Concerns over European sovereign crisis continue to wait on market
sentiments and support dollar and yen. Funds continue to flow into safe
haven assets, pushing gold to new record high against dollar and euro.
Dollar index's break of 75.38 resistance suggests more upside in the
greenback in near term. Asian equities are broadly lower with Japanese
Nikkei closed at the lowest level since April 2009. Meanwhile, German
bund yields extends recent decline and reached new all time low of
1.799%.
There were intensified worry as ECB and the IMF were in disagreement
regarding the capital requirements of European banks. In a draft of the
Global Financial Stability Report, the IMF unveiled that the funding
needs for European banks would be as much as 200B euro. ECB President
Trichet said 'there is a very important disagreement on the methods for
calculating the capital needs' and he is 'convinced that the final IMF
figure will not be that[probably much lower]'. At the same time, Trichet
urged debt-ridden countries such as Greece and Italy to strictly
implement austerity measures as planned.
As expected the RBA left the cash rate unchanged at 4.75% in
September. The initial market reaction was a rebound in the Aussie as
the post-meeting statement turned out to be less dovish than previously
anticipated. The central bank attributed the pause to the growing
uncertainty in global economic outlook. Recent developments have damped
confidence and tamed inflation. Against some of the market participants'
forecasts, the RBA did not hint any signs on rate cut.
On the data front, UK BRC retail sales monitor dropped -0.6% yoy in
August. Australian current account deficit narrowed to AUD -7.4b in Q2
but was wider than expected. Australian home loans rose 1.0% in July CPI
dropped -0.3% mom rose 0.2% yoy in August. Looking ahead Eurozone CPI
revision, German factory orders will be released. Main focus should be
on US ISM non-manufacturing index while is expected to drop 51.3.
XAU/EUR's uptrend resumes this week by taking out 1331.41 resistance
and reaches as high as 1366.56 so far. There is no sign of topping yet
and further rise is still expected. Break of 261.8% projection of 954
to 1088 from 1021 at 1372 should send XAU/EUR through 1400 psychological
level.
Dollar index's break of 75.38 minor resistance suggests that stronger
rebound is under way for 76.71 resistance. It also raises the chance
that whole down trend from 88.70 has completed at 72.69 already.
Nevertheless, we'd still prefer to see sustained break of 76.71 to
confirm. Otherwise,we'll stay neutral.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.4045; (P) 1.4109 (R1) 1.4158;
EUR/USD's fall from 1.4548 extends further to as low as 1.4038 and
breaks mentioned 1.4054 support. Intraday bias remains on the downside
and further decline should now be seen towards 1.3837 support next. On
the upside, above 1.4175 minor resistance will turn bias neutral and
bring recovery first. But after all, as long as 1.4548 resistance holds,
consolidations from 1.4939 is still in progress and more choppy
sideway trading would be seen in near term.
In the bigger picture, EUR/USD is still trading above medium term
trend line support from 1.1875 (now at 1.3941) and thus, rise from there
should still be in progress. Break of 1.4939 should confirm rally
resumption and should send EUR/USD through 1.5143 resistance towards
1.6039 high. However, considering that weekly MACD has been staying
below signal line for some time now, a break below 1.3837 will have the
trend line support, as well as 55 weeks EMA firmly taken out. That would
argue that the rally from 1.1875 has indeed finished and will bring
deeper fall towards 1.2873 support and possibly below.
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