U.S. Dollar Trading (USD) heavy selling was seen overnight on the back of the worsening EU debt crisis and weak Australian Jobs data. US stocks have fallen for 7 days now and we are reaching some extremely oversold levels so are on the lookout for a short squeeze or relief rally. Chinese GDP may be the catalyst with the world’s largest economy slowing as expected to 7.6% but not as sharp as some feared with rumors of 7% doing the rounds in Asia before the release. Looking ahead, July UoM Consumer Confidence released.
The Euro (EUR) broke through 1.2200 but was able to find support at 1.2160 and we nearly closed the day out above 1.2200 in the US session. The relief was short-lived however as after the bell we saw Italy downgraded by 2 notches by Moody in a move that is likely to be copied by the other rating agencies. The EUR/USD will need some positive news to stop the down trend with most crosses also very weak and hampering any buying.
The Japanese Yen (JPY) USD/JPY calmed down after its sharp move towards Y80 and subsequent drop to Y79.25 post BOJ yesterday. The outlook is for more range trading while the US QE debate rages on and the EUR/JPY sellers are in control. AUD/JPY is also under pressure as stock losses mount and we could see some sharp selling if Y80 is broken.
Australian Dollar (AUD) the AUD/USD was a big mover overnight falling dramatically against the USD and most crosses when Unemployment missed for June. The trading so far in Asia has seen some buying come through though with stocks recovering into the weekend and Chinese GDP not as bad as feared.