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Mid-Day Report: USD/JPY Dives ahead of BernankeThe greenback dropped against the Japanese yen and euro on speculation that Federal Reserve Chairman Bernanke's speech may disappoint those market participants who are betting for further monetary stimulus. Bernanke will speak soon at the Kansas City Federal Reserve's annual conference in Jackson Hole, Wyoming, in the same event last year, Bernanke pulled the curtain for QE2 by saying that the Fed would do all it can to ensure a continuation of the economic recovery and asset buying might be necessary if growth slowed (After 2 months, Fed announced a $600 billion QE2). |
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| Featured Technical Report | |
USD/JPY Mid-Day OutlookDaily Pivots: (S1) 76.97; (P) 77.33; (R1) 77.82; More. USD/JPY's fall from 77.68 accelerates in early US session with focus now on 76.46 minor support. Break there will suggest that recovery from 75.94 has finished and turn bias back to the downside for this support. Break there will confirm resumption of recent decline and should target 100% projection of 81.46 to 76.28 from 80.23 at 75.05 next. On the upside, above 77.68 will bring another recovery. But after all, we'll stay bearish as long as 80.23 and expect more downside ahead. |
| 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 – Hold long entered at 0.7905As the greenback has staged a strong rebound after intra-day retreat to 0.7892, retaining our bullishness and break of indicated resistance at 0.7989-91 would signal the correction from 0.8020 has ended and bring retest of this level, above there would confirm the upmove from 0.7068 record low has resumed and extend gain towards 0.8050/55 later. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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