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Daily Report: Dollar Weakens as Yields Fall again, Swissy and Yen Remain StrongDollar volatility continued to be driven by treasury yield this week's thin market. Yields once again fell after the $29b auction of seven-year notes surprisingly drew solid demand. Bid-to-cover ratio was at 2.86 comparing to 2.63 at November's sale. More importantly, indirect bidders, which is viewed as a proxy of foreign buyers including central banks, took 64.2% on offer, highest since June 2009 and was much stronger than average of 49.9% for the past four auctions. |
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| Featured Technical Report | |
USD/JPY Daily OutlookDaily Pivots: (S1) 81.33; (P) 81.89; (R1) 82.18; More. USD/JPY's fall resumes after brief recovery and reaches as low as 81.28 today so far. Near term outlook will remain bearish as long as 82.53 resistance holds. Current decline should continue for a test on 80.29 low or even further to 79.75 key support level. On the upside, above 82.53 will 82.53 will indicate that a short term bottom is formed and bring lengthier consolidation before staging another decline. |
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| 2011 Currency and Monetary Policy Outlook |
Uneven Growth Story Prolongs EZ's Hard Time while Money-Printing Nature in SMP will Send Euro LowerThe sovereign crisis in the European periphery that triggered panic selling of the euro in 2010 will have further to run in 2011. Bailouts for Greece in May and Ireland in November failed to stem contagion to other countries. The market has speculated Portugal and Spain will the next to seek EU/IMF assistances. While EU financial leaders agreed to create a permanent debt-crisis mechanism in 2013, they failed to compromise on details of the plan and immediate steps to calm the market. Uneven growth prospects in core and peripheral European economies should remain a key issue in 2011.The widening divide of economic performance between Germany and peripheral countries would make ECB's policy outlook more challenging. While we do not foresee a breakup of the 16-nation region, it would be a tough year in 2011. US - A Shift from Monetary to Fiscal StimulusThemes dominated the global FX markets this year will remain in focus in 2011. For much of the time, US economic recovery and Fed's addition of QE were affecting USD's movement. QE2 will expire in June 2011 and therefore the market will find no clues on what's next in coming few months. In our opinion, extension of Bush-era rate cuts would boost US economic growth in coming 2 years. Together with signs of recovery over the past few months, the Fed will not need to extend unconventional measures as QE2 expires. Yet, the Fed will still keep the policy rate unchanged at 0-0.25% and maintain a dovish tone throughout the year. Stronger economic growth and an end to QE should be supportive for US dollar. In the Eurozone, sovereign crisis in peripheral economies may have further to run. We expect the euro will decline against the dollar in 1H11 before recovery seen thereafter. Break-up of the 16-nation region has been a hot topic this year. Indeed, we believe such worry is overdone. However, member countries will have a tough year in 2011. |
| Economic Indicators Update |
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Merry Christmas and Happy New Year, next Ichimoku & Candlestick Trade Idea, and Elliott Wave Trade Ideas update will resume on 3 Jan 2011. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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