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Daily Report: Risk Rebound Lost Steam after Bernanke Disappointment, Fitch Downgraded SpainRisk rally seemed to have lost much momentum as investors were disappointed by Fed Chairman Bernanke's lack of signal on adding monetary stimulus overnight is his testimony to congress. In addition, Fitch's downgrade of Spain's credit rating also remained investors of the ongoing sovereign and banking crisis in Eurozone. The boost from China's first rate cut in three years was rather brief. DOW ended the day up merely 46 pts at 12460, after jumping to as high as 12555 during initial trading. Meanwhile, Asian equities are all in red. In the currency markets, major currencies are showing sign of reversal against dollar and yen and we'd probably see more upside in the latter two before the week closes. |
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| Featured Technical Report | |
USD/CAD Daily OutlookDaily Pivots: (S1) 1.0226; (P) 1.0260; (R1) 1.0311; More. USD/CAD's pull back was contained at 1.0210, above mentioned 1.0206 support (38.2% retracement of 0.9799 to 1.0445 at 1.0198). With 4 hours MACD crossed above signal line, intraday bias is mildly back on the upside for a test on 1.0445 resistance. Break will confirm resumption of whole rise from 0.9799 and should target 1.0522/0656 resistance zone next. In case of another fall, we'd still expect downside to be contained by mentioned 1.0198/0206 support to bring rally resumption eventually. But decisive break there will invalidate our view and bring deeper decline to 61.8% retracement at 1.0046. |
| Special Reports |
China Cut Interest Rates, The First Time In Over Three YearsThe People's Bank of China (PBOC) lowered the 1-year lending and deposit rates by -25 bps, effective June 8. This first rate cut since December 2008 came in with great surprise as the government adopted 'asymmetric' rate change. Slowdown in Chinese economic growth and deterioration in the global environment in recent months have triggered speculations of a reduction in lending rate for some time. However, a cut also in the deposit rate was rather unexpected. Moreover, the PBOC's raise of the ceiling on the deposit rate to 110% from 100% and the lowering of the floor of the lending rate to 80% from 90% have actually reduced the lending rate by more than it announced and increased the deposit rate. We believe the rate cut is generally a positive to the market and marks a small step to interest rate liberalization in China. ECB Left Interest Rates Unchanged, Draghi Questioned the Effectiveness of Monetary Policies on CrisisAs expected, the ECB left the main refinancing rate unchanged at 1% although sovereign debt crisis in the Eurozone intensified. At the press conference, President Draghi unveiled that the decision was made by consensus and indicated "a few members" favored further rate cut. Yet, Draghi also downplayed the effectiveness of additional easing to the economic and financial environment. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: Although the single currency rose to as high as 1.2626 yesterday on Spanish bond auction and China's 25 points rate cut, the pair dropped today in Asia on risk aversion due to Spanish downgrade and Asian names were spotted selling the pair quite aggressively this morning, bids at 1.2500-10 were filled and stops below 1.2490 were tripped. At the moment, more buying interests are tipped at 1.2440-50 and mixture of bids and stops is located at 1.2400-10. On the upside, offers from same parties are lowered to 1.2530-40 with some stops seen above 1.2560 and 1.2580, however, decent offers remain at 1.2620-30. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea: USD/JPY – Buy at 78.75Despite yesterday’s rise to 78.80, as the greenback has retreated after faltering below previous resistance at 79.83, suggesting consolidation below this level would be seen and below 78.97 (previous resistance) would bring retracement to the Ichimoku cloud bottom (now at 78.77), however, renewed buying interests should emerge around there Trade Idea: EUR/USD – Stand asideDespite yesterday’s rise to 1.2626, lack of follow through buying on the brief breach of previous resistance at 1.2625 and the subsequent sharp retreat today suggest top is possibly formed and consolidation with downside bias is seen but break of support at 1.2441 is needed to add credence to this view and bring further weakness to another previous support at 1.2410 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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