Although the single currency tumbled to record low against the
Swiss franc earlier this week on massive safe-haven demand for franc,
Swissy also nose-dived to historical low of 0.7068, both currency pairs
rebounded yesterday partly due to rebound in regional stock markets and
verbal warnings from SNB officials. SNB repeated that more measures to
curb strength in Swiss franc will be taken if necessary, Deputy
President Thomas Jordan was quoted by saying a temporary tie between the
franc and the euro to stem CHF’s rally would be legal under the SNB’s
authorization. He said ‘any temporary measures to influence the exchange
rate are permissible under SNB’s mandate as long as they are consistent
with long-term price stability’. Nevertheless, traders believe there
are not much the Swiss central bank could do under current atmosphere
especially with the SNB already lost over $10 billion in H1 of this year
by increasing its holding of foreign currencies. Room for expanding
measures will be very limited and SNB may only be able to increase the
supply of Swiss franc which could just slow down the pace of franc’s
rise but not turning the major direction under heavy safe-haven flows.
EUR/CHF slipped again from yesterday’s high of 1.0529 back to 1.02
level, however, rebound in Dow and S&P futures lifted the pair again
today and it looks like traders would closely watch development in
global equities in overall risk-off trades.
The greenback finally rebounded from yesterday’s low of 76.35 on
rumors of buying by large pension funds, the pair jumped to as high as
77.23 in early Tokyo morning on stop-hunting activities (stops at 77.00
and 77.20) were triggered). However, dollar ran into heavy offers there
and quickly dropped back to around 76.55/60 as Nikkei 225 turned down to
negative territory with stops below 76.50 in focus (looks like more
stop-hunting would be seen in the near term). More finds were seen
buying 79.00 call options (1-week, 1-month and 3-month) and there are
still rumors that BOJ/MOF are biding persistently above record low of
76.25 to prevent the pair from falling through the post-earthquake
historical low formed in March. One should note that if that is the case
which means those bids were working in New York session but that needs
to be confirmed by monthly intervention data. Traders are becoming more
nervous today as BOJ/MOF intervened last week also on Thursday and there
are talks that MOF Noda cannot bear to fail in this round of
intervention as he is looking to become the next Japan’s Prime Minister
after Kan.
Euro fell sharply yesterday on speculations of an imminent downgrade
of French AAA sovereign rating and although the 3 rating agencies
(Moody’s, S&P’s and Fitch) all came out to reaffirm French top
rating status and positive outlook, not much help on traders’ concerns
over French debt problem and a possible collapse of French bank. EUR/USD
dropped to as low as 1.4122 this morning before rebounding on
recovering Dow and S&P futures, traders are getting obsessed and
followed the movements in stock markets closely especially with a
relatively light economic calendar today (only U.S. trade balance data
at 12:30GMT).
Sterling declined yesterday as well on dovish inflation report from
Bank of England with both CPI and economic growth outlook were revised
lower from the previous report in May. Nonetheless, cable also rebounded
this morning in Asia in tandem with euro on risk-off trades, there are
talks of decent bids above sizeable stops at 1.6100 and 1.6050.
Elsewhere, although aussie slipped briefly after the release of weak
job reports (July employment change at -0.1K vs forecast of 10.3K and
unemployment rate rose to 5.1% against consensus of 4.9%), an Asian
central bank was reported buying aussie aggressively just above 1.0100
level and pushed AUD/USD sharply higher to above 1.0300 level amidst
very thin liquidity.
AUD/USD Daily Outlook
Daily Pivots: (S1) 1.0091; (P) 1.0252; (R1) 1.0338;
AUD/USD's break of 1.0211 minor support suggests that recovery is
finished at 1.0414. Intraday bias is mildly on the downside for
retesting 0.9926 first. Break there will confirm resumption of the whole
fall from 1.1079 and should target channel support (now at 0.9664)
and below. Meanwhile, note that consolidations from 0.9926 could extend
further, but even in case of another recovery, we'd expect upside to be
limited by 1.0526 support turned resistance to bring another fall before
whole correction form 1.1079 completes.
In the bigger picture, bearish divergence condition daily MACD
suggests that rise from 0.8066 might be finished. And that's possible
considering that AUD/USD has just missed a long term projection target
at 1.1084. The break of 1.0390 support affirms this case and deeper
decline would now be seen towards long term channel (now at 0.9664). But
we will treat it as a correction only. And, as long as 0.9404
resistance turned support holds, the whole up trend from 2008 low of
0.6008 should still be in healthy status.
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