LiteForex's analytics

[LF.Anastasia]

GBP: British Pound Sterling is traded with minimal deviation on Friday

At the Forex currency market the British Pound Sterling rate is traded slightly downward on Friday, as external background remain uncertain although there has not been any additional negative news in the market.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal.

Forex recommendations: in case of break down at the level of 1.6035, target for the sale will be the levels of 1.6020 and 1.6000. If downward breakdown does not take place, the pair will stay at the current levels.

Macro-economic situation in Great Britain has not changed much.

Representative of the Bank of England Mr. Bean said earlier that growth rate of the British economy is slowing down in the second half of the year and he believes that real spending of the households will fall even more significantly in the second half of the year.

Member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a representative of the Bank of England and MPC, British economy demonstrates slow growth rate and a chance of recession in Q4 would not be a great surprise.

Debates about monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, 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 consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. 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 has dropped despite the seasonality. Therefore, basic demand is minimal at the moment. As it became known earlier, volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

Meanwhile, King expects sharp decline in 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 impediments to economy. We would remind that at 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, they increased volume of asset redemption 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 asset redemption 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 serious crisis now. As it became known earlier, preliminary GDP in the UK rose by 0.5% q/q (+0.5% y/y) in Q3. In addition, volume of industrial output increased by 0.5% q/q (-0.7% y/y) in Q3. Report on GDP became a good surprise for investors; however a member of MPC Mr. Osborne immediately stressed that Britain has to undergo a long way to achieve stability.

 

[LF.Anastasia]

CHF: Swiss Franc concludes this week at a steady pace

At the Forex currency market Swiss Franc rate is traded slightly downward on Friday.

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 is moving in the sideways in the neutral zone, not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 0.8800, the pair USD/CHF will go to 0.8815 and 0.8835.

Representative of Swiss National Bank said this week that strong Franc continues to exert pressure on the economy of the country and in the event of deflation the SNB is prepared to take extreme measures.

He reiterated that economy of Switzerland is extremely dependent on exports.

It became known earlier that business activity index PMI in Switzerland fell to 46.9 points in October against the forecast of 47.7 points. For the present, it is also the aftereffects of the expensive national currency.

We would remind that kick-start for consolidation of the Franc 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 are growing 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.

Surplus of trade balance amounted to 1850 billion SHF. It became known earlier 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.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, 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.

 

[LF.Anastasia]

JPY: Japanese Yen almost stands still on Friday

At the Forex currency market the Japanese Yen rate stands still at the end of the week after rapid growth in the last five days.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is moving sideways in the neutral zone and is not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 78.10, the pair will go to 78.20 and 78.50. If upward breakdown does not take place, the pair will consolidate at the current levels.

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 said in the comments that he is going to continue lending program until 30 April 2012. The Bank has refrained from 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.

According to statistics released earlier this week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released earlier, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to take prompt actions. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required. This week, the Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected; at the same time, asset purchase program was increased up to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecasts in the future. According to the estimates of the Bank of Japan, exchange rate of the Yen will remain high for a while; the Bank has not clarified whether it means that currency intervention threatens the JPY or not.

We would remind that the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%.

 

[LF.Anastasia]

AUD: Australian Dollar has not demonstrated progress on Friday

At the Forex currency market the Australian Dollar rate almost stands still at the end of the week, as investors prefer to refrain from sharp movements today after full bunch of information received this week.

Forex forecast: MACD indicator for the pair AUD/USD has merged with the signal line and is not giving a clear signal. Stochastic Oscillator is going down in the neutral zone, giving a sell signal and coming closer the oversold zone.

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.

This week, the Reserve Bank of Australia announced reduction in the interest rate up to 4.50% per annum, by 25 basis points, which in general agreed with expectations. In the follow-up comments the RBA noted that inflation is being curbed now, due to the high rate of the currency and low demand of population; regulator expects that in 2012 inflation will be at the level of 2-3%. The Bank also emphasized deterioration of the conditions in the labour market and decrease in prices for the raw materials. Concern about developments in Eurozone is still high, and growth rate of the national economy seems to be moderate. According to RBA, lending rates are now slightly higher than the average level, despite softening of general conditions

It also worth noting, that RBA hinted at further lowering of the rates if general conditions do not improve.

Unemployment rate in Australia declined to 5.2% in September against the level of 5.3% in August. This data shows progress 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.

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. Monetary politician, Mr. Evans pointed to a chance that the rate might go down in November, since low growth of the index indicates general pessimistic sentiment.

