LiteForex's analytics

[LF.Anastasia]

CHF: Swiss Franc demonstrates significant growth

At the Forex currency market Swiss Franc rate demonstrates significant growth on Thursday morning because markets have temporarily forgotten about external turmoil and investors started to purchase currency at attractive levels.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and is increasing giving a pair buy signal; while volumes remain below average and the signal is fading away. Stochastic Oscillator has come into oversold zone, giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 0.8680, the pair USD/CHF will go to0.8650 и 0.8630. If downward breakdown does not take place, the pair will consolidate close to the current levels.

It became known earlier that index of investors’ economic expectations ZEW in May fell by 20.3 points in May, to the level of -11.5 points against the previous level of 8.8 points. Due to such background, a number of those who expected the increase of the interest rate in the next quarter have dropped sharply.

Meanwhile, economists do not assess Swiss economic situation as negative, on the contrary, it is described as “good” (majority -68.6% of respondents think so). The share of those, who expect the rise in inflation in the near future, has fallen to 51.4% (-25.1%).

The head of the National Bank of Switzerland, Mr. Hildebrand noted that strong and expensive Franc undermines exports and disrupts tourism industry; therefore negative impact of the CHF could be worse than predicted. “We intend to take any measures to achieve price stability” stressed the monetary politician. According to him, downside risks to recovery are still preserved, although economy demonstrates steadier growth rate than previously expected. It was worth noting Hildebrand’s statement that expansionary monetary policy constitutes a menace to a number of industrial sectors in the long term.

Julius Baer Group believes that it is not clear yet whether Swiss economy requires the increase in the interest rate or not: “any rise will have an impact on the economy as a whole for a year”. However it is quite possible that local economy and its recovery process are strong enough to cope with the interest rate rise to 1%-1.5%.

Note that real effective exchange rate of the Franc grew by 10% last year.
Swiss National Bank is going to discuss monetary policy issues on 16 June.

Mr. Jordan from the SNB said yesterday that the Bank is very concerned about Swiss Franc rates, although exports have coped well with the impact of the expensive currency. However, the CNB is going to take measures if the threat of deflation will continue to grow. This verbal intervention forced the Franck to roll back, and still remains under selling pressure. We would remind that inflation slowed down in Switzerland in April, which became another negative factor for the Franc, pushing the currency downward. It became known last week that the index rose by 0.1% m/m (+0.3% y/y) which is below the forecast of 0.6% y/y.

 

[LF.Anastasia]

JPY: Japanese Yen does not give up hope to strengthen

The Japanese Yen rate continues to grow moderately at the Forex currency market; the JPY has been making attempts to go upward for the third day already.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to increase slightly, giving a pair buy signal. Stochastic Oscillator begun to decline in the neutral zone and is indicating probability of sale.

Forex recommendations: in case of breakdown at the level of 81.60 the pair will go to 81.45 and 81.25. If downward breakdown does not take place, the pair will consolidate in the current range.

It became known today that index of prices for corporate services in Japan fell by 0.8% y/y in April against the level of -1.2% in March. The data is positive as it reflects ability of the local economy to recover and regenerate.

The data released this week showed that volume of imports increased by 8.9% y/y in April against the forecast of growth by 12.8% and the previous rise by 11.9%; volume of exports fell by 12.5% in April against the forecast of reduction by 12.7% and previous decline of 2.2%.

Minutes of the Bank of Japan meeting of 28 April was released today, it states that the Bank members were requested to expand program of the quantitative easing due to the deterioration in the economic sentiments. In addition the Bank agreed that it is required to focus on the downside economic risks and take further steps to support the process reconstruction after the earthquake.

Macro-economic statistics for March which is being released this week shows weakness of the economy; index of coincident indicators in Japan fell by 3.3% m/m in May against the preliminary estimate of 3.2%; index of leading indicators in Japan decreased by 3.9% m/m in March versus preliminary estimate of -4.5%.

