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CAD: Canadian Dollar weakens on Tuesday

The Canadian Dollar rate decreases at the Forex currency market on Tuesday, amid investors’ aversion to risk.

Forex forecast: MACD indicator is in the positive area for the pair USD/CAD and goes down, giving a sell signal. Stochastic Oscillator is going up in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 1.0240, the pair will go 1.0250 and 1.0265.

If upward breakdown does not take place, the pair will remain at the current levels.Canadian companies are going to continue effective work in the future and increase volume of investments, creating new jobs, however not as fast as it was announced earlier. The country has lowered its forecast for sales in 2012; as a result local producers have to temper their personal forecasts.

According to the estimates of the Bank of Canada, sentiment of the leaders of the large companies fell down compared with the summer period, since top management expects the decrease in the U.S. GDP and conservation of uncertainty in respect to global economic outlooks.The Bank of Canada believes that GDP of the country will amount to about 2.8% in 2011 (reduction by 0.1% versus forecast of April); in 2012 it will be 2.6% and 2.1% in 2013. According to the evaluation of the Bank, exports performance in Canada is negative because low demand in the USA prevents the rise of the indicator and expensive CAD makes situation even more complicated. T

he growth in the interest rate in Canada will directly depend on stability in economic development.By the way, CPI in Canada rose by 0.3% m/m (+3.1% y/y) in August.Now, heads of the major Canadian companies have recorded decline in inflationary expectations; it is projected that in 2012 CPI will be in the range of 1-3%.The head of the Bank of Canada Mr. Carney said earlier that there are several significant obstacles on the way of Canadian economic development.

First of all it is the growth of the Canadian Dollar and secondly, it is European debt crisis, plus to this, drawn-out dialogue about the U.S. national debt also casts a dark shade on the Canadian economy. Central Bank will be able to waive further economic stimulation only when economic system will show steady self-sustained growth.Unemployment rate in the country decreased to 7.1%; while employment rate in the country increased by 60.9 thousand. For the Canadian economy that is closely linked with the economy of the USA it is a significant step forward.

Meanwhile earlier unemployment rate in Canada increased to 7.3% in August against the forecast of 7.2% and previous level of 7.2. In addition, labor productivity fell by 0.9% on quarterly basis in Q2 against the forecast of decline by 0.7% q/q. It also became known that number of begun construction in Canada fell to 184.7 thousand in August against the forecast at 200 thousand. It is clearly obvious at the moment, that slowdown in the key indicators was caused by the state of the global economy and proximity to the Unites States.

 

[LF.Anastasia]

EUR/USD: Euro goes up again due to rumors

The pair EUR/USD goes up steadily at the Forex currency market on Wednesday morning.

By 10.00 MSK the Euro is at 1.3816 against yesterday’s closing level of 1.3752.

Investors’ optimism today is based on rumors about European Fund of Financial Stability and its increase up to 2 trillion euro from the current 440 billion euro. Newspaper Guardian wrote about it, reporting also that France and Germany have already reached an agreement about the way out of the crisis.

Amid such background players ignore the news that Moody’s has downgraded the rating of Spain by one notch.

Therefore another day is ahead of us, which is going to be full of expectations, discussions and rumors.

Most likely the pair EUR/USD will not leave the range of 1.3750-1.3850 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound is ready to recover

At the Forex currency market the British Pound Sterling is traded briskly on Wednesday after correction earlier this week.

Forex forecast: MACD indicator for the pair GBP/USD started to grow moderately in the negative area, shaping a buy signal; however volumes are decreasing. Stochastic Oscillator goes 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 1.5750 target for the purchase will become the levels of 1.5770 and 1.5800. However, if external negative factor intensifies, selling target will be the level of 1.5711.

Yesterday the head of the Bank of England Mr. King said that additional measures to stimulate British economy are fully justified currently and slowdown of economic pace was caused by global imbalance. According to him, decline in exports volumes is harmful for the British economy. In addition, European problems have a negative impact on the pace of development of British economy.

Statistics released on Tuesday was interesting: CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which affects economy. We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the drastic crisis now.

As it became known earlier retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. Volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

Statistics released this morning showed that house price index Rightmove in the UK rose by 2.8% m/m (+1.2% y/y) against preliminary expectations of grow by 0.7% m/m. The survey demonstrated that there is a huge gap between the house prices in the North and South, as in the Southern part of the country the price is still twice as high as in the North.

 

[LF.Anastasia]

CHF: Swiss Franc continues to consolidate

Swiss Franc rate is traded evenly at the Forex currency market on Wednesday and continues to consolidate at the achieved levels.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal. Stochastic Oscillator is coming out of the oversold zone, and started to shape a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9000, the pair USD/CHF will go to 0.9010 and 0.9030. If upward breakdown does not take place, the pair will remain close to the current levels.

Yesterday trade union of Switzerland urged authorities to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession.

According to representatives of trade union this measure will also support employment sector.

