LiteForex's analytics

[LF.Anastasia]

GBP: Reduction is possible for British Pound Sterling

At the Forex currency market the British Pound Sterling rate continues to be traded downward.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is going down, confirming a previous sell signal for the pair. Stochastic oscillator remains in the oversold zone today and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 1.6000, traders’ targets today will be the levels of 1.5980 and 1.5960. More distant bearish target is at the level of 1.5820 – this was the level at which the GBP started to consolidate.

The data of Friday showed that production in the British construction sector reduced by 7.5% m/m in January; however it increased by 5.6% on annual basis. The index fell by 16.6% y/y earlier in December due to harsh weather conditions.

At the meeting last week the Bank of England decided to keep interest rate at the previous level of 0.50% per annum, the volume of debt redemption securities was also left unchanged – 200 billion pound sterling.

The Pound responded to the lack of allusions regarding the start time of the monetary policy tightening by drastic decline. Objectively levels of inflation have been above the levels indicated by the regulator for over a year already, increasing pressure on the recovery of the British economy which is not too steady. Meanwhile interest rate is kept at the level of 0.5% per annum. The increase of VAT in the UK at the beginning of this year contributed to the growth of prices in British shops – the index rose to 24 month highs on annual basis in February. According to the estimates of BRC retailers’ prices rose by 2.7% y/y last month against the rise by 2.5% in January.

Thus, taking into account this factor as well, sooner or later the Bank of England will have to adopt measures aimed at reducing inflationary credibility.

 

[LF.Anastasia]

CHF: Swiss Franc remains in the outset channel

At the Forex currency market Swiss Franc rate still remains in the outset channel of 0.9252-0.9370 on Monday. As long as the market has not determined its attitude to external factors (earthquake and tsunami in Japan, decisions of monetary politicians of Eurozone), CHF will remain in the range close to its historical highs.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and goes upward, giving a pair buy signal. Stochastic Oscillator continues to go down in the neutral zone, confirming a pair sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9370 the pair will go to 0.9430 and 0.9480. If the level of 0.9300 is broken down, traders’ targets will be the levels of 0.9260 and 0.9220. More distant bearish target is 0.9200.

Statistics of last wek demonstrated that level of CPI in Switzerland increased by 0.4% m/m (+0.5% y/y) in February against the forecast of growth by 0.3% m/m. Thus, inflation in Switzerland increases slightly so far, which on one hand, indicates economic recovery in the country, and on the other hand, does not give rise to discussions of the interest rate revision.

Level of retail sales in Switzerland declined by 2.6% y/y in January against the fall by 0.8% in December; however external background still remains the main driver of the Franc’s movement, as well as possible withdrawal of the players from risks. It is the factor of trade balance (index rose to the level of 1.96 billion euro in January against the growth to 1.26 billion euro earlier) that helps the CHF to be considered a stable currency, since the country does not require external borrowings.

According to the data released on Tuesday, unemployment rate in Switzerland reduced to 3.6% m/m in February against the previous rate of 3.8% m/m. In general it is a positive indicator for Swiss economy, which indicates that economic system of the country is being recovering steadily, despite high rate of the national currency.

Index of investor economic expectations ZEW in Switzerland in March will be released in the middle of the week; on Thursday the range of a three-month interest rate LOBOR will become known and also a meeting of Swiss National Bank will be held.

 

[LF.Anastasia]

JPY: Japanese Yen remains under the strongest pressure

At the Forex currency market the Japanese Yen rate remains under the drastic pressure on Monday after the strongest in all history of Japan earthquake and subsequent tsunami.

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

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 82.30 the pair will go to 82.50 and 82.90. If aggressive traders will be back at the market, target of sales will be the level of 81.75 and more distant target today will be the local lows at 80.60.

The following Japanese news was released today:

– Consumer confidence in February: 40.6 points against 41.1 in January;

– Revised industrial production in January: +1.3% m/m against the previous +2.4% m/m.

The largest earthquake in the history of Japan erupted on Friday and triggered a tsunami. Japanese cities are still counting devastation; the death toll is more than several thousands.

