Euro Short Covering Short Lived

After the short covering frenzy in the EUR/USD sputtered out near 1.3730 earlier in the day, the single European currency had nowhere to go but down…..Although levels of 1.3700 were witnesses early in Asia, the pair was victimized by risk aversion as well as some middle of the road statements out of China. Chinese officials were quoted often over the course of the day, with Prime Minister Wen stating that China is willing to help the troubled region while former Peoples Bank of China members expressed caution about any future investments in the Euro Zone. The later comments helped to extend losses in the EUR/USD through 1.3610.

The Aussie was another prime mover today, as better than anticipated consumer sentiment, +8.1% versus last month’s -3.5%, helped to propel the AUD/USD to session highs near 1.0370. Following housing starts data was not as rosy however, coming in at -4.7% versus 0.0% projected and +3.3% last, and starting a slide in the pair that would drop it all the way under 1.0190 on the day. That move was helped along by revised inflation data that showed inflation at 0.7% rather than 0.9%. Risk off followed through the markets with strong buying of dollars out of the Far East.

Looking at Japan, we heard the usual chatter about strong yen from the BOJ but the USD/JPY was mostly tepid between 76.85 and 77.05 as fears of intervention linger despite all the empty talk. Yen crosses were all lower on risk aversion, with GBP/JPY under 121.00 and the EUR/JPY dipping under 104.60. AUD/JPY shed over a big figure and a half to lows under 78.30.

Looking ahead, markets are awaiting the results of a teleconference between Germany, France and Greece which should begin early in the Greek morning. Until then market will likely remain cautious….The potential for big moves ahead of tomorrow’s Asia session are escalated with a slew of US data including Core retail sales, retail sales, PPI and a speech from Treasury Secretary Geithner.

Source: Forex.com

14.09.2011