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Risk Appetite Takes a Hit- Greek Crisis Continues
Thu, Feb 25 2010, 23:15 GMT
2/25/2010 7:30 am: EUR/$..1.3483 $/JPY..89.44 GBP/$..1.5298 $/CHF..1.0852 AUD/$..0.8882 $/CAD..1.0583
Asian markets were generally down today on risk aversion as the Greek sovereign debt crisis once again takes center stage. Risk appetite was subdued after both Moody’s and S&P’s stated that they may downgrade Greece’s credit rating, rekindling fears of a default from the distressed nation. Strikes rippled through Athens yesterday as unions protested the government’s austerity measures. The yen advanced against all the majors as investors sought safe haven currencies, pushing EUR/JPY to a one year low testing 120.21 early in London trade. The yen surged 1% vs. the dollar before bouncing off the S3 daily pivot at 89.23. USD/JPY continues to consolidate into a wedge formation with the lower bound trend line, dating back to Dec 9th, currently sitting at the 89 handle. Additional support levels appear at the S1 monthly pivot at 88.60 and lower at 87.90. The dollar has a chance to gain its footing with a break of the 89.90. Higher resistance rest at 90.70 followed by 91.20 and the 92 figure.
The euro was softer today having tested 1.3450 before settling just below the 1.35 handle. Markets had rallied early on Fed Chairman Ben Bernanke’s testimony before Congress yesterday, launching the euro to 1.3624. However, the single currency quickly relinquished all its gains, falling more than 1.25% by mid-day in the Asian session. Bernanke assured market participants that rates would remain “exceptionally low for an extended period,” a statement investors were expecting. Although US markets closed to the upside, talks of the Greek credit downgrade weighed heavily on markets, with both Asian and European markets in the red half way through the trading day in London. The euro’s troubles are far from over as debates escalate as to whether a bailout would even be able to save the regions debt crisis, revealing deeper, more fundamental problems with the eurozone experiment. The single currency remains under heavy pressure as it maintains the downward channel dating back to Dec 3rd. Short-term support rests at 1.3430 with targets at 1.3385 and 13305. The euro has a chance of redemption with a clean break of the 1.35 handle. Resistance levels peek at 1.3550 and higher at 1.3665.
The pound had its 3rd straight day of declines today, sliding to the S2 weekly pivot at 1.5267 at 9:00am in London today. The pound has been hard hit since Bank of England Governor Mervyn King ’s, comments on Tuesday, hinting that additional quantitative easing measures may be needed to prevent the economy from falling back into recession. Having broken through the lower bound of the downward channel dating back to Oct 26th, cable’s downside momentum picks up steam with a break of the 61.8% Fibonacci extension taken from the Jan 19th and Feb 17th highs, using the Feb 5th trough, at 1.5240. Additional support appears at 1.5070 followed by 1.4884 and 1.4718. Supply sits at 1.5460 with further resistance at 1.5540 and 1.5720.
Today, the economic calendar includes reports from the US on Jan durable goods, weekly jobless claims, and Kentucky Fed manufacturing with jobless claims expected to fall some 13k claims, and durable goods expected to rise to 1.5% from 0.3% in Dec. Tomorrow’s schedule is packed with data with Japan reporting on CPI, industrial production, housing starts, and construction orders. Consumer confidence from the UK is expected to hold steady at -17 while GDP is seen to strengthen marginally. Also tomorrow is data on UK exports/imports, as well as CPI from the Eurozone.