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[LF.Anastasia]

Forex Analytics from LiteForex of 02.11.10: Euro consolidated awaiting the U.S. Federal Reserve decisions

The pair EUR/USD consolidates at the Forex market on Tuesday morning due to the news from Australia where the interest rate has been increased.
By 10.05 Moscow time the Euro is at 1.3936 against closing session level of 1.3896 yesterday.
RBA unexpectedly raised interest rate to 4.75% per annum (25 basis points) on Tuesday noting that the economic growth can trigger inflationary pressure.
Investors nevertheless are concerned again by the possible results of the upcoming meeting of the U.S. Federal Reserve which will start today. Traders await the regulator to announce increase in redemption of government bonds from the market as an incentive of the national economy.
Due to this activity at the trading floors will be low in the next two days.
Most likely the pair EUR/USD will be in the range of 1.3870-1.4000 on Tuesday trading session.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 02.11.10: GBP: British Pound continues to grow after a short break

At the Forex currency market the British Pound Sterling rate continues to go up following the pair EUR/USD. However in the light of the uncertain sentiments at the world capital market it would make more sense to stay out of the market.
Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and it goes down giving ground for a pair sell signal. Stochastic Oscillator has not indentified a signal today.
Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.6080 the pair will go to 1.6140 and 1.6190. If the level of 1.6020 is exceeded traders’ targets will become the levels of 1.5950 and 1.5910.

The UK news was not released today however the trading at the market is carried while external background is kept in view. A two day meeting of the U.S. Federal Reserve also imposes some effect on trading.
It became known yesterday that houses requested prices reduced by 0.9% m/m (-0.1% y/y) as per Hometrack estimation. Economists pointed that pace of decline accelerated after some stagnation while the annual rate of decline had been observed for the first time in January this year. It became known last week that the UK houses prices as per Nationwide estimation continued to decline in October and fell by 0.7% on monthly basis (+1.4% y/y). Nationwide economists point that if the trend which started in the early summer continues in November and December, the prices will have chances to drop by 1% by the end of the year.
Posen, representative of the Bank monetary committee pointed earlier that the rise in inflation above the target level even by 1% will not be crucial and it will take some time – longer than previously expected to set quantitative easing of monetary policy. Posen does not believe that additional stimulation is required for the British economy now. The head of the Bank of England Mr. King noted that the draft Basel III which has been discussed last month will not become a miracle cure for the new round of financial crisis. However according to the monetary politician, British regulator will not force banks to comply with the contract although he holds more stringent views on the problem.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 02.11.10: CHF: Swiss Franc goes up on Tuesday taking advantage of USD weakness

At the Forex currency market Swiss Franc rate goes up on Tuesday taking advantage of the USD weakness in advance of the U.S. Federal Reserve meeting.
Forex forecast: MACD indicator is in the positive area for the pair USD/CHF and it moves along the signal line not giving a clear signal. Stochastic Oscillator gives a pair sell signal being in the neutral zone.
Forex recommendations: if the current external background maintains and in case of breakdown at the level of 0.9890, the pair will go to 0.9850 and 0.9820.
Interest rate in Switzerland remains unchanged for 19 months already at the level of 0.25% per annum. According to the head of the Swiss National Bank, Mr. Hildebrand it is evident now that low levels of the interest rate can become a catalyst for the emergence of new bubbles in the real estate sector. “The longer the monetary policy remains of expansionary nature, the higher the risks of unwanted effects. Some signs of which have already been noticeable. It is especially evident in the real estate market where there is a great imbalances risk in case the rates are maintained at the current low level for a quite a long time”- he stressed last week. Hildebrand also noted that current level of the interest rate in Switzerland is still acceptable; he pointed however that current situation is ideal for the emergence of risks.
We would remind that according to the average forecast GDP in Switzerland will increase by 3% in 2010 which is much higher than the average forecast in comparison with other European countries. At the same time inflationary levels will remain close to the lows. According to the official statistics GDP in Switzerland will increase by 0.9% on quarterly basis (+3.4% y/y) against the forecast of +0.8% (+2.6% y/y) Private consumption index in Switzerland increased to 1.86 in July against the previous level of 1.81 (revised data of 1.80)
Worth noting that investors’ concern regarding the possibility of the Swiss Bank intervention due to the Franc high rate is back at the market. It is also noteworthy that Swiss National Bank apparently continues to diversify their assets while the assets in the Euro reduced to 56% against 70% previously. A year earlier the ratio of the Euro in the SNB currency basket amounted to about 50-60% - this was before the regulator started interventions to ease the rate of the Franc.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 02.11.10: JPY: Japanese Yen continues to decline

