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AUD: Australian Dollar continues to grow on Tuesday

At the Forex currency market the Australian Dollar rate continues to go up on Tuesday, while external background encourages interest in risk.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, and is moving along the signal line, not giving any signals. Stochastic Oscillator is increasing in the neutral zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 1.0650, the pair will go to 1.0670 and 1.0690. If upward breakdown does not take place, the pair will consolidate at the current levels.

As it became known today, business confidence index NAB in Australia is +6 points in May against the level of 7 points in April.
In addition one of the closest commercial partners of Australia, China has released macro- data today, demonstrating that the rise in inflation rate is still preserved.

Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years.

The data released last week showed that Australian economy created fewer jobs than expected; employment rate in Australia increased by 7.8 thousand in May against the forecast of growth by 25 thousand. Unemployment rate remained at the level of 4.9%, the same as in April.

As it was announced earlier inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.

the Reserve Bank of Australia left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.

 

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NZD: New Zealand Dollar started to grow after the series of sales

At the Forex currency market the New Zealand dollar rate started to grow on Tuesday after the series of sales.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, however it is moving along the signal line and is not giving any signals. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.8190 the pair will go to 0.8210 and 0.8240, as part of the corrective rebound. If upward breakdown does not take place the pair will consolidate close to the current levels.

Last week, the Reserve Bank of New Zealand decided to keep interest rate unchanged at the minimum of 2.50% per annum, since it is going to continue its work on improvement in economic system. According to the head of the RBNZ, NZD has been overvalued because of high export prices for raw materials, therefore, national currency rate, which has increased over the last two months, has adverse impact on the rebalancing of the economy in New Zealand. Bollard expressed confidence that decline of the NZD will be gradual because currency intervention will not be able to change the trend.

Note: that budget deficit in New Zealand amounted to NZ$10.17 billion within 9 months, as of 31 March, which had been 15% higher than expected by economists. Terms of trade index in New Zealand rose to the 37-year highs in QI, demonstrating growth by 0.9% (+6.8% y/y). It could be one of the indications that New Zealand economy is recovering as it reflects changes in prices for exports and imports. We would like to point that the index is strongly correlated with the index of living standard in the country which is a positive sign.

Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget; however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand have been doing a good job, and take every step to bring economy to its normal state.

House prices fell by 1.9% m/m in April against the decline by 2.0% in March and credit cards expenses rose by 1.7% м/м in April against the increase by 0.5% in March and credit cards costs rose by 1.7% m/m in April against the growth by 0.5% in March. Therefore, real estate sector of New Zealand started to recover and it is a strong supportive factor for the economy. According to REINZ estimates house prices index in New Zealand increased by 1.1% m/m in April against the forecast of growth by 0.5% m/m. In addition, the agency reported that the level of house sales last month was -4.2% y/y against the level of -5.1% y/y in March.

 

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EURO/USD: Greece is putting pressure on Euro again

The pair EUR/USD is traded downward at the Forex currency market on Wednesday morning, because investors are still apprehensive of the situation in Greece.

By 9.20 Moscow time the Euro is at 1.4420 against yesterday’s closing level of 1.4440.

Yesterday, EU Finance Ministers failed to fully agree on a new plan to support Greece, as a result one more meeting is scheduled for 19 June. Disagreements are observed between positions of Germany and ECB.

Additional tension is created by the fact that there will be a meeting on 17 June in Berlin, where Greek issue is going to be discussed as well.
A lot of statistics on Eurozone will be released today; the U.S. data will become known in the afternoon; therefore this will keep market in suspense.
Most likely the pair EUR/USD will not go beyond the range of 1.4380-1.4490 at the trading session on Wednesday.

 

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GBP: British Pound determines movement direction

At the Forex currency market the British Pound Sterling failed to maintain advantageous position yesterday and in the morning the currency determines movement direction while interest in risk is not too high.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is moving along the signal line, not giving any signals. Stochastic Oscillator begun to go up in the neutral zone and is shaping a buy signal.

Forex recommendations: in case of breakdown at the level of 1.6380, the target for purchase will be the levels of 1.6410 and 1.6450. If upward breakdown does not take place, the pair will consolidate close to the current levels.

