FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Global risk aversion continued to rise during the Asia session after a day of further sovereign spread widening inside the Eurozone, and a poor session for US stocks. EURUSD traded 1.4162-1.4223 and USDJPY traded 77.01-77.40. The S&P 500 closed down -2.55%. AUDUSD remained under severe pressure due to declining risk appetite, and due to the rates market pricing in progressively deeper future cuts to the RBA’s cash rate. US June consumer spending was reported at its lowest level since November 2010, confirming fears that domestic demand is currently not providing any meaningful support to the economy. It also added to nerves about US jobs data to come on Friday, as muted consumer confidence and business activity suggest little scope for a positive surprise. Elsewhere, the US Senate and President Obama signed off on the debt deal, which is aimed at raising the debt ceiling and cutting at least $2.1 trn from the budget deficit. However, this came as no surprise. Moody’s affirmed the US long-term sovereign rating at Aaa in the wake of the deal on the debt ceiling, but lowered the outlook to negative. S&P has yet to give its verdict. ADP employment and the ISM non-manufacturing composite are due.
EUR
Italian authorities reportedly met on Tuesday to discuss the recent turmoil that has sent Italian long-term yields sharply higher, and concluded that the stress is mainly related to non-domestic factors, such as the critical situation in the Eurozone as a whole and in the US.
Eurozone PPI for June was unchanged at 0.0% m/m and +5.9% y/y.
JPY
Finance Minister Noda said the yen is overvalued and pledged to do his utmost to avoid further yen strength. BoJ Governor Shirakawa indirectly raised the prospect of further monetary easing – perhaps as soon as Friday’s scheduled policy announcement. Shirakawa said the bank would take appropriate action after mulling the impact of the strong yen on the Japanese economy. Prime Minister Kan said he hopes the BoJ will support the economy in coordination with the government.
AUD
Although the AUD was already in an intraday downtrend largely due to declining risk appetite globally, a weaker-than-expected trade surplus and soft retail sales for June both added to the downward momentum.
GBP
UK construction PMI came in at 53.5, slightly higher than expectations for 53.1. The important indicator for the UK government will be the services indicator, due tomorrow.
TECHNICAL OUTLOOK
EURCHF breaks 1.0920.
EURUSD BEARISH Next support lies at 1.4014 ahead of 1.3837, the July 12 low. Resistance is at 1.4454.
USDJPY BEARISH Focus on initial support at 76.25, the key low, a move below which would expose 75.00. Near-term resistance is at 78.17.
GBPUSD BULLISH Clearance of 1.6476 would open the way for 1.6547, a key high. Support lies at 1.6186.
USDCHF BEARISH Watch for a move below 0.7500 to open the way towards 0.7374. Resistance is at 0.7857.
AUDUSD NEUTRAL Near-term directional triggers are at 1.0526 and 1.1081.
USDCAD NEUTRAL A move above 0.9669 would signal scope for gains towards 0.9779, while support lies at 0.9486.
EURCHF BEARISH A break below 1.0500 would extend losses towards 1.0311. Resistance is at 1.1205.
EURGBP BEARISH Support lies at 0.8657, a break of this level would open 0.8611, a key low. Near-term resistance is at 0.8806.
EURJPY BEARISH Initial support is at 108.71 ahead of 106.61, the key low from March 17. Resistance is at 112.25.
SCHEDULE
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