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Daily Report: IMF Raised Global Forecast, ECB and BoE in FocusJapanese yen is sharply lower today as Asian equities soar following 2.82% rally in DOW overnight. IMF raised forecast of global growth from April's projection of 4.2% to 4.6%. Though, growth for 2011 was unchanged at 4.3%. The IMF report stated that "The new forecasts hinge on implementation of policies to rebuild confidence and stability, particularly in the euro area." Though, it also warned that "recent turbulence in financial markets - reflecting a drop in confidence about fiscal sustainability, policy responses, and future growth prospects - has cast a cloud over the outlook." While dollar is weak against commodity currencies, it's relatively steady against European majors and is trying to stage a recovery in early European session. Australian dollar is the biggest winner today as supported additionally by solid employment data. |
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USD/JPY Daily OutlookDaily Pivots: (S1) 87.22; (P) 87.50; (R1) 87.97; More. USD/JPY rebounded strongly ahead of 86.96 support and the break of 88.19 resistance suggests that consolidation from 86.96 is still in progress. Stronger recovery might be seen but after all upside is expected to be limited well below 90.27 resistance and bring fall resumption. On the downside, break of 86.96 will confirm the fall from 94.97 has resumed for a retest on key support level of 84.81 low next |
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Austere Fiscal Policies Supporting The Pound Will Weigh On It LaterThe emergency Budget released on June 22 demonstrated the new UK government's commitments to reduce the country's huge deficits. The aggressive fiscal policy has reduced the risk premium of sterling and is a key factor for the currency's strength against the dollar and, to a greater extent, the euro. While GBP may remain firm in the near-term, risk aversion and lower growth expectations should weigh on the currency in the medium-term. Yet, although the pound may weaken against the dollar in coming months, it should stay relatively strong against the euro. Regarding monetary policy, the BOE is at a dilemma in making rate decisions as austere fiscal measures are poised to affect growth but increase inflationary pressure through VAT hike. While the debate on whether to hike or not will continue in coming BOE meetings we expect policymakers will leave rates unchanged for the rest of the year. This should also limit upside of GBPUSD. |
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Trade Idea: USD/CHF – Sell at 1.0610Although the greenback fell to as low as 1.0481 this morning, the subsequent rebound from there signals a temporary low has been formed and consolidation with mild upside bias is seen, break of 1.0559-62 (current level of the Kijun-Sen and previous support) would add credence to this view and bring retracement to the Ichimoku cloud area (now at 1.0609-18) but reckon renewed selling interest would emerge there and bring another selloff. Trade Idea: USD/JPY – Buy at 87.75Despite yesterday's fall to 87.02, the greenback staged a stronger-than-expected rebound after holding above previous support at 86.96 on risk appetite, the breach of resistance at 88.22 signals temporary low has been formed there and correction to 88.77 is underway, however, near term overbought condition should prevent sharp move beyond 89.20/25 (50% Fibonacci retracement of 91.48 to 86.96) and resistance at 89.78 should remain intact. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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