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EU Announced 750b Fund Package, ECB to Buy Government Bonds, Market Sentiments LiftedAsian markets are broadly lifted as EU announced an unprecedented loan package that worth as much as EUR 750b to prevent spreading of sovereign debt crisis in the region. In addition, ECB announced measures to address "severe tensions" in financial markets which include purchase of government bonds in the secondary market. Nikkei rebounds 1.43% while crude oil is up over 2% to press 77 level. Dollar and yen are generally lower as risk aversion eases with dollar index trading at around 83.5 level. |    |
| Featured Technical Report | |
EUR/USD Daily OutlookDaily Pivots: (S1) 1.2625; (P) 1.2711 (R1) 1.2837; More. As short term bottom is in place at 1.2425 and some more consolidations would be seen in EUR/USD first. Nevertheless, we'd expect upside to be limited below 1.3114 support turned resistance and bring fall resumption. Below 1.2706 minor support will flip intraday bias back to the downside. Further break of 1.2526 will target key support level of 1.2329 next. |
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EU and ECB Announced Tremendous Measures to Stem Debt CrisisIn addition to approving the loans to Greece, EU finance ministers announced a plan worth 750B euro to prevent Greek sovereign crisis from spreading and the euro from free-falling. The ECB also announced to intervene the public and private bond markets. The EU stated that the comprehensive package of measures is to preserve financial stability in Europe and it includes a 500B-euro European Financial Stabilization mechanism of which 440B euro will come from 16 member countries in the Eurozone which the remaining 60B euro will come from European Commission's emergency funding. The IMF has agreed to contribute 250B euro in the package. A Hung Parliament in UK - A Drag on Pound as Long as Uncertainty RemainsThe UK general election resulted in the first hung parliament since 1974. Although the Conservative Party got the most votes and won the most seats, it was 20 seats short of a majority in Parliament. The Conservatives are now seeking to reach an agreement with the Lib Dems so as to form a coalition government. However, it's difficult for them to reach an agreement given the great difference in social and European perspectives of the 2 parties. If the Tories fail, the Labours will forge an alliance with the Lib Dems. The problem here is that even if they reach an agreement, they still need supports from other parties to make up a majority. Therefore, political experts believe the most likely outcome is a Conservative-led minority government. The UK had a minority government in 1974 but it only survived for a few months before a new election was called upon. The uncertainties brought by this election resulted in slump in sterling, gilts and stocks. While we believe the market may have overestimated the negative impacts of a hung parliament, uncertainties should leave these financial instruments vulnerable for some more time. |
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Trade Idea: EUR/USD – Buy at 1.2855As the single currency has retreated after intra-day rise to 1.2968, suggesting minor consolidation would be seen and pullback to 1.2900 is likely, however, renewed buying interest should emerge around the Tenkan-Sen (now at 1.2849) and minor support at 1.2809 should hold, bring another rise later. Trade Idea: USD/JPY – Exit short entered at 92.50As dollar has maintained a firm undertone partly due to cross-unwinding in yen, upside risk is seen for test of resistance at 93.27/28, however, break there is needed to signal the fall from 94.99 top has ended at 87.95 last week, then gain to 93.90/00 would be seen but price should falter well below said resistance level. | ||
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