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[LF.Anastasia]

EUR/USD: Another day in the narrow range

The pair EUR/USD is growing moderately at the Forex currency market on Tuesday morning.

By 9.10 Moscow time the Euro is at 1.3073 against yesterday’s closing level of 1.3060.

Activity in the trading floors is still low, Stock Exchanges of Great Britain, Australia, New Zealand and some other countries will be closed, and macro-economic calendar is almost blank.

The only information that helped to enliven the market of this week was the news that China and Japan agreed to use national currencies for settlements and trading, thus avoiding the use of the USD. This information provided some support to the Euro.

Most likely the pair EUR/USD will not go beyond the range of 1.3040-1.3090 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound tends to keep on growing

The British Pound Sterling is traded slightly upward at the Forex currency market on Tuesday in response to quiet external background.

Forex forecast: MACD indicator for the pair GBP/USD is traded upward in the negative area and is giving a buy signal, while volumes are below average. Stochastic Oscillator is going down in the neutral zone and is giving an antipodal signal.

Forex recommendations: in case of breakdown at the level of 1.5640, target for buying will be the levels of 1.5650 and 1.5660. There is a high chance of downward movement.

Markets are closed in the UK today. It became known yesterday that house prices Hometrack in the country fell by 0.2% m/m (+2.1% y/y) in December.

Activity in the pair is still low, although some players have resumed trading. The main constraint factor is that it is the year-end. The Bank of England announced earlier that average inflationary expectations reduced by 4.1% in November against the level of 4.2% in August. At the same time, the level of two-year inflationary expectations was around 3.4% (3.5% previously).

According to the data released earlier CPI in Great Britain increased by 0.2% m/m (+4.8% y/y), as expected. Therefore, British inflation is slowing down its pace; however the index is still too far from the target level of the Bank of England.

Great Britain still tries to keep away from European debt problems: yesterday, during discussions of ways to increase International Monetary Fund with the help of collective contributions, London stated that it would announce its decision at the beginning of 2012. Minutes of the last meeting of the Bank of England has been released this week: according to the document all members of the IFA (ratio 9-0) voted for maintaining interest rate at the current level. In addition, the Committee believes that changes in the program of assets purchases will not bring significant benefits; however, if inflation does not subside, the increase in the volume of the assets purchase program can be required. Sharp decrease of inflation is still expected in the first 6 months of 2012, the prospects of CPI in the next 6 months look more blurry.

It is also worth noting that the Bank of England expects stagnation in the economy in the next quarter and GDP growth in Q1 next year.

Revised GDP in the UK rose by 0.6% q/q (+0.5% y/y) in Q3, statistics released earlier has supported buyers. The index is above preliminary assessment, which was appreciated in the market. It became known earlier that consumer confidence GFK/NOP in the UK declined to-33 points in December against the level of -31 points in November. Judging by small real expenditures and low income of households, the British are getting more conscious about spending. Index is still at 35-year lows and presently regarded as a negative indication.

 

[LF.Anastasia]

CHF: Activity in Swiss Franc remains low

At the Forex currency market Swiss Franc rate almost stays put on Tuesday and the trading situation today is taking a pattern of the yesterday’s one.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down slowly, giving a weak sell signal. Stochastic Oscillator continues to grow in the neutral zone and is giving a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9370, the pair USD/CHF will go to 0.9380 and 0.9390. However, there is a high chance that the pair will consolidate at the current levels.

Situation in the country is stable in terms of macro-statistics. Catholic world is busy celebrating Christmas and a New Year holiday will come next, which means that a chance of important developments in the market is very low.

According to observers from Wells Fargo, economic indexes in Switzerland demonstrated slowdown all the year round and there are many indications showing that the weakness will continue for the next six months. According to them, domestic demand is also getting lower which is a negative sign. As for the rate, it is most likely that SNB will adhere to the zero level due to the soft inflation.

Three-month Libor rate was left in the range of 0-0.25%, closer to zero; the Bank did not change pegging level of Franc to Euro, maintaining the actual level of 1.20. In the follow up comments the head of SNB Mr. Hildebrand stressed that the regulator will continue to maintain the target rate of CHF, with the help of purchases of foreign currency in unlimited quantities and additional package of measures if situation requires. SNB is ready to maintain high level of liquidity, as inflation growth is not expected. In general, economy of the country depends a lot on the European crisis. Apparently, SNB has adopted attitude of an onlooker, keeping in place existing management tools, being pretty confident that they always have time to start intervention.

Swiss National Bank noted earlier that the regulator is prepared to take additional measures if situation at Forex deteriorates. According to SNB, strong Franc creates extra problems for the economy and the issue of negative interest rates and control over the capital movement is being thoroughly scrutinized in the Bank. GDP in Switzerland will amount to 1.5%-2.0% this year; main growth will be attributed to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

It became known earlier that trade balance in Switzerland rose by 3.0 billion francs in November against the forecast of +2.00 billion francs and previous value of +2.15 billion francs. Index is favourable, however it is based on the efforts of the local regulator to curb the rate of the Franc.

