LiteForex's analytics

[LF.Anastasia]

Euro/USD: Euro can find itself in comprehensive sales

The pair EUR/USD is being corrected on Wednesday morning after yesterday’s rise to four-month highs.

By 9.00 Moscow time the Euro is at 1.4171 against closing session level of 1.4198 yesterday.

Decline of the Euro has been caused by two main reasons: firstly it is technical overheating of the pair which has been growing in a steady pace for four sessions until last night. Second reason for the rollback of EUR/USD- is parliamentary vote scheduled for today on the program of budget deficit reduction in Portugal. The country ensured that level of GDP would be lowered to 4.6% against the current 7% within the year of 2011. Nevertheless almost three months have passed and almost nothing has been accomplished yet.

Germany can make its contribution into this issue: Berlin can require tofurther details of the program and in case of negative voting results, it will lead to the resignation of the Portuguese government and to the collapse of the Euro.

Therefore, the day is going to be hectic and uneasy for the EUR/USD and all attention will be focused on Portugal.

Most likely the pair EUR/USD will not go beyond the range of 1.4070-1.4220 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound determines movement direction

At the Forex currency market the British Pound Sterling does not make much movement this morning, determining trading directions.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is moving along the signal line, not giving a clear signal. Stochastic Oscillator is moving toward offset on Wednesday, still staying in the overbought zone.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.6375 the pair will go to 1.6390 and 1.6420. If the level of 1.6320 is exceeded, traders’ targets will be the levels of 1.6300 and 1.6270/50.

The Minutes of Meeting of the Bank of England is expected to make public today at 12.30. The Pound will receive information on the state of affairs in monetary policy and of the extent of disagreements among the MPC members.

Levels of inflation in the UK 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. 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.

Statistics released last Friday showed that level of consumer confidence in Great Britain declined to 38 points in February against the forecast of 47. Thus, the indicator has dropped to the record-breaking lows- for the British economy and for the Pound in particular, it is not a good sign.

The data released last 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 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.

 

[LF.Anastasia]

CHF: Swiss Franc consolidates gradually, aiming at new highs

Swiss Franc rate is traded upward at the Forex currency market on Wednesday, the same as yesterday: Franc demonstrates its protective properties while market is determining further movement direction

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and continues to decline, maintaining a pair sell signal. Stochastic Oscillator is rising slightly in the neutral zone, confirming a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9050 the pair will go to 0.9060 and 0.9090. If the level of 0.9020 is exceeded, traders’ targets will become the levels of 0.9010 and 0.8980.

Statistics released yesterday showed that level of trade balance in Switzerland increased to 2.49 billion francs in February against the value of 2.04 billion francs in January – it is favourable information. In addition, levels of import rose by 0.3% in February; export levels – by 4.2%, +16.53 billion francs.

Therefore, levels of exports in Switzerland are growing even when the Franc is strong, maintaining support for the entire economy

Statistics released earlier showed that volume of industrial output in Switzerland increased by 6.1% y/y in QIV. Before that it became known that index of economic expectations ZEW in Switzerland increased to -13.5 points in March against the previous level of -17.2 points. It is a favourable indication for the local economy.

Swiss National Bank adopted measures of verbal intervention against the Franc last week: representatives of the SNB said following the meeting that strong currency is a hard burden for the economy and its inflated price will trigger a slowdown of economic growth – largely, due to the decrease of the export volumes.

The level of three-month LIBOR rate was left unchanged, at the 0.25%, as expected.

Statistics previously 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.

 

[LF.Anastasia]

JPY: Japanese Yen keeps moving in the offset

At the Forex currency market the Japanese Yen rate remains in the offset channel.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and continues to decline, maintaining a pair sell signal. Stochastic Oscillator remains in the overbought zone today, moving along.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 81.00 the pair will go to 81.20 and 81.50. If the level of 80.60 is exceeded, traders’ targets will be the levels of 80.40 and 80.30/15.

Representative of the Bank of Japan Mr. Miyao said this morning that the regulator shall carefully trace all risk factors for the process of Japanese economic recovery. In addition, time frame and volumes of reconstruction is not known yet which makes obscure further economic outlooks of the Country of the Rising Sun.

It is obvious that aftermath of the earthquake in March will impact on the economy – according to the estimates of the World Bank disasters in Japan in March will reduce GDP of the country in the middle of this year by 0.25%-0.5% ; however it is possible that rapid economic growth will follow after that.

