Forex Analysis for 30.05.2012
EUR/USD: Euro is under pressure again
The pair EUR/USD traded downward at the Forex currency market on Wednesday morning. By 7.30 Moscow time the Euro is at 1.2467 against closing session level of 1.2502. Negative impact came from Spain: it became known last night that the head of the Bank of the country will resign ahead of schedule.
Agency Egan-Jones has downgraded sovereign debt rating of Spain from BB to B, forecast is “negative”. Market fears that similar steps will be made by major rating agency in the near future. Investors will watch for important macro-economic statistics from Eurozone today, in the afternoon the data on the U.S. labour market for may will be made public.
Most likely the pair EUR/USD will not go beyond the range of 1.2440-1.2550 at the trading session on Wednesday.
USD goes up in pairing with Rouble
With the start of the trading session of MICEX the Russian Rouble rate traded downward in pairing with the USD due to new round of pessimism in the world capital markets.
Trading session for the USD started at the level of 32.35 roubles, which is 22 kopeks more than yesterday’s closing session level; the Euro started movement at the level 40.36 roubles, (+4 kopeks).
Dual currency basket value amounted to 35.98 roubles today (+13 kopeks).
Therefore, the Rouble continues to face entire range of negative factors from external background; even interventions of the Central Bank of Russian federation were not able to support currency.
Presumably the pair USD/Rouble will be in the channel of 32.30-32.55 USD/RUR at the trading session on Wednesday.
GBP: British Pound continues to climb down
At the Forex currency market the British Pound Sterling rate continues to climb down on Wednesday morning under growing negative pressure from external background.
Forex forecast: MACD indicator for the pair GBP/USD has broken through the signal line from top to bottom and is going down, giving a sell signal. Stochastic Oscillator tends to go out of the oversold zone and started to shape a buy signal.
Forex recommendations: in case of breakdown at the level of 1.5600 the pair GBP/USD will go to 1.5590 and 1.5570.
The GBP was prepared to regain at the beginning of the week; however external negative factors created an obstacle.
However there are all grounds for growth. Confederation of British Industry reported yesterday that volume of retail trade in the UK has grown in May after decline in April. Balance of sales amounted to 21% versus -6% a month earlier, forecast for June is positive as well.
Mr. Broadbent from the Bank of England said earlier that fears concerning European economy continue to have dramatic impact on British economy, the effect of which will be difficult to eliminate. National Central Bank has scenarios of actions in case of deterioration of macro-economic situation in Eurozone; however the size of internal interventions also has limits.
It became known earlier that CPI in the UK rose by 0.6% m/m (+3.0% y/y) in April against +3.5% earlier. Therefore, for the first time market has real reasons for accepting the fact that inflation in the country can reach target range designated by the regulator. Index is at the levels specified by the Bank of England for the first time since February 2010. So, the head of the Bank of England spared from providing explanations on CPI levels to Finance Ministry.
Unemployment rate in the country amounted to 4.9% in April; number of unemployed unexpectedly decreased by 13.7 thousand on monthly basis. At the same time the data for March has been revised: number of unemployed reduced by 5.4 thousand against primary assessment of growth by 3.6 thousand.
According to the minutes of the last meeting of the Bank of England, Mr. Miles voted for expansion of the QE program for 25 billion pound sterling; as a result the ratio of votes was: 8 to 1. Mr. Bean, representative of the Bank of England believes that in case of deterioration of the global economic situation, launch of another QE program can be required. Most likely dates for shutting down of the current program will be rescheduled for the later time. He also assessed recovery of British economy as “painfully slow”.
CHF: Swiss Franc continues to retreat
At the Forex currency market Swiss Franc rate traded downward on Wednesday. Due to sustained negative factors the session became the seventh session of descending trend.
Forex forecast: MACD indicator for the pair USD/CHF goes upward in the positive area and is giving a buy signal. Stochastic Oscillator remains in the overbought zone and is giving a similar signal.
Forex recommendations: in case of breakdown at the level of 0.9650 the pair USD/CHF will go to 0.9660 and 0.9680.
Statistics released this morning showed that leading indicator index KOF rose to 0.81 points in May against expectations of 0.41 points. It is a good indicator; however Franc has ignored this statistics because of strong external pressure.
Statistics released earlier showed that business sentiment ZEW in Switzerland fell to 4.0 points in May versus forecast of -8.0 points and level of +2.1 points in April. Most likely this data is based on assessment of external conditions.
