ifcmarkets Intraday snapshot |
EUR/USD |
The setback off 1.4498 has room to extend to the 1.4390 area initially. However, a deeper setback testing the 1.4346/1.4369 support zone is likely, before the risk of a more meaningful recovery. The base of the support cluster at 1.4346 is the last line of defence protecting Monday's 1.4285 reaction low. A recovery above 1.4451 is required to lift the tone, threatening a return to Tuesday's 1.4498 high. |
GBP/USD |
Tuesday's bear hammer suggests a setback is due towards 1.6329. A break below support at 1.6356 is the immediate threat, and downside risk exists beyond 1.6329 to 1.6303 - the 50% level of Monday's bullish marabuzo candle. However, only a break below 1.6303 would bring the focus back onto support at 1.6218. A recovery above 1.6385 is required to re-open Tuesday's 1.6440 high, threatening further gains towards 1.6472 and 1.6546. |
USD/JPY |
Tuesday's gains look to put USD bulls back in control of the short-term, as Monday's high at 80.70 is in line for a retest. While support at 80.38 cushions weakness, there is room for a break through 80.70 towards 81.10 and the June 2 high at 81.33. Keeping 80.70 intact would leave the action trapped within a 80.09/80.70 trading range, and prompt a setback towards the range low. |
AUD/USD |
Upside pressure is building on resistance at 1.0717, and a return to the June 3 reaction high at 1.0776 is still the focus. Monday's low at 1.0521 has become a bear failure low, and in conjunction with the May 25 bear failure low at 1.0441, the upside threat is becoming more menacing. A break above 1.0717 and 1.0776 would bring the focus onto the 1.0890 lower high, which protects the 1.1014 peak. Corrective weakness is limited to the 1.0640 area, and only below there would concern AUD bulls. |
ifcmarkets Focus |
The end game for the euro could well be nigh. Of course, we have been here before as euro-zone politicians have struggled in the past to come up with a solution to stop Greece from defaulting. But this time the risks are even higher and chances are that even a last-minute reprieve will not be well received. The current standoff is well known. Germany is pushing for a bailout that involves the private sector, while the European Central Bank insists that any agreement must be voluntary to avoid a Greek default and a run on the country's creditor banks. As the July deadline for new funds gets closer, the standoff between the two sides is becoming even more entrenched and the likely bailout figure even higher. What started out as a need for EUR80 billion is now being talked about in terms closer to EUR120 billion. Germany, meanwhile, is finding political support for helping Greece rapidly ebbing away and with Moody's already downgrading three key French banks--Societe Generale, Credit Agricole and BNP Paribas--the ECB is hardly likely to drop its objection to a deal that could make the whole of Europe's financial sector vulnerable. Conditions in Greece aren't getting any better either, politically or economically. As sporadic strike action against austerity measures continues, Prime Minister George Papandreou's support is disappearing fast and market confidence in the country's ability to meet its fiscal goals with it. |
Europe |
Fear took centre stage in currency markets Wednesday morning as Greek debt concerns mounted, prompting a drop in the euro against most currencies and a flight to the relative safety of the dollar. The European currency fell sharply as the clock ticked down on muddled efforts to find a solution to the Greek debt crisis, with little sign of a breakthrough. News that euro-zone officials remain deeply divided over the issue of a second Greek bailout ahead of a self-imposed June 20 deadline caused investors to contemplate the worst possible outcome of a disorderly Greek default. It also raised the specter of renewed contagion to other indebted euro-zone nations, weighing on European share prices and pushing up the cost of insuring against Greek, Portuguese and Irish debt against default to new record highs. "I think the market was greedy for a neat solution by next week, and now it looks like that's not going to happen," said Daragh Maher, a currency strategist at Credit Agricole in London. "But at the end of the day, I just don't think the authorities will let Greece default," he added. The delay in the decision making process has made investors skittish and heralded a return of defensive trades, at least for this session. Kit Juckes, a currency strategist in London, likened the situation to a hospital emergency room "on a coffee break." The down move isn't surprising so much as the fact it took this long for it to start, Juckes said. |
Asia |
The euro lost steam in Asia Wednesday, falling against the dollar and yen as investors again focused on the risks Greece's troubled finances pose to the euro-zone financial sector. Short-term investors sold the common currency after Moody's Investors Service placed three French brokerages on review for possible downgrade due to their exposure to Greek debt. Some analysts said the euro could stage a slight rebound if Greece's parliament passes a vote on austerity measures later. But the mounting concern that the country's sovereign debt woes may stir up more turbulence in financial markets prodded investors to trim bets on the euro and other risk-sensitive currencies. "The problems with Greek government debt remain in the spotlight, and are giving the euro a weak tone," said Yuzo Sakai, foreign exchange business promotion at brokerage Tokyo Forex & Ueda Harlow. The euro was also hurt as investors shied away from riskier assets due to fresh concern over the Chinese economy, an engine for global growth, after Standard & Poor's downgraded its outlook for China's real estate development sector to negative from stable. |
World |
Economic data from the world's two largest economies eased worries about global growth Tuesday, helping the euro in New York trading to gain broadly against its rivals. The return of risk appetite outstripped fears about the lingering euro-zone debt crisis. Euro-zone finance ministers held discussions to hammer out a new lifeline for Greece, but said nothing to indicate a deal was near. The common currency chalked up its strongest gains against the Swiss franc, against which it had dropped on Monday to an all-time low. A nearly 1.4% rise versus the franc came as investors, more confident about a global recovery, ditched traditional safe havens, such as the Swiss currency, in favor of higher-yielding assets. "The European debt crisis hasn't exactly disappeared as a market issue," said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. "But with no new significant headlines, it is having a lesser impact on the euro. Overall, the temporary calming in market conditions is the key driver," he said. Investors have long worried whether China will be able to slow down its lightening-fast growth without bringing the global economy to a screeching halt--avoiding what is known as a hard landing for its economy. Tuesday's report on consumer price inflation showed consumer prices rising as expected, helping to lend credence to the idea that China is successfully navigating its economy. |