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Mid-Day Report: Dollar Soft as Markets Await FOMCDollar remains soft against other major currencies as markets are calmly awaiting FOMC announcement. Fed will undoubtedly keep rates unchanged at 0-0.25% today. And, we tend to expect the Fed would take some actions in today's meeting, probably extending operation twist which would expire by the end of the month. The Fed may extend operation twist for six months with US$50B per month by selling short-term Treasuries with remaining maturities of three years or less and buying longer-term assets including Treasuries and MBS. The advantage of the move is that the balance sheet would remain unchanged. The extension would provide the Fed several more months to gauge market developments and evaluate whether an outright purchase is needed. In addition, the Fed may also delay the timing of keeping interest rates to exceptionally low levels from late 2014. |
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| Featured Technical Report | |
GBP/USD Mid-Day OutlookDaily Pivots: (S1) 1.5555; (P) 1.5638; (R1) 1.5698; More... . GBP/USD rises further to as high as 1.5777 so far today as rebound from 1.5268 extends. Intraday bias remains on the upside and further rally could be seen to 61.8% retracement of 1.6300 to 1.5268 at 1.5906. On the downside, below 1.5614 minor support will turn bias neutral first. Further break of 1.5475 will suggest that the corrective rise is finished and will flip bias back to the downside for retesting 1.5268 low. |
| Special Reports |
Extension of Operation Twist Likely at June FOMC MeetingIt would be a difficult bet on whether the Fed would announce additional easing at the meeting Wednesday. We received two disappointing employment reports since the last FOMC meeting and the global economic outlook have also deteriorated markedly. Several Fed presidents doubted the effectiveness of further easing from the Fed. In our opinion, the Fed, if it decides to add more stimuli to the market, would more likely extend the operational twist than adopt outright purchase of assets. It is also possible for policymakers to delay the timing for the hiking the Fed funds rate. Concerning economic forecasts, we would not be surprised to see the central projections modestly lowered. 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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US Session: Orders and Options WatchEUR: The single currency rebounded from day's low in European session on continued buying by Middle East names, however, offers from Asian CBs are still noted from 1.2720 all the way up to 1.2750 with stops (option related) building up above 1.2750 barrier with next barrier tipped at 1.2800. On the downside, bids from same parties remain at 1.2660-70 and although some stops are reported below 1.2650, fresh demand should emerge around 1.2600-10 and also at 1.2570-75 with stops building up below 1.2540-50. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea Update: GBP/USD – Buy at 1.5675Despite intra-day brief retreat to 1.5651, as the British pound found decent demand there and has risen again, retaining bullishness for recent rise from 1.5269 low to resume for further gain to 1.5780 but near term overbought condition should prevent sharp move beyond 1.5800-10 and reckon 1.5835-40 would hold, risk from there has increased for a retreat later. Trade Idea: EUR/JPY – Buy at 99.15Although euro has rebounded yesterday after holding above support at 99.09, break of resistance at 100.90 (last week’s high) is needed to confirm the rise from 95.59 low (bottom of wave v and iii) has resumed as the a leg of the wave iv towards 101.60-70 but upside should be limited to 102.12 (previous 4th of a lesser degree), bring the b leg retreat later this month. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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