Earth tremors occurred in Tokyo this morning.

We would remind that the Yen was shaken up last week: countries of the “ Big Seven” agreed to start currency intervention together in order to ease pressure of the expensive Yen on the weak economy of Japan. Therefore, on 18 March authorities of the USA, Great Britain, Canada and ECB have joined the Bank of Japan- the intervention started at 9 am Tokyo time. Half an hour later the JPY collapsed by 3.1% in pairing the USD and continued to fall further.

As noted by the representative of the Bank of Japan Noda, countries of B7 conducted intervention, using the pair Euro/Yan. Currency intervention was not aimed at certain levels.

The situation remains tense in Japan: it became known earlier 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; smoke can be seen over the third reactor.

 

[LF.Anastasia]

AUD: Australian Dollar is prepared for correction

At the Forex currency market correction started for the Australian Dollar rate on Wednesday after four session of significant growth.

Forex forecast: MACD indicator is in the negative area for the pair AUD/USD and is sliding down, maintaining a pair sell signal. Stochastic Oscillator remains in the overbought zone today, and has created conditions for a reversal.

Forex recommendations: if bearish sentiments intensify in the market for the pair and in case of breakdown at the level of 1.0080 the pair will go to 1.0050 and 1.0030.

The data released yesterday showed that leading indicators Westpac fell by 0.1% m/m in January while the forecast had been +0.8% m/m. It is a moderately negative sign for the Australian economy.

Representatives of the Bank of Australia noted earlier that economy of the country has been growing almost at the level of trend, and current moderately restrictive fiscal policy fits the external situation.

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.

Note that last week the Reserve Bank of Australia sold А$414 billion in the market in February – the action was aimed at weakening the position of the AUD, says the RBA monthly bulletin. In addition the RBA bought А$464 billion from foreign banks in February.

No important Australian macro-economic statistics is going to be published this week; therefore movement direction will be determined by external background and domestic news for the pair AUD/USD. There are conditions now for the technical rollback in the pair.

 

[LF.Anastasia]

NZD: New Zealand Dollar stands still in the suspense

The New Zealand Dollar rate stands still at the Forex currency market amid stable external background – investors have adopted “wait and see” position because information on the reduction of the budget deficit in Portugal shall be made public today, and this is one of the most problematic countries of Eurozone.

Forex forecast: MACD indicator is in the negative area for the pair NZD/USD and is moving along the signal line, not giving a signal. Stochastic Oscillator reverses today in the overbought zone, starting to form a pair sell signal.

Forex recommendations: if bears turn up for the pair, the NZD/USD will go to 0.7360 and 0.7320. If downward breakdown does not take place, the pair will consolidate close to the current levels.

Statistics of today showed that balance of current account in New Zealand decreased to -NZ$3.5 billion against the value of -NZ$1.77 billion in QIII. The balance is most likely decreased due to the seasonal factors and we surely can see improvement in the situation.

At the last meeting 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, ignored its decrease by 25 basis points.

It became the reason of the dramatic fall of the NZD, and what is more, Prime Minister John Key said earlier in his interview to Bloomberg News that he would have approved the decision of the Reserve Bank of New Zealand to reduce interest rate.

Note that basically the NZD is still quite weak, although technical chart shows that all conditions have been created for the rebound from the lows.

The main macro- statistics on New Zealand is scheduled for publication on 24 March: particularly, country’s GDP for QIV will become known and this data can significantly affect forces balance in the pair NZD/USD.

 

[LF.Anastasia]

Euro/USD: Euro is being sold due to the news pressure

The pair EUR/USD is traded downward at the Forex currency market on Thursday morning after the release of the negative Portuguese news yesterday.

By 9.15 Moscow time the Euro is at 1.4087 against closing session level of 1.4096 yesterday.

Sales of the pair have been triggered by the Portuguese information on Wednesday night: parliamentary opposition voted against the bill to reduce budget deficit which included unpopular measures; as a result Prime Minister of the country resigned.

Now, due to the dismissal of the Cabinet, chances that Portugal will seek financial help from outside are increasing- it is extremely negative factor for the Euro, as it will reveal new debt problems in Eurozone.

Daily statistics on the Eurozone will be of minor importance; in the afternoon interesting U.S. news will be released.

In addition, a two day summit of the European Union will begin on Thursday; issues of support to the Eurozone countries are going to be discussed there.

Most likely the pair EUR/USD will not go beyond the range of 1.4010-1.4130 at the trading session on Thursday.

