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[LF.Anastasia]

GBP: British Pound declines in response to deterioration of the external background

At the Forex currency market the British Pound Sterling declines at the beginning of the week in response to deterioration of the external background.

Forex forecast: MACD indicator for the pair GBP/USD goes down in the negative area, giving a sell signal; volumes are increasing. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of break down at the level of 1.5805, the target for sale will become the levels of 1.5780 and 1.5750. If a downward breakdown does not take place, the pair will consolidate at the current levels.

So, external background is the crucial driver for the market. Investors do not see the light at the end of the tunnel in order to start buying.

At the meeting which was held last week, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum; volume of assets purchase was also left unchanged. Apparently, the Bank of England is not going to intensify stimulation of the economy, assuming that inflation will reduce by itself. It is interesting that a hawk has showed up again in the horizon of the British financial field; Andrew Sentence, ex-member of MPC said in the interview with “The Times” that he continues to adhere to the view that the rise of the interest rate by 50 basis points is necessary for the country. He also finds arguable expectations of the Bank of England that inflation will move away from the level of 4.50% in the near future.

Preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2. The head of the Bank of England Mr. King noted this week commenting inflationary indices that, CPI can easily reach 5% and MPC can use interest rate or QE to control risks, if the need be.

As the data released the day before yesterday showed index of retail prices BRC in Great Britain increased by 0.1% m/m (+2.7% y/y) in August against the fall of 0.2% m/m a month earlier. However, annual gain amounted to 2.8% in July; obviously the CR continues to decrease. Expensive raw material puts pressure on consumer inflation, which is reflected in the indicator. According to Nielsen estimates about 40% of purchases were the goods involved in various promotions, which proves that the British do not want to spend money.

It also became known earlier that retail sales BRC in the UK fell by 0.6% y/y in August. Low level of consumption in Great Britain, along with the low consumer confidence and poor state of the real estate market has become the main reasons of the decline in the index. Demand is obvious only for food, while demand for clothes and household goods goes down sharply,- reported British Retail Consortium.

 

[LF.Anastasia]

CHF: Swiss Franc continues to retreat

At the Forex currency market Swiss Franc rate is traded downward on Monday: Franc is of no interest as a protective currency to investors. However, there is a chance that due to the increasing negative factors of the external background Swiss currency will be able to strengthen slightly; although this trend is unlikely to be strong.

Forex forecast: MACD indicator is in the positive area for the pair USD/CHF and maintains buy signal. Stochastic Oscillator is in the overbought zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 0.8890, the pair USD/CHF will go to 0.8900 and 0.8920. If upward breakdown does not take place, the pair will consolidate at the current levels.

A meeting of Swiss National Bank will be held this week; decision on the three-month Libor rate will be made there, and also comments will be given on the current economic situation.

By Monday morning economic situation in Switzerland has not changed significantly.

Last week was extremely stressful for Franc and deprived traders of “safe harbor”. We would remind that Swiss National Bank fixed exchange rate of the Euro in pairing with Franc at the minimum permissible level of 1.20, causing a rally in the market. SNB noted in the comments that it is going to buy foreign currency in unlimited quantities to prevent growth of the Franc, as the CHF adversely affects economy of Switzerland. Therefore, now the SNB will carefully monitor the situation at the currency market and carry out interventions without warning.

According to the data released earlier, unemployment rate in Switzerland remained at the level of 3.0% in July. Statistics released earlier showed that the level of retail sales in Switzerland increased by 7.4% in June against the revised level of -3.9% in May. In addition, index of PMI SVME rose to 53.5 points in July against the forecast of 52.5 points. The data released yesterday showed that unemployment rate in Switzerland remained at the level of 2.8% in August, the same as in July. It is good that “long arms” of the Franc has not reached this important sector. Statistics which was made public before this decision showed that Switzerland slides down to deflation: CPI in August fell by 0.3% m/m against the forecast of decline by 0.2% m/m.

It became known earlier that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June. In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. Statistics released earlier showed that indicator of consumption UBS fell to 1.29 points in July against the level of 1.52 points in June. The indicator has been sliding down not for the first month, showing negative tendencies in the economy; therefore, tough position of the SNB will be most welcome.

The Franc has no ground to grow at the moment.

 

[LF.Anastasia]

JPY: Japanese Yen is growing acting as a “safe harbor”

At the Forex currency market the Japanese Yen rate is traded upward on Monday; investors are hedging their risks in YPY because of the significant deterioration in the external background. At the moment even a possibility of new intervention does not remove tension in the pair.

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

Forex recommendations: in case of breakdown at the level of 77.00, the pair will go to к 76.80 and 76.65. If downward breakdown does not take place, the pair will consolidate at the current levels.

