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Daily Report: Risk Aversion Back as Moody's Downgraded Major Banks, Dollar ReboundsRisk aversion is back on the driving seat after Moody's downgraded credit ratings of 15 large banks in the world. Wall Street slumped with the DJIA and S&P 500 losing -1.96% and -2.23% respectively. Asian markets followed and safe have flow drove dollar broadly higher. Moody’s downgraded the credit ratings of 15 banks, including banking giants Morgan Stanley and Credit Suisse. Rating of Morgan Stanley was cut 2 notches to Baa1 while that for Credit Suisse was down by 3 notches to A2. Other banks that faced the downgrades included UBS, HSBC, Goldman Sachs, etc. According to the rating agency, "all of the banks affected by today's actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities". |
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| Featured Technical Report | |
AUD/USD Daily OutlookDaily Pivots: (S1) 0.9973; (P) 1.0089; (R1) 1.0149; More AUD/USD's break of 1.0056 minor support suggests that a short term top is in place at 1.0223, just ahead of 1.0225 support turned resistance. Intraday bias is back on the downside and deeper fall could now be seen back to 0.9820 support. Also, note that with 1.0225 intact, there is no confirmation of completion of the fall from 1.0852 yet. Break of 0.9820 will indeed push AUD/USD through another low below 0.9588. Meanwhile, as discussed before, decisive break of 1.0225 will confirm completion of whole fall from 1.0852 at 0.9588. In such case, stronger rally could be seen through 1.0473 resistance to upper trend line resistance (now at 1.0742). |
| Special Reports |
Fed Extends Operation Twist By $267B, Downgrades Economic ForecastsAs we had anticipated, the Fed decided to extend operation twist through the year-end, instead of implementation of QE3, in June. With the amount of $267B, the pace of asset purchases and sales would remain unchanged. To our surprise but indeed a positive sign, the Fed maintain the reference of keeping interest rates at exceptionally low level at least through late 2014, rather than delaying the timing of the first rate hike. Economic forecasts were markedly downgraded. The Fed retained the possibility of further easing but this would depend on the job market situation. There were 2 additional members at the meeting, Governors Jeremy Stein and Jerome Powell, present at the meeting. BOE More Inclined To Increase Size Of Asset PurchasesThe June minutes for the BOE meeting unveiled that the members were more split on whether to increase asset purchases to stimulate economic growth. With 5 votes favoring no change while 4 votes supporting additional easing, it has become increasingly likely that the central bank would announce a raise in asset purchases at the next meeting. Inflation has moderated more than anticipated and should have created a more comfortable environment for easing policies. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: The single currency tumbled yesterday in part due to the soft data out of Germany as well as eurozone and decline accelerated after clearing bids at 1.2635-40 and stops below 1.2540-50 were eventually triggered. At the moment, mixture of bids and stops is located at 1.2520 and fresh demand is likely to emerge around 1.2500, then 1.2480. On the upside, first offers from funds are tipped at 1.2570 and more selling interests should emerge around 1.2600-10 and further out at 1.2640-50 with stops building up above latter level. Some traders are awaiting the release of German June IFO data at 08:00GMT. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea: GBP/USD – Sell at 1.5690Yesterday’s selloff from 1.5734 together with the breach of support at 1.5615 signal top has been formed at 1.5778 and consolidation with downside bias remains for further weakness to 1.5560-65, however, loss of near term downward momentum should prevent sharp fall below 1.5500 and reckon strong support at 1.5473 would hold from here, risk is seen for a corrective rebound. Trade Idea: EUR/USD – Sell at 1.2615Yesterday’s selloff after breaking indicated support at 1.2638 (now turned into resistance) signals top has been formed at 1.2748 earlier this week and bearishness remains for further weakness to 1.2500, however, loss of near term downward momentum should prevent sharp fall below 1.2470 and reckon support at 1.2440-45 would hold from here, bring rebound later. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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