Japanese Economy Minister is confident that the economy of the Country of the Rising Sun is very easy to adapt to various changes and prior to the earthquake the state of economy had improved. “We are making progress in the fight against limited supply and by the end of this fiscal year GDP will increase by 1%” –he said. The Minister is also assured that economy can avoid recession. Ex-deputy head of the Bank of Japan Mr. Muto said this morning that national economy is weak and will reach the bottom in QIII this year. Future economic prospects are vague.

It was made public earlier that consumer confidence fell to 33.1 points in April against the level of 38.6 points in March, at the same time index of CGPI rose by 0.9% м/м in April against the growth by 0.6% m/m in March. According to the data released earlier, current account balance in Japan fell by 34.3%, to Y1.679 trillion in March against expected -32.0%. The data released earlier showed that leading indicators index decreased by 4.5% and index of coincident indicator subsided by 3.2%. In addition it is also became known that gold and foreign currency reserves of Japan have reached a new peak level.

 

[LF.Anastasia]

AUD: Australian Dollar is growing due to the positive external news

At the Forex currency market the Australian Dollar rate continues to grow on Thursday, following optimistic sentiments of the investors at the global capital markets.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, giving a pair sell signal, while volumes are minimal. Stochastic Oscillator is going up in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 1.0600 the pair will go to 1.0620 and 1.0650. If upward breakdown does not take place the pair will consolidate at the current levels. There is high possibility that aggressive buyers will be back for the pair.

Representative of the Reserve Bank of Australia Mr. Batellino noted today that growth of the Australian Dollar is a direct reflection of the situation in the global economy. “It is difficult to change this situation, so some sectors of the economy will suffer from high exchange rate of the currency” –he stressed. However, he clarified that growth in inflationary pressure is naturall amid recovery of the global economy.

Batellino also reported that increase in savings is positive for the economy because high level of savings in the households does not affect consumption. In addition, the rise in income will enable to rise spending.

It became known today that leading indicators index in Australia increased by 1.5% m/m in March, to the level of 284.5 points, while annual gain is assessed at 5.3%. Index of coincident indicators rose by 0.7% (+2.0% y/y) in March.

Westpac believes that growth rate of the leading indicators, which helps to assess economic prospects for the next 3-6 months, has stabilized, and shows moderate rate of recovery in the Australian economy. “The results of the first half of the year might be not the best, due to slowdown in the pace of development in QI, caused by the weak external sector and wholesale inventories- pointed Westpac.

The minutes of the Reserve Bank of Australia meeting of 3 May which were made public earlier stated that growing Australian Dollar has assisted to curb inflation; while interest rate remains at the previous level of 4.75% per annum.

The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity.
The minutes of the meeting were vague when describing the state of the labor market in the country; it is not clear yet in which way the increasing wages will impact on the tightening of the labor market conditions. At the same time sentiments of households and labour market will be important factors for determining dynamics of inflation in the coming years.

 

[LF.Anastasia]

NZD: New Zealand Dollar grows rapidly in Thursday

The New Zealand Dollar rate is traded rapidly upward the Forex currency market amid stable external environment.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, moving along the signal line and is not giving a clear signal. Stochastic Oscillator is increasing in the neutral zone, giving a pair buy signal and is approaching oversold zone.

Forex recommendations: in case of breakdown at the level of 0.8090, the pair will go to 0.8130 and 0.8150.

Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand are doing a good job and are taking every step to revert the economy to its normal state.

It is worth noting that budget deficit in New Zealand amounted to NZ$10.17 billion for the 9 months by 31 March which was in average 15% higher than expected by economists. This was the fact that provoked previous sales of the NZD.
It became known this week that two-year inflationary expectation in New Zealand increased by 0.3% in QII against the rise of 2.6% on quarterly basis earlier.

