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Mid-Day Report: Euro Struggles to Gain on ECB's Bond Plan, Yen Sold Off SharplyMuch volatility is seen in Euro as ECB Draghi finally unveiled the new bond buying program. Initial reaction was positive which sent EUR/USD to 1.2615. But the common currency quickly lost steam and is struggling below 1.26 level against dollar. Instead, more violent price actions was seen in the Japanese yen which was sold off along with US treasuries. 10 year yield rose sharply to as high as 1.656% in early US session, comparing to yesterday's close of 1.594%. That could be partly due to reduced safe haven buying on ECB's bond plan. Also, that could be due to positive job market data from US, which reduced the likelihood of additional easing from Fed. USD/JPY jumped through 78.84 minor resistance and would likely head back to 79 level. The strength in USD/JPY is somewhat limiting the rise in EUR/USD. But overall, We'd expect USD/JPY to face some resistance above 79 level while we'd expect Euro to stay firm, and yen to stay weak in general. So we'd prefer long EUR/JPY at the moment. |
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| Featured Technical Report | |
EUR/JPY Mid-Day OutlookDaily Pivots: (S1) 98.20; (P) 98.55; (R1) 99.13; More EUR/JPY rose to as high as 99.65 so far today and the break of 99.18 indicates resumption of rebound from 94.11. Intraday bias is back on the upside and current rise should extend to 38.2% retracement of 111.43 to 94.11 at 110.72 next. On the downside, break of 97.98 minor support is needed to signal reversal. Otherwise, we'll stay bullish even in case of retreat. |
| Special Reports |
ECB Unveils More Details about Outright Monetary TransactionsECB leaves main refinancing rate unchanged at 0.75%, compared with our expectation of a rate cut of -25 bps. Policymakers believed that this is not an appropriate time to lower interests as economic weakness had been anticipated. Meanwhile, President Draghi stated at the press conference that officials have basically agreed on unlimited bond purchase program. Despite objected by a member, the program is expected to be able to help "address severe distortions in government bond markets which originate from, in particular, unfounded fears on the part of investors of the reversibility of the euro". According to Draghi, purchases would be fully sterilized, suggesting that the program would not trigger inflation pressure. The ECB also affirmed that purchases would not have seniority. BOC Leaves Policy Rate at 1%, Reaffirming the Next Monetary Decision Would be Rate HikeAs expected the BOC left the policy rate unchanged at 1% in September. Moreover, policymakers indicated for the 4th time that some sort of stimulus may be withdrawn if "the economic expansion continues and the current excess supply in the economy is gradually absorbed". Few surprises were delivered in the accompanying statement despite some disappointments in the central bank's assessment on the domestic economic developments. Policymakers described inflation as "softer than expected in recent months" while growth is "decelerating somewhat more quickly than expected". |
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Orders and Options Watch | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US Session: Orders and Options WatchEUR: Although the single currency rose briefly to 1.2652 (barrier at 1.2650 were tripped), euro quickly turned back south as comments from ECB's Draghi failed to meet expectations of investors as he lowered EU GDP forecasts, he also indicated that bond purchases will increase the chance of distortions in bond markets, bids at 1.2600 were filled and stops below 1.2590 were triggered, however, some bids are still seen at 1.2550 and 1.2530-35 with more stops placed below both levels but mixture of bids and stops remains at 1.2500-10. On the upside, offers are lowered to 1.2600-10 and also in good size at 1.2640-50 with more stops placed above 1.2655 as well as next barrier at 1.2675 and 1.2700. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forex Trade Ideas | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade Idea Update: USD/JPY – Buy at 78.50Current rally after breaking yesterday’s high of 78.54 signals low has been formed at 78.19 and consolidation with mild upside bias is seen for test of previous resistance at 78.85, a sustained breach of this resistance would add credence to this view and bring correction of the decline from 79.66 to 79.10 (61.8% Fibonacci retracement of 79.66-78.16), however, as broad outlook remains consolidative, resistance at 79.38 should limit upside and price should falter below said resistance at 79.66. Trade Idea: AUD/USD – Sell at 1.0310Despite intra-day brief rise to 1.2629,as this indicated resistance has held, retaining our view that further consolidation below last week’s high of 1.2637 would take place and mild downside bias remains, break of the Ichimoku cloud top (now at 1.2576) would suggest top is possibly formed but break of the lower Kumo (now at 1.2560) is needed to confirm, bring subsequent weakness to 1.2530, then towards support at 1.2503 but reckon previous support at 1.2487 would limit downside Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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