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Mid-Day Report: Dollar Rises Broadly as Durable Goods Orders Exceed ForecastThe British pound slipped versus other major currencies on stop-hunting (cross-related) and dovish comments from Bank of England’s Weale. The MPC member said Britain faces the risk of sliding into recession and BOE’s growth forecast for 2011 and 2012 may be too optimistic. Weale joined the central bank’s Monetary Policy Committee from a leading macroeconomic thinktank, the new policymaker also suggested that the central bank may have to consider alternative to quantitative easing that are closer to fiscal policy if the economy slows sharply. He indicated that UK economic problems include a renewed hike in unemployment, declining house prices as well as banking crisis. |
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| Featured Technical Report | |
GBP/USD Mid-Day OutlookDaily Pivots: (S1) 1.6435; (P) 1.6504; (R1) 1.6561; More. GBP/USD dips to as low as 1.6872 in early US session as retreat from 1.6618 continues. Further fall might be seen but downside is expected to be contained well above 1.6110 support. Recent up trend is still expected to resume sooner or later. Above 1.6618 will target 1.6746 resistance and then 100% projection of 1.5780 to 1.6474 from 1.6110 at 1.6807 next. |
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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. Evaluation Of QE2 And Preview Of Possible QE3 Ahead Of Jackson Hole SymposiumThe next major event in the US after the August FOMC meeting will be next Friday's economic policy symposium in Jackson Hole, Wyoming. After the Fed announced to keep interest rates at exceptionally low levels at least through mid-2013 on August 9, the market has been increasingly speculating that Chairman Ben Bernanke will signal additional easing measures at the meeting next week. According to a CNBC survey done after the FOMC meeting, 46% of respondents said the Fed will resume QE, up from 19% in the July survey while 37% said the Fed will not do QE, down from 68% in July. Also, of those who believe the Fed will resume QE, the asset purchases are expected to average at 628B, up from 377B in July. 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 0.7840Dollar’s retreat after intra-day rebound to 0.7945 suggests consolidation with mild downside bias remains for test of the Ichimoku cloud bottom (now at 0.7865) and possibly to yesterday’s low at 0.7853, however, as broad outlook is consolidative, reckon support at 0.7807 would hold and bring another rise later. A sustained breach of said resistance would extend gain to 0.7991, however, only breach of last week’s high of 0.8020 would confirm upmove has resumed for headway towards 0.8050. Trade Idea: EUR/JPY – Hold long entered at 110.40Although euro retreated from yesterday’s high of 111.10, reckon minor support at 110.03-09 would limit downside and mild upside bias remains for another test of said resistance, a sustained break there would extend gain to 111.24 but above latter level is needed to signal the 2nd c leg as well as wave B has ended at 108.01 earlier and bring a stronger rebound toward s112.00, then test of resistance at 112.36/40. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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