Risk aversion dominates the scenes in Asian opening, with stocks futures strongly down across the board and gold, the ultimate safe haven, reaching another record high at $ 1691/oz by the time of writing. Over the weekend, Standard & Poor's rating agency has downgraded the US government debt to AA+, something with no precedents. The agency, stated that “the downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government’s medium-term debt dynamics”.
Crossing the Atlantic, things are not looking good either: the ECB has decided to intervene markets to respond to the escalating debt crisis, while a joint statement today by German Chancellor Angela Merkel and French President Nicolas Sarkozy supports the action, and reiterating their commitment to fully implement the decisions taken by the heads of state and government of the euro area and the EU institutions on July 21st 2011. This Sunday the ECB said it will “actively implement” its bond-purchase program, signaling it is ready to start buying Italian and Spanish securities to counter the sovereign debt crisis.
And if that is not enough, Japanese Finance Minister Yoshihiko Noda said a couple hours ago that he would make some comments after a telephone meeting between the finance leaders of the G7 major industrialized nations. As comment several times in webinars and reports, I do believe that only a coordinated intervention may halt Yen gains at this point.
Anyway, tension is in the air! Debts are huge and keep growing, investors trust gold and nothing else, and dollar is set to extend its slide particularly against European rivals: while CHF remains the strongest currency on the board, GBP may follow, and both are expected to overcome the EUR. As said above, JPY may continue gaining ground to fresh record highs against dollar, unless a G7 coordinated intervention takes place. And while AUD and CAD are now losing ground on risk sentiment, the slide may not last particularly when comes to CAD.
While the EUR/USD opened the week in a strong tone, beware of the 1.4260 support zone, as once below, the slide may extend towards 1.4170 on Monday. Tops in case of bullish runs, should be 1.4450, the daily descendant trend line coming from this year high.
The GBP/USD is stronger right now, holding above 1.6400; bearish momentum may increase if the pair loses 1.6360 area, yet not much lower than 1.6250 for today, while breaks above 1.6480 should point for stronger gains.
The USD/CHF, is unstoppable: bullish rallies should remain contained by 0.7670/0.7700 area, while fresh record lows below 0.7500 are at sight now.
The USD/JPY will remain bearish as long as below 78.50 yet needs to lose again 78.10 to resume its long term bearish trend, and retest the 76.20/40 price zone. Intervention rise has price now below the 50% retracement at mentioned 78.50.
Beware of major long term support in AUD/USD at 1.0200 area: if the slide continues, at least the first test of that level should trigger a strong bullish bounce. Pair needs to recover the far away 1.0550 price zone to erase current bearish tone.