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[LF.Anastasia]

EUR/USD: Dollar is weak, Euro is growing

The pair EUR/USD is traded downward at the Forex currency market on Monday morning, regaining from the information received at the weekend, however it is still above the latest levels.

By 8.30 Moscow time the Euro is at 1.4315 against closing level of 1.4289 on Friday.

Thus, on Friday night after closing of the trading floors, rating agency S&P downgraded U.S. rating by one degree, depriving the country of AAA level, and giving a “negative forecast”.

A meeting of a “Big Seven” was held at the weekend, Finance Ministers of the countries, members of the union agreed to take extreme measures to avoid crisis.

So, panic, which crept over the market, last week received a logical explanation.

This afternoon, investors will make use of all available external information; in the middle of the session the data on Eurozone will become known (investor confidence index Sentix, which is predicted to decline).

Most likely the pair EUR/USD will not go beyond the range of 1.4250-1.4390 at the trading session on Monday.

 

[LF.Anastasia]

GBP: British Pound started new week with decline

At the Forex currency market the British Pound Sterling rate declines on Monday morning; while external background is extremely negative.

Forex forecast: MACD indicator for the pair GBP/USD, remains in the positive area, however it is moving along the signal line, not giving a clear signal. Stochastic Oscillator is going down in the neutral zone, gliding to a sell signal.

Forex recommendations: in case of break down at the level of 1.6390, the pair will go to 1.6370 and 1.6350. If downward breakdown does not take place, the pair will consolidate at the current levels.

Tension at the market will be preserved at the beginning of the week; situation in the U.S. economy along with the spreading debt problems in Eurozone exert pressure on the consumer interests of investors.

Situation in the British economy has not changed much at the moment.

The meeting of the Bank of England was as usual brief and concise: the rate was left at the level of 0.50% per annum, package of public bonds redemption was also left unchanged, in the amount of 200 billion pounds.

No special comments have been made: British regulator continues to adhere to the old monetary policy.

According to Finance Minister Osborne, Great Britain continues to hold a status of a quiet habour, because national authorities are taking tough measures on fiscal policy. He believes that the country shall continue to adhere to consolidation plan to get rid of debts; meanwhile the Britain is able to keep away from recession. Rejection from the fiscal plan at the moment will become a real threat to economic growth, thinks Osborne.

It also became known last week, that index of PMI CIPS in the UK construction sector increased to 53.6 points in July against the forecast of 53.0 points. In June, CPI in the UK fell by 0.1% m/m (4.2% y/y) against the forecast of growth by 0.2% m/m.

Earlier, Confederation of British Industry, CBI has reduced GDP forecast for the current year to 1.3% against the forecast of 1.7% in May. According to experts, sovereign crisis in Europe, debt problems in the U.S. and Japanese disasters will not enable British economy to strengthen considerably. Meanwhile, preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2.

Moody’s believes that the UK DGP will rise by 1.6% this year; in 2012 – by 2.1%; while the growth in 2010 had been by 1.3%. At the same time unemployment rate will vary in the range of 7.8-8.0%. The forecast of the agency is based on the belief that the Bank of England will raise interest rate by 25 basis points before the end of this year and by another 1% -over the next year.

 

[LF.Anastasia]

CHF: Swiss Franc has rushed to historic highs again

At the Forex currency market Swiss Franc rate is traded upward on Monday morning; since extremely complicated situation in the external environment still continues the Franc acts as a protective currency again.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal. Stochastic Oscillator is still in the oversold zone and maintains a sell signal.

Forex recommendations: in case of breakdown at the level of 0.7650, the pair USD/CHF will go to 0.7620 and 0.7600. If downward breakdown does not take place, the pair will consolidate at the current levels.

As we expected before, Swiss National Bank will have to confront a huge number of currency investors, who try to hedge risks in the Franc, due to the increasing instability in the market, the demand in CHF has risen again.

