FX: Euro may slump against the dollar as risk aversion returns
The euro may fall towards 130.85 yen with a close below 135.34 signaling a “bearish trend reversal” and the return of higher levels of risk aversion across equity, commodity and currency markets, RBC Capital Markets said. The euro is testing the base of an ascending channel with daily momentum charts showing a “double top in overbought territory,” George Davis, chief technical analyst for fixed- income and currency strategy in Toronto at the unit of Canada’s biggest lender, wrote in a note to clients yesterday. The Dollar Index, which the ICE uses to track the dollar against currencies of six major U.S. trading partners, has formed a double bottom near 77.69, Davies wrote. A gauge of commodity prices is charting a double top in the 269.18 area, he said. The EUR/USD is currently trading at $1.4270 as of 8:59am, London Time.
The yen rose for a second day against the dollar amid speculation Japanese investors are bringing back income they will receive from U.S. government debt. Foreign investors bought 292.9 billion yen ($3.07 billion) more Japanese stocks than they sold during the week ended Aug. 8 and domestic investors were net buyers of 125 billion yen in overseas bonds and notes, according to figures from Japan’s Ministry of Finance yesterday. Japanese investors are the biggest foreign holders of Treasuries after China with $677.2 billion of the securities in May. Japan’s foreign reserves total $1.02 trillion. The USD/JPY is currently trading at 95.15 as of 9:08am, London Time.
The Australian and New Zealand dollars touched the highest level since September after Reserve Bank of Australia Governor Glenn Stevens said today it will be appropriate to increase interest rates in the future. “Stevens’ upbeat testimony has helped lift the Aussie dollar,” said Sue Trinh, a senior currency strategist at RBC Capital Markets, a unit of Canada’s biggest lender. “That barrier at 85 cents is still ripe for the picking but the real question is whether the Aussie can sustain those levels over the shorter term.” The AUD/USD is currently trading at 0.8420 as of 9:07am, London Time.
