LiteForex's analytics

[LF.Anastasia]

CHF: Swiss Franc will have to face with shaping of trend

Swiss Franc rate makes no headway, being close to the start session level at the Forex currency market on Monday in anticipation of new catalysts for the formation of a trend.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and continues to go down, giving grounds for a pair sell signal. Stochastic Oscillator is giving an antipodal signal today being in the neutral area.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9720 the pair will go to 0.9760 and 0.9800. If the level of 0.9650 is exceeded, traders’ targets will be the levels of 0.9610 and 0.9550.

According to the assessment of KOF, Swiss Institute of research of economic cycles, Swiss Franc will retain the status of safe asset and a status of a refuge for the whole period of tension in Europe.

In addition, KOF has revised its forecast for GDP growth upward in 2011; is it projected that Swiss economy will increase by 1.9% in 2011 against the previous forecast of 1.8%. In 1012 national economy is expected to rise by 2%.

This year, GDP growth in Switzerland can amount to 2.7%.
This forecast is based primarily on the belief that the SNB will increase interest rate by mid-2011. In addition growth of the rate will be insignificant because CNF is constantly under pressure from a growing trend, which is caused by European problems and demand for currency as a protective asset. That is why CHB cannot yet return to its standard monetary policy.

We would remind that at the meeting which was hold last week, Swiss National Bank decided to maintain three months rate Libor in the previous target range of 0-0.75. This decision of the Bank was expected by the market. Index was revised in March 2009 the last time when it was reduced by 0.25%.

 

[LF.Anastasia]

JPY: Japanese Yen remains in the narrow range at the beginning of the week

At the Forex currency market the Japanese Yen rate remains in the narrow range at the beginning of the week amid stable external environment.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY and it continues to move along the signal line preventing from forming a clear signal. Stochastic Oscillator is giving a pair sell signal, being in the neutral zone.

Forex recommendation: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 83.80 the pair will go to 83.50 and 83.10. If the level of 83.95 is exceeded buyers’ targets will be the levels of 84.10 and 84.40.

The following Japanese news was published today:
– Index of leading indicators (unrevised) reduced by 1.4 points m/m in October which was the fourth reduction in a row.
– Index of coincident indicators (unrevised) declined by 1.3 points m/m in October, which was the second reduction in a row.
The data has demonstrated once again that the economic growth in the Country of the rising Sun has slowed down.

Two- day meeting of the Bank of Japan started today; interest rate decision, and assessment of the current situation in the country’s economy will be adopted there. It is predicted that soft monetary policy of the regulator will remain unchanged, since there is no other option in the current situation. Yesterday’s comments of the head of the Bank Mr. Shirakawa will be of interest; he is expected to touch upon the subject of rapid increase in bond yield at the domestic market which has been observed recently.

Interest rate is likely to be preserved in the target range of 0-0.1% and the regulator will not make new decisions of easing.
Tankan report released last week also deserves consideration: it showed decline for the first time in 7 quarters – up to the level of 5 against the previous level of 8 and the forecast of 3. Quarterly report of the Bank of Japan which shows sentiments in the business circles of the country once again confirmed the fact that Japanese indicators of QIV will be weak, which will indicate downturn in economy. Market believes that Tankan indicator will go down to -2 by March 2011 which will mean that pessimists dominate over optimists in the business-class of Japan.

 

[LF.Anastasia]

AUD: Negative factor dominates for Australian Dollar

Australian Dollar continues to be traded without clearly defined direction at the Forex currency market at the beginning of the new week

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and it is going up, confirming a previous buy signal for the pair. Stochastic oscillator is approaching oversold zone, not giving a clear signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.9890 the pair will go to 0.9910 and 0.9930. If the level of 0.9832 is exceeded, traders’ target will be the levels of 0.9800 and 0.9780.