Unemployment rate New Zealand fell to 6.6% in QI against the level of 6.8% in QIV, 2010. The forecast had been 6.7%. In addition the proportion of labor force increased to 68.7% against the previous level of 67.9%. Although indicators are favourable, ASB still believes that report is ambiguous: it is possible that the earthquake of February will have more serious impact on the economy than expected and it will have additional pressure on the labor market of New Zealand and will have an adverse affect on the prospects for the sector as a whole. The data released earlier was mixed: house prices fell by 1.9% m/m in April against the decline by 2.0% in March and credit cards expenses rose by 1.7% м/м in April against the increase by 0.5% in March and credit cards costs rose by 1.7% m/m in April against the growth by 0.5% in March. Therefore, real estate sector of New Zealand started to recover and it is a strong supportive factor for the economy. According to REINZ estimates house prices index in New Zealand increased by 1.1% m/m in April against the forecast of growth by 0.5% m/m. In addition, the agency reported that the level of house sales last month was -4.2% y/y against the level of -5.1% y/y in March.

It is also worth noting that producer price at entrance into QI rose by 2.2% q/q, while the forecast of growth had been 0.6% q/q, producer prices at exit increased by 1.7% q/q with the forecast of 0.5% q/q.

 

[LF.Anastasia]

Euro/USD: Euro grows up, while USD is under pressure

The pair EUR/USD is traded upward at the Forex currency market on Friday morning, continuing to move up.

By 9.30 Moscow time the Euro is at 1.4247 against yesterday’s closing level of 1.4144.

Markets’ concern that growth rate of expenditure of Americans reduced to 0.5%, which would have been the lows of three months, became an adverse factor to the USD. The data will be made public tonight.

Meanwhile the head of Euro Group Mr. Junker said yesterday that Greece might not receive the second tranche of funds from IMF, since the chances of default in Greece next year are too high and it seems unlikely that restructuring of the debts of Athens could be avoided.

As long as external background remains ambiguous, the growth of the Euro is considered not more than a rebound.

Most likely the pair EUR/USD will be the range of 1.4170-1.4290 at the trading session on Friday.

 

[LF.Anastasia]

GBP: British Pound continues to grow

At the Forex currency market the British Pound Sterling rate continues to grow on Friday amid stable and external background

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom and is moving along the signal line now not giving a clear signal. Stochastic Oscillator is increasing, and has reached overbought zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 1.6485, the target of the purchases will be the levels of 1.6500 и 1.6530. If upward breakdown does not take place the pair will consolidate close to the current levels.

According to the data released at the end of the week, the level of consumer confidence has increased in May by 10 points, to the level of -21 points against the level of -31 points in April. The report of GfK NOP said that the index fell short of forecast. However, it is worth noting that consumer confidence in the UK economic situation increased to -44 points over the last 12 months versus the previous level of -57 points.

The research company stresses that it is too early to expect effect from the budget, which was issued only last week, adding that despite the results of today’s reports, confidence remains low.

It became known earlier that service sector index rose by 0.6% m/m against expectations of the growth by 0.5% m/m. In addition, as a result of the second reading, GDP in the UK rose by 0.5% on quarterly basis (+1.8% y/y) in QI, left unrevised.

The Bank of England thinks that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time.

We would remind that at the regular meeting, the Bank of England has left interest rate unchanged at the level of 0.50% per annum and volume of assets purchase was kept unchanged - at the level of GBP200 billion. The situation in the British economy is still far from being stable.

Deloitte & Touche LLP believe that the Bank of England will not raise rates until 2013 – according to observers economic growth in the country is still poor, basic economic trend in the UK is also not too good, which encourages them to leave rates at the current level at least until the end of this year and throughout next year as well. Inflation in the country is twice as high as 2% projected by MPC. Deloitte & Touche LLP indicates that British GDP will amount to 1.5% in 2011, the same as next year; while inflation will reach 4.5% in 2011 and 1.8% in 2012.

 

[LF.Anastasia]

CHF: Swiss Franc has reached historic highs

At the Forex currency market Swiss Franc rate has reached historic highs on Friday, coming up to the level of 0.8532.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and started to go down, forming a pair sell signal; while volumes remain below average. Stochastic Oscillator has come into the oversold zone, giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 0.8550, the pair USD/CHF will go to 0.8530 and to new lows of 0.8520. If downward breakdown does not take place, the pair will consolidate close to the current levels.

It became known yesterday that the level of trade balance in Switzerland rose by 1.52 billion in April against the rise of 1.0 billion in March. In addition, exports in Switzerland increased by 7.9% in April against the fall by 3.1% in March.