As it became known earlier, producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible. Index of PMI SVME fell to 48.2 points in September against the level of 51.7 points in August. In addition retail sales in Switzerland fell by 1.9% y/y in August against +1.9% y/y a month earlier.

It is not known precisely yet what volumes SNB currently has at the trades. According to the annual report of the SNB, over the next 6 month economy of the country will come to a standstill due to the impact of the expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start to consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could be interpreted as follows: regulator’s power to maintain the Franc is fading away. We would remind that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc.

 

[LF.Anastasia]

JPY: Japanese Yen continues to grow

At the Forex currency market the Japanese Yen rate grows in the middle of the week, continuing rapid rise which started earlier this week.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is going up, giving a buy signal; volumes are decreasing. Stochastic Oscillator started to reverse in the neutral zone, shaping a sell signal.

Forex recommendations: in case of breakdown at the level of 76.65, the pair will go to 76.50 and 76.40. If downward breakdown does not take place, the pair will consolidate at the current levels.

Macro- economic background in Japan remains mainly unchanged.

It became known today that, final orders for industrial equipment in Japan increased by 20.1% in September against the growth of 20.3% in August. Association of machine-tool construction industry of Japan stated that last month the index had reached the lowest level since 2009. According to the data released yesterday revised industrial production in Japan rose by 0.6% m/m (+0.4% y/y) in August; below expectations.

Statistics released earlier showed that real revised GDP in Japan fell by 0.5% q/q (-2.1% y/y) in Q2 against the forecast of -0.5% q/q (-2.0% y/y) and previous level of -0.3% q/q. Large information block released at the end of last week included the following piece of information about inflation: base national CPI amounted to +0.2% y/y in August. In addition, it also became known that unemployment fell to 4.3% in August against the forecast of 4.7% and previous level of 4.7%.

As it became known earlier, money supply M2 in Japan increased by 2.7% y/y, which agreed with the forecast. In addition, corporate goods price index rose by 2.5% y/y in September, which agreed with expectations. Tankan business survey published this week, showed that expectations of the large industrial enterprises amounted to +2 points in September against the forecast of +3 points. Expectations of large non-industrial enterprises demonstrated decline of 11 points versus the forecast of -14 points and -21 points previously. Total current account surplus in Japan amounted to Y407.5 billion in August against the forecast of Y462 billion. In addition, consumer confidence index in Japan declined to 38.6 points in September against the forecast of 37.2 points.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen.

 

[LF.Anastasia]

AUD: External positive factors render support to strengthen Australian Dollar

At the Forex currency market the Australian Dollar rate is traded upward on Wednesday, due to general rise in sentiments in the markets caused by expectations of the resolution of European problems. Today’s Chinese statistics was much better than yesterday one which supports buyers of the AUD.

Forex forecast: MACD indicator for the pair AUD/USD is in the negative area and is going up steadily, giving a buy signal; however volumes are minimal. Stochastic is leaving overbought zone, and is giving a start to a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0320, the pair will go to 1.0330 and 1.0350. If upward breakdown does not take place, the pair will consolidate at the current levels. There is high probability that aggressive sellers will be back in the pair.

Macro-economic environment in Australia remains steady.

As it became known last week business confidence NAB in Australia rose to -2 points in September against preliminary level of -3 points. At the same time business conditions increased by 2 points, as per NAB research, against preliminary level of -9 points, which the Research Agency attributed to the sharp fall of the AUD’s rate earlier. According to the data released earlier, consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. As noted by monetary politician Evans it is possible that the rate will go down in November, since low growth of the index indicates general pessimistic sentiment.

In general, last week was successful for the AUD, which at first, took advantage of the external background, and later, statistics to regain from losses of September. Unemployment rate in Australia declined to 5.2% in September versus the level of 5.3% in August. This data demonstrated dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.

This data has scored out expectations that the RBA will reduce the rate in the nearest future. At the last regular meeting the Reserve Bank of Australia decided to leave interest rate unchanged at the level of 4.75% per annum. Thus, the pause in the process of monetary tightening policy of the RBA has been lasting for 11 months. In the follow-up comments the regulator said that monetary policy can mitigate in the future if inflation requires it. The follow-up statement said that more time can be required to analyze the impact of turbulence in the markets. Apparently, the rate of the RBA is unlikely to be raised until the first quarter of 2012.

 

[LF.Anastasia]

NZD: New Zealand Dollar displays unflagging optimism

At the Forex currency market the New Zealand Dollar rate increased in the middle of the week due to optimism in the market and expectations of prompt resolution to debt problems in Europe.

Forex forecast: MACD indicator for the pair NZD/USD is in the negative area, and started sideways movement, not giving a clear signal. Stochastic Oscillator does 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 0.7990, the pair will go to 0.8010 and 0.8030. If upward breakdown does not take place, target for the sales will be the level of 0.7950.

