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Daily Report: Dollar Mixed after Short-Covering Rebound, Jackson Hole AwaitedThe greenback stabilized after yesterday's rebound versus other major currencies on short-covering ahead of Jackson Hole Symposium. Some traders pre-positioned short dollar positions ahead of Federal Reserve Chairman Ben Bernanke's speech tomorrow as they are speculating Bernanke will repeat what he did last year in the same event, i.e. announcing another round of quantitative easing to stimulate U.S. economy. Having said that, when it is getting closer and closer to tomorrow's Symposium, some analysts and investment houses started to voice out that the Fed is unlikely to hint further stimulus especially with recent release of better-than-expected U.S. data (yesterday's durable goods order even doubled the forecast). |
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| Featured Technical Report | |
USD/JPY Daily OutlookDaily Pivots: (S1) 76.60; (P) 76.83; (R1) 77.21; More. USD/JPY's consolidation from 77.19 is still in progress and intraday bias remains neutral. Above 77.19 will bring stronger recovery but after all, we'll stay bearish as long as 80.23 and expect more downside ahead. Break of 75.94 will confirm decline resumption and should target 100% projection of 81.46 to 76.28 from 80.23 at 75.05 next. |
| Special Reports |
What Does Bernanke Want to Tell Us At Jackson Hole?As the annual Jackson Hole Symposium approaches, there have been talks in recent days that Fed Chairman Ben Bernanke will probably disappoint the market, i.e. he will not hint about additional easing. Look at yesterday's price movements: the advance in the USD, the sharp decline in US Treasury and the selloff in gold, it suggests that investors are reducing their speculations on QE3 in August. The title of Bernanke's speech this year is 'Near and Long-Term Prospects for the US Economy', compared with last year's 'The Economic Outlook and Monetary Policy'. Some market participants said the Chairman omitted 'monetary policy' as he wants to tune down hopes of further policy action. European Banks Are Becoming Less Willing To Lend Money, An Early Sign Of Credit Crunch?News that a European bank borrowed $500M from ECB's 7-day USD funding facility last week intensified concerns in the region's money market conditions. The rise in Euribors, the key euro-prices interbank lending rates, also suggests banks are becoming less willing to lend money to each other. They are also increasingly more suspicious of other banks'balance sheets. Some market participants began to worry about a repeat of the credit crunch in 2008. While it's true that persistence of sovereign debt crisis in the European periphery has deteriorated funding conditions in the 17-nation region, traditional interbank funding rate, LIBOR has been staying well-below the level in 2008, suggesting the current situation is still manageable. However, one should be cautious on further tapping of USD facilities as it would signal a dry-up of liquidity in the banking system. Central Bank Forecasts: ECB Remains on Hold Through 2012After rate hikes in April and July (each by +25 bps), ECB's main refinancing rate is now at 1.5%. We expect the central bank will remain on hold through 2012 given weakened growth and inflation outlook. Recent macroeconomic data have been disappointing. Eurozone's GDP growth eased to +0.2% q/q in 2Q11 from +0.8% in the prior quarter. Germany's economy expanded only +0.1% q/q while growth in France stalled. Manufacturing activities have shown signs of fatigue with manufacturing PMI slipping to 49.7 in August from 50.4 a month ago. while consumer confidence soured as there's no way out for the sovereign debt crisis. ZEW's survey showed that Eurozone's economic sentiment tumbled to -40 in August from -7 a month ago. The market had expected a pickup to -6.2. The index for Germany alone plunged to -37.6 from -15.1. Fiscal consolidative measures in debt-ridden economies will also weigh on growth. Diminishing inflationary pressures due to global economy downturn and easing commodity prices also make the central bank more comfortable in putting interest rates on hold. Tight fiscal and accommodative monetary stances will be the region's policy mix in coming years. |
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Trade Idea: USD/JPY – Buy at 76.75As the greenback has risen again after yesterday’s rally, suggesting another test of indicated resistance at 77.23 would be seen, however, a sustained break above there is needed to signal the rise from record low of 75.94 is still in progress for retracement of recent decline to previous resistance at 77.86, however, reckon upside would be limited to 78.00/05 (50% Fibonacci retracement of 88.12-75.94) and bring another decline later. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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