| ifcmarkets Intraday snapshot |
Resistance at 1.4375 will look to cap the corrective recovery off 1.4285. Wednesday's push below 1.4325 confirms Monday's 1.4580 high as a bull failure and further weakness is threatened towards the June 27 reaction low at 1.4102. A downside target at 1.4167 lies in front of the 1.4102 objective. A recovery above 1.4375 would question the EUR bearish outlook, opening 1.4445. |
| Renewed GBP bear pressure is expected on Wednesday's low at 1.5948, as risk for another powerful bear wave increases. The important late June lows at 1.5911 lie just below 1.5948, and there is scope for a downtrend extension into fresh five-month lows below 1.5911. Downside targets lie at 1.5859 and 1.5675 for the short-term, and 1.5375 for the longer-term. A recovery above 1.6060 is required to question the GBP bearish outlook, opening 1.6089 and 1.6139. |
| Remains on course for more gains towards 81.50, despite Wednesday's setback. While projected support at 80.57 holds, a return to Tuesday's high at 81.19 is expected, opening 81.27 and the resistance cluster between 81.40 and 81.50. Only below Monday's low at 80.54 would cause a technical breakdown, exposing the June 30 low at 80.26. |
| The good recovery off 1.0655 is on course for more gains to 1.0773 and the July 1 high at 1.0791. Keeping the important 1.0615 support level protected is behind this latest upwave, and the recent completion of a medium-term bull wedge keeps the underlying tone positive for AUD. A push through 1.0791 would open the May 11 lower high at 1.0890. Only a reversal below 1.0655 would concern AUD bulls, exposing 1.0615. |
| More fair winds are filling the dollar's sails. The winds may still be fitful but nearly all are blowing in the right direction. For weeks, the "good ship dollarpop" has been trying to turn around. Each time, it appeared to hit another gale of bad news with investors finding a new excuse to steer clear. However, a new decline in investor confidence in the euro project; higher interest rates in China; signs of more robust economic data and hopes that the U.S. is moving forward on a debt ceiling solution all suggest the dollar will now have plainer sailing. As many feared, finding a solution to the debt crisis in the euro zone is not only proving more difficult but likely to take even longer than anticipated. The final straw for some was Moody's decision late Tuesday to downgrade Portugal to junk status. The country has only just received a debt bailout. This means that, just like Greece, Portugal will be coming back for more money from the European Union and the International Monetary Fund to keep it afloat next year, seeing that it won't be able to start raising funds anywhere else. With negotiations for a private sector bond rollover for Greece also hitting the buffers, the threat of default and the risk of contagion have not gone away and now look set to haunt European markets for many more months to come. So far, there is little sign that this latest deterioration in the debt crisis will stop the European Central Bank from raising interest rates. But there is talk that the bank will be forced into a more dovish stance if tensions in peripheral debt markets continue to rise. Selling pressure on the euro has been further heightened by continued uncertainty over the global recovery, with the latest rate hike in China only making matters worse. More monetary tightening by Beijing will slow Chinese demand and reduce the chances of an early pick-up in global growth. All this may encourage believers in the "good ship dollarpop," but changes in the U.S. are providing the biggest gusts. For some time now, the failure of U.S. labor market to reflect the upturn elsewhere in the economy has cast doubt over the recovery. Now though, there are forecasts that the main measure of employment, non-farm payrolls, due out Friday, will show a far more robust rise. This will all sit comfortably with the Federal Reserve's refusal to contemplate another dose of quantitative easing and push yields further in the dollar's favor. |
| The euro was broadly weaker Thursday as euro-zone debt contagion concerns resurfaced, countering any support proffered by an expected interest rate increase ahead of European Central Bank President Jean-Claude Trichet's closely watched press conference. Worries that the still unresolved crisis in Greece would spread to other indebted euro-zone countries pushed the single currency below $1.43. News that Spain successfully auctioned EUR1.5 billion of three-year bonds provided only limited respite for the euro. Trichet's press conference at 1230 GMT will follow the ECB's rate decision, which is expected to deliver a 25 basis points increase and lift the euro-zone's base rate to 1.50%. The decision had been pencilled in as one of the main events of the week and a key euro-positive, but a downgrade of Portuguese government debt by rating agency Moody's earlier in the week has stolen some of the ECB's thunder. "With euro peripheral debt centre-stage once again the