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[LF.Anastasia]

JPY: Bank of Japan is preparing for intervention, Japanese Yen has no reaction

At the Forex currency market the Japanese Yen rate almost stands still on Tuesday while investors adopted wait and see attitude until Wednesday when the plan to resolve debt problems of Europe is supposed to be unveiled. Meanwhile, the Bank of Japan is seriously planning monetary intervention if players turn attention on the JPY again in case of deterioration of the external background.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to decline, giving a sell signal. Stochastic Oscillator goes down in the neutral zone, shaping a similar signal.

Forex recommendations: in case of breakdown at the level of 76.05, the pair will go to 76.00 and 75.80. If downward breakdown does not take place, the pair will consolidate at the current levels.

Newly appointed Finance Minister of Japan Mr. Adzumi said that regulator is ready to take decisive measures if the JPY continues to grow, despite the fact that recent rise in the rate of the national currency is the result of speculations. At the same time the Bank of Japan is aware that dynamics of the Yen is based not on the fundamental data but only on the targets of speculators; therefore injections would need to be voluminous and cyclic.

The Yen increased by 6% this year, thus, forcing Government to take measures.

We would remind that anti-inflation strategy is nearly ready in Japan; the country is prepared to announce additional infusion of 2 trillion yen to help companies-exporters which suffered from overvalued national currency. Another 2 trillion yen will be used in the employment sector.

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. The head of the Bank of Japan confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms. According to him situation in Japan is stable at the moment and authorities expect revival of the economic growth soon.

 

[LF.Anastasia]

EUR/USD: Euro is in anticipation of news

The pair EUR/USD is growing moderately at the Forex currency market on Wednesday morning.

By 9.30 MSK the Euro is at 1.3914 against yesterday’s closing level of 1.3907.

Movement in the market is unlikely to be swift today; Investors expect publication of the anti-crisis plan for Eurozone from Germany and France this afternoon.

In general, there is some still disagreement on the number of issues and it is doubtful that final version of a plan will be presented. The cause for arguments is the size of Greek debt to private investors that is to be cancelled –exact amount of which is still unknown. A day later, another European summit will be held; however its effect will be imperceptible for the markets. In general, basic expectations for the plan to rescue Eurozone have already been incorporated in the current prices.

Most likely the pair EUR/USD will not go beyond the range of 1.3870-1.3950 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound continues to grow

At the Forex currency market the British Pound Sterling rate continues to grow in the middle of the week due to support from Investors’ expectations.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator has come into overbought zone, giving a similar signal.

Forex recommendations: in case of break down at the level of 1.6020, target for the purchase will be the levels of 1.6030 and 1.6050. There is high probability of significant downward correction.

Debates regarding monetary policy are still going on in the UK. Thus, yesterday, Mr. Bean noted that as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%.

The head of the Bank of England Mervyn King noted that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, there is a double-edged sword here and no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline of inflation in 2012. 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.

Earlier it became known that 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.

According to Mr. Will a member of the Bank of England and MPC, British economy demonstrates slow growth rate and probable recession in Q4 would not have been a great surprise.

 

[LF.Anastasia]

CHF: Swiss Franc continues to strengthen

At the Forex currency market Swiss Franc rate continues to strengthen on Wednesday.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal. Stochastic Oscillator has come into the oversold zone, and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 0.8750, the pair USD/CHF will go to 0.8730 and 0.8710. If downward breakdown does not take place, the pair will remain close to the current levels.

Macro economic situation in Switzerland remains almost unchanged this morning. SNB has not made comments on the growth of Franc yet.

It became known yesterday that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive.

According to the data released last week, 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.

We would remind that kick-start for 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 have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall 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.

According to the annual report of the SNB, over the next 6 month economy of the country will move in the sideways, due to the impact of 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.

 

[LF.Anastasia]

JPY: Japanese Yen has resumed its growth

At the Forex currency market the Japanese Yen rate continues to grow in the middle of the week: yesterday the Yen has reached postwar highs at 75.73 and then went above 76, returning below this level this morning. Investors continue to ignore the willingness of the Bank of Japan to conduct another intervention.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to decline, giving a sell signal. Stochastic Oscillator has come into oversold zone, shaping a similar signal.

Forex recommendations: in case of breakdown at the level of 75.85, the pair will go to 75.65 and 75.50. If downward breakdown does not take place, the pair will consolidate at the current levels.

A meeting, which has started today the Bank of Japan is going to touch a topic of intervention. The Yen increased by 6% this year, thus, forcing Government to take measures.

At the same time Japanese press gave information that the Bank of Japan is planning to discuss a chance of common intervention with the largest world’s regulators. We would remind that anti-inflation strategy is nearly ready in Japan; the country is prepared to announce additional infusion of 2 trillion yen to help companies-exporters which suffered from overvalued national currency. Another 2 trillion yen will be used in the employment sector.

Newly appointed Finance Minister of Japan Mr. Adzumi said that regulator is ready to take decisive measures if the JPY continues to grow, despite the fact that recent rise in the rate of the national currency is the result of speculations. At the same time the Bank of Japan is aware that dynamics of the Yen is based not on the fundamental data but only on the targets of speculators; therefore injections would need to be voluminous and cyclic.

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. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

 

[LF.Anastasia]

AUD: Australian Dollar was greatly distressed by statistics

The Australian Dollar rate is traded downward at the Forex currency market, largely due to statistics released this morning.

