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Mid-Day Report: Euro Tumbles on Fresh Selling after Spain Bill AuctionsFresh selling is seen in Euro today after Spain bill auctions ended with sharply higher yield while there is growing pessimism that the EU summit later this week will conclude with any substantive actions. Spain sold EUR 1.6b of 3-month bills with yield at 2.362%, nearly tripped 0.846% yield at an auction in May. The treasury also so EUR 1.48b of 6-month bills with yield at 3.237%, also nearly doubled 1.737% in another auction in May. Nonetheless, the combined EUR 3.08b sale exceeded its EUR 2-3b target, suggesting that demand was still there. Meanwhile, Italy sold EUR 2.99b of zero-coupon notes due in May 2014 with yield at 4.71%, higher than late 4.04% at May's auction. Italy also successfully sold EUR 0.92b of inflation linked debt. |
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| Featured Technical Report | |
EUR/USD Mid-Day OutlookDaily Pivots: (S1) 1.2463; (P) 1.2511 (R1) 1.2551; More..... EUR/USD dips further today but is still holding above 1.2435 minor support and intraday bias remains neutral. With 1.2435 intact, corrective rebound from 1.2287 could still extend higher. Above 1.2530 minor resistance will flip bias back to the upside for 1.2747 and then 61.8% retracement of 1.3282 to 1.2287 at 1.2902. Though, break of 1.2435 will indicate that such corrective rise is already completed and will flip bias back to the downside for 1.2287 and below. |
| Special Reports |
Japan Passes Consumption Tax Hike, More Political Than Economic Meaning In The Near-TermThe lower house of the Japanese parliament passed the bill to double the consumption tax in three years by a vote of 363-96. The bill will then be voted by the upper house to become law and it's very likely to be approved. The consumption tax hike was a means to ease the fiscal deficit of the Japanese economy. However, the impact is expected to be small. While the government anticipates it would help soothe the fiscal problems, opposition parties believed this would weaken demand for domestic goods, further hurting the nation's economy. Some analysts viewed that the hike would weaken that outlook of Japanese yen. On the political front, opponents of the tax hike may submit a no-confidence motion regarding the bill. The worst scenario would be resignation of the Noda Cabinet or dissolution of the lower house and elections. EURUSD to Break Below 1.20 by Year EndWe are bearish on the euro's outlook in the second half of the year. Likely delay of the ESM due to Germany's Federal Constitutional Court's examination of the mechanism, expectation of rate cut as it tends to focus more on growth and capital outflow from the Eurozone to small economies such as Switzerland are the key reasons behind our anticipation for further weakness in the single currency. The recovery of EUR/USD since the beginning of June has probably ended and the decline might have resumed. We forecast the currency pair to fall to as low as 1.19 by the year end. |
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Orders and Options Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US Session: Orders and Options WatchEUR: The single currency has fallen again on stop-hunting and sell stop orders below 1.2470 were tripped in U.S. opening, CTA accounts and macro funds were seen selling the pair today, however, some bids are still noted at 1.2450 with more stops placed below 1.2440 but larger bids from European names are expected further out at 1.2410 with bigger stops tipped below 1.2400. On the upside, offers from U.S. names and the aforementioned parties remain at 1.2530-35 and also at 1.2560 with mixtures of offers and stops located at 1.2580-90 and 1.2610 but sizeable stops only emerging above 1.2640-50. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea Update: GBP/USD – Hold short entered at 1.5635Despite intra-day rebound to 1.5650 in part due to the release of stronger-than-expected UK data, as cable met renewed selling interest there (just faltered below indicated previous support at 1.5651) and has retreated, retaining our bearishness for the decline from 1.5778 to resume after consolidation, break of yesterday’s low at 1.5539 would confirm and extend weakness to 1.5520 and possibly 1.5500 Trade Idea: EUR/JPY – Hold long entered at 99.15As the single currency has remained under pressure after yesterday’s selloff, suggesting caution on our long position entered at 99.15 and support at 98.55 needs to hold to retain bullishness for another rebound later, above 100.00 would suggest low is possibly formed but break of 100.35-40 is needed to add credence to this view, bring a stronger rebound to 101.00. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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