ECB meeting is almost a sideshow," said BNP Paribas in a note to clients. Yield spreads, the premium investors demand for holding assets compared with German government bunds and a gauge of investor sentiment, widened to euro-era record levels on Greek, Irish, Italian and Portuguese bonds as worries about contagion spread. "There are lots of countries appearing on the horizon," said Lutz Karpowitz, a currency strategist at Commerzbank in Frankfurt. Investors want to know whether the ECB will continue accepting Greek government bonds, even if they are considered in technical default. Standard & Poor's said Monday that the current proposals on a second bailout package for Greece would likely amount to a selective default. So far the ECB has maintained that it will not accept bonds with a default rating as collateral, which could shut out European banks from the ECB's liquidity operations. But accepting such bonds could damage the institution's credibility and harm the euro. |
| The euro dug in its heels against the dollar in Asia on Thursday as investors refrained from further selling amid strong expectations for the European Central Bank to announce a rate hike later in the global day. Strong jobs data in Australia pushed the Australian dollar up, and also buoyed demand for risk-sensitive currencies such as the euro. Sharp rises in such high-yielding currencies are unlikely for now, though, as mixed signals on the global economy restrain more aggressive buying, dealers said. The "almost certain" 25 basis point hike by the ECB, which is due to announce its rate decision at 1145 GMT, would be positive for the common currency in the near-term, said Hideki Amikura, a foreign exchange dealer at Nomura Trust and Banking. If ECB President Jean-Claude Trichet stresses ongoing upside inflationary risks, at his press conference following the rate call, that could buoy the common currency further, Amikura said. But any rises in the euro will likely face resistance around $1.4500, "as there are still plenty of concerns over the possibility of contagion of sovereign debt problems in Portugal, Italy and the other peripheral countries," he said. At 0450 GMT, the euro was little changed against the dollar at $1.4315 compared with $1.4318 late Wednesday in New York. It was at Y115.85 compared with Y115.88. The Australian dollar rose sharply Thursday morning in Tokyo after a report showed the number of employed Australians rose 23,400 in June, exceeding the forecast for a 15,000 rise. At 0450 GMT, the Australian currency was at Y86.88, compared with around Y86.52 late Wednesday in New York. The Aussie was at $1.0735 compared with $1.0691. While some dealers said the Australian dollar could continue up gradually in the near-term toward resistance around $1.090, most said the boost from Thursday's data had likely run its course. Stronger jobs growth would be "the only thing likely to get the Reserve Bank of Australia to move, but this month's (report) is not enough," said BNP Paribas FX strategist Robert Ryan. The dollar was little changed against the yen, at Y80.93 compared with Y80.90, as investors awaited the June jobs report from U.S. payrolls giant Automatic Data Processing due at 1215 GMT, for clues on what Friday's non-farm payrolls report may hold in store. |
| Three bad harbingers for global growth rocked the euro on Wednesday, pushing the single currency down below $1.43. A China interest-rate hike, soft U.S. economic data and the aftermath of a ratings downgrade for Portugal spurred investors to sell the euro and scurry to the U.S. dollar, along with classic safe harbor currencies, the Japanese yen and Swiss franc. "There are more than enough issues out there to keep sentiment depressed," said Brian Dolan, chief currency strategist at IFCmarkets.com in Bedminster, N.J. "The longer-term debt concerns [in the euro zone] continue to plague and weigh on the euro." Moody's Investors Service's decision to cut Portugal's credit rating into junk territory on Tuesday reignited market concerns of possible contagion in other peripheral euro-zone countries as Greece's sovereign debt crisis looms over markets. These worries carried over into Wednesday's currency trading and put further pressure on the euro, analysts said. Insurance against the possibility of a Portuguese sovereign default hit a record high, with the country's five-year credit default swap spread, reaching 935 basis points, 167 basis points wider than Tuesday's closing level, according to index owner Markit. That indicates markets are as convinced as they've ever been that Portugal may default. New International Monetary Fund managing director Christine Lagarde also noted that the crisis continues to consume investor interest, saying at her first press conference Wednesday that handling the debt fallout is her top priority. The euro fell as much as 1% against the dollar during Wednesday's New York trading session, while also sliding against the Japanese yen and Swiss franc. |
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