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Greece on verge of default

Daily Outlook - 12th September 2011

Written by Imran Allana, Dealer

CURRENCY TRADING SUMMARY 12/09/2011

Sterling / U.S Dollar (GBP / USD):

GBP/USD has been on a major downtrend from the start of this month so far.  Friday saw the UK PPI Input figure come out at lower than expectations, -1.9% vs. -1.6% which help push the pair down to the 1.5900 support area on Friday morning.  Overnight trading in Asia saw a lacklustre performance for the pair ranging from 1.5844/64 before being able to break the 1.5844 support and took the pair to a session low of 1.5820.  Renewed fear over the Greek debt crisis and a consensus building that they will default on their debt has lent some strength to the USD.  Today, we have no major announcements due for either the UK or the US.

Euro / U.S Dollar (EUR / USD):

EUR/USD has also been on a steady downtrend since the start of this month.  Renewed fears over the European debt crisis and a consensus that Greece will default on their debt has weakened the Euro considerably over the past week.  Germany has recently also come out with comments that they will not be prepared to help Greece.  Friday saw the resignation of ECB Executive Council member Juergen Stark.  EUR/USD opened in Asia at 1.3570 and traded slightly lower, hitting a session low of 1.3498.  There are no major announcements due for the Eurozone today.

U.S. Dollar / Japanese Yen (USD / JPY):

USD/JPY opened in Asia at 77.52 with the Yen seeing considerable strength against the dollar and trading lower a few hours into the session hitting a session low of 76.92 before the European session took it even lower to 76.75.  Finance Minister Azumi failed to hammer out a decisive FX strategy with the other G7 Finance Ministers in the meeting on Friday but has said that Japan shares interest in a strong and stable international financial system and supports a market-determined exchange rate.  As far as intervention is concerned; the outcome of the G7 appears to have been welcomed in Japan as a green light for intervention.

Australian Dollar / U.S. Dollar (AUD / USD):

AUS/USD has been on a downtrend since the start of this month with a slight retrace from the 7th-9th of this month.  Since the retracement, it has continued the downtrend, despite the gains in gold and other commodities.  Overnight trading saw the ozzie open at 1.4016 in Asia and traded lower for the entire session, hitting a session low 1.0286 in time for the European session to take over, since which it has traded higher, currently at 1.0322.

Gold (XAU):

Gold (XAU) moves up were capped at $1884 before a sharp drop to $1825 on Friday, a $50 drop in 1 hour! $1825 has been tested again this morning reversing the price $25 higher.  Gold is being supported on the EU debt issue however the US dollar has been getting stronger which is keeping the shiny metal in a range.

Oil:

Oil (crude) drops to $85/ barrel, a level which has so far held off the downtrend reversing the price back to $86. There is downside pressure on oil due to the EU debt concerns and a slowdown in global growth.

Technical Commentary:

Sup 2 Sup 1 Last Res 1 Res 2
GBP/USD 1.5750 1.5790 1.5851 1.5900 1.5970
EUD/USD 1.3500 1.3575 1.3609 1.3649 1.3720
USD/JPY 76.40 76.70 76.98 77.30 77.45
USD/CHF 0.8700 0.8810 0.8850 0.9020 0.9150
AUD/USD 1.0200 1.0275 1.0322 1.0351 1.0385
NZD/USD 0.8025 0.8095 0.8185 0.8230 0.8300
XAU/USD 1592.50 1602.70 1835.30 1617.00 1627.20
OIL/USD 84.40 85.00 85.92 86.70 87.50

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