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[LF.Anastasia]

Euro/USD: News from Portugal and Japan can prevent growth in the Euro

The pair EUR/USD is traded slightly downward at the Forex currency market on Wednesday morning, the news about rating downgrade of Portugal prevents to continue yesterday’s recovery.

By 10.00 Moscow time the Euro is at 1.3985 against closing session level of 1.3997 yesterday.

It became known today that rating Moody’s Investor Service has downgraded rating of Portugal by two degrees, to A3 from the previous A1, leaving the “negative” forecast.

The meeting of the U.S. Federal Reserve held yesterday did not bring any surprises: interest rate was left at the previous range of 0-0.25% per annum; regulator’s representatives confirmed the intention to keep the rate at the low levels for a long time, improving only the estimate of the U.S. situation
Release of radiation in Japan is still a threat to the Euro which can force the players to put assets into safe currencies.

Most likely the pair EUR/USD will not go beyond the range of 1.3920-1.4050 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound is recovering after the sales, signals remain mixed

At the Forex currency market the British Pound Sterling rate demonstrates recovery on Wednesday after massive sales of the pair GBP/USD as part of investors’ risk aversion.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and continues to go down, giving a pair sell signal. Stochastic Oscillator goes up in the neutral zone 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 1.6130, the pair’s target will become the levels of 1.6150 and 1.6170. If the level of 1.6080 is exceeded, traders’ targets will be 1.6050 and 1.6010.

Macro-economic calendar was uneventful on Monday and Tuesday; 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 on production output of Great Britain for January became known earlier – 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.
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 the unemployment rate in the UK in January is going to be released today at 12:30 Moscow time, the forecast is 7.9%.

 

[LF.Anastasia]

CHF: Swiss Franc is being corrected after yesterday’s growth

Swiss Franc rate is being corrected at the Forex currency market on Wednesday after the rise to the historical peak yesterday, when new highs at the level of 0.9140 have been reached.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and continues to move along the signal line, not giving a clear signal. Stochastic Oscillator has come into the oversold zone on Wednesday, maintaining a pair buy signal.

Forex recommendations: it is not excluded that after a technical rebound, sales for the pair will resume at the previous lows of 0.9140 and further 0.9070.

Statistics of the 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.

According to the data released last 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. 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.

 

[LF.Anastasia]

JPY: Japanese Yen is at the local highs

At the Forex currency market the Japanese Yen rate remains close to the local highs on Wednesday.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and continues to go down, confirming a pair sell signal. Stochastic Oscillator is in the oversold zone today, giving a similar signal.

Forex recommendations: in case of breakdown at the level of 80.40 the pair will go to 8020 and 79.80.
Note that if the level of 80.0 is exceeded, the possibility of the Central Bank intervention will increase manifold.

It became known today that the Bank of Japan decided to pour Y3.5 trillion to the market to maintain liquidity level of one-day operations.

The situation remains tense in Japan: it became known yesterday 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. The situation has not changed much by the mid-day on Wednesday; the threat of high radiation background is still there.

According to the information released today, Central Bank of Japan is going to 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 in the amount of 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.

 

[LF.Anastasia]

AUD: Australian Dollar grows as part of technical rebound

The Australian Dollar rate is being technically corrected at the Forex currency market on Wednesday, following drastic sales yesterday.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and it goes down, giving a pair sell signal. Stochastic Oscillator goes down as well today, being in the neutral zone and is giving a similar signal.

Forex recommendations: bears can be back after the technical rebound and in case of breakdown at the level of 0.9910 traders’ targets will be the levels of 0.9850 and 0.9810.

The following data was released today:

– Leading indicators Westpac decreased by 0.1% m/m in January against the preliminary forecast of +0.8% m/m;

– Number of begun constructions declined by 5.3% on quarterly basis in QIV against the fall by 13.0% a quarter earlier.
As representatives of the Bank of Australia noted yesterday, 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, shortage of cash in Australia now amounts to 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.

 

[LF.Anastasia]

NZD: New Zealand Dollar is still under pressure

At the Forex currency market the New Zealand Dollar rate is traded without fundamental direction on Wednesday still remaining under pressure from traders.

Forex forecast: MACD indicator is in the negative area for the pair NZD/USD and continues to descend giving a pair sell signal. Stochastic Oscillator also goes down today, being in the neutral zone and confirming a previous sell signal.

Forex recommendations: in case of breakdown at the level of 0.7300 bears’ targets will be the levels of 0.7280 and 0.7250.

Today’s statistics showed that level of consumer confidence in New Zealand decreased to 101.4 in March against the level of 108.1 points in February. This was another factor in favour of the AUD sales.

