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[LF.Anastasia]

AUD: AUSTRALIAN DOLLAR DETERMINES MOVEMENT DIRECTION

The Australian Dollar rate stands still at the Forex currency market on Friday, determining movement direction.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, however it merged with the signal line, and is not giving a clear signal. Stochastic Oscillator is going down in the neutral zone and is giving a sell signal.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 1.0660 the pair will go to 1.0630 and 1.0610. If downward breakdown does not take place, the pair will consolidate at the current levels. There is high possibility that aggressive sellers will be back for the pair.
It became known today that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.
According to the comments of AIG, such scenario can make households a guilty party because of tight costs control and wary perception of the prospects for the Australian economy. Furthermore, high exchange rate of the AUD puts additional pressure.
Next meeting of the RBA will be held on 7 June. 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.
Representatives of the Ministry of Finance in Australia said yesterday that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth.
This comment upset buyers of the AUD and reduced to zero yesterday’s purchases at the high level. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years. However, decrease in the local economy was not as much as expected, although aftermath of the flooding had a severe impact on exports (the fall of 8.7% in QI which equals to -2.1% of GDP). Despite such state of economy, the market is convinced that the RBA will make the first step towards monetary policy tightening in August this year, interrupting the pause of the previous five meetings
Economists anticipate that second half of the year will be more successful: intake of business investments gives cause to such forecast.
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.

 

[LF.Anastasia]

NZD: New Zeland Dollar Makes No Headway

At the Forex currency market the New Zealand dollar rate practically makes no headway on Monday.
Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, and goes up, giving a pair buy signal. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 0.8160 the pair will go to 0.81800 и 0.8200. If upward breakdown does not take place the pair will consolidate close to the current levels.
The meeting of the Reserve Bank of New Zealand will take place on Thursday, 9 June: it is going to resolve interest rate issue and assess current state of the economy and its further development prospects.
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 have been doing a good job, and take every step to bring 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.
It became known last week that construction permits in New Zealand fell by 1.6% m/m in April against the forecast of growth by 0.5%. 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.
In addition, terms of trade index in New Zealand rose to the 37-year high in QI, demonstrating growth by 0.9% (+6.8% y/y). It could be one of the indications that New Zealand economy is recovering as it reflects changes in prices for exports and imports. We would like to point that the index is strongly correlated with the index of living standard in the country which is a positive sign.

 

[LF.Anastasia]

AUD: Australlian Dollar Tends To Strengthen Further

At the Forex currency market the Australian Dollar rate grows on Monday, continuing to move in the ascending channel.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, moving away from the signal line, and giving a shape to a buy signal. Stochastic Oscillator is going upward in the neutral zone, giving a buy signal.
Forex recommendations: in case of breakdown at the level of 1.0740, the pair will go to 1.0760 and 1.0790. If upward breakdown does not take place, the pair will consolidate at the current levels.
It was announced today that inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.
The meeting of the RBA will be held on Tuesday and it is possible that regulator will give markets to understand that it feels quite comfortable in the current environment at the current levels of rate.
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.
Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years. However, decrease in the local economy was not as much as expected, although aftermath of the flooding had a severe impact on exports (the fall of 8.7% in QI which equals to -2.1% of GDP). Despite such state of economy, the market is convinced that the RBA will make the first step towards monetary policy tightening in August this year, interrupting the pause of the previous five meetings. Economists anticipate that second half of the year will be more successful: intake of business investments gives cause to such forecast.
It became known last week that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.

 

[LF.Anastasia]

JPY: Growth of Japanese Yen Was Interrupted By Slight Pullback

The Japanese Yen rate is traded slightly downward at the Forex currency market on Monday morning after steady growth. The pair USD/JPY is only a figure away from lows in March.
Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to decline sluggishly, giving a pair sell signal. Stochastic Oscillator reversed again in the neutral zone and is going down, which gives a pair sell signal.
Forex recommendations: in case of breakdown at the level of 80.30 the pair will go to 80.20 and 80.00. If downward breakdown does not take place, the pair will consolidate in the current range.
Observers from Moody's Investors Service said that revision of sovereign rating in Japan is quite possible: there is high probability that Japanese government will replace Prime-Minister (Prime Ministers have been in their jobs less than a year in the last four years, which increases the risk of delay in the implementation of the fiscal policy programs). The agency is going to review Japanese ratings in national and foreign currencies for possible downgrade result (now it is Aa2).
Prime Minister of Japan Naoto Khan is going to resign as soon as reconstruction of the country after the earthquake will gain stability. Some markets have been discussing such possibility for some time already, while political forces demand Khan’s resignation.
The head of the Bank of Japan Mr. Shirakawa said in the middle of the week that economy of the country is still under severe pressure and its recovery is expected in the second half of the fiscal year. According to him shortage in supply is decreasing faster than expected; however excessive focus on the level of business activity can lead to risks.
Japanese statistics released last Tuesday showed that industrial output in Japan was favourable, however below the forecast. Unemployment rate increased to 4.7%. In addition, household spending continues to demonstrate negative dynamics.
As it was made public earlier, preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; In addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has 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.

