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Mid-Day Report: Dollar Steady after ISM Manufacturing Report, CAD Still StrongDollar remains steady in range against major indices after ISM manufacturing reports. The headline index rose slightly from 56.6 to 57 in December, inline with expectation. Improvements are show in production and new orders components, which rose to 60.7 and 60.9 respectively. However, employment components dropped from 57.5 to 55.7. Price paid component, on the other hand, rose back to above 70 at 72.5. After all, the report showed mild improvements in manufacturing conditions in the US in DEcember and leading indicators, except employment, are mildly favorable for expansion in factory output in Q1. Elsewhere, former Fed Governor Mishkin said today that he's expecting the Fed to complete the $600b QE2 program even though he believes QE3 is unlikely as he noted that the US economy is "stronger right now". |
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| Featured Technical Report | |
EUR/USD Weekly OutlookEUR/USD's recovery from 1.3054 lost momentum after hitting 1.3423 and formed a temporary top there. Intraday bias is turned neutral for the moment. It looks as if whole sideway consolidation pattern from 1.2969 is extend further and we'll stay neutral as long as EUR/USD is still bounded in range of 1.3054/3423. On the upside, break of 1.3234 will indicate that rebound from 1.2969 is resuming for 1.3785 resistance. On the downside, below 1.3054 will suggest that whole decline from 1.4281 is resuming for another low below 1.2969. |
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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. |
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Trade Idea Wrap-up: USD/CHF – Sell at 0.9435 or Buy at 0.9270Dollar's near term sideways trading is expected to continue and although another corrective rise to 0.9898 (Friday's high) cannot be ruled out, reckon the Ichimoku cloud top (now at 0.9435, this is also the same level as previous support) would limit upside and bring another decline later. A break of Friday's low at 0.9301 would extend recent decline for one more fall to 0.9265/70 (50% projection of 0.9534-0.9301 measuring from 0.9385) but loss of momentum would keep price above 0.9241 (61.8% projection) and bring rebound later. Trade Idea Wrap-up: GBP/USD – Sell at 1.5555As the British pound has retreated again after intra-day brief bounce, suggesting bearishness remains for the fall from 1.5665 top to extend weakness to 1.5420/30, then 1.5400, however, break of support at 1.5367 is needed to confirm the correction from 1.5345 has ended there and bring resumption of decline for a retest of 1.5345, then towards 1.5290/00, otherwise, further choppy consolidation would take place. Candlesticks Intraday Trade Ideas Update Schedule (GMT): Elliott Wave Daily Trade Ideas Update Schedule (GMT): | |||||||||||||||||||||||||||||||||||||||||||||||||
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