The Euro is consolidating its losses before taking another dive
As the Chinese stock market tanked some renewed appetite for the JPY emerged. China's central bank on Tuesday communicated it will not tighten too hard on banks in its drive to curb easy credit, as it is looking to calm market fears of a banking crisis that had driven shares to their lowest in nearly 4-1/2 years on Tuesday.
The People's Bank of China is willing to reduce funds diversion to a pretty vast shadow banking system.
The central bank is looking to shore up growth in the world's second-largest economy, but it’s proving to be a tough task since in the past couple of trading days fears were raised about a lasting credit crunch. Further pressure on markets was exacerbated by reports of outages at cash machines of some banks added to pressure on Asian stock markets hence booting demand for the Japanese Yen.
Binary options traders observed a fairly volatile session with rates dipping back to 127.30 area twice. The pair bouncing since to trade as of writing around 127.95. We saw a raft of data releases this afternoon. Durable goods orders have risen by a better than expected 3.6 % as additional demand for goods from aircraft to machinery rose across the board. Orders for these had increased by a revised 3.6 percent in April. In a separate report prices of U.S. single-family homes jumped in April to rack up their biggest annual gain in seven years, adding to optimism around the dollar and underpinning risk sentiment hence helping the EUR/JPY cross rate.
Consumer confidence rallied in June to its highest level in more than five years as Americans were more upbeat about business and the labor market, according to the Conference Board report released on Tuesday. Its index of consumer attitudes rose to 81.4 from a downwardly revised 74.3 the month before. It was the highest since January 2008 and has beaten expectations for a 75.4 rise by a rather big margin.
Looking at the charts we are expecting another attempt lower towards 127.30. This scenario can be negated by a sharp rally in stocks, but for now it is not materializing. 128.20-30 should be sufficient to contaiun any further attempts at testing the upside.
We had the Bank Of France governor Benoit Coeure saying that the European Central Bank is far from exiting its accommodative monetary policy and will keep an open mind about fresh measures, which it can still deploy if needed. His comments show that the ECB is not yet ready to follow the example of the U.S. Federal Reserve, which is likely to be the first of the world's major central banks to begin exiting its ultra-loose monetary policy policies.
While gently applying pressure on the markets to prepare for an eventual rise in interest rates and urging policymakers to make progress on a European banking union, Coeure made clear the ECB was not about to reverse course any time soon. He reiterated that discussions included the possibility of pushing the bank's deposit rate into negative territory for the first time - meaning the ECB would charge commercial banks for holding their money overnight, Coeure said. The latter can only confirm that the good days are far from ahead for the single Euro currency and opportunities to go short in the near term should pay off nicely.