Thus, the Australian Dollar has failed to form a definite trend for the third session, being under the pressure from different factors.
Investors continue to express concern about continuation of Korean crisis: it became known on Monday that South Korea began shooting near the island of Yeonpyeong. According to the press, guns volleys have been heard there. We would remind that DPRK has repeatedly stressed that if South Korea would conduct military exercise on Yeonpyeong, the country would open fire on the island in “self-defence”.
In general, it is negative news for the AUD – negative factor prevails at the market now.

Domestic Australian news is far from being positive either. We would remind that according to the statistics released earlier, GDP in Australia increased by 0.2% on quarterly basis in QIII; while analytics had expected the rise by 0.5%; the growth over last quarter positioned as the lowest over the last two years, therefore GDP dynamics seems to be descending. It became known earlier that retail sales in October amounted to-1.1% m/m against +0.1% in September and trade balance surplus in October was $2.625 billion. It also became known earlier that current account balance amounted to -А$7.83 billion in QIII against the forecast of -А$6.60 billion.

 

[LF.Anastasia]

CAD: Canadian Dollar tends to be corrected after the previous fall

At the Forex currency market on Monday morning technical rebound is being observed for the Canadian Dollar, following a drastic fall at the end of last week.

Forex forecast: MACD indicator is in the negative area for the pair USD/CAD and it is moving along the signal line, which prevents from forming a clear signal. Stochastic Oscillator is approaching overbought area today and is giving a pair sell signal.

Forex recommendations: if bearish sentiments for the pair USD/CAD intensify traders’ targets today will become the levels of 1.0100 and 1.0085.
The situation in Canada has not changed significantly.

Statistics released last week showed slight recovery of Canadian economy: number of new orders in industrial sector was +3.0 in November; level of stocks in industrial sector was +0.3% in October; deliveries in industrial sector in October: +1.7%.

As it also became known earlier trade surplus in Canada reduced to the lows of 18 years in October and amounted to - C$1.7 billion against -$2.3 billion in September. At the same time exports increased by 3.1% to $33.8 billion in October, while imports rose by 1.2%, to $35.5 billion.

Interest rate in Canada is at the level of 1% per annum. The last increase took place in September this year was by +25 basis points. There is an opinion at the market that the Bank of Canada will not change the interest rate until QII next year, as economic recovery rate slows down in the country. The rate was increased 3 times in a row this year and at the last meeting of 19 October the regulator decided not to change it again.
The head of the Bank of Canada Mr. Carney noted earlier that economy needs regulation system reforms, as the risk of collapse of the financial institutions “which are too large to become bankrupt”’ is still too high at the moment.

He also stressed that the banks themselves should comply with market discipline and currencies rates should reflect the fundamentals. According to Carney increasing tension at the currency market bears risks for Canada itself.

Expectations of the U.S. GDP data for QIII, which will be released on Wednesday, 22 December, will put pressure on the CAD rate this week.

 

[LF.Anastasia]

EUR/USD: Investors buy Euro thanks to China

The pair EUR/USD has consolidated at the Forex currency market on Tuesday morning, following the statement made by China of readiness to provide help to the needy countries of EU.

By 9.15 Moscow time the Euro is at 1.3169 against closing session level of 1.3131 yesterday.

This morning Vice premier of the State Council of PRC Wang Tsshishan noted that his country has already taken concrete steps to support Eurozone in regards to debt problems and is ready to assist further.

The fact that China, which has the largest gold reserves in the world will provide support to weak European countries have a positive impact on traders’ sentiments, indicating interest in risk.

Of course Chinese party has made such decision for a reason – European Union is the largest trading partner of China.

The day is going to be uneventful in terms of macro-statistics, although some interest news will be released on a number of countries.
Most likely the pair EUR/USD will be in the range of 1.3090-1.32801 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound is growing on Tuesday

At the Forex currency market the British Pound Sterling rate consolidates amid the positive external background.

Forex forecast: MACD indicator is in the negative area for the pair GBP/USD and it moves along the signal line, not forming a clear signal. Stochastic Oscillator has come into oversold zone today and is giving a pair buy signal.

Forex recommendations: if current external background is maintained and in case of breakdown at the level of 1.5580 buyers’ targets will be the levels of 1.5650 and 1.5700.

