26-Aug-2011

It was quiet before Jackson Hole summit as investors awaited confirmation from Bernanke on QE3. However, market went topsy-turvy after Bernanke delayed easing talks and monetary policy to Sep FOMC meeting. The immediate response following this was a risk sell-off but market was quick to reverse course to a risk-on mode and currencies generally surged across board against the greenback. Swiss franc was the prominent exception and dived against USD, breaking out of the familiar range 0.7900/80 to reach a high of 0.8156 after the speech. This was likely to be fuelled by the risk sentiment as well as intervention fears by SNB to curb swissy's gains. There were rumours that Swiss banks would begin charging for franc deposits, after earlier measures by SNB to boost liquidity and lower ST i/r. On the other hand, commodity currencies AUD and NZD emerged as the biggest winners with the former gaining 1.42% while the latter 1.65% against USD during the day. AUD was strong after RBA Governor Steven's comments lowered speculation of a rate cut in the near term.

USD/CHF: Early indication of a strong break in psychological barrier 0.8 has confirmed the resumption of rebound from 0.70658 low on 9-Aug, and points to further upward bias as long as 0.78049 minor support holds. A break of the minor support indicates a temporary topping.

EUR/USD: Rangebound at 1.435/1.445  before the meeting. Inspite of the boost in risk sentiments thereafter, investors are still unwilling to test the barrier 1.45. Next week, investors likely to turn back attention to EUR debt problems especially after reports emerged on widening credit spreads in Greek bonds. Short-term outlook remains neutral, tied at 1.43/1.45. Otherwise break of 1.43 signals start of bearish trend.

USD/SGD: Consolidated at 1.20191/1.21149. Outlook remains biased downwards if 1.205 support turns resistance.

NZD/USD: It has been an upward trend for the pairing for the day even before Jackson Hole, but staged an even more impressive surge after the meeting to test 0.84 resistance. A break here is necessary to confirm resumption of rebound from 0.7963 low on 9-Aug to start a bullish trend.