Due to the aggravated situation in the U.S. economy, agency S&P has downgraded rating of the country by one step and gave the U.S. a “negative” forecast. This, along with the spreading of debt problems of the Eurozone towards Italy caused the rise of investors’ interest in safety currencies.

Today, investors will await publication of the unemployment rate in Switzerland for July.

We would remind that earlier, Swiss national Bank had restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. SNB named the threat to economic progress and price instability as main arguments.

Now, it will be interesting to know the volume of the infused liquidity in the market by SNB to assess how firm the Bank’s intention is to conduct intervention.

According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9% y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points.

Current data shows that the data released previously has been of a seasonal character and does not indicate recession of the economy. Index of leading indicators KOF in Switzerland fell to 2.04 in July, while the forecast had been 2.11. The data released earlier showed that trade balance in Switzerland totaled +1.74 billion francs in June against preliminary revised level of +3.25 billion francs.

It is possible that the Franc will shift the highs up, closer to 0.7500.

 

[LF.Anastasia]

JPY: Japanese Yen strengthens on Monday ignoring actions of the Bank of Japan

The Japanese Yen rate remains strong at the Forex currency market on Monday; demand for the JPY is back at the market due to financial instability.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal. Stochastic Oscillator slowed down its growth in the neutral zone, shifting into the sideways and not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 77.90, the pair will go to 77.70 and 77.50.

It became known today that current account surplus in Japan was -50.2% y/y in June, Y526.9 billion against decline of 51.7% y/y in May.

According to statistics released earlier, preliminary index of leading indicators increased to 103.2 points in June against the previous level of 99.4 points. At the same time preliminary index of coincident indicators in June was at the level of 108.6 points against the forecast of 108.7 points. Statistics is positive, it demonstrates that Japanese economy is moving towards recovery although slowly and with halts.

Last weekend, Japanese Finance Minister Noda said that during the meeting of the Big Seven he clarified the importance of the conducted currency intervention which had been aimed to reduce the rise of the national currency. At the same time he did not indicate whether Japan is going to conduct currency intervention in the future. Despite liquidity infused in the market, the Yen continues to grow again, using external instability as a driver.

We would remind that the Bank of Japan had held the meeting a day earlier than scheduled last week and left interest rate unchanged, in the range of 0-0.1%, at the same time program of assets purchase has been increased up to 15 trillion yen (previously: 10 trillion yen). In addition, volume of purchases of the long term government bonds was raised to 4 trillion yen (2 trillion yen earlier); size of program to purchase corporate bonds was increased to 2.9 trillion yen (2 trillion yen earlier). Economic evaluation of the Central Bank was raised again in July, because regulator believes that activity in the economy is growing fast, so economy of Japan is on the way to gradual recovery.

Meanwhile, the Central Bank of Japan had carried out currency intervention to reduce pressure which Yen exerts on the economy. The volume of the intervention amounted to about 5 trillion yen and the Yen had soared up above 80.0, for the first time since July.

According to the previous estimates of the Bank, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%.

Statistics released earlier was mixed: unemployment rate in June was at the level of 4.6%; household spending fell by 4.2% y/y in June; net national CPI increased by 0.4% in June against the forecast of +0.5%. Exports in Japan decreased by 1.6% y/y in June against the forecast of decline by 4.1% y/y; imports rose by 9.8% y/y, while expected growth had been of 11.0% y/y.

 

[LF.Anastasia]

AUD: Australian Dollar accelerated its fall

At the Forex currency market the Australian Dollar rate is traded downward on Monday morning: sales have been going on for the eighth session for the AUD with no correction, under pressure from external background.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, and is going down, while volumes are low, and is giving a sell signal. Stochastic Oscillator is going down, reaching the oversold zone, and maintaining a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0300, the pair will go to 1.0280 and 1.0260. If downward breakdown does not take place, the pair will consolidate close to the current levels.

The Australian Dollar has quickly responded to the deterioration of the external background, which partly explains sales of the AUD. Position of the RBA became an additional factor of pressure when it raised inflation forecast and lowered forecast of economic growth. Now the AUD is becoming a barometer of external instability- investors are not willing to risk making purchases under instability of the market.