At the Forex currency market the Japanese Yen rate continues to go down on Tuesday as earlier the currency again approached the 15 years highs.
Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and it goes up giving grounds for a pair buy signal. Stochastic Oscillator is giving a similar signal today, being in the neutral zone.
Forex recommendations: in case of breakdown at the level of 80.80 traders’ targets will be the levels of 81.10 and 81.50.
Japanese Finance Minister Mr. Noda noted today that currency market movement has a negative impact on the risks in economy as well as the concerns regarding external economy state. In his view, Japanese economy is stagnating now and its growth will be resumed only in case of the appropriate policy.
He also stressed that authorities take all efforts to fight deflation.
The minutes of the Bank of Japan last meeting was released today. It says that some of the bank members believe that the production volume can reduce sharply in Japan in QIV and the recovery time frame looks very blurry.
Many members of the Bank are concerned about the high rate of the Yen.
As it was noted earlier the Bank of Japan believe that Japanese economy will be back on the path of the moderate growth in 2011 while basic inflation average forecast still amounts to 0.4%. Average forecast of the actual GDP level for the next fiscal year is at the level of +2.1% against the forecast of 2.6% in July. The head of the Bank Shirakawa noted that monetary policy easing will be carried more active than before as the economy proceeds along the course of recovery.
As the data today evidenced average basic salary in Japan increased by 0.1% y/y in September against the previous decline by 0.2% which became the first growth factor over the past 25 months.
It became known on Friday that unemployment rate in September was 5.0% against 5.1% in August which became the only bright spot in Friday’s block of statistics. Other data was too poor: industrial production volume in QIII: -1.9% q/q against +1.5% in QII; net national CPI in September: 1.1% y/y against 1.0% in August; actual household expenditures in September remained unchanged against +1.7% in August. Thus, based on the statistics it can be said that deflation spiral in the Japanese economy continues to twist despite all measures taken by the authorities.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 02.11.10: AUD: Australian Dollar goes up amid internal positive factor

At the Forex currency market the Australian Dollar rate has reached the parity with the USD on Tuesday supported by the internal factors.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and it goes up confirming a previous buy signal for the pair. Stochastic oscillator is giving a similar signal being in the overbought area.
Forex recommendations: in case of breakdown at the level of 1.0000 buyers’ targets will be the levels of 1.0040 and 1.0075.
The Reserve Bank of Australia decided to raise interest rate to 4.75% per annum today from the previous level of 4.50% (+25 basis points) which was a surprise to the market. In the follow up comments regulator noted that country’s economy is vulnerable to external influence and has too little spare capacity. The risks of inflation still remain and it will make sense to proceed with policy tightening more actively.
Earlier the minutes of the Reserve Bank of Australia last meeting held on 5 October was released. It explained the reasons which made the regulator keep interest rate unchanged at the level of 4.5%. According to RBA the interval at the moment is a sign of the monetary policy flexibility and the regulator stressed that it was considered and deliberate decision. Risks to the economy as well as risks to the AUD growth were considered which finally will affect inflation. According to the regulator inflation will remain in the target range and will reach the level of 2.75% by the end of the year. By the end of 2012 the Bank expects inflation to be close to 3%.
According to International Monetary Fund the Reserve Bank of Australian shall raise interest rates as the inflation should be chilled out and the outlook risks should be reduced. As the IMF report stated regulator agreed that if the downside risks weaken, the policy of the rates will dictate their growth.
IMF believes that the Australian economy looks quite strong due to the demand in iron ore from China. The IMF report also stressed that the AUD rate seems overrated by 5-15%.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 03.11.10: Activity at Forex will be low on Wednesday; Dollar goes up due to political news

