The greenback recovered from record low against the Swiss franc and
traded with a relative firm undertone as rating agencies Moody’s and
Fitch both affirmed their AAA credit ratings U.S., however, Moody’s
Investors Service warned that downgrades were still possible if
lawmakers fail to form effective debt reduction measures. After U.S.
President Obama signed the bill to lift the country’s debt ceiling and
cut spending cut, Moody’s published a statement and indicated that the
outlook for the U.S. grade is now negative which signaled it is still
possible for a downgrade in the next 12-18 months. The rating agencies
also consider the amount of spending cut of US$2.4 trillion is not
enough to catch up with the country’s debt (Moody’s suggest an amount of
over US$ 4 trillion is needed) and the nation may still face the
inevitable default. Swissy tumbled again yesterday and hit another
record low of 0.7610 earlier today before recovering, offers are
reported at 0.7700-10 and 0.7750 whilst bids are still tipped at
0.7600-10 with stops below there.
With the risk of U.S. default cleared (at least for the near term)
and it is going to take times for the lawmakers to come up with measures
to cut the nation’s spending, investors’ focus will now shift back to
the eurozone debt crisis, recent rise in Italian bond yield started to
put pressure on the euro and Spanish-German 10-year yield spread also
hit a 400 basis points as a result of speculation that Spain is going to
be next country to debt crisis contagion. Euro slipped to 1.4151
yesterday and is still under pressure. Some traders are awaiting the
release of economic data from eurozone countries, including German and
eurozone service PMI and eurozone retail sales. At the moment, bids are
reported at 1.4150-60 with option barriers noted at 1.4150, 1.4100,
1.4050 and also 1.4000, on the upside, offers are tipped in the region
of 1.4230-50 and mixture of offers and stops is located at 1.4280-90.
The greenback remained confined against the Japanese yen in narrow
range on continued verbal intervention from Japanese officials, Economic
Minister Yosano stated that yen’s rise is excessive, Finance Minister
Noda supported the comment and both reiterated that the currency’s rally
does not reflect economic fundamentals. Bank of Japan Governor
Shirakawa joined the team and pointed out that the yen’s gains are
negative for the Japan’s economy. We still heard some bids at 76.90-00
and intervention worries should limit downside, on the upside, offers
remain at 77.40 and further out at 77.60-80 with stops only emerging
above 78.10-20. Traders are awaiting Bank of Japan policy meeting and
there are speculations that the central bank may ease policy by
increasing asset-buying fund by 5-10 trillion yen as early as this week
and the MOF may take this chance to intervene to sell yen.
The British pound is still trading on the defensive side after early
release of soft UK manufacturing PMI data (below 50), speculation that
Bank of England may expand the QEP in order to stimulate UK economy also
seen pressuring the pound. Offers are tipped at 1.6300-10 and mixture
of offers and stops is located at 1.6325-30 but better offers are
expected around 1.6360-70, on the downside, still see more stops below
1.6220 and 1.6200 (large) with bids ahead of both levels.
EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.0694; (P) 1.0950; (R1) 1.1079;
EUR/CHF's fall is still in progress and drops to new record low of
1.0794 so far today, breaking mentioned 100% projection of 1.2344 to
1.1404 from 1.1891 at 1.0951. Intraday bias remains on the downside and
further fall should now be seen towards 161.8% projection at 1.0372
next. On the upside, above 1.0986 minor resistance will turn bias
neutral and bring consolidations. But recovery is expected to be limited
below 1.1404 support turned resistance and bring fall resumption.
In the bigger picture, whole down trend from 1.6827 (2007 high) is
still in progress and in any case, medium term outlook will remain
bearish as long as 1.2399 support turned resistance holds. Next target
will be 161.8% projection of 1.8234 to 1.4391 from 1.6827 at 1.0609.
Nevertheless, break of 1.2399 will be the first sign of bottoming and
should bring stronger rebound to 1.3243 resistance for confirmation.
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