For the advanced economies, there is an unmistakable need to restore fiscal sustainability through credible consolidation plans.
At the same time we know that slamming on the brakes too quickly will hurt the recovery and worsen job prospects. So fiscal adjustment must resolve the conundrum of being neither too fast nor too slow.
via Europe’s Fiscal Overkill – Ambrose Evans-Pritchard Telegraph Blogs.
The ECB can hold the line for now by purchasing €20bn of Spanish and Italian bonds each week. But once the ECB nears €150bn or so, the markets will brace for the next crisis.
via In Defence of PIGS – Ambrose Evans-Pritchard Telegraph Blogs.
The Dow Jones Industrial Average fell sharply on Thursday, accompanied by strong volume. Failure of support at 10700 would complete the dead cat bounce, offering a target of the 2010 low at 9600*.
* Target calculation: 10800 – ( 12000 – 10800 ) = 9600
Spot gold broke through resistance at $1800, signaling an advance to test $2000/ounce in the medium-term. Retracement that respects the new support level would strengthen the signal.
* Target calculation: 1800 + ( 1800 – 1600 ) = 2000
Intervention by the BOJ had limited effect and the greenback is again testing support at ¥76.50. 21-Day Twiggs Momentum oscillating below zero is typical of a strong down-trend. Failure of support would offer a medium-term target of ¥73*.
* Target calculation: 76.50 – ( 80.00 – 76.50 ) = 73.00
The US Dollar strengthened against the South African Rand, testing resistance at R7.35 before retreating to support at R7.00. Respect of support would indicate another test of R7.35. In the long term, breakout above R7.35 would signal an advance to the 2010 high of R8.00.
* Target calculation: 7.35 + ( 7.35 – 6.50 ) = 8.20
The euro is testing the upper border of a large descending triangle against the greenback. Breakout is not expected as this is a bearish pattern, but would test resistance at its 2009 high of $1.50/1.51.
* Target calculation: 1.44 + ( 1.48 – 1.40 ) = 1.52
The pound broke resistance at $1.65 against the US dollar, immediately retracing to test the new support level. Respect would confirm an advance to $1.67. Penetration of the rising trendline warns of reversal to a down-trend, but 63-day Momentum is rising — continued respect of the zero line would be a bullish sign.
* Target calculation: 1.67 + ( 1.67 – 1.60 ) = 1.74
After breaking its long-term rising trendline against the greenback, followed by primary support at $1.01, the Canadian Loonie is testing resistance at $1.02. Weak economic data should increase selling pressure. Reversal below $1.01 would confirm the down-trend, offering a target of $0.96*.
* Target calculation: 1.01 – ( 1.06 – 1.01 ) = 0.96
The divergence between Brent crude and WTI Light crude has widened to more than $20/barrel. WTI is clearly in a primary down-trend, but there is stubborn support for Brent at $104/105 per barrel. Resolution of the conflict in Libya and Nigerian supply fears would see Brent prices soften to within a few dollars of WTI.
* Target calculation: 105 – ( 120 – 105 ) = 90
The strength in the Brent reflects the ongoing loss of high quality Libyan crude and fears of its recent replacement Nigerian bonny light…… Royal Dutch Shell declared force majeure on its Nigerian Bonny Light crude oil loadings for June and July. Shell blamed production cutbacks caused by leaks and fires on its Trans-Niger Pipeline.
via Brent crude oil reaches $21 premium over WTI – Commodities – Futures Magazine.
The Swiss Franc fell sharply before finding support at $1.25 as fears of SNB intervention subsided. Expect some consolidation, but recovery above $1.30 would indicate another test of $1.40. Failure of support is unlikely, and would offer a target of $1.10*.
* Target calculation: 1.25 – ( 1.40 – 1.25 ) = 1.10