 

[LF.Anastasia]

JPY: Japanese Yen strengthens, taking advantage of the situation

At the Forex currency market the Japanese Yen rate continues to strengthen moderately on Tuesday, taking advantage of quiet background in the stock markets and also due to support from the local statistics.

Forex forecast: MACD indicator for the pair USD/JPY is in the positive area and continues to move along the signal line, not giving a clear signal. Stochastic Oscillator is going down slowly in the neutral zone and is giving a moderate buy signal.

Forex recommendations: in case of breakdown at the level of 77.70, the pair will go to 77.60 and 77.45. If downward breakdown does not take place, the pair will consolidate at the current levels.

Japan has reverted to trading today and pleased players with statistics: number of begun housing construction decreased by 0.3% y/y in November against the forecast of decline of 5.0% y/y; orders in the construction sector rose by 21.0% y/y in November versus the growth of 24.3% y/y in October.

In addition, the minutes of the last meeting of the Bank of Japan which was released today stated that it is necessary to trace back the effect of the recent soft policy; special concern is caused by the potential impact of the expensive Yen.

We would remind that a meeting of the Bank of Japan, which was held in December, was gloomy. Thus, the regulator noted that growth of economic activity has slowed down and activity in Japanese economy is zero. The Bank has revised economic situation assessment downward in comparison with November, which is logical. Japanese economy will start to recover as soon as pressure from Europe diminishes.

In addition, interest rate in the country was left unchanged at the level of 0.1%. This decision had been expected.

The head of the Bank of Japan Mr. Shirakawa noted earlier that growth of the JPY continues to negatively impact on the local economy and that current rise of the JPY was provoked by European crisis. He believes that if appropriate measures are not taken straight away, economy of Japan will decline sharply by 2030. Mr. Shirakawa also noted that interventions against Yen are acceptable and effective. However, practical steps to support the words have not been made: apparently the Japanese regulator is in the “fly-through mode” presently moreover, the Yen does not give grounds for intervention due to its moderate activity.

Statistics released earlier was negative. Japanese statistics is negative today. Trade balance deficit amounted to Y684.7 billion in November against the forecast of -Y442.4 billion; at the same time exports decreased by 4.5% y/y in November, while imports increased by 11.4% y/y. It is getting more difficult for Japan to maintain economic growth rate, as both, significant weakness of the world economy and strong Yen complicates the process.

 

[LF.Anastasia]

AUD: Strengthening of Australian Dollar has been suspended

At the Forex currency market strengthening of the Australian Dollar rate has been suspended on Tuesday.

Forex forecast: MACD indicator for the pair AUD/USD continues to move down away from the signal line in the negative area and is giving a sell signal. Stochastic Oscillator remains in the overbought zone and is giving a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 1.0160, the pair will go to 1.0170 и 1.0190. If upward breakdown does not take place, there will be a chance of rollback to 1.0120.

Australian market is closed today.

It was noted by Australian Central Bankon last Tuesday, that the country has been fighting against repercussions of European debt crisis with the help of investment boom: minutes of the last meeting of the Reserve Bank of Australia showed that there is no urgent need at the moment in lowering rate and current steps directed to ease monetary policy is sufficient to support economy.

Observers believe that lowering of the rate of RBA in December was just a safeguard against external negative factors.

Unemployment rate increased to 5.3% in November against the forecast of 5.2%. Employment rate fell by 6 thousand against the growth of 16.8 thousand earlier. The indicator reflects the impact of European debt problems on the Australian economy. Retail sales in Australia increased to the minimum value of +0.2% m/m over 4 months in October. In September the index rose by 0.4%, and by 0.6% in August.

Consumer sentiment index Westpac-MI fell to 94.7 points, -8.3% m/m in December against the value of 103.4 points in November. Business confidence index NAB in Australia increased to 1 point in November against zero level in October. This data is positive at the moment as current conditions have stabilized; however levels of business confidence are still unvaried. It became known yesterday that trade balance in Australia fell to +A$1.60 billion in October against expectations of +A$2.0 billion. Slump in the global demand has played its part here as well.

Last week statistics showed that leading indicator index Westpac-MI in Australia increased to ***.2 points (+0.4 points) in October. The data reflects the pace of economic activity in the next 3-9 months; index has increased on monthly basis, however, it went down on annual basis (2.6% against 2.8% earlier). This is a signal that business activity in the country may decline in the coming months.

