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| Dollar Supported as Majors Continue to Consolidate Posted: 05 Jul 2011 05:06 AM PDT
A busy European trading session has had a few central bank decisions, comments from Moody's, and mixed economic data. Despite the eventful morning the majors remain consolidating in their current ranges. The euro sold-off this morning but the EUR/USD found support just above 1.4440. Uncertainties remain over the next Greek bailout as Moody's commented on potential impairment charges for banks that hold Greek debt though the rating agency has not given its opinion if the French rollover plan for Greek debt would constitute a default. Should the 1.4440 level hold the euro could move higher in the New York trading session but would face resistance above the current consolidation pattern off of the May and June highs which comes in today at 1.4520. Sterling rebounded after a better than expected services PMI reading surprised the market with the index rising to 53.9 from 53.8. It appears that the data could have been leaked early as sterling was seen appreciating minutes ahead of the data release as some punters may have been looking to get ahead of the data. The rally in the GBP/USD held near the mid-May lows at 1.6120. A break here and sterling could tack on an additional 1.5 cents. Support is found at the bottom of the bearish flat pattern of 1.6040. As expected the Australian central bank kept interest rates steady citing growth concerns and the influence of a strong AUD keeping inflation under control. This kept the AUD on the decline as traders largely ignored the strong trade balance numbers. The AUD/USD fell but found support at its 50-day moving average at 1.6060. Further support may be found at the broken downtrend from the May high which comes in today at 1.0590. Asian equities were even with the Nikkei just finishing in the black after Moody's soured market sentiment after warning on Chinese banking concerns. According to Moody's, local Chinese governments may have larger than previously reported debt levels. This warning could damper the "risk-on" trade that began last week, thus a potential catalyst for the dollar. Read more forex trading news on our forex blog. |
| Swedish Krona Rising on Interest Rate Increase Posted: 05 Jul 2011 03:10 AM PDT
The Risksbank increased the repo rate by 25 bps earlier today while raising both its growth and inflation forecasts. Immediately following the announcement the SEK surged versus the euro to a Fibonacci retracement level. Citing strong economic growth and increased inflation expectations the Risksbank hiked interest rates to 2.0% from 1.75%. In the accompanying rate statement the Swedish central bank said it expects the economy to grow this year by 4.6% in contrast to its previous forecast of 4.4%. Next year the Risksbank forecasts increased growth of 2.3% from 2.2% expected growth. CPI expectations were also increased to 3.2% from 3.1% in 2011 and next year inflationary forces should moderate to 2.8%. Given the higher expectations for GDP and CPI, the SEK could make further inroads against the euro on expectations of higher Swedish rates. Comparing the euro zone's growth prospects with the background of the peripheral debt crisis and the Swedish krona looks to be much better growth play. Turning to the charts the EUR/SEK appears to have made a top in its rebound and the move has retraced to 9.0530, near the 38% Fibonacci level from the March to June move. A close below this level would go a long way to shifting momentum to the downside back in line with the long term trend. The next target would be the 61.8% Fib at 8.9170, followed by the June 1st low at 8.8770. Should the pair bounce higher from its current support the EUR/SEK would encounter resistance at 9.1250 and the June high at 9.2725.
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