In other respects situation in Swiss economy remains unchanged.

The head of the National Bank of Switzerland, Mr. Hildebrand noted that strong and expensive Franc undermines exports and disrupts tourism industry; therefore negative impact of the CHF could be worse than predicted. “We intend to take any measures to achieve price stability” stressed the monetary politician. According to him, downside risks to recovery are still preserved, although economy demonstrates steadier growth rate than previously expected. It was worth noting Hildebrand’s statement that expansionary monetary policy constitutes a menace to a number of industrial sectors in the long term.

Julius Baer Group believes that it is not clear yet whether Swiss economy requires the increase in the interest rate or not: “any rise will have an impact on the economy as a whole for a year”. However it is quite possible that local economy and its recovery process are strong enough to cope with the interest rate rise to 1%-1.5%.

Note that real effective exchange rate of the Franc grew by 10% last year.

Swiss National Bank is going to discuss monetary policy issues on 16 June.

Mr. Jordan from the SNB said earlier that the Bank is very concerned about Swiss Franc rates, although exports have coped well with the impact of the expensive currency. However, the CNB is going to take measures if the threat of deflation will continue to grow. This verbal intervention forced the Franck to roll back, and still remains under selling pressure. We would remind that inflation slowed down in Switzerland in April, which became another negative factor for the Franc, pushing the currency downward. It became known last week that the index rose by 0.1% m/m (+0.3% y/y) which is below the forecast of 0.6% y/y.

It became known earlier that index of investors’ economic expectations ZEW in May fell by 20.3 points in May, to the level of -11.5 points against the previous level of 8.8 points. Due to such background, a number of those who expected the increase of the interest rate in the next quarter have dropped sharply.

Meanwhile, economists do not assess Swiss economic situation as negative, on the contrary, it is described as “good” (majority -68.6% of respondents think so). The share of those, who expect the rise in inflation in the near future, has fallen to 51.4% (-25.1%).

 

[LF.Anastasia]

JPY: Japanese Yen continues to consolidate steadily

The Japanese Yen rate continues to grow steadily at the Forex currency market, while investors are not very interested in the USD.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to increase slightly, however today it is moving along the signal line and is not giving a clear signal. Stochastic Oscillator is declining in the neutral zone and is giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 81.00 the pair will go to 80.80 adn 80.60. If downward breakdown does not take place, the pair will consolidate in the current range.

The following Japanese data was released today:

– Preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y;

– Net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April.

Thus, Japan confronted with the rise in inflation for the first time over 28 months, which is crucial for the economy; however, it requires confirmation over the next few months. Japanese consumer prices grew by 0.6% y/y excluding food, and prices for utilities and food skyrocketed.

It became known yesterday that index of prices for corporate services in Japan fell by 0.8% y/y in April against the level of -1.2% in March. The data is positive as it reflects ability of the local economy to recover and regenerate.

The data released this week showed that volume of imports increased by 8.9% y/y in April against the forecast of growth by 12.8% and the previous rise by 11.9%; volume of exports fell by 12.5% in April against the forecast of reduction by 12.7% and previous decline of 2.2%.

In addition, minutes of the Bank of Japan meeting of 28 April was released yesterday, which states that the Bank members were requested to expand program of the quantitative easing due to the deterioration in the economic sentiments. The Bank also agreed that it is required to focus on the downside economic risks and take further steps to support the process reconstruction after the earthquake.

Japanese Economy Minister is confident that the economy of the Country of the Rising Sun is very easy to adapt to various changes and prior to the earthquake the state of economy had improved. “We are making progress in the fight against limited supply and by the end of this fiscal year GDP will increase by 1%” –he said. The Minister is also assured that economy can avoid recession. Ex-deputy head of the Bank of Japan Mr. Muto said this morning that national economy is weak and will reach the bottom in QIII this year. Future economic prospects are vague.

Macro-economic statistics for March which is being released this week shows weakness of the economy; index of coincident indicators in Japan fell by 3.3% m/m in May against the preliminary estimate of 3.2%; index of leading indicators in Japan decreased by 3.9% m/m in March versus preliminary estimate of -4.5%.

