Daily Report: EU Announced 750b Fund Package, ECB to Buy Government Bonds, Market Sentiments Lifted
Asian 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.

After 14-hour marathon talk with ECB and IMF, EU leaders, agreed on EUR 750b emergency financial package to prevent Greek debt crisis from spreading over to the region and destroy the common currency. The EUR 750b package consists of EUR 440b in guarantees from Euro area states, EUR 60b in a European instrument, plus EUR 250b from IMF. The size of the fund clearly surprised the markets. There are estimations that if Portugal, Ireland and Spain lose access to bond markets, it will cost more than EUR 440b to fund them through to end of 2012. Adding to the package for Greece, that would be EUR 550b and should be well covered by the EUR 750b fund. Also, that would represent around 6% of Eurozone's GDP only and should be containable.

In addition to EU's announcement, ECB also said that it will "conduct interventions in the euro area public and private debt securities markets" to "restore an appropriate monetary policy transmission mechanism." In addition, ECB will adopt a "fixed-rate tender procedure" full allotment in the regular 3-month longer-term refinancing operations (LTROs) to be allotted on 26 May and on 30 June 2010. Also, the bank will conduct a 5 month LTRO with full allotment on 12 May 2010, at a rate which will be fixed at the average minimum bid rate of the main refinancing operations (MROs) over the life of this operation. Also, ECB, together with Fed, BoE, SNB, BoJ and BoC announced re-establishment of temporary U.S. dollar liquidity swap facilities. While markets' response to the announcements is positive, the momentum of pull back in dollar and yen is so far relatively mild. Key near term levels in major pairs are still holding well for the moment. We'll take the current ease in risk aversion as part of a short term consolidations only and expect more upside in dollar and yen going forward after the consolidations.

Looking ahead, German trade balance, Eurozone Sentix investor confidence and Canada housing starts will be released today. BoE rate announcement will be a main focus but there's little chance BoE would do anything to interest rates and the asset purchase target before the political situation in UK is cleared.

Looking at the dollar index, a short term top is formed and some more consolidations would seen first, with risk of dipping to 4 hours 55 EMA (now at 83.19) and below. Nevertheless, we'd expect downside to be contained by 61.8% retracement of 80.04 to 85.25 at 82.03 and bring rally resumption. We'd still expecting the whole rise from 2009 low of 74.19 to extend towards 2009 high of 89.62 next


USD/CAD Daily Outlook
Daily Pivots: (S1) 1.0327; (P) 1.0448; (R1) 1.0560.

USD/CAD drops sharply to as low as 1.0260 so far today and is now pressing mentioned 1.0280 near term support level. Intraday bias is turned neutral first. On the upside, firm break of 1.0469 minor resistance will suggest that pull back from 1.0734 is finished after hitting mentioned 1.0260 support. Intraday bias will then be flipped back to the upside for 1.0734 resistance and then 1.0779 key level. Nevertheless, sustained break of 1.0280 will dampen the immediate bullish case and turn focus back to 0.9929 low.

In the bigger picture, the strong break of medium term falling trend line resistance serves as the first alert that USD/CAD has made a medium term bottom at 0.9929, on bullish convergence condition in weekly MACD. Decisive break of 1.0779 resistance, which will also have sustained trading above 55 weeks EMA (now at 1.0692) will confirm this case and turn outlook bullish. In such case, stronger rally should be seen towards 61.8% retracement of 1.3063 to 0.9929 at 1.1866. However, considering that USD/CAD is still limited below 55 weeks EMA, a break below 1.0280 support will dampen the bullish case and turn focus back to 0.9929 low instead.


GBP/USD Daily Outlook
Daily Pivots: (S1) 1.4539; (P) 1.4736; (R1) 1.4999.

GBP/USD edges higher today and recovery from 1.4475 might still continue. Nevertheless, upside is expected to be limited by 1.4936 cluster resistance, which is close to 50% retracement of 1.5389 to 1.4475, and bring fall resumption. Below 1.4739 minor support will flip intraday bias back to the downside for retesting 1.4475 low. Break will target 100% projection of 1.6456 to 1.4783 from 1.5521 at 1.3848 next.

