Sentiment Turns on Italian Bond Buying Reports

The slump in the euro and risk appetite reversed after a report suggested China is preparing to invest in the embattled Italian bond market. On the day, AUD and USD lagged while CAD and JPY were top performers. No major headlines are expected in the Asia-Pacific session buy AUD may climb. Ashraf's Premium trades remain active for EURUSD, gold, CADJPY & USDJPY. while S&P500 hit all targets. EURJPY & silver were stopped out,

Late in Monday`s US session, the FT reported that China's investment fund sent a delegation to Italy in order to investigate buying significant amounts of Italian debt and invest in Italian companies.

EUR/USD jumped a full cent to 1.3680. The daily chart now shows an outside day bullish reversal that may fuel further gains and provide more lucrative entry points for those looking to sell rallies.

To us, the Italian/Chinese news doesn't justify such a large move but the market is heavily short EUR and it was a viable excuse to take profits. Further undermining the news is talk the same Chinese delegation toured several European countries in the past two weeks and also told the UK it is interested in a similar investment.

Earlier pressure on the euro sparked a brief fall below 1.35 on worries about Greece. It began to ebb after Germany's fin min said no country will leave the Eurozone. A source quoted in the WSJ also said Greece was likely to receive the upcoming aid tranche.

Diminished sovereign worries pressure precious metals. Gold fell as low as $1801 and closed down $42 to $1815. Silver fell even harder in percentage terms.

Today's trade from Ashraf on the S&P500 was near-perfect as the index fell just below the low end of the entry range (1237-1242) at 2 p.m. ET then easily hit all targets before the close as the S&P 500 closed up 0.7% to 1162.

SEE ALL THE PREMIUM TRADES at: http://ashraflaidi.com/products/sub01/access/?a=491 or register for access at: http://ashraflaidi.com/products/sub01/

The Asia-Pacific calendar is quiet on Tuesday with Australian business confidence from National Australian Bank at 0130 GMT as the lone indicator. There is no consensus and the prior was -2.0.

Monday’s AUD trade was particularly interesting. The extent of the slump points to some type of large liquidation, rather than one driven by intermarket moves and macro news. Given this, we see the potential for a retracement in the day ahead.