Currency Tech

EURUSD R 2: 1.3130 R 1: 1.3000 CURRENT: 1.2951 S 1: 1.2885 S 2: 1.2725

USDJPY R 2: 93.70 R 1: 93.00 CURRENT: 92.60 S 1: 91.00 S 2: 89.50

GBPUSD R 2: 1.5250 R 1: 1.5050 CURRENT: 1.4906 S 1: 1.4800 S 2: 1.4600

AUDUSD R 2: 0.9250 R 1: 0.9135 CURRENT: 0.9035 S 1: 0.8800 S 2: 0.8750

Market Brief

The EURUSD rose for a second day as EU finance ministers put together an unprecedented loan package worth nearly $1 trillion for debt-swamped governments to restore faith in the common currency. The EUR advanced against most of its counterparts after EU pledged to make loans of as much as 750 billion EUR ($964 billion) available to countries under attack from speculators. The EURUSD advanced to 1.2836 from 1.2755 last week when it tumbled 4.1%, the most since the five days ended Oct. 24, 2008 while EURJPY rose to 118.92 from 116.81. The ECB will probably raise its main refinancing rate from a record low 1% in Q1 2011. Austrian Finance Minister said 440 billion EUR will be loan guarantees and 60 billion EUR will be from the EU existing budget and that the loan guarantees were the biggest sticking point until the very end. Led by Italy's $126 billion, Greece, Spain, Portugal, Ireland and Italy have a total of $215 billion of debt coming due in the next three months.The USDJPY climbed for a second day by 1% to 92.62 on speculation US reports this week will add to evidence the recovery in the US is gaining traction. Confidence among US small businesses rose to 87 in April from 86.8 the prior month, according to a report due tomorrow. The jobless claims fell by 4,000 to 440,000 last week. The fundamentals of the US are firm, monetary policy outlooks for the US and Japan is diverging and the trend for the USD is to strengthen, especially against the JPY. The Fed is likely to raise its benchmark interest rate to 0.75% by the end of this year while the BOJ will keep its benchmark rate at 0.1%.

China's trade surplus shrank 87% from a year earlier as imports grew at a faster pace than exports. The surplus was $1.68 billion, exports rose 30.5% to $119.9 billion, while imports climbed 49.7% to $118.24 billion. The 79% decline in the trade surplus this year, may ease pressure for gains in the Yuan and strengthen the argument that the currency isn't undervalued. The sovereign-debt crisis in Europe may also encourage Chinese officials to delay ending the Yuan's peg to the USD. The trade surplus will continue to narrow this year as booming domestic demand supports imports and the European debt crisis clouds the outlook for global demand while improvements in the trade balance may help to reduce pressure for the Yuan to appreciate.

The AUDUSD and NZDUSD climbed after EU leaders said they planned to set up a stabilization fund to halt a sovereign-debt crisis, reviving appetite for higher-yielding assets. The easing in extreme risk aversion is spurring investors to ditch 'safe haven' currencies such as JPY and the USD in favor of AUD. Reports today showed business confidence slipped 3 points to 13 for a second straight month and advertisements for job vacancies declined 1.2% for the first time since January. The AUDUSD rose 1.5% to 0.9015 from 0.8880 on May 7 while NZDUSD rose 1% to 0.7215.

The BOE will probably keep its bond holdings at 200 billion GBP for a fourth month and maintain the benchmark interest rate at a record low of 0.5% and maintain its emergency economic stimulus today as the post- election deadlock leaves officials in suspense on the scope of government spending cuts to curb the record budget deficit. The EURGBP rose the most in 1 1/2 years to 0.8598 and GBPUSD fell to a 13-month low to 1.4477 last week as the election failed to produce an outright winner. In the absence of evidence of a change in the economic outlook, policy makers will keep stimulus measures unchanged to avoid the appearance of delivering an assessment on the election outcome.