As it became known in the middle of the week, consumer confidence index Nationwide in Great Britain rose to 55 points in May against the forecast of 45 points, a maximum growth on monthly basis in 2005. Thus, royal wedding had a stimulating effect.

The data released yesterday showed that CPI in Great Britain increased by 0.2% m/m (+4.5% y/y) in May, which agreed with the forecast. Inflation is still high, remaining at two-year highs, and continues to grow.

As reported in the publication of “Independence”, the Bank of England must be prepared to save national economy from the threat of double dip recession, and according to the comments of BDO representative the regulator has to leave interest rate at the current level of 0.50% per annum and stop using it as a shield against inflation.

Representative of MRS, Mr. Wheal, one of the remaining “hawks” in the Bank of England, stressed that the soonest rise in the interest rate will reduce the need for its further raise, and it is necessary to increase the rate despite the fact that the level of inflation turned out to be below the forecast. According to him all conditions, required for the preventive measures of the Bank of England have been created, and the sooner the BoE launches tightening policy, the greater flexibility it will give to the regulator in the future.

The Bank of England believes that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.

At the meeting of the Bank of England last week, interest rate was left unchanged at the level of 0.50% per annum, volume of assets redemption was also kept unchanged, at the level of stg200 billion. The follow- up comments did not contain anything fundamentally new, as expected.

 

[LF.Anastasia]

CHF: Swiss Franc continues to weaken

At the Forex currency market Swiss Franc rate continues to move away from historic highs on Wednesday.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and started to reverse upward, giving a pair buy signal, while volumes are decreasing. Stochastic Oscillator goes up in the neutral zone, giving a similar signal.

Forex recommendations: in case of breakdown at the level of 0.8490, the pair USD/CHF will go to 0.8510 и 0.8550. If upward breakdown does not take place, the pair will consolidate close to the current levels.

The data on producer price index and imports in Switzerland in May is going to be released this afternoon.
It became known earlier that unemployment rate in Switzerland fell to 2.9% in May against the level of 3.1% in April and the forecast of 3.0%. It is positive data for Swiss economy because strong Franc does not prevent cohesive economic growth. As it became known earlier level of trade balance in Switzerland rose by 1.52 billion in April against the growth of 1.0 billion in March. Index of leading indicators KOF in Switzerland rose to 2.30 points in May against the forecast of growth by 2.22 points.

GDP in Switzerland has slowed down growth rate in QI this year, increasing by 0.3% on quarterly basis (+2.4% y/y) against the rise of 0.8% last quarter and the forecast of growth of 0.6 %.

According to estimates of the SNB, the main activator for economic growth in Switzerland is still national consumer demand, triggered by the rise in the demand for houses and health care expenditure, as well as high level of export.

In addition, index of PMI SVME in Switzerland increased to 59.2 points against the forecast of 57.5 points. It proves once again that national economy has learnt to be effective even in circumstances where national currency is expensive. The data released last week showed that CPI in Switzerland remained unchanged on monthly basis (+0.4% y/y) in May against the forecast of decline by 0.1% m/m (+0.3% y/y).

Julius Baer Group believes that it is not clear yet whether Swiss economy requires the increase in the interest rate or not: “any rise will have an impact on the economy as a whole for a year”. However it is quite possible that local economy and its recovery process are strong enough to cope with the interest rate rise to 1%-1.5%.

 

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JPY: Japanese Yen retains intention to retreat

The Japanese Yen rate remains under pressure from the USD at the Forex currency market on Wednesday and is declining.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area and is going down, giving a pair sell signal. Stochastic Oscillator is moving in parallel with the signal line, not giving any signals.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 80.60 the pair will go to 80.80 and 81.10. If upward breakdown does not take place, the pair will consolidate in the current range. This morning Finance Minister Mr. Noda, who has not been in public for quite a long time, said that authorities continue to closely monitor currency market; and they remain confident that currency rates should reflect macro-economic foundation. In the event that motion will be chaotic in nature, Finance Ministry intends to take drastic measures.

