A pretty quiet Asian morning, most currency pairs are consolidating
especially in euro and cable after yesterday's rally on eurozone debt
crisis relief, the single currency surged to a 2-week high of 1.4440 as
EU leaders agreed to allow their regional bailout fund (European
Financial Stability Facility - EFSF) to ease terms of loads by extending
maturity (from 7.5 years to 15 years) and lowering lending rates (from
4.5% to approx. 3.5%). European officials also let the EFSF to buy bonds
in the secondary market in a total of 109 billion euro if it comes
necessary to fight debt crisis. Having said that, those die hard euro
bears are still skeptical on whether these measures are enough to
stabilize the whole crisis affecting Greece, Portugal, Spain and even
Italy, rating agencies' assessment are being watched from now. Although
euro eased from 1.4440 on some weekend profit-taking after the over 400
points rally this week, bids from sovereign names out of Asia, are
starting to appear at 1.4370-80 and more buying interest is tipped at
1.4330-40 with first stops placed below 1.4330 and further out at
1.4285-90. On the upside, only small offers seen at 1.4440-50 with a
option barrier at 1.4450 and 1.4500 with more offers ahead.
With eurozone crisis fears eased, the greenback was sold across the
board and focus shifted to the progress of the negotiations on U.S. debt
ceiling in Washington in order to avoid a U.S. default. U.S. President
Obama's team has proposed a deal to the congressional leaders to raise
U.S. debt ceiling and cut deficits by about US$ 3 trillion in over 10
years without immediate revenue increases. USD/JPY fell yesterday to as
low as 78.22 this morning, stops below 78.40 were finally triggered
yesterday as traders were not confident that Japanese officials would
actually intervene the fx market, according to option pricing traders
are still favoring a yen calls with few demand for yen puts. However,
the pair has rebounded this morning in Tokyo as Japan Finance Minister
Noda repeated he is watching forex moves closely and recent movements in
yen have been one sided. Nevertheless, Economic Minister Yosano gave
some opposite comments as he said he doesn't see strength in yen will
affect current economic recovery in Japan. At the moment, offers are
reported at 78.70-80 and further out at 79.00-10 with some stops above
79.10, 79.35-40 and 79.65-70 whilst on the downside, bids remain at
78.10-20 with barrier at 78.00 (stops below).
The British pound rallied yesterday in tandem with euro and surged to
5-week high of 1.6325 this morning before easing as traders squared
long position ahead of weekend, not much news from UK except early less
dovish meeting minutes from Bank of England MPC, No data is scheduled to
be released today with only IFO index from Germany, orders board is
quite light as well, only small offers tipped 1.6330 and 1.6370-80 with
stops above 1.6400 whilst bids from Middle East names are located quite
far at 1.6250 and 1.6200.
Elsewhere, the Australian dollar rose overnight to a over 2-month
high of 1.0843 after the release of much better-than-expected Q2 import
price index, 0.8% versus forecast of -1.1% with export prices surged by
6% against market consensus of 4%, suggesting nation's economy remains
strong and seems to have room for more rate hike. We heard bids are
lined up from 1.0780 (some stops below) down to 1.0750 and further out
at 1.0700 and no major offers reported on the upside.
EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.1641; (P) 1.1720; (R1) 1.1832;
EUR/CHF's rebound from 1.1404 extends further to as high as 1.1822 so
far today and breaches 1.1802 support turned resistance as expected.
Intraday bias remains on the upside and further rise could now be seen
to 61.8% retracement of 1.2344 to 1.1404 at 1.1985. But still we're
expecting upside to be limited below 1.2344 resistance and bring down
trend resumption. On the downside, below 1.1605 minor support will flip
bias back to the downside for a retest on 1.1404 first.
In the bigger picture, whole down trend from 1.6827 (2007 high) is
still in progress and in any case, medium term outlook will remain
bearish as long as 1.3243 resistance holds. Long term target of 138.2%
projection of 1.8234 to 1.4391 from 1.6827 at 1.1516 is already met. But
there is no sign of reversal as long as 1.2344 resistance holds. Next
target will be 161.8% projection at 1.0609. Nevertheless, break of
1.2344 will be the first sign of bottoming and should bring stronger
rebound to 1.3243 resistance for confirmation.
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