EUR/USD briefly rallied on hopes the ECB’s ultra-cheap funding tender would tempt banks to buy Italian and Spanish debt and pull yields lower. The tender eased concerns about an immediate credit crunch, but it also discouraged investors from lending to euro zone banks because of their large exposure to sovereign debt. Besides, now investors think that the U.S. economy is on a recovery path and the improvements in the process will diminish the chance of another round of quantitative easing.
The market participants agree that it will take more time until we see a resolution to Europe’s debt crisis. Forex strategist at Mizuho Securities, Kengo Suzuki said “The EUR/USD is likely to remain in a 1.3000-1.3100 range in Asia after a choppy session overnight, with the technical charts signaling a downward bias for the EUR after recent attempts at a rally failed. The ECB’s operation helped erase excessive pessimism over the European debt crisis, but was not sufficient to make investors more optimistic”.
Meanwhile, The IMF and EU leaders are trying to bring Greece’s debt down to a sustainable level. However, the country’s creditors are resisting pressure from the IMF to accept bigger losses on holdings of the indebted nation’s government bonds. Things don’t seem so good for the eurozone. The latest monthly survey by Merrill Lynch/Bank of America Securities of about 200 major institutional investors revealed that nearly half of all institutional money managers now fear a partial break-up of the eurozone.
Today the Asian stock markets opened slightly lower as lenders borrowed more cash from the European Central Bank than economists had expected, sparking concern the eurozone’s sovereign debt crisis won’t be contained so easily. NIKKEI started the day at 8,429.54, previous close was 8,459.98. HANG SENG opened at 18,342.33, previous close was 18,416.45. Investment strategy at AMP Capital Investors, Shane Oliver said “The ECB doesn’t seem to have stepped up to the plate for bond buying, which I think is negative, but at least they are acting as a lender of last resort for banks. As we are heading closer to a holiday period, volumes decline”.
EUR/USD is trading at 1.3044 by the time of typing and for today resistances are located at 1.3153 and 1.3261. Support levels are 1.2985 and 1.2917.
GBP/USD is at 1.5666. Resistance levels are located at 1.5748 and 1.5837. Supports are located at 1.5621 and 1.5580.
USD/CHF is trading at 0.9359 by the time of typing and for today resistances are located at 0.9416 and 0.9478. Support levels are 0.9300 and 0.9266.
AUD/USD is trading at 1.0070. Resistances are located at 1.0122 and 1.0194. Support levels are 1.0000 and 0.9954.
The economic calendar is not so heavy today but there are some important data releases which can cause volatility in the forex market. Bank of Japan will release its monthly report at 05:00 GMT. Italian Retail Sales report will be released at 09:00 GMT. U.K. Current Account data and Final Gross Domestic Product report will be released at 09:30 GMT. U.S. Unemployment Claims and Final GDP figures will be released at 13:30 GMT. Revised University of Michigan Sentiment report is due at 14:55 GMT. CB Leading Index data will be released at 15:00 GMT. Natural Gas Storage figures will be released at 15:30 GMT.