dollar pushed higher Tuesday, lifted by a better-than-expected report on manufacturing in China and reassuring comments from a member of Australia’s central bank.
Australian bonds fell, particularly on the short end of the curve, in large part due to comments by the Reserve Bank of Australia’s deputy governor, Ric Battellino, who said inflation remains a big concern for policy makers. Given that concern, fixed income traders were slowly unwinding bets the RBA would cut rates in the coming months, with short-end bonds feeling the brunt of weakness on the trend.
Further helping the Australian dollar, China’s manufacturing activity so far in August eased concerns of a downturn in the world’s second-largest economy, injecting some confidence into recently battered markets. The HSBC preliminary PMI rose to a two-month high of 49.8 in August from a final reading of 49.3 in July.
We expect a range for today in AUDUSD rate of 1.0470 to 1.0570 (We short the trade at 1.0510, stop loss at 1.0560, target at 1.0470, and 1.0430. Additional trade set, set to short a trade at 1.0570, stop loss at 1.0620, target at 1.0510 and 1.0470)
EURUSD: German Chancellor Angela Merkel on Tuesday rejected granting Finland special treatment in the form of collateral for fresh aid for Greece, a lawmaker from her ruling Christian Democrats, or CDU, said.
German Finance Minister Wolfgang Schaeuble at the same CDU lawmakers’ meeting said that any bilateral agreement between Finland and Greece on collateral had always been subject to an approval from the entire euro zone, which hasn’t been granted so far, another participant of the lawmaker meeting told journalists.
Euro-zone government leaders agreed July 21 to allow the EFSF to buy sovereign bonds directly in the secondary market, and earlier had decided to boost the fund’s effective lending capacity to EUR440 billion ($634.73 billion).
We expect a range for today in EURUSD rate of 1.4350 to 1.4460 (Yesterday, we mentioned to short the trade at 1.4460, with stop loss 1.4510 and target at 1.4400 and 1.4360, the pair drop low at 1.4380. We will do the same if the pair move up to 1.4460!)
USDJPY: Weak data reinforced the narrative of a weakening U.S. economy Tuesday, simultaneously weakening the dollar and feeding speculation that Federal Reserve Chairman Ben Bernanke may surprise markets by announcing a new round of monetary stimulus on Friday.
Even as traders remain nervous about the prospect of Europe resolving its sovereign debt conundrum, fears are mounting that the U.S. economy is decelerating sharply, or even ambling toward another recession. Earlier, new home sales fell 0.7% to their lowest level in five months, while the Richmond Fed’s manufacturing index plunged in August.
In August 2010, the Fed chief used the address to raise the curtain on a controversial $600 billion quantitative easing (QE2) package. While most currency analysts are discounting a fresh round of stimulus–particularly with price pressures stirring–some say that markets are factoring in the outlying possibility.
We expect a range for today in USDJPY rate of 76.30 to 77.30 (We set to go long at 76.30, stop loss at 75.70, target at 76.70 and 77.00. Alternatively, we short the trade at 77.20, stop loss at 77.70, target at 76.80 and 76.50.)
