Contagion in euro zone spreads highlighted in this report yesterday and in the Global Technical Trends, Euro area tilting at windmills, 23 May 2011, has triggered broader risk reduction and a persistent USD bid. Near-term support at the daily cloud is holding firm for EUR/USD (near 1.3975), though the risk is that this remains under pressure especially as US stocks correct lower. Commodity and Asian currencies are also feeling the heat with USD/CAD closing above its daily cloud for the first time since September 2010. In EM, USD/KRW (1100) and USD/BRL(1.6450) are benchmarks to watch for USD short covering as they run up to their breakdown levels from March.
BARCLAYS CAPITAL
Technical Research