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Mid-Day Report: EUR/USD Dips as EU Summit Starts, Heading Back to 1.23Euro dips through near term support against dollar and yen today as the highly anticipated two-day EU summit starts. Germany is expected to face strong push from France, Italy and Spain on the issue o Eurobonds but Merkel has repeatedly reiterated her firm opposition. Italy sold EUR 5.42b in 5- and 10- year bonds today, near to its maximum target of EUR 5.5b. Yield on the 10 year bond rose slightly to 6.19%, up from 6.03% at May's auction. Yield on 5 year bond also rose to 5.84%, comparing to 5.66% in May. The results were seen as solid even though unspectacular. Technically, the break of 1.2435 in EUR/USD and 95.53 in EUR/JPY opened the case for revisiting recent low at 1.2287 and 98.53. |
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| Featured Technical Report | |
EUR/USD Mid-Day OutlookDaily Pivots: (S1) 1.2439; (P) 1.2473 (R1) 1.2502; More..... The break of 1.2435 minor support indicates that corrective rebound from 1.2287 has finished at 1.2747 already. Intraday bias is back on the downside and deeper fall should be seen to retest 1.2287 first. break will confirm resumption of larger decline from 1.4939 and should target 1.1875 key support level next. On the upside, though, above 1.2523 minor resistance will turn bias neutral and bring again and would likely extend the consolidation from 1.2287 for a while. |
| Special Reports |
USDJPY to be Range-Bound in Coming MonthsWhile some had expected that Japanese yen would decline after passage of the consumption tax hike, the reality was that weakness in the yen was limited and the bill had rather mild impact on the currency. For a long period of time, USD/JPY has been directed by yield differential between US and Japanese bonds. Therefore, monetary policies of respective central banks have indicative meaning for the pair. Both the Fed and the BOJ have already brought the policy rates to unprecedentedly low levels and have shown cautiousness in implementing further unconventional easing. This has made the USD/JPY outlook more difficult to project. Meanwhile, strength of the yen has more driven by the external environment instead of domestic economic developments. We expect USD/JPY will continue fluctuating within a wide -range of 75-85 for the rest of the year. EURUSD to Break Below 1.20 by Year EndWe are bearish on the euro's outlook in the second half of the year. Likely delay of the ESM due to Germany's Federal Constitutional Court's examination of the mechanism, expectation of rate cut as it tends to focus more on growth and capital outflow from the Eurozone to small economies such as Switzerland are the key reasons behind our anticipation for further weakness in the single currency. The recovery of EUR/USD since the beginning of June has probably ended and the decline might have resumed. We forecast the currency pair to fall to as low as 1.19 by the year end. |
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Orders and Options Watch | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US Session: Orders and Options WatchEUR: The single currency slipped again in European session on German government source saying the EU summit will not produce detailed decisions and stops below 1.2435-40 were finally tripped, however, mixture of bids and stops is still seen at 1.2390-00, if stops at 1.2390 are triggered, further fall to 1.2370 and 1.2350 (where more stops are located) cannot be ruled out. On the upside, offers from various parties are lowered to 1.2465-70 and also at 1.2500-10 with stops now building up above 1.2535-40, fresh sell orders should emerge around 1.2550 and 1.2580-90. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Trade Idea Update: GBP/USD – Sell at 1.5590Despite intra-day brief bounce to 1.5624, the British pound ran into heavy offers right at the Ichimoku cloud top and has dropped sharply from there in tandem with euro, intra-day breach of support at 1.5539 signals the fall from 1.5778 is still in progress and weakness to 1.5500 would be seen, however, near term oversold condition should prevent sharp fall below strong support at 1.5473-76 Trade Idea: EUR/JPY – Stand asideFailure to extend yesterday’s rebound and current decline suggest the fall from 101.63 (last week’s high) is still in progress, near term downside risk remains for weakness towards 97.90-00 (61.8% Fibonacci retracement of 95.59-101.63), however, loss of near term downward momentum should prevent sharp fall below 97.50 and reckon support at 97.00-05 would hold Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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