AUDUSD: The Australian dollar was higher late Monday as a return to order on global markets over the weekend restored confidence but traders were warned that plenty of potential hazards could sour the mood before the week is up.
The RBA’s minutes on Tuesday are likely to be hawkish as the August policy meetings preceded last week’s market gyration. RBA Governor Glenn Stevens said at the start of the month that the central bank considered a rise in interest rates due to increasing concerns about inflation.
By contrast, financial markets are pricing in the risk that interest rates will be cut by between 25 basis points and 50 basis points in September. It anticipates 125 basis points by early 2012.
We expect a range for today in AUDUSD rate of 1.0450 to 1.0540 (We current shorting the pair at 1.0460 ranges with stop loss at 1.0520, target at 1.0415 and 1.0380)
EURUSD: Germany is likely to report solid second-quarter growth Tuesday, helping underpin the euro-zone’s fragile economy. But analysts will look for signs that weakness in key export markets could derail the country’s post-crisis economic “miracle”.
Germany’s economy probably grew by 0.4% on the quarter in the April-June period, and by 3.1% on the year. Still, at 3.1%, annual growth looks rosy compared with much of the euro-zone. France’s economy didn’t grow at all in the second quarter according to data released last week, while Greece’s economy contracted by an annual 6.9%, the country’s statistics service said Friday.
Germany’s economy has rebounded briskly from the financial crisis, growing by 3.5% last year amid strong overseas appetite for its machinery and other hard goods. That demand helped slash Germany’s jobless rate to just 7% in July, its lowest level in 20 years, thereby stoking domestic consumption.
We expect a range for today in EURUSD rate of 1.4390 to 1.4480 (We set limit price to short the pair at 1.4480, stop loss at 1.4550, target at 1.4390 and 1.4320)
USDJPY: Dollar/yen options declined Monday in Asia as the spot rate remained stable, with many Tokyo market participants away for the late summer holidays. Despite relative calm in Asian trading, the market focus remains on European sovereign debt problems and the pace of the U.S. economic recovery.
The U.S. Federal Reserve’s pledge to keep interest rates exceptionally low for the next two years is a positive for U.S. government credit, but negative for certain sectors like banks and life insurers.
The announcement, however, is likely to have a negative impact on profitability of interest-rate-sensitive sectors like banks, online brokers, life insurers, money market managers and housing finance agencies
We expect a range for today in USDJPY rate of 76.20 to 77.20 (We decided to close out the trade for USDJPY at the current market price without a loss. Although if the pair falls back to 76.20 ranges, we will consider to re-entry the trade again.)
