AUDUSD: The Australian dollar reached a fresh 30-year high Wednesday on the back of rising inflation in the country. The consumer price index rose 0.9% in the second quarter from the first, above economists’ forecasts for a gain of 0.8%.
At 0600 GMT, the Australian dollar was at US$1.1051, up from US$1.0917 late Tuesday but just off its latest 30-year high of US$1.1062. The push to a new high had been on hold for the past three months but resumed in the past two weeks as the U.S. debt ceiling debate deteriorated.
While the big move in the currency was seemingly on an only slightly higher-than-expected inflation figure, traders noted the move reflected increasingly high Australian economic concerns recently and less worries about inflation prospects.
Notably, Wednesday’s data come less than a week before next Tuesday’s meeting of the RBA board, which has kept interest rates on hold at 4.75% since November and had been expected to keep rates on hold for the coming months prior to the inflation report.
We expect a range for today in AUDUSD rate of 1.0915 to 1.1060 (We expect a pair to come off from these levels. The AUD above 1.10 can be high risk, although investor will booked profit from here.)
EURUSD: European Union leaders have agreed to a new EUR109 billion assistance program for Greece to cover its financing needs for the next several years. Central to the Greek plan is a distressed-debt exchange whereby the country’s private sector creditors agree to accept new bonds worth less than their original holdings.
While Italy’s shadow minister of finance Wednesday accused the government of “collaborating” to push up borrowing costs in the euro-zone’s third-largest economy. Italy’s serious problems are becoming bigger and bigger risks in the absence of a government able of unifying the political, economic and social forces of the country in the national interest,
Yields on Italian sovereign bonds rose again Wednesday, with 30-year debt yields increasing to 6.19% from 6.03%, and yields on shorter two-year bonds rising to 4.15% from 4%. Meanwhile, German bund yields declined Wednesday, pushing the spread–or interest-rate gap–between German and Italian debt to wider levels.
We expect a range for today in EURUSD rate of 1.4260 to 1.4400 (Yesterday we suggested short the pair at the market price 1.4515, although the pair drop low to our second limit 1.4360, which is 155 pips profit. We continue to expect the pair to head further south, possible to 1.4280, if you intend to target further bring stop loss to 1.4390 to protect your trade.)
USDJPY: The pace of the economic recovery slowed in much of the U.S. in June and early July, while the Federal Reserve also reported Wednesday that inflation pressures were beginning to ease in many of its regional districts.
Other recent data indicate the economy has continued to slow going into the second half of the year, with consumers hesitant to spend in the face of high gasoline prices and rising unemployment.
There is a growing concern that a downgrade of Treasury debt could disrupt repo markets, which are a key lubricant for funding the U.S. economy. Lending to consumers and businesses could potentially decline if banks are stymied in obtaining short-term funding, or if repo agreements become more expensive.
We expect a range for today in USDJPY rate of 77.50 to 78.50 (We expect a pair to head north from these levels. We prefer to stay out of the market until next week to confirm U.S debt ceiling.)