Business confidence NAB in Q3 amounted to -4 points in Q3; while the index had been at the level of +5 points in Q2. According to estimates of the observers, the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted to +5 points against +10 points previously and to the 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. As it became known earlier retail sales in Australia rose by 0.4% m/m in September against the growth of 0.6% m/m in August. The data agreed with expectations; the growth has been observed in all retail sectors, although it was just minor.

We would remind that according to the data released earlier, 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 the lowest since Q3 in 1997.

 

[LF.Anastasia]

EUR/USD: Euro might find itself under European pressure again

The pair EUR/USD is traded with slight deviation at the Forex currency market on Monday morning, due to new European problems

By 9.15 the Euro is at 1.3773 against closing level of 1.3789 on Friday.

This time, negative news came from Italy where opposition urges Prime Minister Silvio Berlusconi to resign in order to displace him before the key vote on the budget scheduled for November 8.

Meanwhile, Lower House of Parliament of Italy is ready to vote against Berluskoni, Italian securities yield is growing up, which indicates the fall in confidence at the markets.

Greece will also make one ponder: consensus has been reached there at weekend on the issue of forming a government of national unity. Prime Minister Papandreou said earlier that he would resign as soon as all details would be worked out.

Therefore, external background is very eventful this morning which will be reflected on the market.

Most likely the pair EUR/USD will leave the range of 1.3700-1.3820 oat the trading session on Monday.

 

[LF.Anastasia]

GBP: British Pound went down slightly at the beginning of the week

At the Forex currency market the British Pound Sterling rate is traded downward on Monday, as investors took a break to analyze and draw a deduction from the facts of the stream of news last week.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator is changing direction again in the neutral zone; now it moderately goes upward, giving a buy signal.

Forex recommendations: off the market.

Feasible event scenario t Forex: in case of break down at the level of 1.6005, target for the sale will be the levels of 1.6000 and 1.5990. If downward breakdown does not take place, the pair will stay at the current levels.

It became known this morning that index of consumer confidence Lloyds in the UK fell to -72 points in October against the level of -67 points a month earlier. It is a negative signal reflecting among other things, negative impact of the European debt problems.

A meeting of the Bank of England will be held this week. It is expected that interest rate will be kept unchanged at the level of 0.50% per annum. The follow-up comments of regulator about general economic situation and inflationary pressure may be of interest.

Meanwhile, Member of MPC Mr. Dale says earlier that he expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a representative of the Bank of England and MPC, British economy demonstrates slow growth rate and a chance of recession in Q4 would not be a great surprise. Representative of the Bank of England Mr. Bean said earlier that growth rate of the British economy is slowing down in the second half of the year and he believes that real spending of the households will fall even more significantly in the second half of the year.

The head of the Bank of England, Mervyn King anticipates sharp fall in 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 impediments to economy. We would remind that at 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, they increased volume of asset redemption 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 asset redemption 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 serious crisis now.

Debates about monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, 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%.

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. It became known earlier that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low.

 

[LF.Anastasia]

CHF: Swiss Franc is getting weaker again

At the Forex currency market Swiss Franc rate is traded downward, amid decline in investor interest to trades, which is especially evident after tumultuous last week when market had to react to the lots of information.

Forex forecast: MACD indicator for the pair USD/CHF has broken through the signal line from top to bottom and is traded in the negative area, indicating moderate volume of trades. Stochastic Oscillator is moving sideways in the neutral zone, not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 0.8940, the pair USD/CHF will go to 0.8950 and 0.8975.

According to statistics released earlier, currency reserves of Switzerland decreased to 242.7 billion francs in October against ***.4 billion in September.

Judging by dynamics of the Franc last week, Swiss National Bank ponders about the maximum permissible rate of EUR/Franc. The news about lowering the level of currency reserves has also been unfavourable for SHF.

As it became known earlier index of business activity PMI in Switzerland fell to 46.9 points in Switzerland against the forecast of 47.7 points. For the present, it is also the aftereffects of the expensive national currency.

Representative of Swiss National Bank Mr. Dantin said last week that strong Franc continues to exert pressure on the economy of the country and in the event of risks of deflation the SNB is prepared to take urgent measures. He reiterated that economy of Switzerland is extremely dependent on exports.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, 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.

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, there is a chance that expensive national currency may have its impact there too. Surplus of trade balance amounted to 1850 billion SHF in September. It became known earlier that consumption indicator UBS in Switzerland rose to 0.84 points in September against the 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.

