FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
Risk appetite has been stable in Asia, mainly in reaction to improving sentiment about the EU debt crisis, better than expected macro data, and after news that China‘s government plans to boost its stakes in the country’s biggest banks. In Europe, Greek Finance Minister Venizelos said yesterday that the troika has concluded discussions. An official statement in which the troika inspectors will detail whether they believe that Greece has made enough progress to receive its next aid tranche will now be released earlier than expected, and crucially, ahead of the next EU summit.
On the data front consumer confidence in Japan and business confidence in Australia rose in September. In Germany, exports in August rose to record levels, suggesting that business activity in the Eurozone’s largest member state will not slump, dampening the notion that inflation expectations could fall considerably from current levels. Alongside better risk sentiment, still stretched short positioning suggests EURUSD remains a buy on dips for now. The EU summit originally planned for Oct. 17 has now been postponed to Oct. 23. Most Asian stock market indices are trading in the black, with the Nikkei up by 2.11%. EURUSD traded 1.3617-1.3654 and USDJPY 76.63-76.76. Ahead today, investors will focused on Slovakia‘s parliamentary vote on whether to ratify enhancements to the EFSF. We expect them to approve enhancements.
EUR
With the EFSF ratification process in all 17 Eurozone countries almost complete, attention now turns to the Slovakian parliament which is scheduled to hold a vote on ratification some time after 1100GMT on Tuesday. A junior party in the four-party coalition government has as recently as Monday night, pledged to vote down the Bill. Without the full support of government parties, opposition votes would be needed to secure safe passage of the Bill.
Greece‘s Finance Minister Venizelos said discussions with the troika on plans for 2011 and 2012 have concluded, and negotiations are now focused on 2013 and 2014. Reuters, citing an unnamed source, said that the EU, IMF and ECB inspectors are expected to wrap up Greek aid talks on Monday and issue a statement by Tuesday.
Greece‘s Deputy Prime Minister Pangalos said there is no possibility of anyone leaving the Eurozone or being kicked out. He added that Chinese investors are currently looking into the possibility of buying state assets.
In Germany, exports in August rose to record levels, suggesting that business activity in the Eurozone’s largest member state will not slump, dampening the notion that inflation expectations could fall considerably from current levels. Alongside better risk sentiment, still stretched short positioning suggests EURUSD remains a buy on dips for now.
AUD
Business confidence in September rose to -2 from -9 in August, suggesting that the lower AUD and still firm demand conditions helped ease the corporate sector’s worries about growth prospects. The improvement in confidence suggests that corporates will be more willing to hire, especially as manufacturing activity is expected to rise again. This in combination with stable risk sentiment suggests that AUDUSD remains a buy on dips for now.
TECHNICAL OUTLOOK at 0800 GMT (EDT +0400)
EURUSD NEUTRAL Break above 1.3690 has turned the model neutral. Resistance is at 1.3837 ahead of 1.3937, while support lies at 1.3346.
USDJPY NEUTRAL Initial resistance is at 77.40, top of the bear channel drawn off April 7 high ahead of 77.86. Support lies at 76.50 ahead of 75.95.
GBPUSD NEUTRAL Resistance is at 1.5716/81 area. Support is at 1.5525 and 1.5423.
USDCHF BULLISH Resistance is at 0.9340, a break here would expose 0.9401, a Fibonacci level. Support lies at 0.8919.
AUDUSD NEUTRAL Focus is on 1.0035, a break above which would open 1.0239, a Fibonacci level. Support lies at 0.9728 ahead of 0.9622.
USDCAD BULLISH Initial resistance is at 1.0419 ahead of 1.0483. Key support lies at 1.0144.
EURCHF BULLISH Resistance is at 1.2495, a break above which would open the way towards 1.2646. Support lies at 1.2123.
EURGBP NEUTRAL Resistance is at 0.8750, trendline drawn off July 1 high. Next level is at 0.8795. Support lies at 0.8583.
EURJPY NEUTRAL Near-term directional triggers are at 106.99 and 100.76.
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