Concerns over China’s Growth Worsens Risk Sentiment, US Dollar Holds Ground - 24.6.2013

Following previous week FED’s statement of reducing asset purchases by end of 2013 and even ending the bond buying program by mid-2014 the US dollar was mainly strengthening against its major counterparties. In addition, Goldman Sachs warned for liquidity problems in Chinese banks and thus it cut growth forecast for China to 7.4% in 2013 from 7.8%. The People’s Bank of China said that could adjust its monetary attitude to face cash squeeze between banks. Asian stocks were under selling pressure amid Chinese concerns with NIKKEI 225 declining by 1.26% and Hang Seng losing by 2.21%, risk appetite is for one more time hurt by concerns from China.

The week opened flat for currencies in majority with the US dollar holding well its recently earned territory, likely to continue its upward move as potential FED tightening of monetary policy would support the currency, accompanied by short-term positive trend. Against the Japanese Yen, the US dollar breached resistance at 98.27 in the intraday indicating bullish bias but its strength is mild. The Euro versus the US dollar is in sideways today slightly above 1.3088, perhaps trading could be influenced by German IFO Business coming out in a while. The short-term trend is looking down, we consider that direction the most probable. Apart the IFO Business, Monday lags of economic releases therefore consolidation scenario for currency pairs is also highly possible.