LF.Anastasia
LiteForex Official, Representative
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Forex Analysis for 05.06.2012
EUR/USD: Euro is dismal again
The pair EUR/USD traded downward at the Forex currency market on Monday.
By 8.50 Moscow time the Euro is at 1.2400 against closing session level of 1.2435 on Friday.
American statistics released on Friday caused dismal strain, as the data on unemployment rate and number of jobs was below expectations.
This morning, among other things, investors have to deal with the statement of the German Chancellor Angela Merkel that she is not ready to support the idea of Eurobonds.
Therefore, after slight correction in the major pair, investors resumed sales.
Most likely the pair EUR/USD will not go beyond the range of 1.2350-1.2450 at the trading session on Monday.
GBP: British Pound remains in weak position
At the Forex currency market the British Pound Sterling remains in a weak position on Monday due to negative sentiments among investors at the global capital markets.
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 remains in the oversold zone and is giving a similar signal.
Forex recommendations: in case of breakdown at the level of 1.5360 the pair GBP/USD will go to 1.5350 and 1.5330. Consolidation at the level of 1.5420 is possible.
External situation for the Pound remained unchanged at the beginning of the week: investors are still not willing to take risk and the currency tends to go down after a week of growth. However this scenario does not exclude technical rebound.
In addition to external pessimism, comments Mr. Dale, representative of the Bank of England also contributed to the fall of the Pound in the middle of the week. Mr. Dale noted that expansion of QE will be required if external European negative factors continue to put the same amount of pressure on the British economy.
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".
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.
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. 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, market has solid base for recovery: earlier, Confederation of British Industry reported 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.
CHF: Swiss Franc is ready for correction
At the Forex currency market Swiss Franc rate stands almost still at the Forex currency market at the beginning of the week; however it is obvious that the currency has all grounds for technical correction. It is important for the currency now to obtain similar chance from external background.
Forex forecast: MACD indicator for the pair USD/CHF goes up in the positive area and is giving a buy signal. Stochastic Oscillator tends to go out of the overbought zone and started to shape a sell signal.
Forex recommendations: in case of breakdown at the level of 0.9680 the pair USD/CHF will go to 0.9670 and 0.9650.
Important Swiss statistics is scheduled for the release this week; it will give an idea on how the system operates in the conditions when currency is weak.
Global situation for Franc has not changed fundamentally: technical correction in the pair will not start until external background stabilizes.
It became known earlier 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.
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 the 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.
Statistics released earlier showed GDP in Switzerland rose by 0.7% q/q (+2.0% y/y) in Q1 against expectations of growth of 0.5% q/q (+0.7% y/y). It is a good signal which indicates that when positions of Franc go down, national economy is getting steadier. Similar conclusions can be made looking at statistics released in the middle of the week when it became known that leading indicator index KOF rose to 0.81 points in May against expectations of 0.41 points. Unemployment rate dropped to 3.1% in April against 3.2% earlier.
JPY: Japanese Yen has slightly moved away from lows
The Japanese Yen rate is being slightly corrected at the Forex currency market on Monday after the rise last Friday.
Forex forecast: MACD indicator for the pair USD/JPY goes down in the negative area, while volumes ate increasing and is giving a sell signal. Stochastic Oscillator goes slides down in the neutral zone, giving a similar signal.
Forex recommendations: in case of breakdown at the level of 78.10 the pair will go to 78.0 0 and 77.90.
It is too early to say that demand for the JPY as a “safe currency” has declined.
New round of growth at the end of last week was logical for the JPY: amid surge of panic in the market regarding collapse of Spanish economy, investors rush to move to “quiet habours”
Japanese economy in Q1 has grown more rapidly than projected, 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.
Last week, agency Fitch reported downgrade of the Japanese rating based on the fact that public debt of the country continues to increase.
Statistics released earlier 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, focusing 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.
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 sort 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 do not cease
At the Forex currency market the Australian Dollar rate continues to weaken at the beginning of new week under strong pressure from external background.
Forex forecast: MACD indicator for the pair AUD/USD descends in the negative area, while volumes are high, and is giving a sell signal. Movement of Stochastic Oscillator is in the neutral zone, it moves indistinctly and it is not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 0.96950 the pair will go back to 0.9640 and 0.9620.
Although levels of the AUD are attractive for purchase, market does not rush to enter long position because, as external background is herky-jerky.
Statistics released this morning showed that inflation has not changed on monthly basis in May, 1.8% y/y, as per estimates of TD Securities and Melbourne University.
The data released earlier showed that lending in the private sector of Australia rose by 0.4% m/m in April against the forecast of growth of 0.3% m/m. Market has not responded to this statistics, as external background acts as more powerful catalyst at the moment. 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.
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.
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.
CAD: Demand for Canadian Dollar remains low
At the Forex currency market the Canadian Dollar rate continues to decline on Monday largely due to decreasing oil prices and ongoing risk aversion amongst players.
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 ascends in the neutral zone and is ready to enter into overbought area, giving a buy signal.
Forex recommendations: in case of breakdown at the level of 1.0440 the pair will go to 1.0450 and 1.0460 and further on.
Statistics released on Friday showed that GDP in Canada increased by 0.1% m/m (+1.6% y/y) in March against decline of 0.2% m/m in February.
