Another mixed day of sentiment it is to you dear reader, and although we can see the pessimism and the selloff starting to be confined, the overall sentiment is still negative and the incoming news only eased the downside pressure yet did not reverse it!
The focus remains on the debt crisis in the euro area and the worsening outlook for Greece that near terms of default by day and spooking investors from the repercussions on financial markets stability and a new worse Lehman Chapter.
Clearly the market remains strained and the euro is under downside pressure versus its major peers, where losses are seen versus the lower haven currencies such as the dollar and the yen while limited versus the franc with the SNB maneuvers.
The volatility is clear with the mixed sentiment in the market as the good news from the euro area eased some of the jitters yet clearly did not quell the overall pessimism. The good news was first from Portugal which the IMF granted the new tranche, easing some of the woes on one peripheral nation.
More good news came from Merkel, where a transcript of an interview for the German Chancellor with Inforadio reflected her insistence to salvage the euro and unwind speculation that Germany is preparing for a Greek default, assuring that Greece is taking the right steps for the next bailout in a step to ease the deteriorating status in the market on speculation of eminent default.
On the other hand, news of Italian talks with China to buy bonds and help the nation survive raging market pressure did little to ease the market, where it only helped ease the woes in early Asian trading hours and the market then returned softer as official dismissed talks of bond purchases. The Italian bond sale was also not as expected as the treasury sold 3.9 billion euros of five-year bonds as borrowing costs surged where the treasury set a maximum of 4.0 billion euros of bonds in the auction today.
The news still kept the fears evident and the euro remains bearish. The EUR/USD is currently hovering around 1.3640 recording the high of 1.3695 and the low of 1.3556. The pair is fluctuating as momentum indicators linger in oversold areas yet the stability below 1.3665 favors the resumption of the downside move for the day targeting 1.3540 and 1.3435 areas.
As for the EUR/JPY the pair recovered from the early low of 104.38 though still trading bearishly around 105.10 below the early high of 105.61. With trading still mixed around 105.00 areas due to the pressure from oversold signs on momentum indicators the pair will continue to fluctuate further to unload the positive momentum, where the downside move remains favored with stability below 106.20 over daily basis targeting next areas of 103.00 then 102.05.