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Mid-Day Report: Euro Stays Soft as Spanish Yield Breached 6%Euro remains broadly soft, along with weakness in European stocks on concern on Spain's situation. Benchmark 10 year yield jumped sharply today and breached 6% level as it remains uncertain whether Spain would accept bailout terms and seek support. There were talks that investors are somewhat impatient with the stalemate and could test Spain's nerve by pushing yield back towards 7% level. Political tension in Spain as well as the eventual terms and shape of the EUR 100b banking bailout were also factors that concerned the markets. Also weighing on sentiments, Bank of Spain said that the economy fell "at a significant rate" in Q3 ad there were protests in Madrid ahead of tomorrow's 20123 budget release. |
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| Featured Technical Report | |
EUR/USD Mid-Day OutlookDaily Pivots: (S1) 1.2868; (P) 1.2919 (R1) 1.2952; More..... At this point, we'd still expect strong support from 1.2816 support (38.2% retracement of 1.2255 to 1.3171 at 1.2821) to contain downside and finish the pull back from 1.3171. Above 1.2970 minor resistance will flip bias back to the upside for 1.3171. Break there will resume recent rally fro 1.2042 to 1.3486 key resistance, which is close to 50% retracement of 1.4939 to 1.2042 at 1.3491. However, sustained break of 1.2816 will dampen this bullish view and bring deeper fall back to 55 days EMA (now at 1.2661). |
| 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 | |||||||||||||||||||||||||||||||||||||||||||||||||
US Session: Orders and Options WatchEUR: The single currency has remained under pressure in part due to investors' worries over eurozone debt crisis, indicated stops at 1.2840-50 were tripped, however, some buying interests from Middle East names are still noted around 1.2825-35 and 1.2800-10 with more sell stop orders placed below 1.25820 and 1.2800. 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 Update: EUR/USD – Buy 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 1.2921), break there would signal low is possibly formed Trade Idea: AUD/USD – Sell at 1.0460As aussie has fallen again after brief recovery, adding credence to our bearish view that the decline from 1.0625 top to bring weakness to previous support at 1.0323, below would extend weakness to 1.0300 and possibly 1.0270-75, however, near term oversold condition should limit downside to 1.0250 and price should stay well above support at 1.0167 and bring another rise later. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||
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Fundamental Highlights
Technical Highlights
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