 

[LF.Anastasia]

NZD: New Zealand Dollar is traded in the narrow price band

At the Forex currency market on Friday the New Zealand rate is traded slightly downward on Tuesday, remaining in the narrow trading channel.

Forex forecast: MACD indicator for the pair NZD/USD is in the negative area and continues sideways movement, not giving a clear signal. Stochastic Oscillator remains in the overbought zone and maintains a buy signal.

Forex recommendations: in case of breakdown at the level of 0.7750, the pair will go to к 0.7760 and 0.7770. There is a high chance that sellers will be back in the pair.

Trading floors in New Zealand are closed due to holiday.

Earlier it became known that there was an earthquake of 5.8 points in Christchurch, New Zealand. Severe damages have not been reported yet, however the NZD went down because of the news.

It became known earlier that GDP in New Zealand increased by 0.8% q/q in Q3 (+1.9% y/y) against the forecast of +0.6% on quarterly basis. Significant support to the economy of New Zealand was provided by Rugby Championship which attracted a lot of investments into the country. GDP rose by 0.1% q/q (+1.5% y/y) in Q2 against the level of +0.9% q/q (+1.6% y/y) in Q1. Thus, New Zealand economy is actually in the state of stagnation. GDP had almost stopped growing, however revived later. Most likely the index will be weaker in Q4.

Trade balance in New Zealand was at the level of –NZ$*** million in October against the level of NZ$784 million in September. The index remained in deficit last month although it was higher than forecasts of economists. Volumes of export increased by 5.3% (NZ$3.9 billion) on annual basis in October and imports rose by 8.9% y/y due to demand for industrial production. Consumer confidence index ANZ in New Zealand declined to 108.4 points in December against 109.0 points earlier. It became known last week that business activity index in the service sector amounted to 56.6 points in November, as per BNZ estimates, against preliminary level of 51 points; thus the index has reached twenty-month highs now. The report also showed that new orders of companies and enterprises, as well as sales became a catalyst for activity. In addition, the rise in activity was recorded in the four major regions of the country for the first time this year.

 

[LF.Anastasia]

EUR/USD: Euro remains in the narrow trading range

The pair EUR/USD is traded downward at the Forex currency market on Wednesday morning.

By 9.00 Moscow time the Euro is at 1.3063 against yesterday’s closing level of 1.3067.

Major pair is still being traded in the extremely narrow range in advance of the New Year holiday; small sale was caused by expectations of the continuation of the Italian auction today. Thus, yesterday, yield of Italian ten-year debt securities has exceeded psychologically important mark of 6%, which indicates that market is prepared for high risks.

It is expected that securities placement will be continued today.

In general currency activity remains very low, which is logical.

Most likely the pair EUR/USD will not go beyond the range of 1.3020-1.3080 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound did not find support to continue its growth

The British Pound Sterling rate is traded downward at the Forex currency market on Wednesday.

Forex forecast: MACD indicator for the pair GBP/USD is traded upward in the negative area and is giving a buy signal, while volumes are minimal. Stochastic Oscillator is going down in the neutral zone and is giving an antipodal signal.

Forex recommendations: in case of breakdown at the level of 1.5640, target for buying will be the levels of 1.5630 and 1.5610.

Market in Great Britain was closed yesterday. Today investors are gradually resuming trades; however activity is likely to be low. It is doubtful that someone will be keen on entering into serious positions in the end of the year.

It became known this week that house prices Hometrack in the country fell by 0.2% m/m (+2.1% y/y) in December.

Great Britain still tries to keep away from European debt problems: yesterday, during discussions of ways to increase International Monetary Fund with the help of collective contributions, London stated that it would announce its decision at the beginning of 2012. Minutes of the last meeting of the Bank of England has been released this week: according to the document all members of the IFA (ratio 9-0) voted for maintaining interest rate at the current level. In addition, the Committee believes that changes in the program of assets purchases will not bring significant benefits; however, if inflation does not subside, the increase in the volume of the assets purchase program can be required. Sharp decrease of inflation is still expected in the first 6 months of 2012, the prospects of CPI in the next 6 months look more blurry.

It is also worth noting that the Bank of England expects stagnation in the economy in the next quarter and GDP growth in Q1 next year.

Revised GDP in the UK rose by 0.6% q/q (+0.5% y/y) in Q3, statistics released earlier has supported buyers. The index is above preliminary assessment, which was appreciated in the market.

The Bank of England announced earlier that average inflationary expectations reduced by 4.1% in November against the level of 4.2% in August. At the same time, the level of two-year inflationary expectations was around 3.4% (3.5% previously).

According to the data released earlier CPI in Great Britain increased by 0.2% m/m (+4.8% y/y), as expected. Therefore, British inflation is slowing down its pace; however the index is still too far from the target level of the Bank of England.