Central Bank has already issued $87.5 billion to reassure stock markets where the panic started last week. Private Banks can count on this fund to issue short term loans.

In addition, the regulator will allocate $220 billion to rebuild national economy, which has been weak and recent developments will become extremely heavy burden for the economy.

It became known last week that real revised level of GDP in Japan declined by 0.3% on quarterly basis (-1.3% y/y) in QIV against preliminary level of -0.3% q/q (-1.1% y/y).

Japanese economy has reduced more than expected, which calls into question excessively optimistic statement of the authorities of the country about future outlooks. Chairman of the Bank of Japan Mr. Yagamuchi said earlier that country’ economy shows signs of recovery: amid the growth of the developing markets, Japan also receives a catalyst to get out of hibernation. Amid latest developments, optimism of monetary politicians is out of place.

 

[LF.Anastasia]

AUD: Australian Dollar started new week with sales

At the Forex currency market the Australian Dollar rate started to decline again after the rise on Friday

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and is going down, giving a pair sell signal. Stochastic Oscillator goes up in the neutral zone today, giving a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0130 the pair will go to 1.0150 and 1.0180/90. If the level of 1.0075 is exceeded, traders’ targets will become the levels of 1.0050 and 1.0010.

The situation for the Australian Dollar remains negative. Statistics released last week showed that level of PPI in China increased by 0.8% m/m (+7.2% y/y) in February against the growth by 0.9% m/m a month earlier. Industrial output in China increased by 14.9% y/y in February; on the other hand, level of CPI in China rose by 1.2% m/m (+4.9% y/y) in February against the growth by 1.0% m/m in January. China is the major trading partner of Australia and slowdown in the economy of China will have a negative impact on the Green Continent.

Statistics released on Tuesday morning showed that index of business confidence increased to 14 points in February, as per NAB estimates, against the previous 4 points. Thus, after the flood in the state of Queensland earlier this year the level of business confidence has begun to recover.

О However, it should be taken into consideration that retail sector, manufacturing industry and construction sector are in the difficult situation, while sectors of recreation and mining industry have been successfully recovering. Actually, the Australian economy has slowed down – which has been confirmed by statistics and this factor is negative for the AUD.

Interest rate is at the level of 4.75% per annum in Australia now. The meetings of RBA in 2011 will be held on 4 April, 2 May, 6 June, 4 July, 1 August, 5 September, 3 October, 31 October, 5 December.

 

[LF.Anastasia]

NZD: New Zealand Dollar continues to decline

The New Zealand Dollar started to decline again at the Forex currency market on Monday, amid withdrawal of traders from risky positions.

Forex forecast: MACD indicator is in the negative area for the pair NZD/USD and continues to decline, giving a pair sell signal. Stochastic Oscillator goes up in the neutral zone today and is giving a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.7400 the pair will go to 0.7420 and 0.7450. If the level of 0.7350 is exceeded, traders will become interested in the levels of 0.7320 and 0.7300.

The New Zealand Dollar still looks extremely weak after the collapse last week and developments in Japan as well as slow down of economy in China will prevent the currency from regaining even partially.

At the last meeting last week the Reserve Bank of New Zealand decided to decrease interest rate by 50 basis points, to 2.50% per annum. Investors, who had predicted possible reduction of the indicator, ignored its decrease by 25 basis points.

Previous sales of the NZD were caused by the view of the country’s Prime Minister John Key, who said in his interview to Bloomberg News that he would have approved the decision of the Reserve Bank of New Zealand to reduce interest rate from the current 3%; next meeting of the RBNZ is scheduled for 10 March. Politician does not rule out that effect of the earthquake which took place in the South of New Zealand in February can contribute to the rollback of the national economy into the state of recession.

We would remind that at the last meeting in January the Reserve Bank of New Zealand made an expected decision to keep interest rate at the previous level of 3.0% per annum. The Central Bank showed adherence to maintain monetary policy unchanged. In the follow-up comments, the head of the RBNZ, Bollard stressed that the rates will sequentially increase over the next two years.