 

[LF.Anastasia]

JPY: Japanese Yen is stable at the beginning of new week

At the Forex currency market the Japanese Yen rate on Monday; the currency is definitely waiting for new signals.

Forex forecast: MACD indicator for the pair USD/JPY has broken through the signal line from bottom to top and is traded in the positive area; however a buy signal is very weak. Oscillator is moving sideways in the neutral zone and is not giving a clear signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 78.20, the pair will go to 78.30 and 78.50. If upward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that preliminary index of coincident indicators in Japan fell by 1.4% m/m in September against the decline of 0.1% m/m last month. It is a negative signal for the Japanese economy, indicating sluggish rate of economic growth if there is any growth at all.

According to statistics released last week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released earlier, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to take prompt actions. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required.

We would remind that the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Adzumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%.

Last week, the Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected; at the same time, asset purchase program was increased up to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecasts in the future. According to the estimates of the Bank of Japan, exchange rate of the Yen will remain high for a while; the Bank has not clarified whether currency intervention threatens the JPY or not.

 

[LF.Anastasia]

AUD: Australian Dollar declined moderately through lack of trade ideas

At the Forex currency market the Australian Dollar declines at the beginning of the week, as investors apparently took a break after strong volatility last week.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and is moving along the signal line, not giving a clear signal. Stochastic Oscillator started to go upward in the neutral zone.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0320, the pair will go to 1.0310 and 1.0300. If downward breakdown does not take place, the pair will consolidate at the current levels.

It became known at the beginning of the week, productivity index in the construction sector of Australia rose to 34.7 points in October against 30.0 points in September. However, the AUD has not responded to statistics, because external background remains mixed and investors’ trading sentiment are close to consolidation.

This week, the Reserve Bank of Australia announced lowering in the interest rate up to 4.50% per annum, by 25 basis points which in general, agreed with expectations. In the follow-up comments the RBA noted that now inflation is being curbed with the help of the high rate of the currency and low demand of population; regulator expects that in 2012 inflation will be at the level of 2-3%. The Bank also recorded deterioration of the conditions in the labour market and decrease in prices for the raw materials. Concerns about developments in Eurozone are still high, and it seems that growth rate of the national economy is going to be moderate. According to RBA, lending rates are now slightly higher than the average level, despite softening of general conditions. It also worth noting, that RBA hinted at further lowering of the rates if general conditions do not improve.

Therefore, the AUD is through the force of two strong circumstances: possible reduction in the interest rate and external negative factor.

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. Monetary politician, Mr. Evans pointed to a chance that the rate might go down in November, since low growth of the index indicates general pessimistic sentiment.

Business confidence NAB in Q3 amounted to -4 points in Q3; while the index had been at the level of +5 points in Q2. According to estimates of the observers, the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted to +5 points against +10 points previously and to the 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 against the level of 5.3% in August. This data shows progress 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 continues to give way to USD

At the Forex currency market the Canadian Dollar rate is traded downward on Monday, as interest in risk is minimal at the beginning of the week.

Forex forecast: MACD indicator for the pair USD/CAD has broken through the signal line from top to bottom and is traded in the negative area, moving along the signal line, preventing a clear signal. Stochastic Oscillator had begun to grow in the neutral zone, but later it moved into sideways, not giivng a clear signal either.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0195 the pair will go to 1.0200 and 1.0230. If upward breakdown does not take place, the pair will remain at the current levels.

Statistics released last week showed slump in the Canadian employment sector. Unemployment rate increased by 0.2% in October, up to the level of 7.3% versus the level of 7.1% in September. Full employment reduced by 71.7 thousand, part- time employment increased by 17.7 thousand.

Overall employment in Canada decreased by 54 thousand last month against the growth of 60.9 thousand in September.

After the release of this statistics representative of the Bank of Canada Harper noted that employment statistics fully reflects low confidence both in Canada and in the world; however labour sector is very volatile.

According to information received earlier, Canadian companies are going to continue effective work in the future, by increasing volume of investments and creating new jobs; however not as fast as it had been announced earlier. The forecast for sales in 2012 has been lowered in the country; as a result, local producers had 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.

CPI in Canada rose by 0.2% m/m (+3.2% y/y) in September 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%.

The Bank of Canada believes that GDP growth will amount to about 2.8% in 2011 (decline by 0.1% from the forecast in April); in 2012: 2.6% and in 2013: 2.1%. According to the Bank exports performance in Canada is weak because low demand in the USA impedes progress of the indicator and expensive CAD also makes its contribution. The rise in the interest rate will directly depend on the stability of economic growth.