The pair EUR/USD is traded downward at the Forex currency market on Wednesday morning due to the success of the Republican Party in the elections for the Lower Chamber of the U.S. Congress.
By 9.50 Moscow time the Euro is at 1.4002 against closing session level of 1.4033 yesterday.
However activity at the currency market is likely to be low today – the results of the U.S. Federal Reserve two day meeting will become known tonight and it is assumed that the regulator will announce expansion of the government bonds redemption program which will support economy and lead the USD downward. Worth noting that partly this measure has already been incorporated in the current prices.
In addition the U.S. statistics will be released this afternoon which will also affect trading.
Presumably the pair EUR/USD will be in the channel of 1.3900-1.4080 at the trading session on Wednesday.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 03.11.10: GBP: British Pound determines movement direction

At the Forex currency market on Wednesday the British Pound Sterling rate is traded slightly downward being in the range of 1.6015-1.6055 for three days. External background does not encourage to movement today – at least until the evening when the U.S. Federal Reserve decision will become known.
Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and it goes up, confirming a previous buy signal for the pair. Stochastic Oscillator has not indentified a clear signal today.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 1.6010 the pair will go to 1.5970 and 1.5930. If the level of 1.6050 is exceeded, buyers’ target will be the levels of 1.6070 and 1.6090.
It became known today that consumer prices in Great Britain increased by 0.2% (+2.2% y/y) in October as per BRC estimation against the growth by 0.2% m/m (+1.9% y/y) in September.
Thus, prices in the UK stores continue to grow, the cost of food went up to 17 month high.
Posen, representative of the Bank monetary committee pointed earlier that the rise in inflation above the target level even by 1% will not be crucial and it will take some time – longer than previously expected to set quantitative easing of monetary policy. Posen does not believe that additional stimulation is required for the British economy now. The head of the Bank of England Mr. King noted that the draft Basel III which has been discussed last month will not become a miracle cure for the new round of financial crisis. However according to the monetary politician, British regulator will not force banks to comply with the contract although he holds more stringent views on the problem.
It became known earlier that asking prices for houses reduced by 0.9% m/m (-0.1% y/y) as per Hometrack estimation. Economists pointed that pace of decline accelerated after some stagnation while the annual rate of decline had been observed for the first time in January this year. It became known last week that the UK houses prices as per Nationwide estimation continued to decline in October and fell by 0.7% on monthly basis (+1.4% y/y). Nationwide economists point that if the trend which started in the early summer continues in November and December, the prices will have chances to drop by 1% by the end of the year.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 03.11.10: CHF: Swiss Franc continues to grow in the middle of the week

At the Forex currency market Swiss Franc rate is trade upward on Wednesday in pairing with the USD, however purchase volume today is insignificant as well as the activity of the currency segment as a whole.
Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and it goes down which gives ground for a pair sell signal. Stochastic Oscillator is giving a pair buy signal today, being in the oversold zone.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 0.9820 the pair will go to 0.9850 and 0.9880. In case of breakdown at the level of 0.9770, traders’ target will be the levels of 0.9720 and 0.9670.
Swiss National Bank representative Mr. Jordan noted today that prolonged retention of the interest rates at the low level can cause additional risks for the economy. SNB intends to monitor carefully the dynamics of the real estate sector.
It also became known on Wednesday that retail sales in Switzerland increased by 3.8% on annual basis in September against the growth by 0.1% in August.
Interest rate in Switzerland remains unchanged for 19 months already at the level of 0.25% per annum. According to the head of the Swiss National Bank, Mr. Hildebrand it is evident now that low levels of the interest rate can become a catalyst for the emergence of new bubbles in the real estate sector. “The longer the monetary policy remains of expansionary nature, the higher the risks of unwanted effects. Some signs of which have already been noticeable. It is especially evident in the real estate market where there is a great imbalances risk in case the rates are maintained at the current low level for a quite a long time”- he stressed last week. Hildebrand also noted that current level of the interest rate in Switzerland is still acceptable; he pointed however that current situation is ideal for the emergence of risks.
We would remind that according to the average forecast GDP in Switzerland will increase by 3% in 2010 which is much higher than the average forecast in comparison with other European countries. At the same time inflationary levels will remain close to the lows. According to the official statistics GDP in Switzerland will increase by 0.9% on quarterly basis (+3.4% y/y) against the forecast of +0.8% (+2.6% y/y) Private consumption index in Switzerland increased to 1.86 in July against the previous level of 1.81 (revised data of 1.80). Talk resumed again at the market that SNB can conduct currency intervention, however such intentions have not been confirmed factually.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 03.11.10: JPY: Japanese Yen is in the narrow range without new signals