It became known earlier that business activity index in the construction sector AIG in Australia fell by 0.3 points in July, to the level of 36.1 points.

Index of PPI in Australia increased by 0.8% on quarterly basis in Q2 against the growth of 1.2% in Q1. Business confidence NAB in Australia amounted to +6 points in Q2 against the prior value of +11 points. At the same time index of current conditions rose by 3 points against preliminary +2 points and assessment of business conditions in the three-month term increased by 10 points (forecast had been the growth of 15 points). CPI in Australia increased by 0.9% q/q ((+3.6% y/y) in Q2 against the forecast of growth by 0.7% q/q. This data turned out above expectations and supported growth in the pair AUD/USD. It is worth noting that business conditions index in Australia increased by 2 points in July, as per NAB estimates, against zero value in May. At the same time, business confidence index NAB amounted to 0 points against the level of +6 points in May, and GDP forecast for the fiscal year of 2011-2012 had been reduced to 1.7%

Price index of houses in Australia fell by 0.1% q/q in Q2 against the forecast of reduction by 0.9% on quarterly basis.

According to the decision of the Reserve Bank of Australia, interest rate in the country was left at the previous level of 4.75% per annum. In the follow-up comments, the head of the RBA, Mr. Stevens said that external uncertainty prevents the rise in the interest rate in Australia at the moment. He said that “it was agreed that it was reasonable to maintain current course of monetary policy especially taking into account acute sense of uncertainty at the financial markets recently. At the next meeting the RBA will continue to estimate varying prospects for growth and inflation”.

 

[LF.Anastasia]

NZD: Sales of New Zealand Dollar have been resumed after an interval

At the Forex currency market the New Zealand Dollar rate started to decline over again on Monday, because external background has aggravated once again.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD; it is moving down, giving a sell signal, while volumes are low. Stochastic Oscillator remains in the oversold zone, and maintains a sell signal.

Forex recommendations: in case of breakdown at the level of 0.8270, the pair will go to 0.8250 and 0.8230. If downward breakdown does not take place, the pair will consolidate close to the current levels.

Economic situation in New Zealand has not changed fundamentally on Monday morning.

The AUD is not very popular with traders at the moment, which can be logically explained: as long as economic uncertainty persists in the world, there will be few volunteers who are eager to take risk. The environment has aggravated today due to the downgrade of the U.S. rating and expanding of the debt problems in Eurozone.

CPI in New Zealand rose by 1.0% q/q (+5.3% y/y) in Q2 against the forecast of growth by 0.8% on quarterly basis. It is one more positive characteristic of the economic status in New Zealand.

At the meeting last week, the Reserve Bank of New Zealand decided to leave interest rate at the previous level of 2.5% per annum. In the follow-up comments the RBNZ said that monetary policy tightening which has been planned for the nearest future is aimed to duly curb the rise in prices in the country. As the head of the Bank, Mr. Bollard noted:”World financial risks have begun to fade out and economic growth continues to accelerate pace; therefore, there is no sense to maintain the rate at the current low level any further.”

In addition, it became known this week that unemployment rate in New Zealand amounted to 6.5% in Q2 against revised similar value in Q1. Employment rate in New Zealand has not changed on quarterly basis in Q2, showing growth by 2.0% y/y, to 2.214 million. In general the data agreed with the economists’ forecast, unemployment rate had been even below consensus forecast of 6.6%. However, this did not prevent sales of the NZD.

It is worth noting that permits for construction in New Zealand fell by 1.4% m/m in June against the forecast of +3.0%. Trade balance in New Zealand increased by NZ$230 billion in June against the forecast of NZ$400 billion. Slowdown in surplus was logical in June: volume of growth rate in imports and exports fell last month. Thus exports increased by 4.5% in Q2, to NZ$12.2 billion; imports dropped by 1%, to the level of NZ$11.8 billion. Exports to China and Australia fell sequentially: to +1.3% y/y (+24.2% y/y earlier) and 1.2% y/y (+4.7% y/y earlier) respectively.

