Tuesday, June 19, 2012

20120619 1026 Currencies Related News (Source: Reuters)

 TUESDAY, JUNE 19, 2012


Market Briefs
• US June NAHB Housing Market Index 29 vs exp 28 and prev 28
• CAD APR Int’l. Securities Transactions 10.2b vs exp 5b and prev -2.4b
• EU says the Troika not considering an extension of Irish loan repayments
• Fitch says won’t place all EZ Sovereigns on watch negative as it had indicated would be the case if Greek Euro exit were a probable near-term event
• Fitch says it sees lower risk of disorderly Greek debt default and EU exit
• Germany’s Merkel: Can’t accept any loosening of agreed reform pledges in Greece after election; Greek Gov’t must fulfill commitments made to int’l. lenders
• EU’s Barroso: EUR is very high; it’s not a problem; many in Europe would like it a little lower
• EU’s Wieser: New Greek loan payments won’t be made until a new memorandum of understanding is signed between Greece Gov’t and Troika

Looking Ahead - Data
• JPY 05:00 APR Leading Index Final; No f/c prev 95.1
• JPY 05:00 APR Coincident Index Final; No f/c prev 96.5

Looking Ahead – Events, Other Releases
• AUD 01:30 Reserve Bank Board Minutes for June

Currency Summaries
EUR/USD  Relief that Greece voted for a pro-bailout party on Sunday was short-lived, as were EUR/USD gains on the news. It topped out by 1.2750 and the upper 21-day Bolli band. Much of the first half of this month was about squaring up short EUR trades in case of a supposedly supportive Greek vote result or central bank action, namely from the ECB, that will put the financing crisis on the periphery in remission again. Unfortunately, Spanish 10-yr yields surged to new euro-zone highs above 7% today, which forced heavy macro selling of EURs versus the USD and most other currencies. By the London fix, the damage was done and EUR/USD was clinging to support at 1.2550-55. While Greece's ND party was trying to cobble together a workable coalition, a Spanish Minister was saying only the ECB had the tools to relieve crushing financing costs. Merkel threw cold water on easier bailout terms for Greece and ECB's Draghi got ready for his Thur meet with EZ FinMins at which we suspect he will be pressed for LTROs, SMPs or anything to stop the rot. G20's a joke. It's all about the ECB at this stage.

USD/JPY EUR/JPY led the early losses in the yen crosses and USD/JPY, as the hoped-for Greek election result failed to end the upward spiral in Spanish yields to new EUR-era highs. The bulk of the disappointment in that result was priced before the London fix. An uptick in the US NAHB index to a 5-yr, if still deeply depressed, high prompted profit-taking by EUR shorts and spec buying on the notion that there's no alternative to ECB liquidity injections at this point. EUR/JPY bounced from 99.15. The cross was oversold on the hourlies and traders failed to remove Friday's 99.10 low. Rebounds look stunted by offers in the 99.70 and 200-HMA vicinity. Day's high was rejected just ahead of the Jun 11 recovery high, making that even more pivotal. USD/JPY, on Friday, caromed away from the topside of its downtrend line from Mar highs. Monday's rebound was rejected by the hourly downtrend line off the Jun 13 high. It's Tenkan is crossing above the Kijun now, removing the bearish alignment, though Cloud cover looms in the low 80s. AUD/JPY cleared down TL and 38.2% Fibo hurdles today, running stops in the event.

GBP/USD Sterling was something of a sideshow to the main euro story in the wake of the Greek elections. The focus shifting to Spain saw the single currency sold again, and that pushed EUR/GBP below Friday’s lows into the 0.8025 area after it had played around near 0.8100. Cross selling helped support GBP/USD somewhat, but the market still retraced back to test 1.5630 into the US morning during the worst of the risk aversion action. As that market psychology eased, though, cable managed to recovering back to range around 1.5660.The reversal from new highs in GBP/USD creates a dark cloud cover candlestick pattern. Coming close to the declining upper Bollinger Band and near the bottom of the consolidation area either side of 1.5800 from mid-May, it's a natural reversal situation within the context of a consolidation period. That could mean further weakness. May UK CPI is expected to come in at 0.1% Tuesday, down from 0.6% in April, potentially supporting the case for the BoE to do QE soon, which wouldn't help cable.

