In the wake of Portugal's downgrade by Moody's, the dollar has extended its advance so that it is now up 0.6% against a basket of major foreign currencies. That makes for a fresh session high.
The Dow recently set a new session low, but neither the Nasdaq nor the S&P 500 confirmed the move. In fact, the Nasdaq only came in contact with the flat line, but found support there.
The dollar advanced versus most of its major counterparts on speculation China’s efforts to tame inflation will cool growth and damp demand for riskier assets.
The euro dropped for the first time in seven days versus the greenback after Moody’s Investors Service said banks rolling over Greek bonds into new securities may incur impairment charges.
“We had this insipient risk recovery last week, and it has all of a sudden stalled,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “Moody’s has been in the news saying that the recent rollover plan constitutes a credit event. We thought Greece was taken off the table last week, and it’s still there, so that’s taken the steam out of the euro.”
The Swiss franc, a traditional haven from economic turmoil, rallied against all of its major counterparts.
China is likely to raise rates to combat consumer-price increases that may have reached 6.2 percent in June, said the Economic Information Daily, citing market estimates. That followed comments by the People’s Bank of China yesterday that the country still faces “large” inflationary pressure.
The Standard & Poor’s 500 Index fell 0.3 percent after rallying 5.6 percent last week. Yields on Treasury 10-year notes dropped five basis points to 3.13 percent today.
The Australian dollar weakened against the greenback after the South Pacific nation’s central bank left borrowing costs unchanged. The Reserve Bank of Australia kept its cash rate target at 4.75 percent for a seventh straight meeting as signs of slower growth from Europe to China dimmed prospects for an acceleration in hiring at home.
August crude gains now approaching $2 at $96.88, the contract holding just shy of the session high at $96.99.
CIBC says +0.8% May factory orders on top of a healthy ISM report shows mfg remains in expansion. They note April orders were revised to -0.9% from -1.2%.
Currently gold prices hold at $1511.50/oz with trading range is limited by $1493.40 - $1511.91. For any kind of upward momentum the gold will need to vault last week's highs near $1513.71 and then the 55-day MA ($1518 on Tuesday). Edel Tully from UBS says "rather than rallying now, gold is likely to stay rangebound either side of $1500."
EUR/GBP weakens again after it failed to back above stg0.9000. Cross currently holds around stg0.8980, above session lows on stg0.8974. The support remains at stg0.8975/70 with a break under opens the way to stg0.8935/30.
EUR/USD $1.4200, $1.4300, $1.4355, $1.4500, $1.4665
USD/JPY Y79.75, Y80.75, Y80.80, Y81.00, Y81.60, Y82.00
USD/CHF chf0.8350, chf0,8410, chf0.8600
GBP/USD $1.6000
AUD/USD $1.0500, $1.0565, $1.0600
EUR/JPY Y116.45
US stocks were poised to open little changed Tuesday.
Standard & Poor's warned Monday that a plan for European banks to roll over some of Greece's debts into longer-term bonds would still be considered a default.
Economy: Factory orders are due from the Commerce Department after the start of trading. Orders are forecast to have risen 1% in May, after falling 1.2% April.
Companies: Shares of China's top search engine Baidu (BIDU) rose 1%, after it reportedly signed a deal with Microsoft (MSFT, Fortune 500) to provide English-language search results in China.
Baidu's main rival, Google (GOOG, Fortune 500), has failed to gain traction in the Chinese market.
World markets: European stocks were mixed in morning trading. Britain's FTSE 100 added 0.1% and the DAX in Germany rose 0.2%, while France's CAC 40 slipped 0.3%.
GBP/USD challenging support at $1.6100. Offers at session highs on $1.6130, with stronger offers behind at $1.6145/50 ahead of $1.6195/00. Bids at $1.6070/60. Cable trades around $1.6101.
USD/JPY weakens, currently holding around Y81.07. rate earlier was between the narrow range, limited by Y80.09-19. Bids at Y80.80/75 and Y80.65/60, a break here and stops sub Y80.50. On the topside stops through Y81.20/40, offers at Y81.55/60. The pair trades Y81.10.
Data released:
07:45 Italy PMI services (June) 47.4 49.4 50.1
07:50 France PMI services (June) 56.1 56.7 62.5
07:55 Germany PMI services (June) seasonally adjusted 56.7 58.3 56.1
08:00 EU(17) PMI services (June) 53.7 54.2 56.0
08:30 UK CIPS services index (June) 53.9 53.5 53.8
09:00 EU(17) Retail sales (May) adjusted -1.1% -1.0% 0.9%
09:00 EU(17) Retail sales (May) adjusted Y/Y -1.9% -0.6% 1.1%
The pound strengthened against the euro and the dollar after a report showed a measure of U.K. service PMI exceeded economists’ forecasts in June
A gauge of U.K. services growth based on a survey of companies rose to 53.9 from 53.8 in May. The median forecast was for a decline to 53.5.