Apparently, the RBNZ will start a new phase of monetary policy tightening soon.

 

[LF.Anastasia]

Euro/USD: USD consolidates against Euro amid risk aversion

The pair EUR/USD is traded downward at the Forex currency market on Tuesday morning, although it is still close to1.3950

By 9.40 Moscow time the Euro is at 1.3939 against closing session level of 1.3988 yesterday.

Demand for the USD increases after another accident at the atomic power station in Fukushima, Japan – it became known earlier that in the fourth power generating unit of the station there was a fire, which resulted in the emission of high concentrated radioactivity.

The U.S. Federal Reserve meeting will start tonight, however it is not expected to cause sensation- interest rate will be kept at the previous level and in the follow-up comments monetary politicians will confirm their intention to maintain the rate at the low levels for a long time.

In general external background still dictates market direction.

Most likely the pair EUR/USD will not go beyond the range of 1.3900-1.4020 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound is being sold again

At the Forex currency market the British Pound Sterling rate is traded downward on Tuesday after yesterday’s recovery – investors’ risk aversion was caused by new information from Japan.

Forex forecast: MACD indicator is in the negative area for the pair GBP/USD and it goes down, giving a sell signal. Stochastic Oscillator is moving upward in the neutral zone on Tuesday, giving a pair sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.6160 the pair will go to 1.6180 and 1.6200. If the level of 1.6100 is exceeded, traders’ targets will be the levels of 1.6070 and 1.6050.

Macro-economic calendar was uneventful on Monday; external background was the main movement driver. Following the meeting of the Bank of England last week it became known that interest rate was kept at the previous level of 0.50% per annum, volume of debt securities repurchase was also left unchanged, 200 billion pound sterling.

The Pound responded to the lack of allusions regarding the start time of the monetary policy tightening by drastic decline. Objectively levels of inflation have been above the levels indicated by the regulator for over a year already, increasing pressure on the recovery of the British economy which is not too steady. Meanwhile interest rate is kept at the level of 0.5% per annum. The increase of VAT in the UK at the beginning of this year contributed to the growth of prices in British shops – the index rose to 24 month highs on annual basis in February. According to the estimates of BRC retailers’ prices rose by 2.7% y/y last month against the rise by 2.5% in January.

The data of Friday showed that production in the British construction sector reduced by 7.5% m/m in January; however it increased by 5.6% on annual basis. The index fell by 16.6% y/y earlier in December due to harsh weather conditions.

The data on production output of Great Britain for January became known yesterday – the index has increased rapidly over the past 16 years (+1.0% m/m, +6.8% y/y) while the forecast of growth by 0.8% m/m. Statistics been particularly strong compared with the decline of the index in December last year.

 

[LF.Anastasia]

CHF: Buyers have returned to Swiss Franc

Swiss Franc rate is traded upward at the Forex currency market today – Franc is in demand again as a “safe harbour” amid investors’ aversion to risk.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and is moving along the signal line, not giving a clear signal. Stochastic oscillator goes down today, approaching oversold zone and giving a pair sell signal.

Forex recommendations: in case of breakdown at the local lows traders’ targets will be the levels of 0.9170 and 0.9140/30.

Index of investor economic expectations ZEW in Switzerland in March will be released in the middle of the week; on Thursday the range of a three-month interest rate LOBOR will become known and also a meeting of Swiss National Bank will be held.

Statistics of last week demonstrated that level of CPI in Switzerland increased by 0.4% m/m (+0.5% y/y) in February against the forecast of growth by 0.3% m/m. Thus, inflation in Switzerland has been increasing slightly so far, which on one hand, indicates economic recovery in the country, and on the other hand, does not give rise to discussions of the interest rate revision.

Level of retail sales in Switzerland declined by 2.6% y/y in January against the fall by 0.8% in December; however external background still remains the main driver of the Franc’s movement, as well as possible withdrawal of the players from risks. It is the factor of trade balance (index rose to the level of 1.96 billion euro in January against the growth to 1.26 billion euro earlier) that helps the CHF to be considered a stable currency, since the country does not require external borrowings.