 

[LF.Anastasia]

CHF: Swiss Franc almost stands still

At the Forex currency market Swiss Franc rate almost stands still on Wednesday, remaining in the narrow trading range; which is not surprising when less than three working days are left before the New Year.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down slowly, giving a weak sell signal. Stochastic Oscillator started to decline in the neutral zone and is giving a sell signal.

Forex recommendations: in case of breakdown at the level of 0.9330, the pair USD/CHF will go to 0.9320 and 0.9300. However, there is a high chance that the pair will consolidate at the current levels.

Macro-economic situation in the country remains stable.

Swiss National Bank noted earlier that the regulator is prepared to take additional measures if situation at Forex deteriorates. According to SNB, strong Franc creates extra problems for the economy and the issue of negative interest rates and control over the capital movement is being thoroughly scrutinized in the Bank.

GDP in Switzerland will amount to 1.5%-2.0% this year; main growth will be attributed to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

It became known earlier that trade balance in Switzerland rose by 3.0 billion francs in November against the forecast of +2.00 billion francs and previous value of +2.15 billion francs. Index is favourable, however it is based on the efforts of the local regulator to curb the rate of the Franc.

According to observers from Wells Fargo, economic indexes in Switzerland demonstrated slowdown all the year round and there are many indications showing that the weakness will continue for the next six months. According to them, domestic demand is also getting lower which is a negative sign. As for the rate, it is most likely that SNB will adhere to the zero level due to the soft inflation.

Three-month Libor rate was left in the range of 0-0.25%, closer to zero; the Bank did not change pegging level of Franc to Euro, maintaining the actual level of 1.20. In the follow up comments the head of SNB Mr. Hildebrand stressed that the regulator will continue to maintain the target rate of CHF, with the help of purchases of foreign currency in unlimited quantities and additional package of measures if situation requires. SNB is ready to maintain high level of liquidity, as inflation growth is not expected. In general, economy of the country depends a lot on the European crisis. Apparently, SNB has adopted attitude of an onlooker, keeping in place existing management tools, being pretty confident that they always have time to start intervention.

 

[LF.Anastasia]

JPY: Japanese Yen continues to slide upward

At the Forex currency market the Japanese Yen rate continues to slide upward resolutely on Wednesday, unlike most of the other currencies, and catalysts for the JPY are being updated virtually every day.

Forex forecast: MACD indicator for the pair USD/JPY is in the positive area and continues to move along the signal line, not giving a clear signal. Stochastic Oscillator is going down slowly in the neutral zone and is giving a moderate buy signal.

Forex recommendations: in case of breakdown at the level of 77.70, the pair will go to 77.60 and 77.45. If downward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that preliminary retail sales in Japan fell by 2.3% y/y in November against the forecast of zero changes, consumer spending reduced by 3.2% y/y in November versus expectations of decline of 1.1% y/y. In addition, preliminary volume of industrial output decreased by 2.6% m/m in November (-1.5% y/y) against projected value of -0.8% m/m (-2.0% y/y).

The data is not impressive: the pace of decline is definitely accelerating, which is a negative factor for the recovering economy of Japan and for the forecasts; nevertheless, the JPY feels quite at ease.

Statistics released earlier this week, was slightly more optimistic: number of begun housing construction decreased by 0.3% y/y in November against the forecast of decline of 5.0% y/y; orders in the construction sector rose by 21.0% y/y in November versus the growth of 24.3% y/y in October.

In addition, the minutes of the last meeting of the Bank of Japan which was released today, stated that it is necessary to trace back the effect of the recent soft policy; special concern is caused by the potential impact of the expensive Yen.

We would remind that a meeting of the Bank of Japan, which was held in December, was gloomy. Thus, the regulator noted that growth of economic activity has slowed down and activity in Japanese economy is zero. The Bank has revised economic situation assessment downward in comparison with November, which is logical. Japanese economy will start to recover as soon as pressure from Europe diminishes.

Interest rate in the country was left unchanged at the level of 0.1%. This decision had been expected. The head of the Bank of Japan Mr. Shirakawa noted earlier that growth of the JPY continues to negatively impact on the local economy and that current rise of the JPY was provoked by European crisis. He believes that if appropriate measures are not taken straight away, economy of Japan will decline sharply by 2030. Mr. Shirakawa also noted that interventions against Yen are acceptable and effective. However, practical steps to support the words have not been made: apparently the Japanese regulator is in the “fly-through mode” presently moreover, the Yen does not give grounds for intervention due to its moderate activity. Statistics released earlier was negative. Japanese statistics is negative today. Trade balance deficit amounted to Y684.7 billion in November against the forecast of -Y442.4 billion; at the same time exports decreased by 4.5% y/y in November, while imports increased by 11.4% y/y. It is getting more difficult for Japan to maintain economic growth rate, as both, significant weakness of the world economy and strong Yen complicates the process.