“The focus from the market right now is very much on the growth numbers, and positive data outcomes will tend to be supportive of sterling,” said Chris Scicluna at Daiwa Capital Markets Europe.
The pound has slumped this year as Conservative Prime Minister David Cameron’s austerity measures to shrink the budget deficit crimp growth and inflation squeezes incomes at the fastest pace since the 1970s. Efforts to eliminate the bulk of the fiscal shortfall by 2015 involve the deepest spending cuts since World War II and more than 300,000 state-employee job losses.
The Bank of England will keep its main rate unchanged at 0.5% on July 7. Investors are betting the central bank won’t raise borrowing costs until after next May.
EUR/USD weakens after some consolidation within the $1.4460/90 range.
GBP/USD rose from session lows around $1.5990 to $1.6030 before retreated.
USD/JPY rose to Y81.20. Later rate retreated to Y81.05.
US data starts at 1400GMT, US factory orders are expected to increase 1.0% in May on the already reported 1.9% increase in durable goods orders.
Goldman believe there are facts to support US economy in H2, including the following: commodity prices have eased; financial conditions are easier; vehicle production has rebounded; and labor market stabilized.
AUD/USD back up around $1.0700 amid reports of some GBP/AUD sales from model accounts. Currently rate holds around $1.0697 after post RBA low of $1.0665 earlier.
GBP/USD rose strongly after the release of June UK PMI. Rate printed session high on $1.6128 and currently holds around the figure. Offers at $1.6140/45. Support sitting at $1.6005/00 with retail bids behind at $1.5985/70.
European stocks advanced, as the Stoxx Europe 600 Index rallied for a seventh day. Asian shares fell and U.S. index futures were little changed. Celesio AG (CLS1), Europe’s biggest drug wholesaler, surged 5 percent after analysts raised their recommendation on the stock. CSM NV slumped more than 9 percent, its largest drop in 2 1/2 years, after saying first-half earnings will decline because of higher raw-material costs.
The U.S. dollar recovered on short covering on Tuesday while Asian stocks retreated from a one-month high.
The euro weakened, though it still held within striking distance of a one-month high against the U.S. dollar before a much expected interest rate increase on Thursday.
The Australian dollar languished near the day's lows after the central bank held interest rates at 4.75%, as widely expected. RBA also said the economy was unlikely to grow as strongly in 2011 as it first thought.
The RBA's dovish comments led to a short squeeze in the U.S. dollar.
The RBA's accompanying statement bolstered expectations for a moderate slowdown in Asia.
"It's a classic short squeeze in the dollar, but I don't think the recent 'risk-on' trend has changed because of this sharp move," said Tsutomu Soma, a senior manager at Okasan Securities. "Both the Aussie and euro were overbought, so many players simply wanted to lock in profits made on those rallies," Soma said.
EUR/USD holds stable around $1.4480 with trading range is limited by $1.4460-99. Stops below $1.4450, extending through $1.4415 ahead of $1.4380/75. Resistance at $1.4485/90 with a break here to open $1.4525/30.
USD/JPY holds higher - above Y81.00. The rate earlier broke through the overnight high (Y81.12) to print high around Y81.18. Support at Y80.80/75 and Y80.65/60. Resistance at Y81.20/30 and Y81.55/60. The rate currently trades Y81.12.
EUR/USD $1.4200, $1.4300, $1.4355, $1.4500, $1.4665
USD/JPY Y79.75, Y80.75, Y80.80, Y81.00, Y81.60, Y82.00
USD/CHF chf0.8350, chf0,8410, chf0.8600
GBP/USD $1.6000
AUD/USD $1.0500, $1.0565, $1.0600
EUR/JPY Y116.45
Nikkei 9,972 +0.07%
Data:01:30 Australia Trade Balance (May) 2333M
01:30 Japan Labor Cash Earnings (YoY) (May) 1.1%
04:30 Australia RBA Interest Rate Decision (Jul 5) 4.75%
The euro weakened versus the yen after Standard & Poor’s said a debt-rollover plan for Greece may prompt a “selective default” rating for the country.
The euro earlier advanced on speculation the European Central Bank will increase interest rates this week. The ECB on July 7 will increase its benchmark rate to 1.5% from 1.25%, according to economists.
The Swiss franc declined after data showed retail sales fell 4.1% in May from a year earlier. The Swiss currency has advanced 9.3% versus the dollar this year as investors sought a haven amid the euro-area debt crisis.
Resistance 3: Y81.80 (May 31 high)
Resistance 3: Chf0.8610 (50.0 % FIBO CHF0,8950-Chf0,8275)
Resistance 3: $ 1.6260 (Jun 22 high)
Resistance 3: $ 1.4650 (Jun 9 high)
03:30 Australia RBA meeting announcement 4.75% 4.75%
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