According to the data released on Tuesday, unemployment rate in Switzerland reduced to 3.6% m/m in February against the previous rate of 3.8% m/m. In general it is a positive indicator for Swiss economy, which indicates that economic system of the country is being recovering steadily, despite high rate of the national currency.

In general, amid total global instability, the Franc’s status of a protective currency enables to test new historical highs

 

[LF.Anastasia]

JPY: Japanese Yen demonstrates its strength

At the Forex currency market the Japanese Yen rate is almost motionless on Tuesday amid new information about developments in the atomic power station in Japan.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY; however it moves along the signal line and does not give a clear signal. Stochastic Oscillator goes down in the neutral zone today and gives a pair buy signal.

Forex recommendations: there is a great possibility that bearish sales will resume for the pair with the targets of 81.20 and 80.60, which became a local bottom yesterday.

The situation remains tense in Japan: it became known today that radiation background near the atomic power station in Fukishima is at extremely high level due to the accident at the power generating unit caused by the earthquake and tsunami

According to the information released today, Central Bank of Japan is going repurchase debt securities from the market in the amount of 2 trillion yen on 17-18 March. Closure of financial market due to stock market panic is not planned. In addition, starting from 22 March the bank of Japan intends to offer bonds to the market for 300 billion yen – received funds will be spent for reconstruction.

The fact that Japanese companies have a well-developed network of foreign branches speaks in favor of the continued growth of the JPY: in the nearest future their overseas branches will allocate funds to their parent companies for restoration, which will support the Yen in the medium term

Central Bank has already issued $87.5 billion to reassure stock markets where the panic started last week. Private Banks can count on this fund to issue short term loans.

In addition, the regulator will allocate $220 billion to rebuild national economy, which has not been strong before, and recent developments will become extremely hard burden for it.

It became known last week that real revised level of GDP in Japan declined by 0.3% on quarterly basis (-1.3% y/y) in QIV against preliminary level of -0.3% q/q (-1.1% y/y).

Yesterday the Bank of Japan stated that interest rate will be kept in the minimum range of 0-0.1% per annum.

 

[LF.Anastasia]

AUD: Nothing prevents Australian Dollar from sales

At the Forex currency market the Australian Dollar rate continues to be at the gunpoint of traders, despite activity of the local authorities.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, giving a sell signal. Stochastic Oscillator is also descending, giving a similar signal.

Forex recommendations: in case of breakdown at the local lows, traders’ targets will be the levels of 0.9880 and 0.9820/10.

Is it was noted by the representatives of the Bank of Australia today, economy of the country has been growing almost at the level of trend, and current moderately restrictive fiscal policy fits the external situation.

In addition, according to the RBA there is shortage of cash in Australia now in the amount of А$1.437 billion

The major catalyst for sales of the AUD is investors’ risk aversion caused by the events in Japan. The situation for the Australian Dollar remains negative. Statistics released last week showed that level of PPI in China increased by 0.8% m/m (+7.2% y/y) in February against the growth by 0.9% m/m a month earlier. Industrial output in China increased by 14.9% y/y in February; on the other hand, level of CPI in China rose by 1.2% m/m (+4.9% y/y) in February against the growth by 1.0% m/m in January. China is the major trading partner of Australia and slowdown in the economy of China will have a negative impact on the Green Continent.

Interest rate is at the level of 4.75% per annum in Australia now. The meetings of RBA in 2011 will be held on 4 April, 2 May, 6 June, 4 July, 1 August, 5 September, 3 October, 31 October, 5 December.

Statistics released last Tuesday showed that index of business confidence increased to 14 points in February, as per NAB estimates, against the previous 4 points. Thus, after the flood in the state of Queensland earlier this year the level of business confidence has begun to recover.

However, it should be taken into consideration that retail sector, manufacturing industry and construction sector are in the difficult situation, while sectors of recreation and mining industry have been successfully recovering. Actually, the Australian economy has slowed down – which has been confirmed by statistics and this factor is negative for the AUD.