Next meeting of the Bank of Canada is scheduled for 5 June, economists do not expect any fundamental developments: most likely the regulator will leave 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 maximum performance 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 LiteForex
EUR/USD: Euro is dismal again
The pair EUR/USD traded downward at the Forex currency market on Monday.
By 8.50 Moscow time the Euro is at 1.2400 against closing session level of 1.2435 on Friday.
American statistics released on Friday caused dismal strain, as the data on unemployment rate and number of jobs was below expectations.
This morning, among other things, investors have to deal with the statement of the German Chancellor Angela Merkel that she is not ready to support the idea of Eurobonds.
Therefore, after slight correction in the major pair, investors resumed sales.
Most likely the pair EUR/USD will not go beyond the range of 1.2350-1.2450 at the trading session on Monday.
GBP: British Pound remains in weak position
At the Forex currency market the British Pound Sterling remains in a weak position on Monday due to negative sentiments among investors at the global capital markets.
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 remains in the oversold zone and is giving a similar signal.
Forex recommendations: in case of breakdown at the level of 1.5360 the pair GBP/USD will go to 1.5350 and 1.5330. Consolidation at the level of 1.5420 is possible.
External situation for the Pound remained unchanged at the beginning of the week: investors are still not willing to take risk and the currency tends to go down after a week of growth. However this scenario does not exclude technical rebound.
In addition to external pessimism, comments Mr. Dale, representative of the Bank of England also contributed to the fall of the Pound in the middle of the week. Mr. Dale noted that expansion of QE will be required if external European negative factors continue to put the same amount of pressure on the British economy.
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".
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.
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. 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, market has solid base for recovery: earlier, Confederation of British Industry reported 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.
CHF: Swiss Franc is ready for correction
At the Forex currency market Swiss Franc rate stands almost still at the Forex currency market at the beginning of the week; however it is obvious that the currency has all grounds for technical correction. It is important for the currency now to obtain similar chance from external background.
Forex forecast: MACD indicator for the pair USD/CHF goes up in the positive area and is giving a buy signal. Stochastic Oscillator tends to go out of the overbought zone and started to shape a sell signal.
Forex recommendations: in case of breakdown at the level of 0.9680 the pair USD/CHF will go to 0.9670 and 0.9650.
Important Swiss statistics is scheduled for the release this week; it will give an idea on how the system operates in the conditions when currency is weak.
Global situation for Franc has not changed fundamentally: technical correction in the pair will not start until external background stabilizes.
It became known earlier 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.
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 the 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.
Statistics released earlier showed GDP in Switzerland rose by 0.7% q/q (+2.0% y/y) in Q1 against expectations of growth of 0.5% q/q (+0.7% y/y). It is a good signal which indicates that when positions of Franc go down, national economy is getting steadier. Similar conclusions can be made looking at statistics released in the middle of the week when it became known that leading indicator index KOF rose to 0.81 points in May against expectations of 0.41 points. Unemployment rate dropped to 3.1% in April against 3.2% earlier.
JPY: Japanese Yen has slightly moved away from lows
The Japanese Yen rate is being slightly corrected at the Forex currency market on Monday after the rise last Friday.
Forex forecast: MACD indicator for the pair USD/JPY goes down in the negative area, while volumes ate increasing and is giving a sell signal. Stochastic Oscillator goes slides down in the neutral zone, giving a similar signal.
Forex recommendations: in case of breakdown at the level of 78.10 the pair will go to 78.0 0 and 77.90.
It is too early to say that demand for the JPY as a “safe currency” has declined.
New round of growth at the end of last week was logical for the JPY: amid surge of panic in the market regarding collapse of Spanish economy, investors rush to move to “quiet habours”
Japanese economy in Q1 has grown more rapidly than projected, 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.
Last week, agency Fitch reported downgrade of the Japanese rating based on the fact that public debt of the country continues to increase.
Statistics released earlier 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, focusing 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.
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 sort 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 do not cease
At the Forex currency market the Australian Dollar rate continues to weaken at the beginning of new week under strong pressure from external background.
Forex forecast: MACD indicator for the pair AUD/USD descends in the negative area, while volumes are high, and is giving a sell signal. Movement of Stochastic Oscillator is in the neutral zone, it moves indistinctly and it is not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 0.96950 the pair will go back to 0.9640 and 0.9620.
Although levels of the AUD are attractive for purchase, market does not rush to enter long position because, as external background is herky-jerky.
Statistics released this morning showed that inflation has not changed on monthly basis in May, 1.8% y/y, as per estimates of TD Securities and Melbourne University.
The data released earlier showed that lending in the private sector of Australia rose by 0.4% m/m in April against the forecast of growth of 0.3% m/m. Market has not responded to this statistics, as external background acts as more powerful catalyst at the moment. 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.
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.
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.
CAD: Demand for Canadian Dollar remains low
At the Forex currency market the Canadian Dollar rate continues to decline on Monday largely due to decreasing oil prices and ongoing risk aversion amongst players.
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 ascends in the neutral zone and is ready to enter into overbought area, giving a buy signal.
Forex recommendations: in case of breakdown at the level of 1.0440 the pair will go to 1.0450 and 1.0460 and further on.
Statistics released on Friday showed that GDP in Canada increased by 0.1% m/m (+1.6% y/y) in March against decline of 0.2% m/m in February.
Next meeting of the Bank of Canada is scheduled for 5 June, economists do not expect any fundamental developments: most likely the regulator will leave 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 maximum performance 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 LiteForex