The New Zealand Dollar still looks extremely weak after the collapse last week and developments in Japan, as well as slowdown of economy in China will prevent currency’s recovery, even partial.

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

Previous sales of the NZD were triggered 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%. Investors interpreted his opinion as a call to action and pressed the pair through to the local lows. The politician does not rule out that effect of the earthquake in the South of New Zealand in February can cause the rollback of the national economy into the state of recession.

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

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 commitment to maintain monetary policy unchanged. In the follow-up comments, the head of the RBNZ, Bollard stressed that the rates will gradually increase over the next two years. Amid the latest macro-economic news such plans seem comic.

 

[LF.Anastasia]

Euro/USD: External background prevents Euro’s recovery

The pair EUR/USD is traded slightly upward at the Forex currency market on Thursday morning due to the rebound, following previous sales.

By 8.40 Moscow time the Euro is at 1.3935 against closing session level of 1.3931 yesterday.

Market is strongly concerned about further developments in Japan, Finance Ministers of and Central Bank of “Big Seven” will hold emergency meeting to discuss action sequence.

In addition, supporters of the colonel Kaddafi in Libya took control of the town Adzhdabiya; supports of the opposition keep saying that they will die in the last ditch.

These factors together are strong enough to force investors to adhere to safety currencies until the end of this week, which, in its turn, will prevent the Euro’s recovery.

This afternoon will be eventful: the data on the U.S. consumer prices in February will be known, as well as levels of core inflation and weekly data on unemployment benefit applications. In general the USD can well be supported by statistics.

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

 

[LF.Anastasia]

GBP: British Pound is being technically corrected

At the Forex currency market the British Pound Sterling rate is being technically corrected on Thursday after yesterday’s fall.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is descending, confirming a pair sell signal. Stochastic Oscillator remains in the oversold zone today.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.6120 the pair will go to 1.6180 and 1.6250. If the level of 1.5980 is broken down, traders’ targets will be new local lows at 1.5940 and 1.5900.

The UK Finance Minister Osborn said yesterday that the country will continue to adhere to the selected financial policy; however last data on the labor market indicates weak economic growth. He thinks that current indicators in the in the labor sector demonstrate economic imbalance.

In order to relieve tension in economy it is necessary to resolve the issue of budget deficit as well.

The data released in the mid-week showed that unemployment rate ILO in the UK increased to 8.0% in November- January, while the forecast was 7.9%. At the same time level of unemployed ILO rose by 27 thousand on quarterly basis.

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 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.

In general the Pound tightly correlates with the position of the pair EUR/USD and reflects the dynamics of investors’ risk aversion.

 

[LF.Anastasia]

CHF: Swiss Franc is being corrected after reaching new historical highs

At the Forex currency market Swiss Franc rate is being corrected today after testing new historical highs at 0.8925.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and continues to go down, giving a pair sell signal. Stochastic Oscillator is coming out of the oversold zone and it started to form a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9070 the pair will go to 0.9140 and 0.9200. If the level of 0.8980 is exceeded, bears’ targets will become new historical lows.

According to the data released on Thursday volume of industrial output in Switzerland increased by 6.1% y/y in QIV.

Market awaits decision of Swiss National Bank on three-month LIBOR rate today, which is at the level of 0.25% at the moment. It is most probable that the rate will not be changed as inflation levels will not let the SNB continue previous monetary policy.

It became known yesterday that index of economic expectations ZEW in Switzerland increased to -13.5 points in March against the previous value of -17.2 points. It is a favourable indication for the national economy.

Statistics of the 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.

According to the data released last 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, Franc’s status of a protective currency enables to test new historical highs.

 

[LF.Anastasia]

JPY: Japanese Yen moves away from new highs

The Japanese Yen rate moves away from new highs at the Forex currency market today

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and goes down, confirming a previous sell signal for the pair. Stochastic Oscillator is still in the oversold zone, although it tends to come out of it.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 79.50 the pair will go to 80.30 and 80.50. If the level of 78.50 is exceeded, the pair will have a chance to test new lows at 77.20 and further 77.00.

The situation remains tense in Japan: it became known yesterday 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. The situation has not changed much by the mid-day on Wednesday; the threat of high radiation background is still there.

It became known yesterday that the Bank of Japan decided to pour Y3.5 trillion to the market to maintain liquidity level of one-day operations.

According to the information released on Tuesday, Central Bank of Japan is going to 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 in the amount of 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.

Emergency meeting of Finance Ministers and heads of Central Banks of the countries of “Big Seven” is scheduled for Friday.