PMI in manufacturing sector of Switzerland fell to 46.9 points in April against the level of 51.1 points in March. Earlier, Ministry of Finance reiterated approval of pegging of the rate of Franc to the Euro. It will mean that the level of 1.20 will be preserved for a long time. Consumption indicator UBS in Switzerland rose to 1.22 points in March against provisional estimate of 0.9 points. Currency reserves rose to 237.5 billion in March against previous level of 224.9 billion francs. PMI SVME in Switzerland increased to 51.1 points in March against the forecast of 49.5 points.
Unemployment rate dropped to 3.1% in April against 3.2% earlier.
It became known last week that trade balance in Switzerland amounted to 1.33 billion francs in April versus forecast of 1.9 billion francs. Most likely it happened because of high price of the currency, along with decline in the buying activity. Consumer confidence index in Switzerland rose to -8 points in April against the level of -19 points in January. This is a good signal especially because economists expected that index would continue to decline.
GDP rose by 0.1% q/q (+1.3% y/y) in Q4 against the forecast of zero changes (+1.1% y/y). This positive data indicates that Swiss economy is getting adjusted to expensive Franc. Thus, the regulator expects that inflation in 2012-2014 will be in the range of -0.6% to +0.6% and GDP growth will be at the level of 1.0% this year.
Swiss National Bank is determined to resist external attack against Franc; yesterday the head of NB reiterated that the regulator would monitor flows of capital into economy of the country. According to him, government shall be prepared for the collapse of the European Union, although Jordan does not particular believe in such course of events
Recall, that the head of Swiss National Bank Mr. Jordan said last Friday that CB will develop a package of measures for the case of Greece discontinues membership in Eurozone; according to him a chance of this is low; however it is better to be prepared. First of all, SNB will protect the level of 1.20 in the pair EUR/CHF and in addition, the Bank is going to keep control over flows of foreign capital into the country to ensure smooth exchange rate of Franc and prevent growth of its influence on exports and domestic demand.
JPY: Japanese Yen is in demand
The Japanese Yen rate traded upward at the Forex currency market, due to investors' interest to safe currency, amid negative external conditions.
Forex forecast: MACD indicator for the pair USD/JPY is moving along the signal line in the negative area and is not giving a clear signal. Stochastic Oscillator slightly goes down in the neutral zone, giving a sell signal.
Forex recommendations: in case of breakdown at the level of 79.30 the pair will go to 79.20 and 78.95.
Statistics released this morning showed that index of manufacturing activity PMI/Nomura amounted to 50.7 points in May, which agreed with preliminary expectations. The figures were neutral, so market did not pay much attention to them and focused on global performance.
Unemployment rate in Japan increased to 4.6% in April against 4.5% in March; retail sales grew by 5.8% last month versus expectations of +6.0% y/y. In general, statistics was not very impressive and growth in unemployment rate is easy to explain.
Earlier agency Fitch reported downgrade of the Japanese rating based on the fact that public debt of the country continues to increase. Japanese economy has grown much above forecasts in Q1, showing the rise of 4.1% y/y. Strong support to GDP growth was provided by the sector of consumer spending which had been backed up by government subsidy. Given, however that consumer spending increases only temporarily, GDP growth may be temporary as well. As soon as index of consumer spending decreases, pressure on CB will rise too. Meanwhile the head of the Bank of Japan Mr. Shirakawa has stressed that local economy is still in the disastrous situation.
Minutes of the meeting of the Bank of Japan of 27 April, which were made public earlier, did not provide a lot of information: the document stated that CB should avoid introduction of policy that can be considered as a kind of monetization. The effect of monetary policy easing in Japan will be clearly traced, as soon as the system demonstrates steady recovery. In general, the document did not provide any information that would be fundamentally new to the market.
We would remind that in the result of two-day meeting of the Bank of Japan the Regulator decided to leave discount rate of the country at the level of 0.1% per annum, as expected. Asset purchase program remained unchanged at the level of 70 billion yen. In the follow-up comments the Bank of Japan noted that anxiety of the world capital market is reflected on the national economy, impeding recovery, while economic system of the country is shifting into the phase of more rapid growth. So, the Bank of Japan refrained from expansion of the stimulus program; however there is every reason to believe that the regulator will make it before July this year.
AUD Sales of Australian Dollar have not ceased
At the Forex currency market the Australian Dollar rate goes down in the middle of the week, to new local lows under increased pressure from external background. Rumors in the market saying that, Chinese program of additional stimulation is not going to be extensive, are unfavourable for the AUD.
