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Daily Report: Dollar Retreats from Highs as Traders Await BernankeAlthough the greenback rallied across the board yesterday as the Federal Reserve looked less likely to announce QE3, the greenback failed to extend yesterday's gain and retreated quite sharply versus most major currencies. In the past 2-3 trading days, the greenback started to rebound as more and more traders changed their view and bet on Fed Chairman Ben Bernanke may not signal addition bond-buying in today's Jackson Hole Symposium, USD/JPY and USD/CHF surged to as high as 77.70 and 0.7989 respectively whilst EUR/USD and GBP/USD slipped to 1.4328 and 1.6260. |
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| Featured Technical Report | |
USD/JPY Daily OutlookDaily Pivots: (S1) 76.97; (P) 77.33; (R1) 77.82; More. USD/JPY's recovery extends further to as high as 77.68 so far before retreating mildly. With 76.46 minor support intact, intraday bias is mildly on the upside for further rise. But after all, we'll stay bearish as long as 80.23 and expect more downside ahead. Below 76.46 minor support will flip bias back to the downside. 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 Update: USD/CHF – Buy at 0.7905As the greenback has risen after finding renewed buying interest around the Ichimoku cloud top, suggesting a test of indicated resistance at 0.7991 would be seen, break there would bring a retest of recent high of 0.8020 but it is necessary to see a breach of this level to confirm the upmove from 0.7068 record low has resumed and extend gain towards 0.8050/55 later. Trade Idea Update: GBP/USD – Sell at 1.6460As cable has remained under pressure partly due to the release of weaker-than-expected UK CBI sales data, suggesting the decline from 1.6618 top is still in progress and bearishness remains for a stronger retracement of recent upmove to 1.6323 but 1.6305 (61.8% Fibonacci retracement of 1.6111 to 1.6618) should limit downside due to near term oversold condition. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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