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Daily Report: Portugal Seeks Bailout, BoJ Offers Post-Quake Loan, Aussie Jumps, ECB & BoE NextEuro pares some gain ahead of ECB rate decision as Portugal was finally forced to seek a bailout after Ireland and Greece as borrowing costs jumped to record highs. Prime Minister Jose Socrates confirmed yesterday that the "government decided to make the European Commission a request for financial aid". Bond yields jumped sharply after Socrates offered to resign last month following rejection of the new austerity measures by parliament. 10 year yield jumped to new record of 8.8% yesterday and 7% is already the level where markets perceived as unsustainable. Socrates didn't reveal any detail on the bailout request but it's believed that Portugal is aiming for a package that's around EUR 75b to EUR 80b. Euro's retreat is mild though, as the bailout should have been mostly priced in. Focus will turn to ECB rate decision today. |
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| Featured Technical Report | |
EUR/USD Daily OutlookDaily Pivots: (S1) 1.4243; (P) 1.4296 (R1) 1.4384; More. EUR/USD retreats mildly after rising to 1.4348 but with 1.4251 minor support intact, intraday bias remains on the upside and further rise should still be seen to 100% projection of 1.2873 to 1.386 from 1.3427 at 1.4414. On the downside, below 1.4251 minor support will turn bias neutral and bring consolidations. But near term outlook will remain bullish as long as 1.4020 support holds. |
| Special Reports |
ECB To Begin Tightening In AprilAs signaled by President Trichet and other governing council members, the ECB will hike interest rates at the meeting next week. While the main refinancing rate will be lifted to 1.25% from a record low of 1%, the corridor (marginal lending rate minus marginal deposit rate) will be widened back to 200 bps. In an interview with a Russian TV channel, executive board member Lorenzo Bini Smaghi indicated there will a series on rate hikes rather than just one. The central bank will be raising interest rates 'in a gradual way, first... Maintaining interest rates where they are now would mean basically becoming more and more expansionary, which is not appropriate'. Since the March ECB meeting policymakers have guided the market to expect a rate hike in April. Uncertainties caused by Japan's earthquake and sovereign debt problems in the European periphery are unlikely to delay the tightening step. Another issue worth attention is the potential new financing facility for bank restructuring. FOMC Member Divided On Whether To Unwind StimulusFOMC minutes for the March meeting indicated that policymakers were divided on whether to begin exiting monetary stimulus this year. While the economic outlook over the medium-term was largely unchanged from the projections published in January, the staff revised up its projection for consumer price inflation in the near-term, largely driven by the recent increases in the prices of energy and food. Overall, the consensus is that the rise in headline inflation as temporary but policymakers will put much focus on inflation expectations. If elevated price levels prove to be a long-term issue, they will act on it. |
| Economic Indicators Update |
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Trade Idea: USD/JPY – Buy at 84.70Despite intra-day rebound to 85.51, as the greenback has retreated after faltering below yesterday's high of 85.53, retaining our view that further consolidation would take place and test of the Ichimoku cloud top (now at 85.01) is likely, break would bring retracement to 84.84 (yesterday's low) and then test of lower Kumo (now a t84.69) but reckon renewed buying interest would emerge there, bring another rise later. Trade Idea: USD/CHF – Sell at 0.9235Despite yesterday's selloff to 0.9131, the subsequent rebound after holding above previous support at 0.9127 suggests further consolidation would take place and recovery to the Kijun-Sen (now at 0.9198) cannot be ruled out, however, renewed selling interest should emerge below the Ichimoku cloud bottom (now at 0.9244), bring another decline. A breach of strong support area would retain bearishness for the fall from 0.9341 top to bring a stronger retracement of recent rise to 0.9100. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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