Currency Updates:
U.S. Dollar Trading (USD) with the EU Summit starting on Thursday the market is starting to price in a failure of EU officials to make progress with German Chancellor Merkal once again stating she is against the idea of Eurobonds. Such Joint liability she believes will not address the main cause of the crisis which is fiscal discipline and structural reforms. Global stock markets are under pressure as the uncertainty grows and risk assets/currencies are being sold aggressively. Looking ahead, April Case Shiller House Prices forecast at -2.5% vs. -2.6% previously.
The Euro (EUR) the EUR/USD grinded lower with after opening at 1.2550 to break below 1.2500 and find support at 1.2480. The EUR/JPY was a constant source of selling pressure falling from Y101 to below Y100 as the Safe haven roared back into favor. EUR/JPY eventually found support at Y99.2 and is retracing in Asian trade Tuesday so far but with the EU summit looming more selling on rallies is expected.
The Japanese Yen (JPY) the USD/JPY was a big mover on the day falling from above Y80 to below Y79.50 as sentiment changed dramatically on Monday from last week. There are concerns that the EU summit will fail and that Japan itself will be having political risks with a major tax bill to be voted on this week. The rejection of the Y80 level is very concerning for the bulls and the price action this week will be watch closely by medium term traders.
The Sterling (GBP) the GBP/USD was more stable than most majors with a tight 50 pip range 1.5540-90 containing Monday’s price action. The EUR/GBP once again was on the downside grinding towards the 0.8000 level and helping to support the major from larger losses. Looking ahead, July German Consumer sentiment forecast at 5.6 vs. 5.7. Also ahead, UK May Public sector net borrowing forecast at 14.25bn vs. -18.81bn previously.
Australian Dollar (AUD) the large falls in Global stock markets on Monday weighed on the AUD/USD which is a traditional risk currency. The key 1.0000 level was broken in US trade and support was found at 0.9970. The outlook is mixed with the recent rally now under threat and whether we close under 1.0000 is key for this week’s trade. Looking ahead, no major economic data releases.
Oil & Gold (XAU) Gold reversed higher overnight bucking the strong USD as the Eurozone debt crisis once again festered and investors flooded into the safe haven and alternative investment in the precious metal. OIL/USD fell from $80 to $78 before recovering to $79 as the rollercoaster to the downside continued. Falling global demand outlooks have been the main catalyst for the recent drop.
