Euro remains soft after markets eyes are now on Greece's auction of 6-month T-bills today. Greece is seeking to raise EUR 1.25b and markets will be closely watching the result of today's auction as an indication of Greece's ability to raise short-term money...
Euro remains soft after markets eyes are now on Greece's auction of 6-month T-bills today. Greece is seeking to raise EUR 1.25b and markets will be closely watching the result of today's auction as an indication of Greece's ability to raise short-term money. S&P downgraded Greece's credit rating by 2 notches to B yesterday, the lowest rating among European countries, from BB- after a meeting by European finance officers unveiled that Greece may be allowed to extend the debt payment maturities of the 80B euro bailout plan. The agency said that 'as part of such an extension', the Eurozone creditor governments would "likely seek 'comparability of treatment' from commercial creditors in the form of their similarly extending bond and loan maturities".
S&P also worried about Greece's consolidation plan as the country's deficit was at +10.5% of GDP in 2010, short of the 9.6% target. Whether the government can achieve the target this year is 'uncertain' and 'a restructuring of official and commercial debt' may be an option. For other rating agencies, Moody's place Greece's B1 rating on negative watch, suggesting a downgrade may come soon. German newspaper Sueddeutsche Zeitung said Fitch has planned to downgrade Greece's rating to B or B- this week, followed by the agency's statement that 'Fitch rates Greece at BB+ with a negative outlook. The agency does not comment on market speculation'.
Sterling is relatively resilient after RICS house price gauge rose to the highest level in nine months in April. The RICS house price balance, showed number of real estate agents and surveyors which said price fell exceeded those gains by 21 percent points, compared to 23 in March. Though, RICS said that "activity still remains subdued and it is difficult to see it picking up materially over the coming months" and "there is still a long way to go before lending levels increase enough to have any real impact. Economic uncertainty may also continue to weigh on sentiment for a while." UK BRC retail sales monitor rose 5.2% yoy in April.
Other data released today saw Australian trade surplus came in wider thane expected at AUD 1.74b in March, NAB business confidence dropped to 7 in April. Swiss SECO Consumer confidence dropped to -1 in April. Swiss CPI, US import prices and wholesale inventories will be released later today.
Dollar index's rebound halted yesterday at 75.16 as commodity recovered after last week's steep selloff. Crude oil is back above 100 while gold is also back above 1500. The structures of recovery in crude oil and oil are both corrective which suggest that there might be more downside in near term. In that case, dollar index would likely extend the rebound from 72.70. From a near term angle, we'd still expect dollar index to rise further as long as 73.94 minor support holds, towards medium term falling trend line (now at 77.27). But upside is expected to be limited there and finally bring resumption of the whole down trend from 2010 high of 88.70 towards 70.70 all time low.
EUR/JPY Daily Outlook
Daily Pivots: (S1) 114.77; (P) 115.62; (R1) 116.22; More
EUR/JPY dips further to as low as 114.79 so far and met mentioned 100% projection of 123.31 to 116.46 from 121.82 at 114.97, 50% retracement of 106.57 to 123.31 at 114.94. Further decline is still in favor with 117.57 minor resistance intact and focus will remain on 113.54 support. Decisive break there will indicate that whole rebound from 106.57 has completed at 123.31 already and will bring deeper fall to retest this low next. Though, strong rebound above there, will retain the bullish case that rebound from 106.57 is still in progress. Above 117.57 will flip bias back to the upside for 121.82 resistance first.
In the bigger picture, as long as 1113.54 support holds, we'd still slightly favor the bullish case that EUR/JPY has bottomed out in the longer term at 105.42 already. A break of 123.31 should pave the way to 139.21 resistance (which is close to 50% retracement of 169.96 to 105.42 at 137.69) to confirm completion of whole down trend from 2008 high of 169.96. However, break of 105.42 will invalidate this bullish case and indicate that down trend from 169.96 is still in progress for another low below 105.42 before reversal.
Market Overview | Written by ActionForex.com | May 10 11 06:56 GMT