At the Forex currency market the Japanese Yen rate continues to be in the narrow channel of 80.29-80.90 as there are no new catalysts for the movement,
Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, however it goes up, giving grounds for a pair buy signal. Stochastic Oscillator is giving a similar signal today, being in the neutral zone.
Forex recommendations: if the current external background maintains and in case of breakdown at the level of 80.80 the pair will go to 81.10 and 81.50.
It is a day off in Japan today; The Japanese Bank new decision on rates will become known on Friday. The meeting was rescheduled for the earlier date to give monetary politicians a chance to discuss issues of additional redemption of securities from the market in order to support country’s economy.
Japanese Finance Minister Mr. Noda noted yesterday that currency market movement has a negative impact on the risks in economy as well as the concerns regarding external economy state. In his view, Japanese economy is stagnating now and its growth will be resumed only in case of the appropriate policy. He also stressed that authorities take all efforts to fight deflation.
The minutes of the Bank of Japan last meeting was released on Tuesday. It says that some of the bank members believe that the production volume can reduce sharply in Japan in QIV and the recovery time frame looks very blurry. Many members of the Bank are concerned about the high rate of the Yen.
As it was noted earlier the Bank of Japan expect that Japanese economy will be back on the path of the moderate growth in 2011 while basic inflation average forecast still amounts to 0.4%. Average forecast of the actual GDP level for the next fiscal year is at the level of +2.1% against the forecast of 2.6% in July. The head of the Bank Shirakawa noted that monetary policy easing will be carried more active than before as the economy proceeds along the course of recovery.
As the data showed on Monday, average basic salary in Japan increased by 0.1% y/y in September against the previous decline by 0.2% which became the first growth factor over the past 25 months.

 

[LF.Anastasia]

Forex Analytics from LiteForex of 03.11.10: AUD: Australian Dollar can be on sale

At the Forex currency market the Australian Dollar rate goes down slightly today repeating general dynamics of the market in advance of the U.S. Federal Reserve announcement on Wednesday night.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, however it goes down giving grounds for a pair sell signal. Stochastic Oscillator is giving a similar signal today, being outside of the overbought zone.
Forex recommendations: in case of breakdown at the level of 0.9950 traders’ targets will be the levels of 0.9910 and 0.9850.
The following Australian data was released today:
– Total construction permits in September:-6.6% m/m against previous:-4.8% m/m, changes had not been expected;
– Business activity index in the service sector AiG in October: 50.7 against 45.6 previously.
The main event of Tuesday – the decision of the Reserve Bank of Australia to raise interest rate to 4.75% per annum from the previous level of 4.50% (+25 basis points) which was a surprise to the market – however expectations of the U.S. Federal reserve decisions which will be known tonight are in the forefront today.
Regulator noted in the comments yesterday that country’s economy is vulnerable to external influence and has too little spare capacity. The risks of inflation still remain and it will make sense to proceed with policy tightening more actively.
According to International Monetary Fund, the Reserve Bank of Australian shall raise interest rates as the inflation should be chilled out and the outlook risks should be reduced. As the IMF report stated regulator agreed that if the downside risks weaken, the policy of the rates will dictate their growth.
IMF believes that the Australian economy looks quite strong due to the demand in iron ore from China. The IMF report also stressed that the AUD rate seems overrated by 5-15%.
Worth noting that the RBA expects that inflation will remain in the target range and reach the level of 2.75% by the end of the year. By the end of 2012 the Bank expects inflation to be close to 3%.