In the bigger picture, as noted before, corrective rise from 1.3503 should have completed at 1.7043 already and fall from there is tentatively treated as resumption of the whole down trend from 2007 high of 2.1161. Such fall should target 61.8% projection of 2.1161 to 1.3503 from 1.7043 at 1.2310 after taking out 1.3503 low. On the upside, break of 1.5521 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish


USD/CHF Daily Outlook
Daily Pivots: (S1) 1.1029; (P) 1.1102; (R1) 1.1155.

USD/CHF's correction from 1.1244 is still in progress and further decline might be seen. Nevertheless, we'd expect downside to be contained by 1.0746/0923 support zone and bring rally resumption. Break of 1.1244 high will target 161.8% projection of 1.0131 to 1.0897 from 1.0434 at 1.1673 next.

In the bigger picture, sustained trading above the medium term falling trend line affirms our view that whole correction from 1.2296 has completed with three waves down to 0.9916. Rise from 0.9916 is tentatively treated as resumption of the whole rise from 2008 low of 0.9634 and should now target a retest on 1.1963/2296 resistance zone. On the downside, break of 1.0434 support is needed to indicate that such rise fro 0.9916 is completed. Otherwise, we'll stay bullish.


USD/JPY Daily Outlook
Daily Pivots: (S1) 87.90; (P) 90.94; (R1) 93.62.

USD/JPY's strong rise today indicates that rebound form 88.25 is not finished yet. Intraday bias is mildly on the upside for 93.20 and above. However, a short term top is at least in place at 94.97 and even in the most bullish scenario, USD/JPY should stay below 94.97 for a while. On the downside, below 90.86 minor support will flip intraday bias back to the downside for 88.13 key support.

In the bigger picture, the exaggerated volatility last week mixed up the overall outlook in USD/JPY and we'd stay neutral first. On the downside, break of 88.13 support will indicate that rise from 84.81 has completed at 94.97 already. The three wave corrective structure will in turn indicate that down trend from 124.13 is not completed yet and would bring another fall to 84.81 and below. On the upside, though, break of 94.97 will reaffirm the case that 84.81 is already the long term bottom and will target 101.43/65 medium term resistance zone for confirming this bullish case.


AUD/USD Daily Outlook
Daily Pivots: (S1) 0.8675; (P) 0.8884; (R1) 0.9058.

AUD/USD's rebound form 0.8715 extends further to as high as 0.9062 so far today and further rise could still be seen. Nevertheless, we'd expect upside to be limited by 0.9093 cluster resistance (61.8% retracement of 0.9324 to 0.8715 at 0.9091) and bring fall resumption. Below 0.8917 minor support will flip intraday bias to the downside. Break of 0.8715 will target 0.8577 key support next.

In the bigger picture, the sustained break of medium term rising channel revives that case that medium term rally from 2008 low of 6.008 is finished at 0.9404 already. Deeper decline should now be seen to wards 0.8577 key support first (23.6% retracement of 0.6008 to 0.9404 at 0.8603). Decisive break there will confirm medium term reversal and should target 0.7702/8262 support zone next. On the upside, break of 0.9404 is needed to confirm medium term rally resumption. Otherwise, outlook will now be neutral at best.


EUR/JPY Daily Outlook
Daily Pivots: (S1) 114.10; (P) 116.31; (R1) 118.99.

EUR/JPY's strong rebound from 110.69 extends further today and reaches as high as 120.68 so far. At this point, intraday bias remains on the upside and further rise should be seen. The break of 61.8% retracement of 125.95 to 110.69 at 120.12 dampens our bearish view and put focus back to 127.88 resistance now. On the downside, Below 114.60 minor support will flip intraday bias back to the downside for a retest on 110.69 low.

