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FX: What If Greece Defaults?

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TODAY'S BIGGEST PERCENTAGE MOVERS

THE STORIES IN THE CURRENCY MARKET

EXPECTATIONS FOR UPCOMING FED MEETINGS

CURRENT US INTEREST RATE: 0.25%
06/22 Meeting 08/09 Meeting
NO CHANGE 56.0% 55.8%
CUT TO 0BP 44.0% 39.1%
HIKE TO 50BP 0.0% 5.1%

FX: WHAT IF GREECE DEFAULTS?

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USD: WHY END OF QE2 IS GOOD FOR DOLLAR

GBP: WILL RETAIL SALES BE WEAK?

CAD: WEAKER WHOLESALE SALES

JPY: BOJ MINUTES SHOW CAUTIOUS OPTIMISM

After the wild roller coaster ride in currency trading this week, the Japanese yen trickled higher against all of the major currencies with the exception of the New Zealand dollar. While the market is bracing for the next chapter of the Greek tragedy, yen was helped by a better sentiment in the domestic economy and risk aversion flow. Since March, the Japanese export industries were hammered by the supply- side constraint caused by the disaster. Bank of Japan injected a record amount of cash into the money market after the earthquake. In addition to its key interest rate near zero, BoJ's attempt to boost the confidence gradually stabilized the market. Furthermore, with the release of the minutes from bank's May 19 and 20 meeting, the central bank indicated that financial conditions have generally continued to ease. Although the Japanese economy is expected to experience downward pressure for the time being, BoJ anticipates that the economy should return to a moderate recovery path from the second half of fiscal 2011. Despite the improved sentiment, a group of ruling and opposition Japanese politicians called on BoJ to take extra steps in supporting the recovery. Out of 14 economists surveyed by Bloomberg, 90 percent said the next central bank move will be to provide more monetary stimulus. Deputy Governor of the Bank Kiyohiko Nishimura suggested in April that the bank expand its asset-purchase program, a proposal defected by the board. The appreciation of the yen has hurt major corporations such as Canon and Toyota, the largest automaker which gets about 72 percent of revenue outside of Japan. As the Bank of Japan fights the aftermath of the quake and the recession, the yen remains strong amid the concerns for Greece and sputtering recovery in the US. With the Ministry of Finance publishing its trade balance on Sunday night, there will be clearer signs of how the Japanese exports are rebounding. Furthermore, if a resolution could be reached between the European leaders, the yen should lose its strength. Otherwise, the yen would likely continue its climb.

EUR/USD: Currency in Play for Next 24 Hours

EUR/USD will be our currency pair in play for Monday. The German producer price report will be released at 2:00ET/ 6:00GMT followed by the Eurozone current account balance at 4:00ET/ 8:00GMT from Europe. While there is no scheduled economic data from the US, the market will tune into the meeting of the Eurozone Finance ministers on Sunday.

After bouncing back from a two-week low yesterday, the euro traded higher today but continued to be range-bound, which we determined using Bollinger Bands. If EUR/USD could sustain its upward momentum after Finance Ministers meeting, the pair would find its first resistance level at 1.4452, the 23.6% Fibonacci retracement drawn from a major trough in January to its peak in May. Once the level was broken, the pair would find another resistance at 1.4743, the upper second Bollinger Band. Should the pair declined amid an unfavorable outcome of the meeting, EUR/USD would be supported at 1.4000. If the unfolding Greek Saga pushed the pair through that psychologically significant level, the EUR/USD should bounce back at 1.3825, its 200-day moving average.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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