Source: ForexYard
Markets this morning are in a much calmer state a day after the announcement of the Greek referendum but the tepid recovery should not overshadow the underlying uncertainty that remains surrounding the Greek bailout. The EUR is beginning to form a base for a recovery as the North American trading session nears with all eyes on the ADP jobs report and the Fed.
European equities are up 0.5% while the EUR/USD in turn is higher by almost 1%. The EUR has also put in gains in the crosses. With a bit of solidarity coming from the Greek cabinet in support of the referendum the EUR has managed to move higher though near-term gains have been capped at 1.3800.
The USD/JPY is once again sliding lower under the 78 yen level on overall USD weakness for the day. With Monday’s intervention estimated to be a record ¥7 trn the yen looks to continue to strengthen and the USD/JPY could once again drift lower towards its record low. The relationship between the USD and the JPY is highly correlated between the spreads of nations’ 10-year bonds. Given the possibility of additional moves to ease US monetary policy it is unlikely that the US 10-year note will be yielding much more than its current 2.06%. The USD/JPY may have scope back to 77.50 from the mid-October high. Additional yen strength could push the EUR/JPY lower to yesterday’s low of 106.50.
US job numbers and monetary policy are coming into focus this afternoon. The ADP jobs report is typically the preview of Friday’s jobs report but there is very little evidence showing the private report has any success forecasting the outcome of the NFP report. Today’s WSJ article did not hint at additional policy measures to be taken by the Fed but Bernanke’s press conference at 18:15 GMT may provide fireworks. The next short-term resistance for the EUR/USD is found at 1.3870 from yesterday. To the downside losses may be capped at yesterday’s low of 1.3600.
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