 

[LF.Anastasia]

GBP: British Pound continues to decline

At the Forex currency market the British Pound Sterling rate continues to be under pressure from the traders after the publication of the minutes of meeting of the Bank of England which disappointed market.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is moving along the signal line, not giving a clear signal. Stochastic Oscillator has come out of the overbought zone on Thursday, giving a pair sell signal.

Forex recommendations: if negative sentiments are maintained and in case of breakdown at the level of 1.6200, traders’ targets will be the levels of 1.6180 и 1.6165/50. If breakdown will not take place, the pair will consolidate close to the current levels.

Thus, according to the Minutes of meeting of the Bank of England 6 members of MPC voted for keeping interest rate at the previous level. In addition, 8 people were for preserving current volume of the assets redemption program. Posen voted for the growth of QE by 50 billion pounds.

Therefore, balance of forces in the Monetary Committee has remained unchanged, which frustrated bulls who expected indications of imbalance. Following the meeting of the Bank of England 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.

Levels of inflation in the UK 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. 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.

Statistics released last Friday showed that level of consumer confidence in Great Britain declined to 38 points in February against the forecast of 47. Thus, the indicator has dropped to the record-breaking lows- for the British economy and for the Pound in particular, it is not a good sign.

The data released last 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.

 

[LF.Anastasia]

CHF: Swiss Franc reverted to decline

At the Forex currency market Swiss Franc rate is getting weaker, although the volumes for the pair USD/CHF are not large.

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

Forex recommendations: if bullish sentiments are maintained in the market and in case of breakdown at the level of 0.9100, the pair will go to 0.9120 and 0.9145/50.

Swiss National Bank adopted measures of verbal intervention against the Franc last week: representatives of the SNB said following the meeting that strong currency is a hard burden for the economy and its inflated price will trigger a slowdown of economic growth – largely, due to the decrease of the export volumes.

The level of three-month LIBOR rate was left unchanged, at the 0.25%, as expected.

Statistics previously 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.

Statistics released the day before yesterday showed that level of trade balance in Switzerland increased to 2.49 billion francs in February against the value of 2.04 billion francs in January – it is favourable information. In addition, levels of import rose by 0.3% in February; export levels – by 4.2%, +16.53 billion francs.

Therefore, levels of exports in Switzerland are growing even when the Franc is strong, maintaining support for the entire economy

Statistics released earlier showed that volume of industrial output in Switzerland increased by 6.1% y/y in QIV. Before that it became known that index of economic expectations ZEW in Switzerland increased to -13.5 points in March against the previous level of -17.2 points. It is a favourable indication for the local economy.

 

[LF.Anastasia]

JPY: Japanese Yen remains in the narrow offset channel

The Japanese Yen rate remains in the narrow offset channel at the Forex currency market on Thursday. Market assumes that the Yen can revert to growth in the long run –if only the Bank of Japan and friendly regulators do not conduct another round of currency intervention.

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

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 81.00 the pair will go to 81.20 and 81.50. If the level of 80.60 is exceeded, traders’ targets will be the levels of 80.40 and 80.30/15.

A lot of Japanese macro- statistics have been published today, although this is the data for February and it can lose its topicality, as all economic processes have changed significantly in the Country of the Rising Sun after the earthquake on 11 March. There are still earth tremors of varying intensity in Japan, in Tokyo in particular which has been registered yesterday and this morning.

Representative of the Bank of Japan Mr. Miyao said yesterday that the regulator shall carefully trace all risk factors for the process of Japanese economic recovery. In addition, time frame and volumes of reconstruction is not known yet which makes obscure further economic outlooks of the Country of the Rising Sun.

It is obvious that aftermath of the earthquake in March will impact on the economy – according to the estimates of the World Bank disasters in Japan in March will reduce GDP of the country in the middle of this year by 0.25%-0.5% ; however it is possible that rapid economic growth will follow after that.

We would remind that earlier Japan with the help of Central Banks of B7 countries conducted currency intervention, which discarded the Yen from local highs. As noted by the representative of the Bank of Japan Noda, countries of B7 conducted intervention, using the pair Euro/Yan. Currency intervention was not aimed at certain levels.

Market believes that regulator will have to carry out cash infusion not once to maintain the effect of the intervention- a one-time intervention is unlikely to be effective for the JPY. And offset of the pair USD/JPY in the last few days is a striking proof of that.