The fact that traders started to buy the Yen trying to move away from risk only increases a chance that the Bank of Japan will instill new funds to the market to fight against expensive JPY because it is one of the three objectives of a new Cabinet. It is possible that in the coming weeks, the new government will present a plan to stabilize the JPY, which can make the Yen weaker but not for long.

At the meeting this week, the Bank of Japan decided to leave interest rate unchanged at 0.1% per annum. Changes in the monetary policy are not planned: program of buying assets and lending program will remain unchanged along with the exchange rate. In the follow-up comments the Central Bank noted that situation in Europe requires thorough attention and Japanese economy maintains the tendency to recover.

New Minister of Economy in Japan stayed in the office for only 8 days: he was dismissed because of his bad joke about radiation.

Statistics released this morning showed that real revised GDP in Japan fell by 0.5% q/q (-2.1% y/y) in Q2 against the forecast of -0.5% q/q (-2.0% y/y) and previous level of -0.3% q/q. Statistics released yesterday showed that bank lending fell by 0.5% in August against the decline of 0.6% in July. In addition, index of economical observers who monitor current situation fell to 47.3 points in August against the level of 52.6 points in July.

According to 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%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the Country of the Rising Sun said that next quarter Japan will demonstrate the rise of economy.

 

[LF.Anastasia]

AUD: Australian Dollar is getting weaker at the beginning of the week

At the Forex currency market the Australian Dollar rate continues to decrease on Monday: investors are risk aversion and close positions in the pair due to the deterioration in the external environment.

Forex forecast: MACD indicator for the pair AUD/USD has merged with the signal line and is not giving a signal. Stochastic Oscillator reversed in the neutral zone and goes down, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0320, the pair will go to 1.0300 and 1.0270. If downward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that trade balance in Australia was at the level of +A$1.83 billion in July against the forecast of +A$1.9 billion, which is slightly better than the data in June, however weaker than predicted. Obviously external background puts pressure on the economy of New Zealand.

At the meeting last week, the Reserve Bank of Australia decided to leave the cash rate unchanged at 4.75% per annum, as expected. In the follow-up comments the head of the RBA Glen Stevens noted that “medium term economic prospects look worse that it had been expected a few months earlier. Global financial markets demonstrated severe instability”. The situation with the rate seems logical amid such background. “The RBA Committee decided that the most viable option will be to maintain current course of the monetary policy. At the next meeting the RBA will continue to carefully analyze both the prospects for economic growth and inflation in Australia, –said Stevens.

The pause in the policy of monetary tightening, maintained by the RBA, has been already going on for 9 months and it is possible that it will continue for a couple of months.

Last week was very eventful for the AUD in terms of statistics, which was mixed and did not contribute to establishing a specific direction of movement. Thus, Australian data which became known yesterday was not very positive: unemployment rate rose to 5.3% in August versus the level of 5.1% in July. It is possible labour market is affected by the situation with exports. Statistics released before that showed that GDP in Australia rose by 1.2% q/q (+1.4% y/y) in Q2 against the forecast of growth by 1.0% on quarterly basis. The data was above expectations; however uncertainty in the external economy is very high, which prevents growth in the exchange rate. According to the governor of the RBA Mr. Glen Stevens, as long as markets are panic-stricken it is better to keep rates steady.

As long as external background remains negative, the pair will continue to lose positions.

 

[LF.Anastasia]

CAD: Canadian Dollar is being sold for the third consecutive day

At the Forex currency market the Canadian Dollar rate continues to follow the trend of the last five days: the CAD is being sold due to the lack of support: price for oil are decreasing and risks are increasing.

Forex forecast: MACD indicator is moving up in the positive area for the pair USD/CAD; however it is moving along the signal line and is not giving a clear signal. Stochastic Oscillator goes up in the neutral zone, and is giving a buy signal, while approaching overbought zone.

Forex recommendations: in case of breakdown at the level of 1.0010, the pair will go 1.0050 and 1.00700. If upward breakdown does not take place, the pair will stay at the current levels.

Last week was very eventful for the Canadian Dollar. It became known that unemployment rate in Canada increased to 7.3% in August against the forecast of 7.2% and previous level of 7.2%. In addition, labour productivity fell by 0.9% on quarterly basis in Q2 against the forecast of decline by 0.7% q/q.

It also became known that number of begun construction in Canada fell to 184.7 thousand in August against the forecast at 200 thousand.

Slowdown of the key indicators is obvious at the moment; which is caused by the state of the global economy and proximity to the Unites States.

According to statistics released earlier, net CPI in Canada increased by 0.2% m/m (+1.6% y/y) in July. The indicator fell by 0.7% m/m (+3.1% y/y) in June.

