FOREX NEWS | CURRENCY NEWS BY FOREXLIVE

Nikkei flat in early trade

No sign of any risk-aversion emanating from the Japanese sharemarket this morning.

The FX market is staying quiet.

USD/JPY orders: Bids strong 79.50/80.00

Still plenty of strong bids reported at regular intervals towards 79.50 with stops only becoming heavy below 79.20.

Japan’s foreign reserves rise to record high

Totalling $1140 billion at the end of May.

EUR/GBP: Sellers and stops

Sell orders reported in EUR/GBP between .8940/50 with stops, as usual, just above.

Sovereign names have been notable buyers of this pair over the last week.

UK retail sales -2.1% YoY, down from +5.2% last month

The latest BRC retail figures for the UK are very disappointing, much lower than the 2.25% expected.

The belt-tightening measures are obviously having a detrimantal effect on economic activity.

Cable could be headed back to 1.5000

Obviously not my own view, but that of a medium-sized hedge fund. Their view is that we are entering a phase of prolonged weakness in the equity markets which will lead to extensive risk aversion in the FX markets. This will have the effect of forcing the market to cover their USD shorts whilst remaining bullish CHF and possibly JPY. They are neutral on EUR in this phase. Their preferred trades based on this scenario are to be long CHF and short GBP and AUD. Their medium term targets are 1.5200/1.5000 in cable, .97/.98 in AUD/USD and .80 in USD/CHF.

USD/JPY: Watch equity markets and US yields

If worldwide equity markets continue to fall this will encourage risk-averse trading in the FX market and therefore increase downward pressure on the JPY crosses.

US yields have traditionally had a close correlation with USD/JPY and if they also continue to fall, then USD/JPY will struggle to stay above 79.50. Many dealers still expect the BOJ to make an appearance sooner rather than later.

AUD/USD: Expect range trading to continue

The AUD/USD posted a 5-wave reversal off the 1.1010 highs which does suggest that there may be some more downside yet to come. If that is to be the case, then we should expect technical levels such as 1.0790 (the 61.8% of 1.1010/1.0435) to form some strong resistance.

On the other hand, AUD/USD is still on a strong uptrend and trying to fight it may well be totally pointless. Recent support has been solid at 1.0600 and the bears will struggle to get below there.

If in doubt, trade the edges of this 1.0600/1.0790 range until the picture becomes clearer.

 

ForexLive Asian market open

All eyes this morning on the RBA who are widely expected to leave interest rates unchanged. The EUR has pulled back a bit after the ‘overvalued’ comments and USD/JPY is sitting precariously just above 80.00.

Good luck today and let’s hope its busier than yesterday.

ForexLive US wrap: Overvalued comments sends EUR/USD lower

• Eurogroup’s Juncker: Euro is “objectively” overvalued; Trichet’s Euro finance ministry won’t work; ECB working on formula to for Greece that would not be
• EU’s Rehn: EU ready to study the option of issuing Euro bonds
• Trichet: Euro has been a very good store of value; Greece did not behave properly but policies have improved from the past
• Greek PM: May put austerity measures to a referendum
• Fitch: A distressed Greek debt exchange would be considered a default
• S&P 500 falls 1.1%; US yields loss gains, end unchanged at 2.99%
• Oil falls $1.35; gold rises $3 to $1544

EUR/USD traded in narrowly range-bound fashion for most of the US session, between 1.4595 and 1.4625. It finally began to move lower during the New York afternoon after EU officials raised concerns over the value of the euro, the logistics of the Greek bailout and even broached the subject of a referendum on the Greek austerity measures…All that helped whip-up a fresh does of risk aversion, sending stocks lower , bonds higher in price/lower in yield and oil down below $100 again. Stops below 1.4590 were triggered and we dipped as low as 1.4557 before steadying.

USD/JPY eased back to the 80.05 level late in the day as US yield fell. USD/CHF fell once agin as risk aversion was the major theme of the afternoon.

Anyone with a long enough memory realizes how volatile markets will be if Greece does in fact put its austerity measures to a popular vote. See the French and Dutch referendums from 2005 and Irish referendum of 2008…EUR crosses could see serious downside pressure in the weeks ahead if this becomes a reality. CHF crosses would outperform in that circumstance.