FX Consolidates As Headlines Slow
May 17 2012

Currency Tech

EURUSD
R 2: 1.2950
R 1: 1.2860
CURRENT: 1.2733
S 1: 1.2640
S 2: 1.2625

GBPUSD
R 2: 1.6155
R 1: 1.6005
CURRENT: 1.5901
S 1: 1.5870
S 2: 1.5805

USDJPY
R 2: 80.86
R 1: 80.60
CURRENT: 80.32
S 1: 79.65
S 2: 79.45

AUDUSD
R 2: 1.0085
R 1: 1.0035
CURRENT: 0.9946
S 1: 0.9860
S 2. 0.9745

Market Brief

Risk appetite returned marginally in the Asian session as the fear driving Greece headlines tampered off. Given the uncertain overhang in Europe, we suspect the recent recovery in FX markets is more a function of consolidation rather than reversal in expectations. EURUSD was range-bound between 1.2736 to 1.2750, while USDJPY fell to 80.26 in light trading. In a subdued session, Asia’s regional indices are stronger across the board with Nikkei up +0.77%, the Hang Seng +0.85% and the Shanghai Composite higher by +1.36%. AUDUSD recovered to 0.9962 from 0.9908 as Australia consumer inflation expectations for May at 3.1% vs. 3.3% in April. In Singapore, GDP came in at 1.6% y/y vs. 1.8% continuing a trend of weaker than expected regional growth data. As for Europe, pressure continues to build on the Greek banking sector. Yesterday it was reported that the ECB had halted offering liquidity to select Greek banks which they considered insolvent. A unnamed Eurozone central bank source stated "As recapitalization wasn't in place, the ECB stopped monetary policy operations". The names of the banks and numbers were not released, but the move had the markets anticipating financial crisis round 2. The fear of contagion illustrated through higher yield and CDS prices in Italy and Spain sent risky assets lower across the board. Gold fell to $1526, while Crude (wti) hit a low at $91.81. Mario Draghi once again reiterated that ECB had done enough and that it was out of their jurisdiction. "I want to state that our strong preference is that Greece will continue to stay in the euro zone," but he went on to say that "since the treaty does not foresee anything on (an) exit, this is not a matter for the ECB to decide." As for today, the light European calendar (select nations on holiday) will have traders watching Spain this morning, with Q1 GDP release and a €2.25bn bond issuance.

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