| ifcmarkets Intraday snapshot |
The powerful downwave is closing in on the 1.4086 target, although there is scope for a more powerful setback towards 1.3832. Wednesday's sharp weakness defines the near-term tone, and a push below 1.4086 is expected to expose 1.4050 and the May 23 reaction low at 1.3968. But the structure of the six-day bear wave creates room for the 1.618 Fibonacci extension target at 1.3832 in the coming sessions. Regaining ground above 1.4308 is required to provide respite, which is protected by 1.4204. |
| The short-term decline has been upgraded, leaving the May 24 reaction low at 1.6057 vulnerable. Wednesday's push below 1.6218 puts GBP bears in control, exposing 1.6111 and 1.6057, but creating room for 1.5990 and the Mar. 28 reaction low at 1.5937. A recovery above 1.6271 is required to provide temporary respite, but corrective upside risk is limited. |
| A push above 81.08 towards is expected towards 81.56 and 81.77, as USD bulls regain control. Minor resistance intervenes at 81.42, but USD bull momentum appears strong enough to extend to the wave equality target at 81.56. The wider picture suggests action is trapped within a six-week bear pennant continuation pattern, which means this bull wave has room for 81.77 and the 82.23 area in the coming sessions. Only a push below 80.59 would question the USD bullish outlook. |
| Extends the sharp setback to put AUD bears in control, to leave the May 25 reaction low at 1.0441 vulnerable. The bear wave off the June 3 lower high at 1.0776 has been upgraded following the break below 1.0521, creating room for weakness below 1.0441 to the 1.0304/1.0327 support cluster. Regaining ground above 1.0592 would provide respite, but only above 1.0635 would question the bearish AUD outlook. |
| That is the lesson coming from the latest spasm of global risk aversion that has sent investors scurrying back into U.S. Treasurys. Rising fears of contagion in the euro zone combined with growing doubts about the global recovery appear to have done the trick, helping investors to crystallize exactly where they want to be. Over the last few weeks, the underlying picture was far from clear. Sure, the dollar attracted some support before. But, that was largely due to higher U.S. Treasury yields, driven by hope that the U.S. economy was finally improving. If anything, the dollar's safe haven status appeared in doubt as investors tended to favor other traditional havens in times of uncertainty. However, events over the last few days have changed all that. As mild risk aversion has turned to more extreme risk aversion, the dollar has once again become king. In the euro zone, the political process for resolving Greece's debt problems is falling apart. The Greek government is hanging by a thread and euro zone finance ministers charged with negotiating a solution show little sign of agreement. As markets start to prepare for what now looks like an inevitable contagion to other euro zone debtors, that is, Ireland and Portugal, as well as the European banks that will probably have to deal with a technical default, there is some recognition of the scale of the problem. This came with the admission from European Central Bank council member Nout Wellink that the European Financial Stability Facility needs to be doubled to about EUR1.5 trillion. Reality finally started to hit home. The tremors over Greece this week coincided with another dose of disappointing activity data from the U.S., growing fears that China is going to raise its interest rates again and signs that the global recovery is not as strong as many thought it was. |
| Nerves intensified sharply in European trading hours Thursday, with EUR/CHF sinking to yet another all-time low (1.1957) and EUR/USD also felt the pain as the Greek situation went from bad to worse. Sterling also faced selling pressure. The shift had no specific trigger, but there's no shortage of grim headlines. The dollar was down in Europe at Y80.72, while the euro was down at $1.4110 and the pound had fallen to $1.6120. |
| Deepening worries about Greece's debt crisis and the possibility of contagion to other euro-zone countries sent the euro to a three-week low against the dollar in Asia Thursday. After a relatively quiet session in Asia, a report in a Dutch newspaper that European Central Bank Governing Council member Nout Wellink favors boosting a temporary sovereign bailout fund for euro-zone coutries caught traders off guard and triggered stop-loss selling, sending the euro down sharply. Wellink said the European Financial Stability Facility should be increased to EUR1.5 trillion, according to a report in Het Financieele Dagblad. Such an increase would be needed to secure private sector support for a second Greek aid package, Wellink told the paper. Yuji Saito, foreign exchange market director at Credit Agricole in Tokyo, said any solution may not be hammered out until a European Union leaders' meeting on June 23-24. But traders and analysts in Tokyo are keeping a close eye on Friday's meeting in Berlin between French President Nicolas Sarkozy and German Chancellor Angela Merkel in the hope of finding any signs for an early resolution. |
| Fears that Greece is moving closer to default Wednesday toppled the euro in New York trading. Investors sought refuge in the dollar, yen and Swiss franc as the Greek debt anxiety also inflamed contagion fears across the euro zone. The single currency was down 1.8% versus the dollar, the biggest one-day loss against the U.S. currency since May 5. "It's the uncertainty that a default--which looks likely to happen--will basically create a domino effect in the European banking sector, and then cause Ireland and Portugal to say, 'Well, you know Greece has restructured, we want to do the same thing,'" said Michael Hewson, market analyst at CMC Markets. The euro was punished throughout New York's trading session as market participants saw every piece of news as a reason to hit the sell button. The euro fell below $1.42 for the first time since May 27. The latest fall followed a series of ratings agencies' warnings about the possible fallout from a Greek default and Greek protests over austerity measures. Greece's Prime Minister George Papandreou announced he planned to shuffle the government, but he wouldn't step down. |
|
