IM: Euro-Dollar Extends Correction Post Weak German Orders
LONDON, July 7 (MNI) - Risk aversion carried over from the Asian market into the European morning session favouring the dollar and yen.
Euro-dollar extended its corrective pullback off Tuesday's highs of $1.2663 to $1.2554 after the release of weaker-than-expected German orders data, while dollar-yen broke below its NY base at Y87.35 to place pressure on key support at Y87.00. Dollar and yen were holding off best levels ahead of the New York open.
EURO SUMMARY: Opened in early Europe around $1.2585
Rate initially lifted back to mark session highs at $1.2634 before reversing on risk aversion flows, the move down prompted by Asian equities moving into the red (Russian IIB default mentioned). Break below $1.2600 triggered minor stops but was able to press rate to lows of $1.2577 before meeting short-term spec and prop account demand which cushioned. Rate recovered to $1.2600 ahead of the European open before dropping back to $1.2580 as fresh selling emerged. Recovery efforts faltered as rate met Russian supply on moves above $1.2590, with rate cushioned by reported semi-official demand interest placed around $1.2570. Rate bounced above $1.2590, with short term specs squeezed as they were positioned for stops below $1.2560, but recovery soon faltered with rate easing back, allowing for a probe under $1.2560. Release of poor German orders data eased it to lows of $1.2554 but continued dip buys supported.
US:Press pick-ups in the US Wednesday: * US PRESS: Labor unions have dominated spending on independent campaign ads so far this election season, despite a recent Supreme Court decision that freed spending by corporations, the Washington Post reports. * US PRESS: Steel prices in the U.S. are declining after holding firm for months, potentially a bad omen for the nation's economy as manufacturing activity slows and consumers grow more cautious about big-ticket purchases, such as cars and appliances, the Wall Street Journal reports.
EUROZONE: Data released in the eurozone Wednesday, * EMU: 1Q10 real GDP unrev +0.2% Q/Q, +0.6% y/y - 1Q private consumption -0.1% Q/Q; 4Q +0.2%; 3Q -0.2% * FRANCE: May sa merchandise trade deficit E5.500 bln after -E4.258 bln in April (revised from -E4.248 bln) - Trade balance below MNI median analysts survey forecast of -E3.8 bln
YEN SUMMARY: Asia opened Y87.52/Y110.51 ranged Y87.37-68/Y109.87-110.69
dollar edged higher but quickly gave way on cross selling and a softening Nikkei. The European opening saw further pressure heaped on the dollar with various sellers, including life insurers, seen filling bids between Y87.00-10. At the time of writing the Y87.00 remains intact with a low posted of Y87.02, but traders remain very cautious and report an abundance of stops at the Y86.90-95 level down to Y86.20. Earlier stops from momentum players in the crosses were triggered in sterling-yen at Y131.45-50 and euro-yen at Y109.50, with talk of more on an appropriate break of Y87.00 and stops in euro-dollar through $1.2550. The market is now balancing ahead of the NY opening. Euro-yen came off after sales in euro-dollar from a US name, pushing the cross to a low of Y109.87. Support is placed at Y109.71 and the Jun 30 high of Y109.13 with resistance at Y110.85 and Y111.01.
JAPAN: Press pick-ups in Japan Wednesday, * JAPAN PRESS: In a sign of anxiety about its chances in this Sunday's upper house election, the ruling Democratic Party of Japan is considering putting off the next substantive Diet session, which would delay passage of the Japan Post overhaul and other legislation, The Nikkei reports. DPJ leaders are mulling a proposal to convene the Diet for a full-on extraordinary session after the party selects its next president in September. Prime Minister Naoto Kan will make a final decision after the election, the report says.
JAPAN: Data released in Japan Wednesday, * Japan's foreign reserves rose to $1.050 trillion at the end of June from $1.041 trillion at end-May but were below the record high of $1.074 trillion marked at end-November 2009, the Ministry of Finance said. The country's forex reserves remain the second largest in the world, next to China's which are estimated at $2.45 trillion at the end of March.
