The Euro weakens as the slump continues on the continent

The euro may fall to 87.50 British pence over the next three months, Standard Chartered Plc forecast, citing technical charts that predict price movements. Daily momentum indicators such as the relative strength index and the stochastic oscillator charts are “turning bearish, favoring downside retracement,” Callum Henderson, head of global currency strategy at Standard Chartered in Singapore, wrote in a research note today. A close below the 20-day moving average of 93.20 pence would add to the prospect that the short- term trend is changing, he said. “Technically, clients should cut euro-pound longs and go short for 87.50 pence initially,” The euro fell against the dollar before data that will probably show slowing regional inflation, giving the European Central Bank more room to lower interest rates. The EUR/USD is currently trading at $1.3430 as of 8:30am, GMT.

The yen rose slightly against the dollar on speculation Japanese investors took advantage of its decline yesterday to buy the currency to repatriate overseas earnings. Obama told House Speaker Nancy Pelosi yesterday that he favors a U.S. economic stimulus plan of about $775 billion, a Democratic aide said. The president-elect, who is due to deliver a speech on the economy on Jan. 8, met with congressional leaders from both parties at the Capitol to help win support for a two-year plan to tackle the nation’s recession. “When the yen comes back to Tokyo as cheaply as it did today, some Japanese investors can’t pass up the chance to buy it,” said Takeshi Tokita, vice president of foreign-exchange sales in Tokyo at Mizuho Corporate Bank, a unit of Japan’s second-largest publicly traded lender. The USD/JPY is currently trading at 93.60 as of 8:45am, GMT.

The Australian dollar touched the highest in more than 2 1/2 months against the greenback. The currency gained for a fourth day versus the yen as stocks rose amid optimism U.S. President-elect Barack Obama’s fiscal stimulus will help the world’s largest economy recover from recession, reviving investors’ appetite for higher-yielding assets. The Australian dollar touched an eight-week high against the yen. “There has been an improvement in the risk environment as equity markets had a positive start to the New Year,” said Imre Speizer, a market strategist in Wellington with Westpac Banking Corp. “U.S. data, while still poor, hasn’t been as bad as the market expected and commodities also recovered. Obama’s planned tax cuts also may bolster consumer and business sentiment.” The AUD/JPY is currently trading at 66.45 as of 9:10am, GMT.