According to economists from Fitch, current account surplus in New Zealand will expand in 1012 and amount to 4.9%, in 2013-5.5%. At the same time net level of foreign debt of New Zealand is above the level corresponding to its ranking. Finance Ministry of the country noted that rating agencies in the world are too cautious about debt problems and it is still unknown whether the similar actions should be expected from other players in the ranking sector. Earlier the head of the Reserve Bank of New Zealand said that probably financing of the banks in the country can become a problem in 1012. According to Bollard banking system of New Zealand is in a better state now that it was in 2008; however risks from Europe and the U.S. are still there. The rate of NZD is still overvalued.

As it was made public earlier, house prices QV in New Zealand increased by 0.7% y/y in September against the rise of 0.1% y/y in August. Meanwhile, the AUD is closely monitoring the situation in China, since potential trade war between China and the USA does not look promising to high-yielding currencies.

Prior statistics showed that GDP in New Zealand increased by 0.1% q/q (+1.5% y/y) in Q2 against +0.9% q/q (+1.6% y/y) in Q1. Commodity prices ANZ in New Zealand fell by 1.3% m/m in September against -1.2% m/m. It is obvious that economy of the country, which is focused on exports, suffers from significant external impact: we are speaking here about global reduction in demand all over the world. Therefore, economy of New Zealand has actually fallen into stagnation: GDP almost stopped growing in the last quarter, which only proves that the decision of the RBNZ not to change the levels of the interest rate was logical. The report disappointed market and currently it is quite possible that regulator will keep interest rates at this level for a long time, at least until the end of spring 2012.

Business activity index in the service sector of the country decreased to 53.2 points in September against preliminary level of 53.8 points. At the same time, 4 out of 5 components of the index have increased, and only one component (warehouse stock) has decreased. Index shows ambiguous data: there have been too many mixed external factors lately.

 

[LF.Anastasia]

EUR/USD: Investors started to sell Euro, moving away from risks

The pair EUR/USD is traded downward at the Forex currency market on Thursday morning as investors begun to fear that there is no consensus in the issue how to extricate the Eurozone from crisis.

By 9.30 MSK the Euro is at 1.3704 against yesterday’s closing level of 1.3759.

Despite previous news, Germany and France still cannot agree on the rescue strategy for Eurozone, in particular on the scheme of expansion the Fond EFSF. Representative of Finland has announced that all discussions about raising required amount for the Fund are used to cover up additional costs of strong European countries.

Now it appears that market considers possible disappointment by the results of the EU summit on 23 October.

The day will be eventful with European data of various contents; the U.S. news is scheduled for the release in the afternoon.

Most likely the pair EUR/USD will not leave the range of .3650-1.3750 on Thursday.

 

[LF.Anastasia]

GBP: British Pound failed to determine movement direction

At the Forex currency market the British Pound rate is declining on Thursday morning, since investors’ optimism in regards to prompt resolution of European debt problems is fading away.

Forex forecast: MACD indicator for the pair GBP/USD started to grow moderately in the negative area, shaping a buy signal; however volumes are decreasing. Stochastic Oscillator goes 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 1.5720 target for the purchase will become the levels of 1.5730 и 1.5750. However, if external negative factor intensifies, selling target will be the level of 1.5700.

Great Britain keeps reiterating that it is Europe that impedes its recovery. Yesterday representative of the Bank of England Mr. Bean said that the Bank of England is now focused on medium- term inflation prospects; however the country is still affected by the developments in Eurozone. Recent data, which showed the rise in inflation, had been triggered by number of factors of temporary nature.

CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which affects economy. We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the drastic crisis now.

The head of the Bank of England Mr. King said earlier that additional measures to stimulate British economy are fully justified currently and slowdown of economic pace was caused by global imbalance. According to him, decline in exports volumes is harmful for the British economy. In addition, European problems have a negative impact on the pace of development of British economy.

As it became known earlier retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

 

[LF.Anastasia]

CHF: Swiss Franc is getting weaker after steady growth

At the Forex currency market Swiss Franc rate is moving away from local highs, which it was able to reach while market had been distracted. Now SNB is again undertaking to bring exchange rate of the currency to more comfortable levels.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal. Stochastic Oscillator is coming out of the oversold zone, and started to shape a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9070, the pair USD/CHF will go to 0.9080 and 0.9100. If upward breakdown does not take place, the pair will remain close to the current levels. It became known today that trade surplus In Switzerland amounted to 1850 billion SHF in September. Market has ignored this information.

As it became known earlier, producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible. Index of PMI SVME fell to 48.2 points in September against the level of 51.7 points in August. In addition retail sales in Switzerland fell by 1.9% y/y in August against +1.9% y/y a month earlier. According to the annual report of the SNB, over the next 6 month economy of the country will come to a standstill due to the impact of the expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start to consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could be interpreted as follows: regulator’s power to maintain the Franc is fading away. We would remind that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc.

Earlier trade union of Switzerland urged authorities and the Bank to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession. Representative of the Trade Union believe this measure will also support employment sector.