 

[LF.Anastasia]

CHF: Swiss Franc Reaches New Historic Highs

At the Forex currency market Swiss Franc rate has reached new historic highs of 0.8326 at the beginning of the week, while the USD remains weak.
Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and goes down, forming a pair sell signal; while volumes are increasing. Stochastic Oscillator tends to come out of the oversold zone; however it is keeping such position for a few days already, maintaining a pair buy signal.
Forex recommendations: in case of breakdown at the level of 0.8340, the pair USD/CHF will go to 0.8326 and to new lows of 0.8300. If downward breakdown does not take place, the pair will consolidate close to the current levels.
The economic situation in Switzerland remains almost unchanged, because the market was closed due to day off in the country.
Mr. Danten, a board member of the Swiss national Bank, said earlier, commenting statistics that economy of Switzerland is developing well, which is demonstrated by strong Swiss Franc.
It became known earlier 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.
Index of leading indicators KOF in Switzerland rose to 2.30 points in May against the forecast of growth by 2.22 points.
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%.
As it was made public earlier, index of PMI SVME in Switzerland increased to 59.2 points against the forecast of 57.5 points. It proves once again that national economy has learnt to be effective even in circumstances where national currency is expensive.
GDP in Switzerland slowed down growth rate in QI this year, increasing by 0.3% on quarterly basis (+2.4% y/y) against the rise of 0.8% last quarter and the forecast of growth of 0.6 %.
According to estimates of the SNB, the main activator for economic growth in Switzerland is still national consumer demand, triggered by the rise in the demand for houses and health care expenditure, as well as high level of export.

 

[LF.Anastasia]

GBP: British Pound Has Slowed Down Its Growth

At the Forex currency market the British Pound Sterling rate slowed down its growth, which has been observed for the last two trading days.
Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom, started to increase, and is ready to merge with the signal line, giving a pair buy signal. Stochastic Oscillator has reversed in the neutral zone, and is giving a buy signal.
Forex recommendations: in case of breakdown at the level of 1.6420, the target for purchase will be the levels of 1.6450 and 1.6480. If upward breakdown does not take place, the pair can consolidate close to the current levels.
A meeting of the Bank of England will be held on Thursday this week. According to the economists from Barclays, regulator will raise the rate not in August but in November because new signs of weakness in the British economy and its dependence on the external demand are not favourable at the moment to start monetary policy tightening.
At the same time, the Bank indicated that according to the swap curve SONIA, which reflects weighted average index of the Pound - Overnight, the rise in the rate should not be expected before 2012- by 25 basis points.
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.
Representative of the MPC of the Bank of England Mr. Sentence who is going to retire next week noted this week that he has always stood for gradual rise in the interest rate and the level of confidence in the Bank of England can suffer, due to the current financial situation. He also stressed that existing situation does not require urgent special changes in the monetary policy, however sharp increase in rates is possible in the future.
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, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.
He also noted that he would think about the second round of QE.

 

[LF.Anastasia]

EURO/USD: Euro Continues To Grow AMID Weakness Of Dollar

The pair EUR/USD is traded upward at the Forex currency market on Monday morning, and continues to strengthen amid weak Dollar, credibility of which has reduced due to the publication of the poor data on the labor market on Friday.
By 9.00 Moscow time the Euro is at 1.4635 against closing level of 1.4633 on Friday.
The data on the U.S. labor market was released last Friday which showed that unemployment rate increased to 9.1% in May against the forecast of reduction to 8.9%, the rate of employment, excluding agricultural sector was also low.
Meanwhile, Greek problems continue to be addressed. As the mass media said at the beginning of the week, a new aid package to Athens could be larger than expected, it is also assumed that extension on debt repayment will be provided for private creditors in the amount of 30 billion euro.
Monday is going to be quiet in terms of macro-statistics and external background will be the main guideline.
Most likely the pair EUR/USD will not go beyond the range of 1.4570-1.4690 at the trading session on Monday.