USD/CHF Initial reaction to the ND win in Greece was to buy dollars in Wellington, but this was rapidly replaced by dollar buying against the EUR and CHF - tied at the hip via the SNB's 1.2000 EUR/CHF floor - when it became clear the news would not be enough to lower rising funding costs in Spain, Italy and other debt-burdened euro-zone members. Even if a new Greek govt is formed via coalition, the betting is they'll be unable to move the reform/austerity agenda very far, will run out of money by summer end and will not get the Troika's blessing then. German and others have already said they expect the terms of the second Greek bailout to be adhered to. USD/CHF caromed off its lower 21-day Bolli by today's 0.9424 low and surged back toward the converging 10 and 21-DMAs at 0.9540/50 and close to the down TL off the Jun highs, Tues at 0.9564. Slightly oversold daily Slow Stochs are turning back up. Main question is whether the meeting between the EZ FinMins and Draghi on Thursday will trigger a new round of LTROs, SMPs or some new emergency measure to beat back the USD, if only temporarily.

USD/CAD  spent most of the NY session consolidating within the upper limits of the range for the day. Risk-on sentiment from the Greek election was non-existent during NY hours giving the USD a flight to quality bid for most of the session. Early NY trades saw the pair continue the O/N rally off the lows as sentiment soured throughout the morning. Oil and NorAm equity marts traded lower throughout the day and aided in keeping USD/CAD at elevated levels. The 10 & 21 DMAs (1.0278) combined with offers layered in the 1.0280-1.0305 region capped the rally and the pair settled into a tight 1.0240/60 range for the afternoon. Consolidation could be in order over the coming sessions. Daily Bolli bands are narrowing while daily RSI and Stoch studies are turning up. The 10 and 21 DMAs have done a good job of containing price action so the pair may trade between them and the lower 21 day Bolli c. 1.0160 for now. Tomorrow brings Apr. Wholesale Sales data from Canada but market players are likely to focus on the EZ situation and the upcoming FOMC meeting on Wednesday. Should the Fed come up with new easing measures, recent USD/CAD gains are likely to be wiped out.

AUD/USD  Opened NY feeling heavy and unloved as the positive risk sentiment from overnight faded. Early NY trade saw the pair drift lower and re-test the O/N lows and close of Friday c. 1.0055/60. Bids in that region and a bounce off the lows in commodity and NorAm equity markets stemmed the slide. An early afternoon spike in price saw a rally and the pair make new highs for the day. The rally was attributed to a major U.S. custodial bank selling massive amounts of EUR/AUD for the 1 p.m. NY fix. EUR/AUD spiked lower to briefly trade below 1.2400. AUD could be gaining favor globally again. Blowout GDP and employment data two weeks ago have traders thinking the economy is not doing all that bad. Some of the highest interest rates in the developed markets combined with massive quantities of hard assets also make investments down under attractive. With the EZ still not out of the woods, we may see EUR/AUD continue its slide started in mid-May. Daily technical studies indicate EUR/AUD’s move lower can continue. Daily RSI and Stoch studies still show negative momentum with no signs of diverging. The 21 day Bolli bands continue to widen indicating the move lower has legs. The RBA releases the minutes of their June meeting at 01:30 GMT. Traders will be looking for hints of future rate cut to come. Keep in mind though that the better than f/c GDP & jobs data were post-RBA rate cut so they will not be factored into any comments made during the meeting.

NZD/USD For the most part, the kiwi stayed out of the fray surround the reaction and counter-reaction to the Greek election result. This had both plusses and minuses. On the one hand, NZD/USD held to a fairly narrow range throughout, sticking either side of about 0.8000 for the most part. On the other hand, the lack of a rally in the NZD in the latter part of the day was indicative of relative weakness in the face of a falling USD. AUD/NZD had fallen to the 1.2740 area in the European morning where it bottomed into the US morning, but the cross recovered to the 1.2790 area. The sustained action in NZD/USD today creates an over-bought risk for the market in that the day's range is almost entirely above the upper Bollinger Band. That isn't a sustainable situation, so we can expect to see at least a lessening of the upside momentum, if not some kind of consolidation. Even still, the next resistance of note to look for is the March low near 0.8050. There's nothing on the NZ calendar for Tuesday to impact the kiwi.

LATAM An up and down (or down and up) set of markets saw the major Latam pairs cover a fair bit of ground. The initial moves were driven by a strong positive reaction to the Greek election results that saw the USD weaken in line with higher Treasury yields and stronger stocks. That all turned quickly, though, such at the trend was already working well in favor of a stronger dollar by the US morning. In that swing, USD/MXN rallied to 13.96 from lows below 13.85 and USD/BRL pushed toward 2.07. The greenback held strong against the euro, but a better overall risk tone helped the commodity currencies. That saw USD/MXN fall back toward 13.84 in the US afternoon. USD/BRL also retraced, but only reached back to about 2.06. The reversal was supported by strong stocks and higher interest rates, though the likes of oil never really got up off the mat.

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