It became known today that consumer confidence index in Great Britain, calculated by GfK/NOP, has not changed in December and remained at the level of -21, while reduction to -22 was predicted.

The index of large purchases increased due to the rise of VAT level.
The data released earlier seemed mixed. Inflation in the UK increased by 0.4% (+3.3% y/y) in November against the growth by 3.2% y/y in October. The fact, that the rate has been growing for the ninth consecutive month made economists worried. It is possible that the Bank of England will have to raise interest rate earlier to demonstrate that the inflation is under control. Interest rate is at the level of 0.50% per annum currently, the decision to leave it unchanged was made a week ago. We would remind that the UK unemployment rate in QIII increased to 7.9% against the previous level of 7.8% and the forecast of 7.7%. Number of unemployed reduced in Great Britain only by 1.2 thousand in November against expected reduction by 3 thousand.

As it is noted in the studies conducted by Markit company, sentiments of the British consumers have become less pessimistic; thus, current financial situation does not seem fatal to buyers; nevertheless no one has changed gloomy forecasts. Conclusions are made on the basis of the index of financial state of households, where the balance of households that are satisfied with their financial state has increased to the level of 39.9 against 38.9 in November. Although the indicator is located bellow the borderline level of 50 points.

 

[LF.Anastasia]

CHF: Swiss Franc continues to grow consistently

At the Forec currency market on Tuesday Swiss Franc rate continues to grow for the second consecutive day.

Forex forevast: MACD indicator is in the negative area for the pair USD/CHF and continues to go down, confirming a pair sell signal. Stochastic oscillator is giving a similar signal, being in the neutral zone.

Forex recommendations: if bearish sentiments intensify for the pair traders’ targets will be the levels of 0.9620 and 0.9570.

The CHF rose to a new high in pairing with the USD yesterday, and the pair USD/CHF looks more stable.
According to the assessment of KOF, Swiss Institute of research of economic cycles, Swiss Franc will retain the status of safe asset and a status of a refuge for the whole period of tension in Europe.

In addition, KOF has revised its forecast for GDP growth upward in 2011; is it projected that Swiss economy will increase by 1.9% in 2011 against the previous forecast of 1.8%. In 1012 national economy is expected to rise by 2%.
This year, GDP growth in Switzerland can amount to 2.7%.

We would remind that at the meeting which was hold last week, Swiss National Bank decided to maintain three months rate Libor in the previous target range of 0-0.75. This decision of the Bank was expected by the market. Index was revised in March 2009 the last time when it was reduced by 0.25%.

Speaking of the prospects of currency intervention it can be noted that it is possible that SNB will carry out intervention on a unilateral basis next year if the Franc will continue to grow rapidly.

Due to the high rate of the CHB the regulator cannot yet return to its standard monetary policy – it is expected that SNB will increase interest rate by mid- 2011. In addition growth of the rate will be insignificant because CNF is constantly under pressure from a growing trend, which is caused by European problems and demand for currency as a protective asset.

 

[LF.Anastasia]

JPY: Japanese Yen demonstrates inclination to grow

The Japanese Yen rate continues to consolidate at the Forex currency market on Tuesday.

Forex forecast: MACD indicator is in the positive area for the pair USD/JPY and it is moving along the signal line, preventing from forming a signal. Stochastic oscillator is giving a pair sell signal, being in the neutral zone.

Forex recommendations: if bearish sentiments intensify for the pair and in case of breakdown at the level of 83.60 traders’ targets will be the levels of 83.10 and 82.70.

The Bank of Japan announced its decision today to leave interest rate unchanged in the range of 0-0.1% per annum. The vote was unanimous.

In addition the Bank of Japan lowered its forecast for the production volume and drew attention to the need to keep track of the downside risks to the national economy.

The Yen hardly responded to the Bank of Japan decision, as it was quite predictable.
Tankan report released last week also deserves consideration: it showed decline for the first time in 7 quarters – up to the level of 5 against the previous level of 8 and the forecast of 3. Quarterly report of the Bank of Japan which shows sentiments in the business circles of the country once again confirmed the fact that Japanese indicators of QIV will be weak, which will indicate downturn in economy. Market believes that Tankan indicator will go down to -2 by March 2011 which will mean that pessimists dominate over optimists in the business-class of Japan.

