The greenback extended losses against the Japanese yen to another 4-month low of 77.57 in European session, however, price then recovered as fears of intervention remain. Uncertainty over U.S. debt ceiling negotiation between Democratic and Republican leaders continued to put pressure on the greenback and as long as the lawmakers are unable to agree on a plan to lift the government of debt ceiling at the amount of US$ 14.3 trillion before 2 Aug deadline, it is quite difficult to see the greenback from rebounding against other major currencies especially those traditional safe haven alternatives such as Swiss franc and Japanese yen.
Although Japan's Finance Minister Yoshihiko Noda repeated that the officials are closely watching the forex markets and yen's moves have been 'one-sided', traders are still not totally convinced to see intervention by MOF, at least not before the result from U.S. debt talks. We still heard bids ahead of 77.50 barrier (rumors to be Kampo) and more buying interest is tipped at 77.00-10 ahead of 77.00 barrier with stops placed below both option triggers. On the upside, offers remain at 78.00 with stops placed above 78.20 and then 78.50-60.
Swiss franc also edged higher to another record high versus the greenback to 0.7996 (yesterday's high was 0.7997), more and more analysts are expecting the United States to lose its top rated AAA credit rating from one or more rating agencies. However, traders found some buying interest from option players and U.S. big name above 0.7990 where a large option barrier is reported. Swissy recovered from 0.7996 after the release of slightly weaker-than-expected Swiss July KOF leading indicators (2.04 vs forecast of 2.11). More option defensive bids are located at 0.7960-70 with stops placed below 0.7950 whilst on the upside, offers are tipped at 0.8030-50 area with stops remain above 0.8080 and 0.8140-50.
Meanwhile, the single currency slipped from over 1-month high against dollar at 1.4537 on doubt that last week's agreed Greek bailout package may not be enough to stop contagion from the debt crisis to other euro zone countries such as Italy and Spain. Fitch warned that Italy need to take further measures in order to avoid eurozone debt crisis from spreading to the nation's economy. Traders are working on bids from sovereign names at 1.4440-50 and more buying interest is tipped at 1.4400, U.S. prime name was seen selling the euro offers are starting to emerge from 1.4500 up to 1.4520 with larger offers tipped at 1.4550 and 1.4580.
The British pound followed the single currency and has retreated in London session after the release of much worse-than-expected UK CBI trends total orders number (-10 vs forecast of -3), some stops at 1.6370 were triggered and more stops below 1.6340-50 are in focus. Having said that, the release of weaker-than-expected U.S. June durable goods orders (-2.1% vs forecast of 0.3$% and ex-transportation also softer at 0.1% vs consensus of 0.5%) helped cable to recover but offers are seen at 1.6400 and also 1.6440-50 with stops above 1.6450 whilst mixture of bids and stops is located at 1.6320-30 with more bids reported at 1.6300 and larger stops at 1.6260.
Elsewhere, the Australian dollar maintained a firm undertone after rising to a record high of 1.1081 after the release of higher-than-expected Australian inflation data, most people believe that the Reserve Bank of Australia will not cut rate in the near future and some are starting to consider the RBA may even raise rates in light of this above target inflation numbers. Corporate offers are reported at 1.1060-80 and more selling interest from U.S. funds are reported at 1.1100 whilst on the downside, bids from various parties (including UK clearer) are noted at 1.1000 and 1.0950. Traders are closely watching RBNZ rate decision at 21:00GMT with economists expecting the central bank to keep New Zealand interest rates unchanged at 2.5%.
EUR/USD Mid-Day Outlook
Daily Pivots: (S1) 1.4403; (P) 1.4464 (R1) 1.4571; More.
EUR/USD formed a temporary top at 1.4537 and retreats today. Intraday bias is turned neutral for some consolidations. But we'd expect downside to be contained by 1.4282 resistance turned support and bring another rise. Focus remains on 1.4577 resistance. Decisive break there will indicate that correction pattern from 1.4939 has completed with three waves down to 1.3837. In such case, the larger up trend is likely resuming for 1.5 and beyond. However, with 1.4577 resistance intact, a break of 1.4282 will likely bring another fall before correction from 1.4939 completes.
In the bigger picture, EUR/USD is still trading above medium term trend line support from 1.1875 (now at 1.3823) and thus, rise from there should still be in progress. We'd continue to favor the bullish case that correction from 1.6039 has completed with three waves down to 1.1875 already and above 1.4939 will target 1.5143 resistance first. Break will affirm the bullish case of long term up trend resumption for another high above 1.6039. However, sustained trading below the mentioned trend line support will indicate that there should at least be one more medium term decline, possibly for below 1.1875, before correction from 1.6039 completes.
Economic Indicators Update
|EUR||German CPI M/M Jul P||0.40%||0.30%||0.10%|
|EUR||German CPI Y/Y Jul P||2.40%||2.30%||2.30%|
|01:00||NZD||NBNZ Business Confidence Jul||47.6||46.5|
|01:30||AUD||CPI Q/Q Q2||0.90%||0.70%||1.60%|
|01:30||AUD||CPI Y/Y Q2||3.60%||3.40%||3.30%|
|01:30||AUD||CPI RBA Trimmed Mean Q/Q Q2||0.90%||0.70%||0.90%|
|01:30||AUD||CPI RBA Trimmed Mean Y/Y Q2||2.70%||2.50%||2.30%|
|01:30||AUD||CPI RBA Weighted Median Q/Q Q2||0.90%||0.70%||0.80%|
|01:30||AUD||CPI RBA Weighted Median Y/Y Q2||2.70%||2.50%||2.20%|
|06:00||EUR||German Import Price Index M/M Jun||-0.60%||-0.20%||-0.60%|
|08:00||EUR||Eurozone M3 Y/Y Jun||2.10%||2.40%||2.40%||2.50%|
|09:30||CHF||KOF Leading Indicator Jul||2.04||2.11||2.23|
|10:00||GBP||CBI Trends Total Orders Jul||-10||-3||1|
|12:30||USD||Durable Goods Orders Jun||-2.10%||0.30%||1.90%||2.10%|
|12:30||USD||Durables Ex Transportation Jun||0.10%||0.50%||0.60%||0.70%|
|14:30||USD||Crude Oil Inventories||2.3M||-1.2M||-3.7M|
|18:00||USD||Fed's Beige Book|
|21:00||NZD||RBNZ Rate Decision||2.50%||2.50%|