The Bank of Canada believes that GDP of the country will account to 2.8% in 2011 (reduction by 0.1% versus forecast of April); and it will be: 2.6% in 2012 and 2.1% in 2013. According to the Bank evaluation, export performance in Canada is negative, because low demand in the USA prevents the rise of the indicator and expensive CAD makes situation more complicated. The growth in the interest rate in Canada will directly depend on stability in the economic development. The head of the Bank of Canada Mr. Carney said earlier that there are several significant obstacles on the way of Canadian economic development. First of all it is the growth of the Canadian Dollar and secondly, it is European debt crisis, plus to this, drawn-out dialogue about the U.S. national debt also casts a dark shade on the Canadian economy. Central Bank will be able to waive further economic stimulation only when economic system will show steady self-sustained growth.

As it became known, number of begun construction in Canada increased to 205.1 thousand in July which is higher than the forecast at 194.5 thousand and above the previous level of 196.6 thousand. In addition, trade deficit in Canada was at the level of -$1.6 billion in June against the level of -$1 billion in May. This is probably related to the problems in the neighboring U.S.

 

[LF.Anastasia]

EUR/USD: Euro has stabilized after collapse

The pair EUR/USD is almost not moving at the Forex currency market on Tuesday morning, after yesterday’s collapse to the lows of February. By 9.10 MSK the Euro is at 1.3675 against yesterday’s closing level of 1.3678.

The pair went down to 1.3502 during the trading session, which was the level of this February, in response to the external events: on Monday it was reported that there was an accident in the atomic power station in France. In addition, information on Tuesday showed that IMF in Portugal is going to issue tranche in the amount of 4 billion euro after conducting an audit of the program to cut government spending.

The Euro is still under pressure; investors await progress in the issue with Greece where economy remains weak.Most likely the pair EUR/USD will not go beyond the range of 1.3550-1.3700 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound is very weak

At the Forex currency market the British Pound Sterling is traded quietly on Tuesday morning, trying to recover from yesterday’s sales.

Forex forecast: MACD indicator for the pair GBP/USD continues to go down in the negative area, giving a sell signal; volumes are increasing. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of break down at the level of 1.5805, the target for sale will become the levels of 1.5780 and 1.5750.

If a downward breakdown does not take place, the pair will consolidate at the current levels.It became known today that house price balance RICS in the UK amounted to -23% in August which agreed with the forecast.Visit of British Prime Minister Davis Cameron has not influenced on the position of the currency – it is more a political issue, although during the meeting with Russian authorities some commercial contracts have been signed.It seems that Great Britain will continue to reform the banking sector with the main objective of protecting investors and consumers from financial crisis.

Preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2. The head of the Bank of England Mr. King noted this week commenting inflationary indices that, CPI can easily reach 5% and MPC can use interest rate or QE to control risks, if the need be.

According to the data released earlier retail price index BRC in Great Britain increased by 0.1% m/m (+2.7% y/y) in August against the fall of 0.2% m/m a month earlier. However, annual gain amounted to 2.8% in July; obviously the CR continues to decrease. Expensive raw material puts pressure on consumer inflation, which is reflected in the indicator.

According to Nielsen estimates about 40% of purchases were the goods involved in various promotions, which proves that the British do not want to spend money. At the meeting last week, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum; volume of assets purchase was also left unchanged.

Apparently, the Bank of England is not going to intensify stimulation of the economy, assuming that inflation will reduce by itself. It is interesting that a hawk has showed up again in the horizon of the British financial field; Andrew Sentence, ex-member of MPC said in the interview with “The Times” that he continues to adhere to the view that the rise of the interest rate by 50 basis points is necessary for the country. He also finds arguable expectations of the Bank of England that inflation will move away from the level of 4.50% in the near future.

 

[LF.Anastasia]

CHF: Swiss Franc has hardly changed its position

Swiss Franc rate remains at its local lows at the Forex currency market on Tuesday. The currency has hardly changed its position even considering that investors’ interest to “safe harbor” currencies is very high. Franc was struck from of this list due to the tough stance of SNB.

Forex forecast: MACD indicator for the pair USD/CHF is growing in the positive area and maintains a buy signal. Stochastic Oscillator is in the overbought zone and is giving a similar signal; however it tends to go out of the zone.

Forex recommendations: in case of breakdown at the level of 0.8810, the pair USD/CHF will go to 0.8850 and 0.8880.

If upward breakdown does not take place, the pair will consolidate at the current levels.The data released earlier showed that unemployment rate in Switzerland remained at the level of 3.0% in July. Statistics released earlier showed that the level of retail sales in Switzerland increased by 7.4% in June against the revised level of -3.9% in May. In addition, index of PMI SVME rose to 53.5 points in July against the forecast of 52.5 points.

