FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The dollar was dealt a double blow over the past 12 hours. Moody’s put the US sovereign rating on review for a possible downgrade, citing a lack of progress in negotiations on raising the debt ceiling. The dollar sold off in response, and losses were especially pronounced against the JPY and CHF. Earlier, Fed Chairman Bernanke’s testimony to Congress set a relatively dovish tone and comments suggesting that the option for further stimulus remains open stoked fears of another round of QE. Bernanke’s speech largely repeated themes from his June 22 comments but the Fed is clearly keeping an open stance on policy until a significant trend in data emerges. The euro shook off uncertainty over the timing of a potential emergency meeting in the Eurozone and a Fitch downgrade of Greece. EURUSD traded 1.4131-1.4282. USDJPY traded 78.47-79.61. Eurozone core CPI and US jobless claims are due.
EUR
Separate Eurozone authorities continue to dispute whether an emergency session will take place on Friday to address the region’s debt crisis. The German Chancellor’s office said no plans were being made at this time, though other sources noted that a meeting had been confirmed.
Fitch cut Greece’s rating to CCC, and removed it from ratings watch negative. The agency said the move owes to the “absence of a new, fully-funded and credible EU-IMF economic program” and said a “rating default event” could arise from private sector involvement in Greece.
Eurozone industrial production for May grew at +4.0% y/y (cons. +4.8% y/y).
The Italian centre-left opposition called for approval of government austerity measures in the Senate by Thursday and by the lower house by Sunday. The Italian Economy Minister said the package will be approved and reinforced by Friday.
GBP
UK employment data was mixed. The claimant count for June came in at 24.5k, well above market expectations of 15.0, although the ILO measure showed that the labour market is still expanding. Sterling fell on the release and we look for further moves downward as the BoE doves maintain control of the BoE.
UK Chancellor George Osborne called upon Eurozone governments to act decisively on current risks, and warned that the UK was not immune to any financial storm led by the Eurozone..
JPY
Finance Minister Noda said recent moves in USDJPY have been one-sided, and that he does not want the current yen rise to persist. After first falling to a low of 78.45, USDJPY suddenly jumped to a high of 79.62 in Asia. There was no official confirmation of any intervention activity.
CHF
SNB’s Jordan was on the wires yesterday, saying he was “very worried about current developments” in Europe and was “watching” EURCHF. He said that pegging EURCHF “would mean loss in sovereignty” however and the SNB was “neither powerless nor unable to act”, suggesting that intervention was not completely off the table but remains dependent on CPI.
TECHNICAL OUTLOOK
USDJPY pressures 78.44 support
EURUSD BEARISH Break of 1.3951 would open 1.3837 key low. Resistance is at 1.4342 Fibonacci level.
USDJPY BEARISH Pressure on 78.44 Fibonacci support; a break here would open 76.25 key low. Near-term resistance is at 79.57 previous low.
GBPUSD BEARISH The pair bounced back through 1.6141 to expose 1.6263. Overall outlook is negative and we expect weakness towards 1.5906 and 1.5781.
USDCHF BEARISH Bear trend continues; decline through 0.8165 has triggered further weakness towards 0.8000 psychological level. Resistance is at 0.8276 previous low.
AUDUSD BULLISH Break of 1.0790 has exposed 1.0889, while support lies at 1.0580,
USDCAD BEARISH Violation of 0.9566 has exposed 0.9513, a key level. Resistance is at 0.9669.
EURCHF BEARISH The cross continues to weaken. Support is at 1.1458, where a break would open up the way for eventual move towards parity. Resistance is at 1.1752.
EURGBP BEARISH Clearance of 0.8749 would expose 0.8722. Initial resistance is at 0.8906.
EURJPY BEARISH Support lies at 109.58, a move below the level would open 107.99 and 106.61 next. Near-term resistance is at 112.95.
SCHEDULE
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