as Greek bailout optimism continues to fade after the fact. Data and news flows have been relatively light with the majority of economic releases coming from the ‘land down under’:
- Australia Dec. Westpac Leading Index rises +0.5% vs. -0.3% in Nov.
- Australia Jan. Internet Job Vacancies fall -0.6% in month
- Australia 4Q Wage Price Index rises +1% q/q vs. expected +0.8% and prior +0.7%
- Australia 4Q Wage Price Index rises +3.6% y/y vs. expected +3.4% and prior +3.6%
- New Zealand Jan. Credit Card Spending rises +0.8% vs. month ago
- New Zealand Jan. Credit Card Spending rises +3.1% vs. year ago
- China Feb. HSBC Manufacturing rises to 49.7 from 48.8
. While an imminent hard default by Greece seems to have been averted, the potential for negative headlines remains high. Besides the parliamentary votes of approval needed from EZ sovereigns in the coming days to weeks, the implementation of fresh austerity measures and a possible early Greek election may throw a big wrench in the hopes for a sustainable Euro-area economic recovery.
Judging from continuing ‘buy the rumor, sell the fact’ price action into Wednesday’s Asia Session, the path of least resistance seems to point lower for a number of G10 currencies. To be more specific, currencies backed by accommodative CBs - EUR, GBP, JPY, USD - have scope for extended downside although the U.S. Dollar seems likely to get a reprieve on a still highly possible return of risk aversion and resultant ‘safe haven’ interest.
Additional weight to G10/USD ccy pairings may actually come as a result of their respective runs higher as of late. The recent multi-month rally in G10 and EM FX vs. USD may have righted the ship. Heavy EUR short positioning seems to have been rebalanced via the squeezing out of weak USD longs, potentially clearing the path for another wave lower:
- EUR/USD exited below the base of a rising wedge formation, as typically suggested by traditional technical analysis, around the 1.3230/35 area which also happens to be its 55-hr sma. The bearish pattern break may set the stage for downside to continue to prior resistance and now potential support in the form of the 100-hr sma around 1.3175 initially. Key resistance still remains just below the 100-hr sma around the 1.3275/95 zone which capped upside despite the announcement of an official Greek bailout plan agreement. (Click here to view the last update to the potential strategy …FX VIEWS: Greece assisting, risk missing, & USD rebounding...posted 02.14.12 )
- GBP/USD posted an hourly close below the 200-day sma around 1.5775 but found support into the 50% retracement for the recent 1.5650/1.5875 ascent. However, think hourly closing breaks below the rising trend-line from the Jan. 16th 1.5235 lows, also its 100-day sma, around the 1.5690/00 would be needed to confirm a reversal to the short term uptrend. (Click here to view the last update to the potential strategy … FX VIEWS: FED, ECB lax policy...posted 01.27.12 )
- NZD/USD downside bias while below the 100-hr sma around 0.8355 with recent range lows around 0.8250 in view next. Above sees meaningful resistance at recent range highs around 0.8425. ( Click here to view the last update to the potential strategy… FX VIEWS: A diamond in the rough for kiwi shorts?...posted 02.15.12 )
- EUR/TRY bounced higher as the CBRT cut the upper end of its interest rate corridor down to 11.50% while softening its language. However, the pair held below its 21-day sma around 2.3250 and still remains attractive on a carry adjusted volatility basis. Furthermore, a UK bank labeled TRY as a potential ‘carry’ favorite which was publicly released to the press. While we have noted the potential for positive TRY carry interest since October ’11, we think better long TRY value may be attainable. ( Click here to view Emerging Markets FX Insider posted 25. Oct. 2011 and last updated in Emerging Markets FX Insider - Low U.S. & Euro...posted 02.07.12 )
- AUD/USD posted its first daily close below the 21-day sma for 2012 on Tuesday as the pair trades well off multi-month highs just above the 1.0800 figure but has so far found decent decent demand ahead of the 1.0600 figure. However, hearing stops rumored to be building below the 1.0600 figure and a break below could trigger further another slide lower. At the moment, the 1.0650/60 pivot appears to be immediate resistance.