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Daily Report: Markets Pared Gains, Awaiting FOMCHigh-beta currencies pared back some of recent gains as investors are taking profits on risk markets ahead of FOMC rate decision today and, more importantly, ECB meeting tomorrow. Weak China manufacturing data is also weighing down on sentiments a bit. USD/JPY is back pressing 78 level for the moment but lacks sustainable selling to push in through 77.94 support. Markets are generally very cautious and refuse to commit in either direction. Nonetheless, the yen could be given a boost further if Fed hints on additional stimulus today. |
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| Featured Technical Report | |
EUR/JPY Daily OutlookDaily Pivots: (S1) 95.81; (P) 96.04; (R1) 96.35; More EUR/JPY is trying to draw support from 4 hours 55 EMA for the moment and intraday bias is turned neutral. Note again that 94.11 should be a short term bottom and consolidation from there should continue in near term. Above 97.32 will bring stronger recovery to falling trend line resistance (now at 98.31). |
| Special Reports |
Fed To Extend Low-Rate Guidance Until 2015, QE3 To Be Announced In SeptemberWe expect the Fed would continue to leave the QE3 decision on hold in August as the better timing for action would be in September when two employment reports would be released for gauging the impacts of extension of operation twist in June. Moreover, a press conference will be held and staff forecasts will be published by then. Yet, what the Fed might do to drive sentiment in August might be extending the low rate guidance to 2015 and pledging the Fed would use whatever tools to stimulate the economy. ECB to Disappoint in AugustThe market has been eagerly awaiting the ECB meeting which will be held Thursday after President Mario Draghi's comment last week that the central bank would do whatever it can to preserve the euro. This has raised speculations that the ECB would resume bond purchases in the form of SMP. However, there are many hurdles to this move, in particular opposition of the Bundesbank. While the case of ECB purchases of bond has greatly increased due to worsening of situations in Spain and Italy, the timing of the move is an important issue. The ECB obviously prefer to see the Spanish government request support from the EFSF with conditionality in place before the central bank's involvement in bond purchases. However, this may not come earlier than the Thursday. In such case, we expect the ECB would not announce SMP in August, leaving it to September possibly. We also believe the central bank to leave interest rates unchanged this month, after the surprising rate cut in July. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: Although the single currency retreated from yesterday's high of 1.2330 in late New York, euro found support at 1.2281 in Asia and has rebounded on buying by U.S. banks (mainly in EUR/JPY). At the moment, offers are still noted at 1.2330-40 with stops remain above 1.2345 and 1.2360, followed by larger sell orders at 1.2380-00 region (for protection of 1.2400 barrier). On the downside, decent demand from same parties plus Asian names are reported at 1.2270-80 and 1.2250 with more buying interests remain at 1.2220-30, followed by stops building up below 1.2220 and 1.2200 (large). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea: EUR/USD – Buy at 1.2275Although the single currency has rebounded again after intra-day retreat to 1.2281 and consolidation with mild upside bias is seen, break of 1.2345-50 is needed to signal the pullback from 1.2390 has ended at 1.2225 and bring a retest of this level, then previous resistance at 1.2401-08 but reckon upside would be limited to 1.2444 (61.8% Fibonacci retracement of intermediate fall from 1.2693-1.2042). Trade Idea: USD/JPY – Buy at 77.80Although dollar has rebounded after intra-day brief breach of 77.94 support, reckon the Ichimoku cloud top (now at 78.38) would limit upside and near term downside risk remains for recent fall to extend marginal weakness, however, as broad outlook is consolidative, reckon downside would be limited and support at 77.65 should hold, bring another rebound. A sustained breach of the upper Kumo would suggest low is possibly formed 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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