- USD/JPY tumbles to post-WWII low of 75.78 before recovering to close near 76.10
- Troika of EU, ECB and IMF say Greece has taken a turn for the worse
- Despite worries, EU approves release of sixth tranche of aid of EUR 8 bln
- Troika sees PSI of 50-60% needed
- China Investment Corp chair; Europe offers value if credible plan reached
- Obama announces US troops to withdraw from Iraq by year-end
- German budget committee: No leverage, no ECB backing for EFSF–Limits Merkel’s room to negotiate
- Fed’s Yellen says more QE may be appropriate
- French FinMin Barroin: Making EFSF a bank easiest leverage solution but not worth fighting over
- Market adds to net USD long in latest week- CFTC
- Austrian FinMin: Euro group down to two options on EFSF
- Reuters: Senior EU source– no ECB role in EFSF leverage
- S&P 500 rises 1.9% to 1238
- US 10-year note yield rises 3 bp to 2.21%
- WTI rises 1.50 to $87.55; Gold rises $21 to $1640
It was a lively Friday session in which the market felt a sudden urge to cover shorts taken in EUR/USD as the Fed waxes dovish and Europe grudgingly grapples with the scale of the Greek debt debacle. The market is pricing in major haircuts in Greece on the order of 50-60% and an EFSF leveraged to the extent that it can offset the resulting void on European bank balance sheets.
EUR/USD reached 1.3902 late in the session but fell short of the important zone of resistance between 1.3915 and 1.3935. Above 1.3950, the technical picture for EUR/USD changes dramatically, with a very sharp rally a distinct possibility.
The dollar was quite weak across the board with USD/JPY taking a rare starring role. It plunged nearly a yen in early NY trade on disappointment in the incremental moves announced by Japanese officials overnight to cope with the effects of JPY strength rather than deal directly with the strength itself. Recent lows at 76.30 were quickly violated and soon after barriers at 76.00 and all-time lows at 75.94 were surpassed. We fell to 75.78 before USD/JPY was able to right itself. Rebounds were limited 76.30 and we close around 76.25.
The Swiss franc was quite strong today as speculative shorts in that currency were unwound. USD/CHF dropped to 0.8806 and EUR/CHF to 1.2237 in NY.
Cable ends above the 50% retracement of ots drop from Mid-August through Mid-September. 1.6000/05 is strong resistance near-term with barriers noted at the former level and a broken trendline at the later.