FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400)
USD
The euro got a strong boost from a Wall Street Journal article which claimed that Germany might be willing to participate in another round of funding for Greece, even if a voluntary ‘soft’ restructuring of Greek debt does not first take place. No sources were cited, however the currency reaction was logical given that, if this is what ultimately happens, the market will not have to cope with the potential trauma of a restructuring event – at least not in the near term. EURUSD traded 1.4272-1.4406, USDJPY 80.72-81.38. Elsewhere, strong New Zealand data propelled NZD to a new high, while the AUD was hurt after data pointed to the likelihood of a very weak Q1 GDP print tomorrow. US house price data, the Chicago PMI are due. Our US economists think consumer confidence will come in well ahead of consensus expectations.
EUR
Germany’s Finance Minister Schaeuble said it can no longer be assumed that Greece will be able to refinance a portion of its debt in Q2 2012, which is why further measures are currently being discussed.
The Greek press reported that the troika have delayed their departure from Greece until Saturday, after which they are due to report back on their findings. According to the same reports, tough negotiations with Greek government officials are due to conclude by Wednesday night.
France’s Finance Minister Lagarde, and candidate to succeed Strauss-Kahn at the IMF, said it is important that currencies do not exhibit excessive volatility and that the IMF needs to increase coordination to prevent this.
Fitch downgraded Cyprus by three notches to A- from AA-.
JPY
Moody’s put Japan’s AA2 rating on review for a possible downgrade. The agency thinks a JGB funding crisis is unlikely in the near to medium term, but sees a risk that at some point in the future a tipping point could be reached where the market would put a risk premium on Japanese government debt. USDJPY jumped 50 pips on the news.
CAD
Our Canadian economist expects the Bank of Canada to keep the base rate unchanged at 1% at today’s policy meeting, given that core CPI numbers remain comfortably inside the BoC’s target range. This is inline with consensus expectations.
TECHNICAL OUTLOOK
EURUSD NEUTRAL Move above 1.4346 has exposed resistance at 1.4442, while support at 1.4257 holds.
USDJPY BEARISH Support is at 80.64, break below this would expose 80.34. Initial resistance is at 82.00.
GBPUSD BULLISH Rise through 1.6517 has exposed resistance at 1.6584 ahead of 1.6661. Near-term support is at 1.6450.
USDCHF BEARISH Initial support is at 0.8465; break of this level would pave the way for further downside towards 0.8400. Resistance lies at 0.8663.
AUDUSD BULLISH Break above 1.0794 is required to confirm the bull trend, while support lies at 1.0609.
USDCAD BULLISH Pull back through 0.9724 has exposed support at 0.9675. Initial resistance is at 0.9787 ahead of 0.9816.
EURCHF BEARISH Clearance of 1.2099 would expose next support at 1.2000. Resistance is at 1.2360.
EURGBP BEARISH Decline through initial support at 0.8657 would open 0.8611. Resistance lies at 0.8752.
EURJPY NEUTRAL Break of 116.38 has turned the model to neutral and exposed resistance at 117.24. Support is at 115.21.
SCHEDULE
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