 

[LF.Anastasia]

AUD: Purchase of Australian Dollar has been observed since the beginning of the week

At the Forex currency market the Australian Dollar rate continues to demonstrate intention to grow on Tuesday.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and it continues to go up, confirming a pair buy signal. Stochastic Oscillator is giving a similar signal, being in the neutral zone.

Forex recommendations: if consumer interest will be maintained, buyers’ targets will be the levels of 1.0000 and 1.0030.

In general monetary policy according to RBA estimates can be regarded as moderately restrictive.

The minutes also emphasized that households can still keep spending in check and in this case it will lead to short term rise in inflation and to a lack of aggregate demand in economy.
Interest rate in Australia is now at the level of 4.75%per annum.

External news put pressure on the AUD yesterday; it became known that South Korea began shooting near the island of Yeonpyeong. According to the press, guns volleys have been heard there. We would remind that DPRK has repeatedly stressed that if South Korea would conduct military exercise on Yeonpyeong, the country would open fire on the island in “self-defence”. However, as soon as North Korea stressed that it will not react to provocation, the AUD started to rise.

We would remind that according to the statistics released earlier, GDP in Australia increased by 0.2% on quarterly basis in QIII; while analytics had expected the rise by 0.5%; the growth over last quarter positioned as the lowest over the last two years, therefore GDP dynamics seems to be descending. It became known earlier that retail sales in October amounted to-1.1% m/m against +0.1% in September and trade balance surplus in October was $2.625 billion. It also became known earlier that current account balance amounted to -А$7.83 billion in QIII against the forecast of -А$6.60 billion.

 

[LF.Anastasia]

NZD: Growth of New Zealand Dollar can be interrupted

At the Forex currency market the New Zealand rate growth continues on Tuesday, however, according to technical signals it can be limited.

Forex forecast: MACD indicator is in the negative area for the pair NZD/USD and it is going down, giving a pair sell signal. Stochastic Oscillator has left oversold zone and is giving a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.7490 the pair will go to 0.7525 and 0.7580. If the pair break down the level of 0.7435, traders’ targets will be the levels of 0.7400 and 0.7350.

As in case with the Australian Dollar, the NZD rate has been affected by the developments on the Korea peninsula. It became known on Monday that that South Korea began shooting near the island of Yeonpyeong. According to the press, volleys of guns have been heard there. We would remind that DPRK has repeatedly stressed that if South Korea would conduct military exercise on Yeonpyeong, the country would open fire on the island as “self -defence”. However, as soon as North Korea stressed that it will not react to provocation, the AUD started to rise. For the NZD the effect was not too strong, however level of purchase has reduced.

Otherwise the situation in New Zealand has remained unchanged.
Interest rate of the Reserve Bank of New Zealand is now at the level of 3.0% per annum. Commenting the last RBNZ meeting the regulator noted that the rate of the monetary policy tightening is expected to be moderate in the next two years, since the earthquake which happened in the country recently (and which was the strongest over the last 80 years) had a significant impact on the state of the national economy.
According to the head of the RBNZ Mr. Bollard: “The most reasonable at the moment will be to keep rates low until the moment when economic recovery becomes steadier and inflationary pressures will start to demonstrate sings of consolidation. In the next two years interest rate will rise in a more moderate pace than it had been expected earlier”.

We would remind that last week Ministry of Finance brought down economic growth forecast for the current and the next fiscal years. In particular, estimate of GDP growth for the next fiscal year which starts on 1 June was brought down to 2.2% against the previous target level of 3.2%. In 2012 monetary politicians expect economic growth to 3.4%; however later, in 1015, economic growth in New Zealand will slow down again to - 2.7%
In addition, it is assumed that there will be a budget deficit in the country, which is predicted to increase from the current 14.1% of GDP to 28.5% of GDP by June 2015.