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Daily Report: European Majors Boosted by Merkel's Comments, But Limited by Near Term ResistanceEuropean majors staged a strong rebound overnight, together with rally in equities, after German Chancellor Merkel voiced her support to ECB's effort on fighting the debt crisis. Merkel stated that policymakers "feel committed to do everything" they can "in order to maintain the common currency". She also affirmed that Draghi's decisions have "made it clear that the ECB is counting on political action in the form of conditionality as the precondition for a positive development of the euro". These comments indicated that Germany has moved away from the opposition position over the ECB's purchases of Spanish and Italian bonds and further affirm the chance that ECB will be acting soon. |
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| Featured Technical Report | |
EUR/JPY Daily OutlookDaily Pivots: (S1) 97.28; (P) 97.72; (R1) 98.50; More EUR/JPY rose to as high as 98.17 so far and the break of 97.81 resistance indicates that rebound from 94.11 has resumed. Intraday bias is back on the upside for further rally. The current rebound should at least be a correction to fall from 111.43 and should target 38.2% retracement of 111.43 to 94.11 at 110.72 next. On the downside, break of 95.71 support is needed to signal completion of such rebound. Otherwise, we'll stay bullish even in case of retreat. |
| Special Reports |
Loonie Supported By Rate Hike RhetoricWeakening global economic outlook, ongoing sovereign debt crisis in the Eurozone and flaggy domestic economic recovery should be convincing factors leading to depreciation in Canadian dollar. However, similar to other commodity currencies, the loonie has been getting stronger again the US dollar since early June. The key reason is that the economic situation in the US is even worse. Other than this, CAD is also supported by safe haven demand, bottoming of monetary easing in the BOC and strength in crude oil prices. Kiwi To Be Support By Interest Rate Differential And Soft Commodity PricesSimilar to the Australian dollar, the New Zealand dollar also proved to be resilient despite concerns over global economic slowdown. Strength of the kiwi against the backdrop of sluggish domestic economic recovery after emerging from recession in 2009 has led to talks of official intervention of the currency market. Prime Minister John Key said last week that a strong NZD would make the economy 'splutter and stutter and probably stop' and that 'a rising exchange rate takes pressure off the Reserve Bank. Base rates are still much higher than they are generally around the world -2.5%. There are options, so let's see'. In our opinion, it would be rare for the RBNZ to intervene at the current trend of the NZD. Concerning the outlook, while the kiwi has been pressured by the lack of stimulus from the Fed and the ECB, it would strengthen again in the longer-term as supported by interest rate differential and the rise of soft commodity prices. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: The single currency has risen again after intra-day brief retreat to 1.2338 and offers from short-term specs were filled, mixture of offers and stops in good size at 1.2390-00 is now in focus, however, more selling interests from funds are tipped further out at 1.2440-50 (related to barrier at 1.2450) with more stops placed above there. On the downside, bids from various parties (including Asian and Middle East names) are lined up at 1.2340-50 with light stops expected below 1.2330-35 but fresh demand should emerge around 1.2300-10 and also in good size at 1.2255-60 with mixtures of bids and stops remain at 1.2240 and 1.2210-20. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forex Trade Ideas | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Idea: EUR/USD – Buy at 1.2290Despite yesterday’s marginal fall to 1.2256, lack of follow through selling on break of previous support at 1.2265 and the subsequent rally on dollar’s broad-based weakness suggest a test of indicated resistance at 1.2386-87 would be seen, above there would suggest the fall from 1.2444 has ended at 1.2242 and bring further gain to 1.2400-10 but said resistance at 1.2444 should cap upside from here. Trade Idea: USD/JPY – Buy at 78.65Although the greenback has continued to edge higher in part due to cross-selling in yen, loss of near term upward momentum should prevent sharp rise beyond 79.70-75 and reckon resistance at 79.97-00 would limit upside, risk has increased foe a minor correction back to 79.05-06 (current level of the Ichimoku cloud top and previous resistance) but renewed buying interests should emerge around support at 78.60, bring another rise towards previous chart resistance at 80.10 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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