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Daily Report: US Yields Dived on Safe Haven Flow, USD/JPY FollowedWorries on Spain continue to weigh down on market sentiments. Asian equities are broadly lower today following the -160 pts fall in DOW overnight. Markets are all seeking safe haven and funds flew to US treasuries and drove 10 year yield to 60 years low of 1.62%. Weakness in yields in turn drove yen broadly higher with USD/JPY breaking through recent support of 78.99 to as low as 78.46 so far. Commodity currencies, like Aussie and Loonie, are weak against dollar and yen but the selloff is not as bad as European majors. We'd expect European majors to remain generally weak and the major focus will remain on development in Spain, in particular on how quick the benchmark 10 year yield will march to 7% level, which eventually led to bailout of Greece, Ireland and Portugal. |
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| Featured Technical Report | |
USD/JPY Daily OutlookDaily Pivots: (S1) 78.75; (P) 79.16; (R1) 79.45; More... The break of 78.99 confirmed resumption of whole decline from 84.17. Intraday bias remains on the downside and current fall should target 75.56/76.02 support zone. on the upside, above 79.33 minor resistance will turn bias neutral and bring consolidations. But break of 80.29 is needed to signal near term reversal. Otherwise, outlook will remain bearish even in case of recovery. |
| Special Report |
Direct Yen-Yuan Trading Marks a Step Forward to Yuan InternationalizationJapanese yen (yen) and the Chinese Renminbi (yuan) will be allowed for direct trading from June 1. This is the first time China allows a major foreign currency, other than the US dollar, to trade directly against the RMB. While some analysts do not view this as an important issue other than reducing transaction cost and lowering settle risks, we believe this is one of the various steps that the Chinese government has taken for internationalizing the RMB. Going forward, the government would adopt further policies to promote the use of the RMB, increase the flexibility of the foreign exchange market and relax constrains in the capital accounts so as to transform the RMB into a truly global currency, Ireland's Ability to Access Bond Markets Not Certain although Fiscal Pact Likely ApprovedIt is likely that Ireland will pass the European fiscal pact on the referendum on May 31 as the latest polls showed that 60% of the voters supported the deal. Unfortunately, the market anticipates that the country might not be able to tap public funding later this year as the government planned. That means, the debt-ridden peripheral country in the Eurozone, despite its efforts in meeting the fiscal target and the return to growth in 2011, may need further bailout from the EU, the IMF or other international sources besides the 67.5B euro borrowed. |
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European Session: Orders and Options WatchEUR: The single currency has recovered after falling to 1.2358 (barriers at 1.2400 were tripped) initially this morning in Asia but defensive bids (for protection of 1.2350 barrier) are still intact, however, offers from various parties are still lined up from 1.2400 up to 1.2430 and more selling interest should emerge around 1.2470-75, followed by bigger sell orders planted at 1.2500-10. On the downside, stops are building up below the aforesaid barrier and more buying interests from Asian sovereign names should emerge around 1.2310-20 with next barrier seen at 1.2300. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea: USD/CHF – Buy at 0.9605As dollar has eased after intra-day initial rise to 0.9720, suggesting minor consolidation would be seen and below the Kijun-Sen (now at 0.9672) would bring retracement to 0.9611-12 (current level of the Ichimoku cloud top and previous resistance), however, the lower Kumo (now at 0.9585) should hold, bring another rise. A break of said resistance would extend medium term upmove to 0.9750 Trade Idea: EUR/USD – Sell at 1.2500As the single currency extended recent selloff to as low as 1.2358 this morning, suggesting recent downtrend is still in progress and further weakness to 1.2350 and possibly 1.2320 would be seen, however, near term oversold condition should prevent sharp fall below there and reckon 1.2300 would hold from here, risk from there is seen for a rebound later. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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