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Daily Report: Euro Soft ahead of Spain Auction, Markets Steady as BRICS Pledged New Contribution to IMFAsian markets are mixed as investors calmed down from the optimism from Greece elections that an immediate disastrous situation in the Eurozone was avoided. It's clear that the real debt and growth problems in the periphery have remained unresolved. Euro is hovering around 1.26 against dollar and 99.5 against yen for the moment. But notable weakness is seen against Aussie as EUR/AUD breached 1.24 level. Situation in Spain weighed on sentiments on Euro as benchmark 10 year yield hit another euro-era high of 7.3% yesterday and stayed in bailout danger zone above 7%. It was reported that bad loans at the country's banks rose to 8.72% of all loans in April. Spain will auction EUR 2-3b of 12- and 18- bills today and face an even more important test of auction of 2014, 2015 and 2017 bonds on Thursday. |
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| Featured Technical Report | |
EUR/AUD Daily OutlookDaily Pivots: (S1) 1.2344; (P) 1.2470; (R1) 1.2544; More... EUR/AUD's decline from 1.3028 accelerated further to as low as 1.2395 so far and broke mentioned target of 61.8% retracement of 1.2132 to 1.3028 at 1.2474. Intraday bias remains on the downside and current fall should now target a retest on 1.2132 low. On the upside, above 1.2517 minor resistance will turn bias neutral and bring consolidations. But recovery should be limited below 1.2667 support turned resistance and bring fall resumption. |
| Special Reports |
RBA Cut Cash Rate Amid Concerns On Global Economic OutlookThe RBA released minutes for the June meeting explaining the decision of reducing the policy rate by -25 bps to 3.5%. The minutes suggested that the decision was made after 'finely balanced' arguments among members. Policymakers remained optimistic on the domestic economic outlook and it was mainly the global economic slowdown, particularly the sovereign debt crisis in the Eurozone, that triggered the rate cut. The central bank viewed the current monetary stance as stimulatory and thus another rate cut in July appears less likely. Yet, if the global economic environment continues to deteriorate, the RBA would still lower interest rates further later in the year. Pro-Bailout Parties Win Greek Election. Real Problems RemainThe latest general election in Greece alleviated market concerns that the debt-ridden country would abandon the fiscal tightening measures and leave the Eurozone as, according to exit polls and official projections, New Democracy came first and the pro-bailout parties are likely to secure enough seats to control the parliament. The single currency and risk assets buoyed as the situation in Greece is temporarily stabilized. However, uncertainty indeed remains. How would the new government negotiate with the EU/IMF regarding the austerity measures? How would the country catch up with its fiscal tightening, as Greece is far off track from the targets agreed previously? Would other EU members still want Greece to stay in the Eurozone if it consistently fails to achieve its targets? There are no immediate answers to these questions and are expected to threaten the outlook the Eurozone economic as well as the euro in the medium to long term. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: The single currency reversed yesterday's initial gain on fresh concerns over Spanish debt and banking problems, stops below 1.2590 were tripped and mixture of bids and stops at 1.2540-50 is now in focus, however, fresh demand from Asian and Middle East names are tipped further out from 1.2530 down to 1.2500 with larger bids seen at 1.2470. On the upside, offers are expected at 1.2645-50 and further out at 1.2680-90, followed by combinations of offers and stops located at 1.2725-30 and further out at 1.2750-55. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea: EUR/USD – Sell at 1.2650Yesterday’s selloff from 1.2748 suggests top is possibly formed and consolidation with downside bias is seen for another test of yesterday’s low of 1.2550, however, break of another previous support at 1.2542 is needed to add credence to this view, bring further weakness towards 1.2500 but loss of near term momentum should prevent sharp fall below there and reckon 1.2460 would hold from here. Trade Idea: USD/JPY – Hold long entered at 78.95Although dollar’s retreat from 79.31 (yesterday’s high) suggests consolidation would be seen, as the rebound from last week’s low of 78.62 suggests mild upside bias remains for another test of said resistance, then towards Friday’s high of 79.51, however, break of indicated resistance at 79.80-83 is needed to extend the rise from 77.65 for a stronger retracement of recent decline to psychological resistance at 80.00 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fundamental Highlights
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