Wide spread risk aversion still remains the main driver for the pair NZD/USD.

 

[LF.Anastasia]

EUR/USD: Euro retrieves its positions

The pair EUR/USD is traded upward at the Forex currency market on Tuesday, although yesterday it failed to hold out at high levels and fell at the end of the day.

By 9.17 Moscow time the Euro is at 1.4230 against yesterday’s closing level of 1.4178.

At the beginning of the week, financial floors regained from the fact that rating agency S&P downgraded the U.S. rating from high level of AAA to AA+ with a “negative” forecast. This was the reason for significant rise in volatility and acted as a driver for substantial sales all over the fiscal market.

However on Monday night, rating agency Moody’s stated that they confirm the U.S. rating at the level of AAA and stressed in the comments that they rely on the measures undertaken by the Americans authorities.

Eurozone will not indulge investors with macro-statistics; however the U.S. macro-economic environment will be eventful: a block of statistics will be released tonight, the meeting of the U.S. Federal Reserve will be held and at 22.15 Moscow time, a decision on the rate will be also announced.

Most likely the pair EUR/USD will not go beyond the range of 1.4150-1.4290 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound takes interest in growth

At the Forex currency market the British Pound Sterling rate tries to regain from yesterday’s sales on Tuesday morning.

Forex forecast: MACD indicator for the pair GBP/USD remains in the positive area, however it started upward reversal and is ready to give a buy signal. Stochastic Oscillator is moving along the signal line in the neutral zone, not giving a clear signal.

Forex recommendations: in case of break down at the level of 1.6340, the pair will go to 1.6360 и 1.6380. If upward breakdown does not take place, the pair will consolidate at the current levels.

This week started with ongoing preservation of market tension: situation in the U.S. economy along with spreading debt problem in Eurozone puts pressure on the purchase interest of investors.

This afternoon the data on the UK industrial output and trade balance in June will be released.

It also became known last week, that index of PMI CIPS in the UK construction sector increased to 53.6 points in July against the forecast of 53.0 points. In June, CPI in the UK fell by 0.1% m/m (4.2% y/y) against the forecast of growth by 0.2% m/m.

Earlier, Confederation of British Industry, CBI has reduced GDP forecast for the current year to 1.3% against the forecast of 1.7% in May. According to experts, sovereign crisis in Europe, debt problems in the U.S. and Japanese disasters will not enable British economy to strengthen considerably. Meanwhile, preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2.

Moody’s believes that the UK DGP will rise by 1.6% this year; in 2012 – by 2.1%; while the growth in 2010 had been by 1.3%. At the same time unemployment rate will vary in the range of 7.8-8.0%. The forecast of the agency is based on the belief that the Bank of England will raise interest rate by 25 basis points before the end of this year and by another 1% -over the next year.

The meeting of the Bank of England was as usual brief and concise: the rate was left at the level of 0.50% per annum, package of public bonds redemption was also left unchanged, in the amount of 200 billion pounds.

No special comments have been made: British regulator continues to adhere to the old monetary policy.

According to Finance Minister Osborne, Great Britain continues to hold a status of a quiet habour, because national authorities are taking tough measures on fiscal policy. He believes that the country shall continue to adhere to consolidation plan to get rid of debts; meanwhile the Britain is able to keep away from recession. Rejection from the fiscal plan at the moment will become a real threat to economic growth, thinks Osborne.

 

[LF.Anastasia]

CHF: Swiss Franc continues to reach new historic highs

At the Forex currency market Swiss Franc rate continues to be strong on Tuesday. Yesterday, the currency has shifted up historic highs once again and now its peak is at the level of 0.7482.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going down, giving a sell signal. Stochastic Oscillator is still in the oversold zone and maintains a sell signal.

