EUR

ForexLive Asian Market Wrap: Consolidation Inside 70 Pip Ranges

CIC tokeep investment level steady
Feds Lacker: less comfortable with extended period language
Japans trade surplus for April grows again on the back of strong Asian trade
Australia expected to soften proposed mining tax
Prudential investors to oppose AIA deal
Regional stockmarkets up by around 0.5%

It has been a reasonably sedate Asian trading session with most of the majors trading in 70 pip ranges. NY closed on its session lows in the EUR/USD around 1.2160 but Asia did not have the firepower to test supposedly strong bids around 1.2150. Real money players were active buyers during the NY session. The statement from the CIC helped the EUR to bounce off its lows as did the fact that regional stockmarkets were at least not sold off. Ranges: 1.2155/1.2245

USD/JPY has as usual been very quiet in a 30 pip range either side of 90.00, moving around with short term sentiment in the crosses. Ranges: 89.86/90.16; 109.20/110.25.

The AUD/USD rallied early in the session on talk of a watering down of the proposed mining tax. Ranges: .8200/88, AUD/JPY 73.70/74.70

Sterling has again been quiet following the lead of the EUR but to a lesser extent. .8400 is looming as pivotal support for the EUR/GBP. Talk that the PRU/AIA deal might not go through has led to speculation that the cable hedges (thought to be substantial) might have to be taken off which would lead to large buying of cable. Ranges: 1.4370/1.4417, .8452/92

Ranges: Nikkei +0.4%, HK +0.5%, Seoul +0.9%. Gold steady at $1215/oz. Oil $71/bbl.

i still see longer term parity with euro. after june we will certainly get a fall of about 5% then we will reach 100 on dxy for 2011. so for a long term trade, u could consider long dollar but we are almost at the end of the initial upleg.

ForexLive US Wrap-Up: Euro Pressures Return With A Vengeance

FT: China reviews Euro zone bond holdings
Australia may water-down 40% mining tax
US durable goods orders rise 2.9% in April
US new home sales rise 14.8% in April as tax credit expires
Geithner calls on Europe to take action to implement euro rescue package
Italian main labor union may call general strike in June
Berlusconi calls Italian budget cuts necessary to save euro
Moodys: US credit card charge-offs peaked in Q1
Gold closes at 1212.50 as dollar strengthens; oil rises $2.10 to 70.85 on shut-down in Alaska Pipeline
S&P 500 falls 0.6% in late session slide as China euro worries spook market

EUR/USD was one way traffic today, falling throughout the US session in fits and starts. From opening 1.2330 levels we slumped to 1.2247. Heavy selling by the BIS helped weigh on the pair while Asian central bank sales were noted as well in early trade. Selling was heavy at the 15:00 GMT fixing. We fell from 1.2260 ahead of the fixing to 1.2190 30 minutes after the fix. Early afternoon saw consolidation in a 1.2190/1.2240 range before news that China is reviewing its euro-denominated bond holdings sent the market down to 1.2177 to retest the set Tuesday.

AUD/USD was the other huge mover today. It spiked on talk that Australia may water down its mining tax but was unable to maintain its gaisn above 0.8365, an important resistance levels. Prices soon fell sharply, aided by rumor of a Spanish sovereign debt downgrade, taking AUD through 0.8275 support. We end at 0.8220 amid full-blown risk aversion.

EUR/GBP selling help keep cable aloft in afternoon trade. We squeezed as high as 1.4440 before cable finally slumped. We end near 1.4375.

EUR/CHF fell back on risk aversion this afternoon, falling to 1.4125 from levels near 1.4300 earlier in the day.

USD/CAD was extremely volatile intraday. CAD benefited from the oil spike at times, was blasted on the Aussie tax talk and Weakened late in the day as stocks dove. 1.0577/1.0700 was the range with a close near the highs.

Look for the China story on European bonds to be a game changer and put pressure on the 1.2132, the 50% retracement of the lifetime 0.8225/1.6040 range in EUR/USD to be retested. Huge 1.20 barriers will be targeted on a break.

The dollar's recent strength has been explained by most market analysts as a result of the euro weakness rather than any fundamental support for the greenback. In fact, a closer look at the dollar's chart - particularly the dollar index - suggests the currency may be primed for a collapse.
The dramatic dollar index rise from $0.81 to $0.87 in recent weeks shows the chart's developed a dramatic and possibly dangerous parabolic trend.
The dollar index suggests the greenback will continue to stengthen until the end of June, with a target near $0.89-$0.91, before it collapses to a downside target of $0.81. trend has four important features.

OECD: BOE Should Start Monetary Tightening In 2nd Half 2010
London (MNI) The Bank of England should start tightening monetary
policy in the second half of this year, earlier than markets are
currently anticipating, according to the Organisation for Economic
Co-Operation and Development.
In its latest economic outlook, published Wednesday, the OECD said
the BOEs current policy stance was appropriate but that the bank should
look to lower the level of quantitative easing and start to normalize
rates in the second half of 2010. Markets recently have sharply scaled
back expectations of higher rates this year, putting little more than a
1 in 10 chance on a single 25-basis-point hike by the end of December.
With the Bank of Englands policy rate close to zero and
quantitative easing amounting to stg200 billion (14% of GDP), monetary
policy remains highly expansionary. This is appropriate as the large
output gap and falling unit labour costs are expected to underpin a
slowdown in inflation to below the 2% target during 2011, the OECD
said.
The organization added, however, that in response to the expected
gradual rise in underlying inflationary pressure as the recovery gathers
pace and to anchor inflation expectations, the normalisation of interest
rates and the scaling back of quantitative easing should start during
the second half of 2010.
The OECD said that if the pace of fiscal tightening were stepped
up, this would leave room for a more gradual normalisation of monetary
policy.
The OECD predicted a pickup in UK growth, projecting it to climb
from 1.3% this year to 2.5% in 2011, and from 2.2% on the year in the
fourth quarter of this year to 2.6% in Q4 2011.
The OECDs growth projections are softer than the BOEs, with the
latter forecasting 2.8% growth on the year in Q4 of 2010 and 3.5% in Q4
2012.
Private consumption growth is expected to accelerate sharply in
2011 compared to this year, from 0.3% to 2.2%. Final domestic demand is
expected to rise from +0.7% this year to +2.1% in 2011.
The recovery is gaining traction, supported by improving financial
conditions, rebounding exports and a temporary surge in stockbuilding,
the OECD said.
While elevated inflation and the effects of the credit crunch will
keep growth subdued this year, the OECD predicts the recovery will
gather pace next year, bolstered by a acceleration of household
consumption and business investment.
The OECD predicts UK unemployment is already around its peak and
will fall back after the mid-point of this year.
Echoing the BOEs central view in its recent Inflation Report, the
OECD predicts inflation will drop back below target due to the high
degree of slack in the economy.
It also endorsed the view of the new UK government that further
fiscal consolidation is required, saying that a concrete and
far-reaching consolidation plan needs to be announced upfront.
While monetary policy should remain expansionary over the forecast
period to support activity against the background of low levels of
resource utilisation, the process of normalisation of interest rates
needs to start soon in response to the expected gradual rise in
underlying inflation, the OECD concluded.
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