 

[LF.Anastasia]

AUD: Australian Dollar strengthens at a steady gait

At the Forex currency market the Australian Dollar rate continues to grow on Friday amid stable external background.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, giving a pair sell signal, while volumes are minimal. Stochastic Oscillator is going up in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 1.0700 the pair will go to 1.0720 and 1.0750. If upward breakdown does not take place the pair will consolidate at the current levels. There is high possibility that aggressive buyers will be back for the pair.

Situation in the Australian economy has not changed fundamentally.

It became known yesterday that leading indicators index in Australia increased by 1.5% m/m in March, to the level of 284.5 points, while annual gain is assessed at 5.3%. Index of coincident indicators rose by 0.7% (+2.0% y/y) in March.

Westpac believes that growth rate of the leading indicators, which helps to assess economic prospects for the next 3-6 months, has stabilized, and shows moderate rate of recovery in the Australian economy. “The results of the first half of the year might be not the best, due to slowdown in the pace of development in QI, which was caused by weakness in external sector and wholesale inventories”, pointed Westpac.

The minutes of the Reserve Bank of Australia meeting of 3 May which were made public earlier stated that growing Australian Dollar has assisted to curb inflation; while interest rate remains at the previous level of 4.75% per annum.

The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity.

Representative of the Reserve Bank of Australia Mr. Batellino noted yesterday that growth of the Australian Dollar is a direct reflection of the situation in the global economy. “It is difficult to change this situation, so some sectors of the economy will suffer from high exchange rate of the currency” –he stressed. However, he clarified that growth in inflationary pressure is natural amid recovery of the global economy.

Batellino also reported that increase in savings is positive for the economy because high level of savings in the households does not affect consumption. In addition, the rise in income will enable to rise spending.

 

[LF.Anastasia]

NZD: New Zealand Dollar is testing local highs

At the Forex currency market the New Zealand Dollar rate continues to grow, reaching again local highs of 0.8199 at the Asian session today.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, and started to go up, giving a pair buy signal. Stochastic Oscillator has reached oversold zone, maintaining a similar signal.

Forex recommendations: in case of breakdown at the level of 0.8190, the pair will go to 0.8200 and 0.8220.

Growth of the New Zealand Dollar has slowed down when it became known that rating agency Moody's downgraded ratings of the largest banks of New Zealand to the level of AA3 from the previous AA2, while the rating of the subordinated debt was downgraded by two positions, to the level of A2.

Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand are doing a good job, and they take every step to revert the economy to its normal state.

Note: that budget deficit in New Zealand amounted to NZ$10.17 billion within 9 months, as of 31 March, which had been 15% higher than expected by economists. This fact provoked sales of the NZD previously.

It became known this week that two-year inflationary expectation in New Zealand increased by 0.3% in QII against the rise of 2.6% on quarterly basis earlier.

It is also worth noting that producer price at entrance into QI rose by 2.2% q/q, while the forecast of growth had been 0.6% q/q, producer prices at exit increased by 1.7% q/q with the forecast of 0.5% q/q.

Country’s unemployment rate fell to 6.6% in QI against the level of 6.8% in QIV, 2010. The forecast had been 6.7%. In addition the proportion of labor force increased to 68.7% against the previous level of 67.9%. Although indicators are favourable, ASB still believes that report is ambiguous: it is possible that the earthquake of February will have more serious impact on the economy than expected and it will have additional pressure on the labor market of New Zealand and will have an adverse affect on the prospects for the sector as a whole.

The data released earlier was mixed: house prices fell by 1.9% m/m in April against the decline by 2.0% in March and credit cards expenses rose by 1.7% м/м in April against the increase by 0.5% in March and credit cards costs rose by 1.7% m/m in April against the growth by 0.5% in March. Therefore, real estate sector of New Zealand started to recover and it is a strong supportive factor for the economy. According to REINZ estimates house prices index in New Zealand increased by 1.1% m/m in April against the forecast of growth by 0.5% m/m. In addition, the agency reported that the level of house sales last month was -4.2% y/y against the level of -5.1% y/y in March.