Forex forecast: MACD indicator for the pair AUD/USD has broken through the signal line from top to bottom and is now in the positive area, giving a buy signal. Stochastic Oscillator tends to reverse in the overbought zone and started to shape a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0380, the pair will go to 1.0370 and 1.0350. If downward breakdown does not take place, the pair will consolidate at the current levels.

According to the data released today, CPI in Australia rose by 0.6% q/q (+3.5% y/y) in Q3 against the forecast of growth by 0.5% on quarterly basis. At the same time, inflation increased by 0.9% on quarterly basis in Q2; slowdown in CPI is obvious.

It is worth noting that seasonally-weighted CPI rose by 0.3% (it is being tracked by RBA). Growth of inflation has been minimal since Q3 1997.

It is possible now that at the meeting on 1 November the RBA will decrease the rate from the current 4.75% per annum.

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.

Business confidence NAB in Q3 amounted -4 points while in Q2 the index had been at the level of +5 points. According to observers’ estimates the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted +5 points against +10 points previously and amounted to level of +18 points on annual basis against prior +27 points. Sharp decline in the indicator kicked off a quarter earlier, is still going on.

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.

 

[LF.Anastasia]

CAD: Canadian Dollar has started to grow again after correction

At the Forex currency market the Canadian Dollar rate started to grow again after correction last night.

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

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0010, the pair will go 1.0080 and 1.0030. If downward breakdown does not take place, the pair will remain at the current levels.

According to the decision of the Bank of Canada, interest rate was left at the previous level of 1.00% per annum. This agreed with markets’ expectation.

However, in the comments, regulator announced downgrade of his forecasts for economic growth and inflation. Thus, recurrence of the economy of Canada to the previous levels will take longer than previously expected, since debt crisis in Europe and weakness of American economy has a significant impact on the economic developments in the country.

Forecast for economic growth for the current year was lowered to 2.1%; revised to 1.9 ( 2.6% previously) for 2012. In 2013 the situation seems more optimistic: the forecast was revised up to 2.9% from the previous level of 2.1%.

Inflation forecast of the Bank of Canada has also been revised: it is expected that by mid- 2012 CPI will fall to 1% and in 2013 the indicator will amount 2%.

As it became known at the end of last week, CPI in Canada rose by 0.2% m/m (+3.2% y/y) against the forecast of growth by 0.1% m/m. At the same time base inflation showed growth of 0.5% m/m (+2.2% y/y) versus the forecast of growth by 0.2% m/m. At the moment the rise in inflation is within acceptable limits and is not harmful to economy. Leaders of the large Canadian companies indicate decline in inflationary expectations; it is predicted that in 2012 CPI will be in the range of 1-3%. 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.

 

[LF.Anastasia]

EUR/USD: Euro continues to tend upwards

The pair EUR/USD continues to grow at the Forex currency market on Thursday morning taking advantage of the decisions of the EU summit on Greece and recapitalization of European banks. By 9.35 MSK the Euro is at 1.3986 against yesterday’s closing level of 1.3906. In general, EU summit has streamlined the situation: European banks will be recapitalized, capital reserve requirements will be raised to 9% in 2012 and private capital will write off 50% of Greece’s debt. New aid plan to Greece in the amount of 100 billion will be considered and approved before the end of this year. All this news was welcomed by market and today, the pair Euro/Dollar is in a favourable position, approaching the level of 1.40. In the afternoon, attention of the market will be focused on the U.S. data including dynamics of GDP in Q3 which is going to be published today. Most likely the pair EUR/USD will not go beyond the range of 1.3890-1.4020 at the trading session on Thursday.

 

[LF.Anastasia]

GBP: British Pound seeks to soar up

At the Forex currency market the British Pound Sterling rate continues to grow on Thursday morning, supported by external positive factors. Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator has come into overbought zone, giving a similar signal. Forex recommendations: in case of break down at the level of 1.6020, target for the purchase will be the levels of 1.6030 and 1.6050. There is high probability of significant downward correction. Macro-economic background remains unchanged in the UK and current dynamics of the market is directly associated with investors’ optimism about Eurozone. Debates regarding monetary policy are still going on in the UK. Thus, yesterday, Mr. Bean noted that as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%. It became known earlier that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. As it became known earlier retail price index BRC in the UK rose 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. Earlier it became known that 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. The head of the Bank of England Mervyn King noted that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, there is a double-edged sword here and no one can guarantee that QE2 can increase the volume of borrowing. Meanwhile, King expects sharp decline of inflation in 2012. 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 creates new obstacles to 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. Meanwhile, member of MPC Mr. Dale noted yesterday that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a member of the Bank of England and MPC, British economy demonstrates slow growth rate and probable recession in Q4 would not have been a great surprise.

 

[LF.Anastasia]

CHF: Swiss Franc continues to rise after a short break

At the Forex currency market Swiss Franc rate is traded upward on Thursday after yesterday’s slight correction.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal., while volumes are minimal. Stochastic Oscillator has come into the oversold zone, and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 0.8750, the pair USD/CHF will go to 0.8730 and 0.8710. If downward breakdown does not take place, the pair will remain close to the current levels.

There are no fundamental changes in the economy of Switzerland this morning. SNB has not made comments on the growth of Franc yet..

We would remind that kick-start for 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 have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall 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. According to the annual report of the SNB, over the next 6 month economy of the country will move in the sideways, due to the impact of 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. Surplus of trade balance amounted to 1850 billion SHF. It became known yesterday that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive. 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.