Forex recommendations: in case of breakdown at the level of 0.7500, the pair USD/CHF will go to 0.7490 and to new highs of 0.7470. If downward breakdown does not take place, the pair will consolidate at the current levels.

The data released yesterday showed that unemployment rate in Switzerland was maintained at the level of 3.0% in July.

Today, investors will await the release of the consumer confidence index in Q3.

As we expected before, Swiss National Bank will have to confront a huge number of currency investors, who try to hedge risks in the Franc, due to the increasing instability in the market, the demand in CHF has risen again.

Due to the aggravated situation in the U.S. economy, agency S&P has downgraded rating of the country by one step and gave the U.S. a “negative” forecast. This, along with the spreading of debt problems of the Eurozone towards Italy caused the rise of investors’ interest in safety currencies.

According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9% y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points.

Current data shows that the data released previously has been of a seasonal character and does not indicate recession of the economy. Index of leading indicators KOF in Switzerland fell to 2.04 in July, while the forecast had been 2.11. The data released earlier showed that trade balance in Switzerland totaled +1.74 billion francs in June against preliminary revised level of +3.25 billion francs.

We would remind that earlier, Swiss national Bank had restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. SNB named the threat to economic progress and price instability as main arguments.

Now, it will be interesting to know the volume of the infused liquidity in the market by SNB to assess how firm the Bank’s intention is to conduct intervention.

 

[LF.Anastasia]

JPY: Japanese Yen continues to grow

At the Forex currency market on Tuesday morning the Japanese Yen rate continues the growth which started yesterday, since external instability at the trading floors remains acute to a great extent.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and is going down, giving a sell signal. Stochastic Oscillator goes down in the neutral zone, giving a similar signal..

Forex recommendations: in case of breakdown at the level of 77.30, the pair will go to 77.10 and 76.90.

The data released in the morning showed that composite index of consumer confidence in Japan increased to 37.0 points in July against the value of 35.3 points in June. It also became known yesterday that current account surplus in Japan was -50.2% y/y in June, Y526.9 billion against decline of 51.7% y/y in May.

Last weekend, Japanese Finance Minister Noda said that during the meeting of the Big Seven he clarified the importance of the conducted currency intervention which had been aimed to reduce the rise of the national currency. At the same time he did not indicate whether Japan is going to conduct currency intervention in the future. Despite liquidity that has been infused in the market, the Yen continues to grow again, using external instability as an activator. According to statistics released earlier, preliminary index of leading indicators increased to 103.2 points in June against the previous level of 99.4 points. At the same time preliminary index of coincident indicators in June was at the level of 108.6 points against the forecast of 108.7 points. Statistics is positive, it demonstrates that Japanese economy is moving towards recovery although slowly and with halts.

Statistics released earlier was mixed: unemployment rate in June was at the level of 4.6%; household spending fell by 4.2% y/y in June; net national CPI increased by 0.4% in June against the forecast of +0.5%. Exports in Japan decreased by 1.6% y/y in June against the forecast of decline by 4.1% y/y; imports rose by 9.8% y/y, while expected growth had been of 11.0% y/y.

We would remind that the Bank of Japan had held the meeting a day earlier than scheduled last week and left interest rate unchanged, in the range of 0-0.1%, at the same time program of assets purchase has been increased up to 15 trillion yen (previously: 10 trillion yen). In addition, volume of purchases of the long term government bonds was raised to 4 trillion yen (2 trillion yen earlier); size of program to purchase corporate bonds was increased to 2.9 trillion yen (2 trillion yen earlier). Economic evaluation of the Central Bank was raised again in July, because regulator believes that activity in the economy is growing fast, so economy of Japan is on the way to gradual recovery.

Meanwhile, the Central Bank of Japan had carried out currency intervention to reduce pressure which Yen exerts on the economy. The volume of the intervention amounted to about 5 trillion yen and the Yen had soared up above 80.0, for the first time since July.

According to the previous estimates of the Bank of Japan, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%.