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Mid-Day Report: Euro Struggles to Gain as Spanish Boost FadesThe boost from Spanish budget was rather brief as markets got cautious again ahead of bank stress tests results to be released later today. Spanish 10 year yield is back above 6% level after a brief dip. European stocks pared earlier gains with DAX and CAC turned red and US futures point to lower opening. Euro is struggling to extend gains against dollar and yen. Nonetheless, reversal in risk sentiments seem to hurt Sterling and commodity currencies harder as recovery is seen in EUR/GBP, EUR/AUD and EUR/CAD. Markets could be remain steady as Spain will release data on how much toxic assets held by 14 largest banks after markets closes. Once the numbers are revealed, the toxic assets will be taken off the banks' balance sheets and placed in a state-run bad-bank. Total recapitalization is estimated to be around EUR 50b to 60b. |
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| Featured Technical Report | |
EUR/USD Mid-Day OutlookDaily Pivots: (S1) 1.2851; (P) 1.2889 (R1) 1.2951; More..... At this point, intraday bias in EUR/USD remains cautiously on the upside for the moment with focus on 1.2970 minor resistance. break will affirm that pull back from 1.3171 is already finished at 1.2828. In such case, further rally should be seen through 1.31717 to 1.3486 key resistance, which is close to 50% retracement of 1.4939 to 1.2042 at 1.3491. In any case, we'll stay bullish as long as 1.2186 holds. But sustained break of 1.2816 will dampen this bullish view and bring deeper fall back to 55 days EMA (now at 1.2670). |
| Special Reports |
Spain Pledges To Reduce Spending Further To Meet Fiscal TargetThe Spanish government confirmed in the 2013 Budget that the deficit targets are 6.3% of GDP this year and 4.5% next year, down from 8.9% in 2011. In order to achieve this goal in the face of economic contraction and sluggish employment condition, the government announced additional fiscal tightening measures which mainly focused on reduction in spending rather than tax increase. While the market remains skeptical over whether the target can be achieved, the plan should ease the process for the Spanish government to request financial assistance from the EFSF/ESM. France's Budget Plan Focuses on Tax Hike on Rich and BusinessUnlike Spain, France's 2013 Budget focused on tax hike on business and the rich, rather than spending cut. The government pledged to narrow the deficit to 3% of GDP in 2013 from 4.5% this year and eventually to 0.3% by 2017, compared with 0% in previous estimates. Prime Minister Jean-Marc Ayrault described the budget plan as "a fighting budget to get the country back on the rails". Yet, with record unemployment rate and sluggish macroeconomic data, the government faces challenges even on meeting the newly announced deficit target. |
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Trade Idea Wrap-up: GBP/USD – Hold short entered at 1.6265Despite intra-day brief breach of resistance at 1.6267, lack of follow through buying and current retreat from 1.6273 has retained our near term bearishness and consolidation with downside bias remains for test of the Ichimoku cloud top (now at 1.6202) but break of 1.6166-78 (yesterday’s low and current level of the lower Kumo) is needed to confirm the rebound from 1.6137 has ended and bring retest of this level later. Trade Idea: AUD/USD – Sell at 1.0510As aussie has continued to move higher after staging a strong rebound from 1.0328, suggesting near term upside risk remains for gain towards 1.0511-19 (61.8% Fibonacci retracement of 1.0625-1.0328 and previous resistance), however, if our view that top has been formed at 1.0625 is correct, upside should be limited to 1.0550 and bring another decline later. Below 1.0390 would bring test of support area at 1.0323-28 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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