LONDON (SHARECAST) - Yesterday’s plunge in equity markets saw investors pile to the exits and into the more traditional safe havens of the dollar, Swiss franc and Japanese yen as all three surged as a number of factors sent risk appetite through the floor, as we head into month end and the end of the second quarter. Not content with concerns about the solvency of European banks and concerns about Chinese growth, US Consumer Confidence for June came in massively below expectations at 52.9 against an expectation of 62.8. The euro in particular has suffered against a range of currencies after the failure of a European Central Banksterilisation auction yesterday, and raises the question of whether the ECB will be able to sterilise any future purchases of toxic European debt. Against the Swiss franc it has continued to make all-time lows every day this week as fears over Thursday’s ECB loan expiries dominates sentiment. ECB Governing Council member Christian Noyer sought to assuage concerns yesterday by stating that the ECB “will do what is necessary to make sure the liquidity is there”, but it would appear that the markets remain unconvinced. In US data out today markets will be looking to today’s US ADP employment number for clues as to the jobs picture in the US and Friday’s public sectoremployment report. A number of 60k is expected. EURUSD – yesterday’s break of support around the 1.2250/60 area has, as expected, seen a subsequent test of the 1.2135/45 area, which has managed to hold so far. Any rebounds from here should find resistance around the previous support of 1.2250/60. Expectations remain for the euro to remain susceptible to further declines and a break of the 1.2135/45 level would re-target this months lows at 1.1880 on the way towards the 2005 lows, around 1.1650, while below 1.2460. GBPUSD – yesterday’s highs of 1.5130 have seen the pound inevitably give up some of the recent gains slipping back towards the breakout level around 1.5030. A break here could see further declines towards near term support around 1.4980, while there is also longer term support around 1.4750. However the break above 1.5000 has opened the way for a possible move towards 1.5250 in the near term and possibly the 50% level of 1.5345. EURGBP – the break of 0.8170 now opens up the possibility of a test towards 0.8000 on the way to a test of 0.7785 over the coming months which is a 61.8% Fibonacci retracement of the same 3 and half year up move. We could well see rallies back towards resistance around the 0.8170/80 area in the meantime, while behind that there is also resistance around the 0.8320/30 area. USDJPY – the yen has continued to strengthen on the back of the recent reduction in risk appetite, and stopped just short of the flash crash lows of the 6th May at 87.95 finding support at 88.30. There is a strong level of support at these levels which should hold, however a sustained break of 88.00 could well re-target the lows of last year at 84.80 and re-open nervousness about possible Bank of Japan intervention, as Japanese exporters get impacted by the recent yen strength. The dollar should now find resistance on any rallies around the 89.20/30 and would need to see a rally back above the 89.75/80 area to re-target a move towards the 90.20/30 area.

Source