Daily Report: Euro Off as Greece Decision Delayed Again, Aussie Down as RBA Turned Dovish

Euro extends recent decline broadly after the six-hours EU finance ministers meeting in Luxemburg yielded few concrete conclusion on the Greece and the measures to contain European debt crisis. Belgian Finance Minister Reynders noted that they're informed by Greece that funds will have to be made available in "mid-November" and EU will now wait for the report from troika to decide on release the next tranche of bailout fund. Nonetheless, EU President Juncker later assured that there's "no one advocating a default for Greece" and it will be avoided. Focus will turn to next meeting on October 13 and it's still doubtful whether the decision will be delayed once again. Meanwhile, the finance ministers are also reviewing the size of private sector involvement in the second bailout for Greece.

Regarding the discussion on expanding and leveraging the EFSF, it appears that the possibility is low as finance ministers are divided on the issue. Bank of France Governor Noyer said he supported leveraging the fund. However, it's unrealistic to expect an increase in the beefed-up rescue fund and it's unlikely for leverage. Juncker said the ceiling of the rescue fund shouldn't be raised and the ECB should not be involving in any future leveraging of the fund. German Finance Minister Schaeuble said that expansion talk was premature as 3 countries have yet to even ratify the EFSF plan agreed in July.

Japanese Finance minister Azumi urged Europe to "make the process of rescuing Greece more transparent to the markets" in order to "halt the extreme strength in the yen and weakness in the euro". after EUR/JPY drops to decade low and is heading towards 100 psychological level. There are increasing speculation that Japan will target the next intervention move towards EUR/JPY even though such speculation is premature for the moment.

Fed debuted that operation twist program yesterday by buying USD 2.5b in treasuries maturing in 25-30 years. 30 year yield dived to close to 2.761% overnight, hitting the lowest level in almost three years. 10 year yield also dropped to 1.785%. Bernanke will appear before the Join Economic Committee today on economic outlook and would likely face questions on how effective the operation twist will be.

Aussie extends recent fall against dollar and breaches 0.95 level today on risk aversion and as RBA turned dovish. As expected, the RBA left the cash rate unchanged at 4.75%. Yet the post-meeting statement came in more dovish than the previous one. Governor Glenn Stevens downplayed impacts of recent deterioration US and European outlook. Nevertheless, it now appears more likely that the central bank will consider a rate cut in coming months if inflation is under control. We retain our view that a rate cut will be carried out in the fourth quarter. 

AUD/JPY extends recent down trend this week as reaches as low as 72.46 so far. Near term outlook remains bearish as long as 76.65 resistance holds and we'd expect further fall to 71.84 support next. Current development is also inline with the view that whole medium term rise from 2008 low of 55.09 is already completed at 90.01 and deeper fall should be seen to 61.8% retracement of 55.09 to 90.01 at 68.42 and below. 

EUR/JPY Daily Outlook

Daily Pivots: (S1) 100.19; (P) 101.70; (R1) 102.47; 

EUR/JPY's fall is still in progress and reaches as low as 100.74 so far today. Intraday bias remains on the downside for 100 psychological level. Break will target 200% projection of 123.31 to 113.41 from 117.74 at 97.94 next. On the upside, above 102.22 minor resistance will turn bias neutral and bring consolidations. But break of 104.92 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, whole down trend from 2008 high of 169.96 is still in progress and is building up downside momentum again. Sustained trading below 100 psychological level should pave the way to 100% projection of 139.21 to 105.42 from 123.31 at 89.52, which is close to 88.96 all time low. On the upside, break of 111.93 resistance is needed to be the first signal of medium term reversal. Otherwise, we'll stay bearish. 

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.3098; (P) 1.3240 (R1) 1.3313; 

EUR/USD drops further to as low as 1.3163 today so far and intraday bias remains on the downside for 161.8% projection of 1.4939 to 1.3969 from 1.4548 at 1.2979, which is close to 1.3 psychological level. On the upside, above 1.3381 minor resistance will turn bias neutral and bring consolidations. But break of 1.3689 resistance is needed to signal short term bottoming. Otherwise, outlook will remain bearish.

In the bigger picture, current development indicates that medium term rise from 1.1875 has completed with three waves up to 1.4939 already. That also suggests that it's merely part of the consolidation pattern that started back in 2008 at 1.6039. Further decline would now be seen to 1.2873 support first and break will target 1.1875 and below. On the upside, above 1.4548, resistance is needed to confirm completion of the fall from 1.4939 or we'll stay bearish in EUR/USD.

USD/CHF Daily Outlook

Daily Pivots: (S1) 0.9122; (P) 0.9170; (R1) 0.9262; 

USD/CHF's break of 0.9182 resistance confirms resumption of recent rally from 0.7065. Intraday bias remains on the upside and further rally should be seen to 161.8% projection of 0.7065 to 0.8246 from 0.7710 at 0.9621 next. On the downside, break of 0.8917 support is needed to signal short term topping. Otherwise, outlook will remain bullish in near term.

In the bigger picture, medium term down trend from 1.1730 is already completed at 1.7065. But there is no indication of long term reversal yet. Rebound from 0.7065 is treated as part of a medium term consolidation pattern. Such rebound would possibly extend to 0.9916/1.1730 resistance zone. But strong resistance should be seen there and bring reversal. On the downside, break of 0.7710 is needed to indicate completion of the rebound from 0.7065. Otherwise, we'll stay near term bullish in the pair for the moment.

 Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Monetary Base Y/Y Sep	16.70%	16.30%	15.90%
0:30	AUD	Trade Balance (AUD) Aug	3.10B	2.14B	1.83B	1.82B
0:30	AUD	Building Approvals M/M Aug	11.40%	1.00%	1.00%	1.80%
1:30	JPY	Labor Cash Earnings Y/Y Aug	-0.60%	0.70%	-0.10%	-0.20%
3:30	AUD	RBA Rate Decision	4.75%	4.75%	4.75%
8:30	GBP	PMI Construction Sep		51.6	52.6
9:00	EUR	Eurozone PPI M/M Aug		-0.20%	0.50%
9:00	EUR	Eurozone PPI Y/Y Aug		5.80%	6.10%
14:00	USD	Fed Chairman Bernanke Testifies
14:00	USD	Factory Orders Aug		-0.10%	2.40%