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Daily Report: Dollar Rebounds as Fed Plosser Sent Equities LowerUS equities staged a sharp fall towards to the end of yesterday after Philly Fed President Plosser poured cold water on the impact of Fed's QE3. DOW closed the day -101 pts lower while S&P 500 also dropped -15.3 pts. Asia stocks followed with Nikkei down -171 pts, HK HSI down -184 pts at the time of writing. Commodities were relatively steady thought with the CRB index holding above 305 level and crude oil is still defending 90 psychological level. Dollar extended recent rebound but the dollar index is still kept well below 80. European majors and commodity currencies weakened against both dollar and yen. |
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| Featured Technical Report | |
EUR/JPY Daily OutlookDaily Pivots: (S1) 100.00; (P) 100.52; (R1) 100.88; More Despite mild recovery, EUR/JPY's fall quickly continued and dipped to as low as 99.98 so far today. Deeper fall could still be seen. But fall from 103.86 is viewed as a correction and should be contained by 99.52 support and bring rebound. Above 101.04 minor resistance will flip bias back to the upside for 103.86 first. Also, note again that rally from 94.11 is expected to continue sooner or later and break of 103.86 will target 61.8% retracement of 111.43 to 94.11 at 104.81 and above. Though, sustained trading below 99.52 will dampen our bullish view and turn focus back to 97.98 support instead. |
| Special Reports |
Tensions Between China And Japan This Time May Hurt Trades More Seriously Than 2005Tensions between China and Japan over the inhabited Diaoyu/Senkaku Islands intensified after the Japanese government announced on September 11 that it would nationalize three of the island chain by purchasing them from the Kurihara family for 2.05B yen. The Chinese government was furious about the issue and declared that the islands have been under Chinese territory since ancient times and China would do anything to protect it sovereignty. Reports also showed that nationalists protested on streets and destroyed shops owned by Japanese in China. Last week, China's Vice President Xi Jinping spoke after weeks' of disappearance about the latest Sino-Japanese conflict. He said that Japan's 'purchase' of the islands was a farce and 'Japan should rein in its behavior and stop any words and acts that undermine China's sovereignty and territorial integrity'. Despite heightened tensions, we believe that military conflicts are unlikely. Yet, deterioration of relationship between the world's second and third largest economies in the period of global economic turmoil would inevitably have impacts on the economic developments in the East Asian region, and the world as a whole. Decline In FX Reserve In China Signals Loss Of Confidence In RMB's OutlookChina recorded a fall in FX reserve in 2Q12, the first decline since 1998. Although recent global economic slowdown has affected China's exports while China's growth moderation also eased the country's demand for imports, the drop in FX reserve in the second quarter was not driven by narrowing current account surplus in the world's second largest economy. Instead, the details of the data set showed that the decline was mainly driven by the outflow of currency and deposits. By also considering the composition of China's FX deposits in banks, we believe that the decline in FX reserve signaled the loss of lost confidence by Chinese companies on Renminbi's strength, thus shifting their deposits denominated in RMB to USD. |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||
European Session: Orders and Options WatchEUR: Although the single currency rebounded yesterday in New York morning, the pair ran into heavy offers just above 1.2970 and slipped again in overnight trade, bids and stops at 1.2870-80 were cleared, indicated stops below 1.2840-50 are now in focus but some bids are still noted above there but more buying interests from Middle East names are expected around 1.2825-35 and 1.2800-10. On the upside, offers from various parties are reported at 1.2900-10 and also in the region of 1.2950-70, more selling interests should emerge around 1.2990-00, followed by mixture of offers and stops at 1.3040-50. | |||||||||||||||||||||||||||||||||||||||||||||||||
| Forex Trade Ideas | |||||||||||||||||||||||||||||||||||||||||||||||||
Trade Idea: GBP/USD – Sell at 1.6220Despite yesterday’s brief bounce to 1.6267, renewed selling interests emerged there and cable has fallen below precious support at 1.6163, adding credence to our bearish view that a temporary top has been formed at 1.6310 and consolidation with downside bias is seen for correction of recent upmove to 1.6130 and possibly 1.6117 (50% Fibonacci retracement of 1.5923-1.6310) but reckon support at 1.6071 (same level as 61.8% Fibonacci retracement) would hold. Trade Idea: EUR/USD – Turn long at 1.2815Although the single currency has fallen again after yesterday brief bounce to 1.2971 (renewed selling interests just emerged right at the Ichimoku cloud top) and recent decline from 1.3172 may extend weakness to 1.2835-40 (50% Fibonacci retracement of 1.2503-1.3172), near term oversold condition should prevent sharp fall below support at 1.2812-17 and risk from there is seen for a strong rebound to take place later. Above intra-day resistance at 1.2913 would bring test of the lower Kumo (now at 1.2928) 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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