Euro extends this week's recovery against dollar after Portugal delivered a solid auction with yield not as high as market feared.
Portugal successfully sold maximum target of EUR 1.25b of 2014 and 2020 government bonds today with bid-to-cover ratios at 2.6 and 3.2 respectively versus prior bid-to-cover ratios of 2.8 and 2.1.
Average yield for 2014 bonds was at 5.396%, up from prior 4.015% while the average yield for the 2020 bonds was at 6.716%, slightly down from prior 6.806%. 80% of demand came from foreign investors. The sub-7% yield of the nine-year bond eased worry of an imminent bailout, even though analysts still believe that bailout is eventually inevitable.
Meanwhile, it's reported that EU governments are considering to prepare the aid package for Portugal as well as including debt buybacks, lower interest rates on rescue loans and guarantees against excessive debt. The plan is believed to include EUR 60b loan to portugal and purchase of outstanding Greek bonds. EU finance ministers would be discussing the details of the plan next week. German Chancellor Angela Merkel said Germany is ready to revise the terms of the EUR 750b bailout fund for indebted Eurozone members and pledged to protect the Euro with whatever needed.
Data released today saw US import price rose 1.1% mom in December. Canada new housing price index rose 0.3% mom in November. Eurozone industrial production rose 1.2% mom, 7.4% yoy in November. UK Visible trade deficit widened to GBP -8.7b in November. Japan money stock rose 2.3% yoy in December, current account surplus narrowed to JPY 1.15T in November, Econ watcher current sentiment rose to 45.1 in December.
Dollar index 's retreat from 81.31 extends lower today and is now pressing 4 hours 55 EMA. We're still expecting the strong support from the current EMA level to contain downside and bring another rise. Decisive break of 81.31/44 resistance zone will target 61.8% projection of 75.63 to 81.44 from 78.78 at 82.37 first. sustained trading below the EMA will bring deeper fall towards 78.70 support. Nevertheless, we won't turn bearish before a break there.
USD/JPY Mid-Day Outlook
Daily Pivots: (S1) 82.78; (P) 83.13; (R1) 83.59; More.
USD/JPY recovers mildly in early US session but is still bounded in familiar range below 83.67. Intraday bias remains neutral and more sideway trading might be seen but retreat is expected to be contained by 82.27 support and bring another rise. Above 83.67 will target a test on 84.49 resistance first and break there will confirm that whole rebound from 80.29 has resumed for 100% projection of 80.29 to 84.49 from 80.93 at 85.13. Though, below 82.27 will turn focus back to 80.93 support instead.
In the bigger picture, with 85.92 cluster resistance (38.2% retracement of 94.97 to 80.29 at 85.89) intact, there is no confirmation of reversal yet and the longer term down trend in USD/JPY is possibly still in progress for another test on 79.75 (1995 low). Note that USD/JPY is possibly picking up downside momentum again. Decisive break of 79.75 will target 61.8% projection of 94.97 to 80.29 from 84.49 at 75.41 next. On the upside, break of 84.49 resistance, though, will argue that a medium term bottom is likely formed and will turn focus back to 85.92 cluster resistance for confirmation.
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