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Daily Report: Dollar Consolidations Continue as Risk Appetite Recedes on China Tightening WorryDollar recovers mildly currencies with help of receding risk appetite on worry of more tightening from China. PBoC noted yesterday that there is "no absolute ceiling" for reserve requirement as it's aimed at "excessive liquidity from capital inflows." The bank noted rising commodities prices and global excessive liquidity as a threats to risks of overheating in merging economies. And pledged to "use interest rates and other price tools to adjust demand for funds, to adjust investment and savings behavior to manage inflation expectations." The message sent Asian equities broadly lower today with Shanghai composite down more than -2.4%. Dollar extends recent recovery against Aussie and Sterling but remains weak against Euro, Swissy and Yen. |
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| Featured Technical Report | |
USD/CAD Daily OutlookDaily Pivots: (S1) 0.9455; (P) 0.9487; (R1) 0.9529; More. USD/CAD's recovery from 0.9444 extends further today and the development indicates that consolidations from 0.9453 is still in progress. While stronger rise cannot be ruled out, we'd stay bearish in the pair as long as 0.9575 resistance holds and expect another decline soon. Break of 0.9444 will extend recent down trend towards 100% projection of 1.0285 to 0.9666 from 0.9972 at 0.9353 first. Break there will pave the way to key support level at 0.9056, which is close to 0.9 psychological level. Above 0.9575 will argue that a short term term bottom is formed and would bring stronger rebound towards 0.9720 resistance instead. |
| Special Reports |
ECB: Vigilant Or Not?While the ECB is widely expected to leave the main refinancing rate at 1.25% in May, the focus is on the accompanying statement and the press conference as clues on the next rate hikes may be provided. Although President Trichet had said after April's rate hike that policymakers 'did not decide today that it was the first in a series of interest rate increases', recent economic developments and comments from ECB members suggested that further tightening later in the year is highly likely. The market will probably search for the 'vigilant' language in the statement as it signals a rate hike in the coming meeting. Our bottom line is that the next rate hike will be in July but a raise in June cannot be ruled out should inflationary pressures accelerate faster than anticipated. RBA Leaves Cash Rate Unchanged But Sees Rising Inflationary PressuresAs expected, the RBA left the cash rate at 4.75% for a 5th meeting in May. While acknowledging continued growth in global economy, policymakers stated floods in Queensland may cause a decline in real GDP in 1Q11. Concerning inflation, the central bank was aware that underlying inflation has run its course recently. In the longer term, price levels will increase further if economic conditions evolve broadly as expected. We expect the central bank will resume tightening in the second half of the year as inflation pressures heighten. |
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Trade Idea: USD/CHF – Sell at 0.8690Despite yesterday's resumption of decline to 0.8595, lack of follow through selling and the subsequent rebound suggest consolidation above this level would take place and retracement to the Ichimoku cloud bottom (now at 0.8660) is likely, however, reckon upside would be limited to 0.8687-97 (current level of the upper Kumo and previous resistance) would attract renewed selling interest, bring another decline. Trade Idea: USD/JPY – Buy at 80.10Although the greenback recovered after falling to 80.70 yesterday, reckon the Ichimoku cloud (now at 81.23-34) would limit upside and bring another decline, below said support would extend recent decline from 85.53 top for further weakness to 80.50/55, however, oversold condition should prevent sharp fall below the psychological support at 80.00 and 79.79 (61.8% Fibonacci retracement of 76.25 to 85.53) should remain intact Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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