The data released yesterday showed that unemployment rate in Switzerland remained at the level of 2.8% in August, the same as in July. It is good that “long arms” of the Franc has not reached this important sector. Statistics which was made public before this decision showed that Switzerland slides down to deflation: CPI in August fell by 0.3% m/m against the forecast of decline by 0.2% m/m.It became known earlier that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June.

In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. Statistics released earlier showed that indicator of consumption UBS fell to 1.29 points in July against the level of 1.52 points in June. The indicator has been sliding down not for the first month, showing negative tendencies in the economy; therefore, tough position of the SNB will be most welcome.Last week was extremely stressful for Franc and deprived traders of “safe harbor”.

We would remind that Swiss National Bank fixed exchange rate of the Euro in pairing with Franc at the minimum permissible level of 1.20, causing a rally in the market. SNB noted in the comments that it is going to buy foreign currency in unlimited quantities to prevent growth of the Franc, as the CHF adversely affects economy of Switzerland.

Therefore, now the SNB will carefully monitor the situation at the currency market and carry out interventions without warning.At the meeting of Swiss National Bank which will be held this week, a decision on the three-month Libor rate will be made and also comments will be given on the current economic situation.

 

[LF.Anastasia]

JPY: Growth of Japanese Yen has been lasting for the second day

At the Forex currency market the Japanese Yen rate continues to grow on Tuesday responding to the desire of investors to wait out in the “safe harbor” until the time of turbulence is over.

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

Forex recommendations: off the market.Feasible event scenario at Forex: in case of breakdown at the level of 77.00, the pair will go to к 76.80 and 76.65.

If downward breakdown does not take place, the pair will consolidate at the current levels. The risk of currency intervention from the Bank of Japan is very high.A meeting of G7 last weekend showed that member countries are concerned about the fate of Japan and large countries are willing to participate in consultations; however joint actions are not yet expected.At the meeting last week, the Bank of Japan decided to leave interest rate unchanged at 0.1% per annum.

Changes in the monetary policy are not planned: program of buying assets and lending program will remain unchanged along with the exchange rate. In the follow-up comments the Central Bank noted that situation in Europe requires thorough attention and Japanese economy maintains the tendency to recover. Statistics released earlier showed that real revised GDP in Japan fell by 0.5% q/q (-2.1% y/y) in Q2 against the forecast of -0.5% q/q (-2.0% y/y) and previous level of -0.3% q/q.

Statistics released yesterday showed that bank lending fell by 0.5% in August against the decline of 0.6% in July. In addition, index of economical observers who monitor current situation fell to 47.3 points in August against the level of 52.6 points in July. According to 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%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the Country of the Rising Sun said that next quarter Japan will demonstrate the rise of economy.

The fact that traders started to buy the Yen trying to move away from risk only increases a chance that the Bank of Japan will instill new funds to the market to fight against expensive JPY because it is one of the three objectives of a new Cabinet. It is possible that in the coming weeks, new government will present a plan to stabilize the JPY, which can make the Yen weaker but not for long.

 

[LF.Anastasia]

AUD: Australian Dollar relies on rebound

The Australian Dollar rate is traded slightly upward at the Forex currency market today as part of technical rebound after sales of the last three days.

Forex forecast: MACD indicator for the pair AUD/USD has merged with the signal line and is not giving a signal. Stochastic Oscillator goes down the neutral zone, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0350, the pair will go to 1.0320 and 1.0300.

If downward breakdown does not take place, the pair will consolidate at the current levels. The AUD can reach 1.0410 as part of technical correction.

Statistics released this morning showed that index of business conditions NAB in Australia fell by 3 points in August against the level of -1 point in July. The index declined to the lows since April 2009, indicating slump in the sentiments and prospects. National Australian Bank Ltd, noted commenting this outcome that it reflects increased level of uneasiness and concern that debt crisis will spread further.

As long as external background remains negative, the pair will continue to lose positions.It became known yesterday that trade balance in Australia was at the level of +A$1.83 billion in July against the forecast of +A$1.9 billion, which is slightly better than the data in June, however weaker than predicted. Obviously, external background puts pressure on the economy of the Green Continent.

At the meeting last week, the Reserve Bank of Australia decided to leave the cash rate unchanged at 4.75% per annum, as expected. In the follow-up comments the head of the RBA Glen Stevens noted that “medium term economic prospects look worse that it had been expected a few months earlier. Global financial markets demonstrated severe instability”. The situation with the rate seems logical amid such background.

“The RBA Committee decided that the most viable option will be to maintain current course of the monetary policy. At the next meeting the RBA will continue to carefully analyze both the prospects for economic growth and inflation in Australia, –said Stevens.The pause in the policy of monetary tightening, maintained by the RBA, has been already going on for 9 months.