Forex forecast: MACD indicator for the pair AUD/USD descends in the negative area, while volumes are high, and is giving a sell signal. Stochastic Oscillator is in the neutral zone; it shifted into sideways and is not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 0.9760 the pair will go back to 0.9750 and 0.9730.
Statistics released in the middle of the week showed that total volume of production in the construction sector of Australia rose by 5.5% q/q in Q1. In addition, retail sales fell by 0.2% m/m in April against the forecast of growth of 0.2% m/m.
Due to the news about retail sales the AUD rate went down sharply.
Sale of houses in the primary housing market HIA grew by 6.9% m/m in April against decline of 9.4% a month earlier. This is a good signal; although it should be regarded as recovery from the previous slump. Leading indicator index CB rose by 0.2% in March against zero change in February. It became known earlier that inflationary expectations MI in Australia rose by 3.1% in May against the level of +3.3% in April. Consumer sentiment index Westpac-MI in Australia rose by 0.8% m/m in May to the level of 95.3 points, which is above forecasts.
Trade balance amounted to –A$1.6 billion in March against the forecast of –A$1.2 billion. Growing deficit is not the best indication for Australian economy. It became known earlier that retail sales in Australia rose by 0.9% m/m in March against expectations of +0.2% m/m. In addition, business confidence index NAB increased to 4 points in April versus the level of 3 points in March.
Unemployment rate in Australia fell to the lows of the year in April, reaching 4.9% against 5.2% a month earlier. Number of new jobs rose by 15 thousand last month against expectations of decline of 0.5 thousand. Report illustrated that employment increased due to the rise in the part- time jobs (+26 thousand); however number of full time jobs fell by 10.5 thousand. Such strong figures on unemployment rate have reduced chances that interest rate will be lowered in the near future.
We would remind that meeting of the Reserve Bank of Australia, which was held at the beginning of May, had astonishing and alarming effect on the market. Interest rate was reduced by 50 basis points to the level of 3.75% per annum. The head of RBA, Mr. Stevens has referred to inflation in his comments, saying that slowdown in inflation give cause for government’s concern. It is logical that the lending rate has been reduced to 3.75% from 4.25% in order to create more flexible lending conditions. However it is obvious that Australian economic system faces serious growth difficulties.
CAD: Canadian Dollar is getting weaker today
At the Forex currency market the Canadian Dollar rate traded downward on Wednesday due to another round of external negative factors and the fall in oil prices.
Forex forecast: MACD indicator for the pair USD/CAD continues to go up in the positive area and is giving a 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 1.0270 the pair will go to 1.0280 and 1.0300 and further on. Consolidation near the current levels is possible.
Next meeting of the Bank of Canada is scheduled for 5 June, economists do not expect any fundamental news:most likely the regulator will keep interest rate unchanged.
The Bank of Canada will not make any sharp movements as long as external background remains weak, as well as housing market in the country.
The head of the Bank of Canada Mr. Carney said this month that monetary tightening can be justified only if it progresses gradually. This subject has been raised recently: Mr. Carney said a week earlier that economic recovery would increase chances of monetary policy tightening. Meanwhile stimulation of economic activities will be maintained.
According to projections made by the Bank of Canada, country’s economy will regain full capacity in the first half of 2013.
The head of the Bank of Canada Mr. Carney said earlier that economic growth in the country is above the forecast and authorities have number of tools in order to protect housing market from overheating. Nevertheless instruments of monetary policy will be applied only in case of emergency.
Statistics released last week showed that leading indicator index rose by 0.3% in April against expectations of growth of 0.4%, which was the tenth factor of growth in a row. At the same time, retail sales in Canada increased by 0.4% in March versus forecast of +0.3% m/m.
PMI fell to 52.7 points in April from 63.5 points a month earlier; thus, the index has been declining for the second consecutive month. According to report two out of 4 components of PMI demonstrated growth last month; however the data on employment rate (decline to 52.2 from 52.7) and price component (60.3 from 63.9) have disappointed investors.
It became known earlier that CPI in Canada rose by 0.4% m/m (+2.0% y/y) in April; inflation, excluding food and energy, rose by 0.4% m/m (+1.9% y/y) last month. Wholesale sales increased by 0.4% in March against forecast of +0.3%. The index looks encouraging.
Analysis Department of
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