More downside risk for the aussie

A meeting overnight between five party leaders in Athens yielded no breakthroughs in forming a new government. Whilst this was no surprise, the clear lack of cooperation between the various parties is very disconcerting and, accordingly, risk sold off following the meeting.

It now appears an election will be held on June 17 and party leaders will meet later tonight to form a caretaker government. The possibly that the Syriza party will win the election, which current poles suggest it might, is weighing down risk sentiment, as the party has made it clear it intends to put a definitive end to the bailout.

Elsewhere, there was a batch of reasonably solid US economic data which supports the view of no more QE. Thus, when we combine this with the political uncertainty in Greece, and the general uncertainty surrounding the Eurozone, we think it provides downside risk for EURUSD.

Once again local data is taking a backseat to the situation in Europe. Higher than expected Japanese machine orders figures (-2.8%y/y versus exp. -3.5%) and better than expected confidence figures out of Australia failed to move JPY and AUD respectively.

The lack of headline data releases during the session may keep high beta currencies and the euro fairly range bound throughout the session. We commonly see this when the market is squarely focused on Europe. Thus, we don’t think AUDUSD will have the legs to push back above parity today. In fact, despite the better than expected confidence data out of Australia, with the market so focused on Greece we think the pair may sink lower throughout the session but only if it can break through a support level around 0.9920 (low since December 2011).

Source: Forex.com

15.05.2012