| ifcmarkets Intraday snapshot |
The recovery off Monday's 1.4285 low has acquired fresh impetus, and resistance at 1.4445 is being challenged. Room has been created for a push above 1.4445, opening 1.4465 and 1.4490 - the latter being the 50% Fibonacci retracement level of the 1.4696/1.4285 decline. However, maximum upside risk lies to the 1.4540 area, should 1.4490 be broken. Failure to meet 1.4465, combined with a break below 1.4378 would put EUR bears back in control, and prompt a fresh wave of weakness back to the 1.4285 low. |
| Monday's bullish marabuzo candle highlights the depth of USD uncertainty, and further gains are expected towards the 1.6466/72 resistance area. The failure to meet the downside target at 1.6212 should concern GBP bears, and a break above 1.6472 would bring the May 31 reaction high at 1.6546 back into the picture. Good support lies at 1.6285 to protect the 1.6218 low. |
| The rally above 80.32 turns the overall tone directionless. The recovery off Tuesday's current session low at 80.09 needs to force a break above 80.47 in order to create scope for a recovery back to Monday's 80.70 high. To put USD bears in control, weakness below 80.09 and 79.96 would confirm Monday's 80.70 high as a bull failure, and pave the way for further weakness towards the June 8 reaction low at 79.69. |
| The strong rally off 1.0568 creates scope for a return to the June 3 reaction high at 1.0776. Good support at 1.0568 protects Monday's low at 1.0521, and a push above 1.0654 would suggest a significant base-building formation is underway. Meeting an upside target at 1.0686 would attract the impetus needed to re-open the 1.0776 high. Failure to meet 1.0686, combined with a break below 1.0568 would concern AUD bulls, and bring the focus back onto Monday's low at 1.0521. |
| Parity between the euro and the Swiss franc is not so unthinkable. A warning this week from two Swiss business leaders that this is the way things are headed may have brought some shock headlines. Some Swiss exports may be fairly immune to exchange rates, but a lot of companies could still suffer if the franc continues to strengthen. The problem is that flows into the Swiss franc are starting to intensify. Not only have other traditional safe havens--the dollar and the yen--lost some of their attraction in recent months, but there is evidence that investors are even turning away from some European markets as well. There is nothing new in the shelter the franc provides at a time of international uncertainty. And to start with at least, this financial crisis has been no different. The fact that the Swiss economy has also done so well, with economic growth expected to come in at 2.1% this year, unlike many other major economies, has only made the franc even more attractive. When the financial crisis initially broke back in 2007, the euro was trading up close to 1.70. The pair is now flirting with a break under 1.20. Initially, the Swiss National Bank did launch a defensive attack through market intervention to at least stop the franc from rising too fast. But, the exercise had limited success and the central bank soon retired from the market. The success of Swiss exporters in over coming a stronger currency has certainly made the Swiss authorities more tolerant. However, a new wave of franc strength could now be developing. |
| The dollar was mostly weaker in European trading Tuesday as in-line inflation data fanned hopes the Chinese will avoid a hard economic landing. This came despite the Asian behemoth raising its reserve requirement ratio, and as traders looked ahead to pivotal U.S. retail sales data. The euro extended overnight gains against the dollar in a stop-loss driven rally, hitting the day's high at $1.4473 in early London trade. It then settled back as the market awaited fresh news on muddled efforts to find a market-palatable solution to the Greek debt crisis ahead of a gathering of euro-zone finance ministers. The euro's run higher against the dollar triggered buying on the crosses, with the single currency powering higher against the Swiss franc and notching up gains against the pound. The positive run was in spite of news late Monday that Standard & Poor's Corp downgraded Greece to CCC from B, with a negative outlook, making the country the lowest rated sovereign in the world. "The concerns over the impact on global growth from the ongoing uncertainties in the euro-zone were offset today by the better than expected activity data from China," noted Derek Halpenny, a currency strategist at the Bank of Tokyo Mitsubishi-UFJ in London. |
| The euro rose against the yen Tuesday in Asia as China's softer-than-expected inflation data and Bank of Japan's comments not ruling out further easing prompted some investors to stock up on high-yielding but riskier assets. Foreign exchange investors often buy the currencies of nations with high interest rates when global share prices gain and stoke risk appetite. That was the case in Asia, dealers said. An initial cue was China's consumer price index for May, which rose 5.5% from a year earlier. Though the reading exactly matched economists' expectations, some investors had anticipated a sharper increase of more than 6.0%. The actual number damped concerns that China may embark on a more aggressive tightening campaign that could squeeze equities. That, in turn, helped the common currency, dealers said. "The CPI result provided us some relief, and the market turned on its risk-taking appetite," said Tsutomu Soma, a senior dealer at Okasan Securities. Another tailwind for the euro came from the Bank of Japan, which announced the establishment of a new credit line to expand its lending facility, dealers said. In the statement, the central bank also said it will keep checking the after-quake economy and "take appropriate policy action as necessary." |
| The euro rose on Monday in New York as investors shrugged off Standard & Poor's decision to cut Greece's sovereign rating to the lowest in the world, choosing instead to focus on the likelihood that euro-zone officials will reach a deal to help the nation avoid a default. "Europe will come through in the end and do the things which do not upset markets too much," said Alan Ruskin, global head of G10 foreign exchange strategy at Deutsche Bank in New York. The common currency has been buffeted in recent weeks by continued back-and-forth over a new lifeline for fiscally stressed Greece. But the euro's gain Monday suggests investors might be buying into the idea that the ink will soon dry on a final agreement that would help Greece avoid default, analysts said. "One suspects that policymakers will avoid such a dire outcome, but the uncertainty is weighing on investment decisions," said Karl Schamotta, market strategist at Western Union Business Solutions in Victoria, B.C. Still, a cautious tone hung over markets, Ruskin said. Some investors still harbor concerns about Greece defaulting, while others eye a slowdown in U.S. and global data, fearing they are a sign of a more pronounced retrenching in growth. All of these worries come as the Federal Reserve prepares to turn off its faucet of liquidity, ending its massive purchase of Treasurys dubbed quantitative easing, or QEII. With QEII ending, the Greece scare, and global economic slowing, Ruskin said "risk appetite is inclined to take a very cautious line." |
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