 

[LF.Anastasia]

NZD: New Zealand Dollar tries To Grow

The New Zealand dollar rate tries to grow at the Forex currency market on Tuesday after three days of indistinct movement.
Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, and goes up, giving a pair buy signal. Stochastic Oscillator reversed in the neutral zone, and is increasing, giving a buy signal.
Forex recommendations: in case of breakdown at the level of 0.8200 the pair will go to 0.8220 and 0.8240. If upward breakdown does not take place the pair will consolidate close to the current levels.
Economic situation in New Zealand has not changed fundamentally this morning.
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 have been doing a good job, and take every step to bring 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.
In addition, terms of trade index in New Zealand rose to the 37-year high in QI, demonstrating growth by 0.9% (+6.8% y/y). It could be one of the indications that New Zealand economy is recovering as it reflects changes in prices for exports and imports. We would like to point that the index is strongly correlated with the index of living standard in the country which is a positive sign.
It became known last week that construction permits in New Zealand fell by 1.6% m/m in April against the forecast of growth by 0.5%. 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.
The Reserve Bank of New Zealand at the meeting, which will take place on Thursday, 9 June, is going to resolve interest rate issue and give assessment of the current state of the economy and its further development prospects.

 

[LF.Anastasia]

AUD: Australlian Dollar Declines After RBA Decision

At the Forex currency market the Australian Dollar rate declines on Tuesday because Reserve Bank of Australia has left interest rate unchanged.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, moving upward from the signal line, and giving a shape to a buy signal. Stochastic Oscillator is moving along the signal line in the neutral zone, not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 1.0650, the pair will go to 1.0630 and 1.0610. If downward breakdown does not take place, the pair will consolidate at the current levels.
Thus, the Reserve Bank of Australia has left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.
It was announced earlier that inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per estimates of TD Securities. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate at the moment (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.
Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years. However, decrease in the local economy was not as much as expected, although aftermath of the flooding had a severe impact on exports (the fall of 8.7% in QI which equals to -2.1% of GDP). Despite such state of economy, the market is convinced that the RBA will make the first step towards monetary policy tightening in August this year, interrupting the pause of the previous five meetings. Economists anticipate that second half of the year will be more successful: intake of business investments gives cause to such forecast.
It became known last week that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.
The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity. However, market is not yet assured if it is really required.

 

[LF.Anastasia]

JPY: Japanese Yen Is Getting Slightly Weaker

The Japanese Yen rate goes down slightly at the Forex currency market on Tuesday; however we have already witnessed the situation at a few sessions when currency’s weakness in the morning transformed into the full-blown consolidation.
Forex recommendations: in case of breakdown at the level of 80.10 the pair will go to 80.0 0 and 79.80. If downward breakdown does not take place, the pair will consolidate in the current range.
It became known today that preliminary index of leading indicators rose by 3.7% m/m in April against he fall of 3.9% in March. In addition, preliminary index of coincident indicators grew by 0.3% m/m in April (-3.3% m/m in March).
The head of the Bank of Japan Mr. Shirakawa said in the middle of the week that economy of the country is still under severe pressure and its recovery is expected in the second half of the fiscal year. According to him shortage in supply is decreasing faster than expected; however excessive focus on the level of business activity can lead to risks.Japanese statistics released last Tuesday showed that industrial output in Japan was favourable, however below the forecast. Unemployment rate increased to 4.7%. In addition, household spending continues to demonstrate negative dynamics.
As it was made public earlier, preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; In addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has 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.
Observers from Moody's Investors Service said that revision of sovereign rating in Japan is quite possible: there is high probability that Japanese government will replace Prime-Minister (Prime Ministers have been in their jobs less than a year in the last four years, which increases the risk of delay in the implementation of the fiscal policy programs). The agency is going to review Japanese ratings of national and foreign currencies for possible downgrade. (Now it is Aa2).
Prime Minister of Japan Naoto Khan is going to resign as soon as reconstruction of the country after the earthquake will gain stability. Some markets have been discussing such possibility for some time already, while political forces demand Khan’s resignation.