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Mid-Day Report: Aussie Lower after China Rate Hike, Dollar SteadyDollar is mildly up against commodity currencies as risk appetite is hit by unexpected rate hike from China. The PBoC raised the benchmark 1-year deposit rate by 25bps to 3% and the 1-year lending rate by the same amount to 6.06%, effective Wednesday. The is the second hike in just over a month, with the prior hike on both benchmark rates on Christmas day. The move is inline with the central bank's pledge in January that fighting inflation would receive priority this year China's inflation jumped to a 28-high of 5.1% last November and much is needed to be done to bring inflation back down to the government's target. The news sent commodities down on expectation of slower demand where copper pulls back by 1% after making record high earlier this week. Crude oil also, dips sharply through 86 level. The development sends Aussie, and to a lesser extent, Loonie lower and provides some support to the greenback. Though, dollar's strength elsewhere is so far mild. |
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| Featured Technical Report | |
USD/JPY Mid-Day OutlookDaily Pivots: (S1) 82.16; (P) 82.31; (R1) 82.46; More. USD/JPY dips mildly today but loss is limited. Intraday bias is neutral with 4 hours MACD crossed below signal line. Though, we're still favoring the bullish case that choppy fall from 83.67 has completed with three waves down to 81.12. Hence, we'd expect the current retreat to be brief and above 82.45 will target 83.19 resistance first. Break should bring resumption of rise from 80.93 through 83.67 to retest 84.49 key resistance. On the downside, however, below 80.93 will target a new low below 80.29 instead. |
| Special Report |
BOE To Stay Sidelined But The Chance Of Early Rate Hike IncreasingWhile the BOE will very likely leave the Bank rate at 0.5% and the asset-purchase program at 200B pound, the chance that the central bank will raise interest rates earlier than we had anticipated (4Q11) is increasing. Inflationary pressures have head sharply higher with the annual rate jumping to +3.7% in December from +3.3% in the prior month. The CPI has overshot the upper limit of BOE's target since January 2010. In January, the UK composite PMI rose to 56.5, a level close to where the BOE hiked rates in the past. PMIs rebounded in January from weather-affected readings in December, strengthening the case for a rate hike. While 2 MPC members favored raising interest rates higher, the majority is, however cautious and prefers to see more evidence of recovery before implementing tightening policies. |
| Economic Indicators Update |
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Trade Idea Update: EUR/USD – Buy at 1.3575 or sell at 1.3685Although the single currency has risen again after finding support above the Kijun-Sen and retracement of the decline from 1.3862 to 1.3680-85 (Friday's high and current level of the Ichimoku cloud top) is likely, renewed selling interest should emerge there and bring another decline later. However, only break of 1.3540 would signal the rebound from 1.3508 has ended and bring resumption of the decline from 1.3862 top Trade Idea: AUD/USD –Hold short entered at 1.0170Current euro-led rebound suggests caution on our short position entered at 1.0170 and last week's high at 1.0201 must hold to retain near term bearishness for another retreat to 1.0103 support (yesterday's low), break there would suggest top is possibly formed and then test of next support at 1.0055 would follow, break there would confirm this view and bring further fall to 1.0000 Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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