In the bigger picture, the break of 112.10 support indicates that whole long term down trend from 2008 high of 169.96 has resumed. Outlook will now remain bearish as long as 127.88 resistance holds and further fall should be seen to 61.8% projection of 169.96 to 112.10 from 139.21 at 103.45 which is close to 100 psychological level. However, note that we're slightly favoring the case that fall from 169.96 is corrective in nature. Hence, we'll start to watch out for reversal signal between 2000 low of 88.96 and 100 psychological level. On the upside, break of 127.88 resistance will argue that whole fall from 139.21 might be over and will turn outlook bullish for stronger rise.


EUR/GBP Daily Outlook
Daily Pivots: (S1) 0.8423; (P) 0.8615; (R1) 0.8789.

Intraday bias in EUR/GBP remains cautiously on the upside for the moment. As noted before, fall from 0.9137 should be completed at 0.8427 already. Above 0.8806 will bring rally resumption to retest this resistance. Nevertheless, below 0.8587 minor support will turn intraday bias neutral and mixes up the near term outlook.

In the bigger picture, price actions from 0.9799 are treated as consolidations in the larger up trend. In any case, as long as 0.9137 resistance holds, such consolidation might still extend further with another low below 0.8399. However, even in such case, strong support should be seen from 0.8186 cluster support (50% retracement of 0.6535 to 0.9799 at 0.8167) to conclude the consolidation and bring up trend resumption finally. Break of 0.9137 will be an important signal that such consolidation is completed and will turn focus to 0.9410 resistance for further evidence


GBP/JPY Daily Outlook
Daily Pivots: (S1) 133.05; (P) 135.61; (R1) 138.12.

GBP/JPY edges higher to 137.71 so far today and further recovery could still be seen. Nevertheless, we'd expect upside to be limited by 139.36 cluster resistance (61.8% retracement of 145.19 to 130.00 at 139.38) and bring fall resumption. Below 133.13 minor support will turn intraday bias to the downside. Further break of 130.00 will target a retest of 118.18 low.

In the bigger picture, last week's development revives that case that recovery from 118.81, which is treated as correction in the larger down trend from 2007 high of 251.09, has completed at 163.05 already. Fall from 163.05 is tentatively treated as resumption of such long term down trend and should target 61.8% projection of 215.87 to 118.81 from 163.05 at 103.06 next, which is close to 100 psychological level. On the upside, break of 145.94 resistance is needed to invalidate this view. Otherwise, outlook will remain bearish


EUR/CHF Daily Outlook
Daily Pivots: (S1) 1.4048; (P) 1.4117; (R1) 1.4183.

EUR/CHF's rebound from 1.4003 extended further to as high as 1.4272 so far today and further rise could still be seen. But after all, we'd expect upside to be limited by 1.4294 support turned resistance, which is close to 61.8% retracement of 1.4465 to 1.4003, and bring fall resumption. Below 1.4141 minor support will flip intraday bias back to the downside. Decisive break of 1.4000 will target 61.8% projection of 1.6368 to 1.4315 from 1.5138 at 1.3869 next.

In the bigger picture, whole long term down trend from 2007 high of 1.6827 is still in progress and further fall should be seen to next medium term target will be 61.8% projection of 1.6368 to 1.4315 from 1.5138 at 1.3869. On the upside, break of 1.4465 resistance is needed to be first signal of bottoming. Otherwise, medium term outlook will remain bearish.


EUR/USD Daily Outlook
Daily Pivots: (S1) 1.2625; (P) 1.2711 (R1) 1.2837.

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.

In the bigger picture, price actions from 1.6039 are treated as correction to long term up trend from 0.8823 and fall form 1.5143 is the third leg of such correction. Further decline should be seen to 1.1639 key support level and possibly further to 100% projection of 1.6039 to 1.2329 from 1.5143 at 1.1433. On the upside, break of break of 1.3691 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

Disclaimer: Content of this article is for informational purposes only; they are based upon information gathered from various sources believed to be reliable, complete, and accurate. However, no guarantee can be made as to the validity of the believed sources. All statements and expressions in are opinions, and not meant as investment advice or solicitation. Forex Markets can be volatile and opinions may change without notice.