The head of the Bank of Japan Mr. Shirakawa said in the middle of the week that economy of the country is still under severe pressure and its recovery is expected in the second half of the fiscal year. According to him shortage in supply is decreasing faster than expected; however excessive focus on the level of business activity can lead to risksAt the meeting of the Bank of Japan yesterday, the regulator decided to leave interest rate unchanged, in the target range of 0-0.1% per annum. In addition, the regulator announced the launch of a new lending program at a rate of 0.1%; the amount of available funds will be Y500 billion. This measure is aimed at supporting economic recovery and can maintain the process of recovery that is hardly visible at the moment.

Preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; in addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has confronted with the rise in inflation for the first time over 28 months, which is crucial for the economy; however, it requires confirmation over the next few months. Japanese consumer prices grew by 0.6% y/y excluding food, and prices for utilities and food skyrocketed.It became known earlier that revised real GDP in Japan fell by 0.9% on quarterly basis (-3.5% y/y) in Q1 against the forecast of -0.8%. This data only confirms the view that Japanese economy is weak – GDP fell lower than expected, although the forecast had been quite pessimistic.

According to the data released earlier trade balance deficit in May (first 20 days) rose to Y1.053 trillion against the level of Y465 billion in April. It also became known that exports volume for the first 20 days in May totaled - 9.3% y/y versus the fall of -12.4% in April.

 

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AUD: Australian Dollar is growing regardless

At the Forex currency market the Australian Dollar rate continues to grow on Wednesday morning, ignoring both statistics and external background.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, and is moving along the signal line, not giving any signals. Stochastic Oscillator is increasing in the neutral zone, giving a buy signal
Forex recommendations: in case of breakdown at the level of 1.0710, the pair will go to 1.0730 and 1.0750. If upward breakdown does not take place, the pair will consolidate at the current levels.

The head of RBA Stevens said today that a new statistical block will be available at the end of July and evaluation of policy will be based on it. According to him, eventually the rise in the interest rate will become a necessity at some point to control prices, however at the last meeting the level required to raise interest rate has not been reached.

Thus, the Reserve Bank of Australia has confirmed its previous hawk opinion, despite the pause in the interest rate rise which lasted for 6 sessions.
At the same time the RBA does not worry about high rate of the AUD, on the contrary, Stevens noted that expensive AUD promotes economic adjustment.

It is worth noting that the RBA intends to pursue preemptive tactic, therefore, the rates can be raised before autumn.

According to the data released today, consumer confidence index Westpac in Australia fell by 2.6% m/m, to 101.2 points in June against preliminary forecast of decline by 1.3%, to 103.9 points. In addition, a number of begun construction in Australia increased by 3.1% q/q in Q1, while the forecast had been -0.6%.

As it was announced earlier inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.

The Reserve Bank of Australia left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.
Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years.

 

[LF.Anastasia]

NZD: New Zealand Dollar declines again

At the Forex currency market the New Zealand dollar rate declines on Wednesday.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, however it started to go down, giving a sell signal. Stochastic Oscillator descends in the neutral zone, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 0.8130 the pair will go to 0.8110 and 0.8080. If downward breakdown does not take place the pair will consolidate close to the current levels.

As it became known in the middle of the week, volume of retail sales in New Zealand rose for the first time in the last three quarters in Q1, which is a good sign of the economic recovery. Thus, indicator increased by 0.9% q/q which agreed with the forecast, excluding inflation.

Meanwhile, low interest rates provide good support to the economy, however growth in domestic demand can provoke the rise in the rates before the end of this year.
It is worth noting also that consumer confidence ANZ increased to 112.5 points in June against the preliminary level of 103.3 points.
Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget; however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand have been doing a good job, and take every step to bring economy to its normal state.

Note: that budget deficit in New Zealand amounted to NZ$10.17 billion within 9 months, as of 31 March, which had been 15% higher than expected by economists. Terms of trade index in New Zealand rose to the 37-year highs in QI, demonstrating growth by 0.9% (+6.8% y/y). It could be one of the indications that New Zealand economy is recovering as it reflects changes in prices for exports and imports. We would like to point that the index is strongly correlated with the index of living standard in the country which is a positive sign.

Last week, the Reserve Bank of New Zealand decided to keep interest rate unchanged at the minimum of 2.50% per annum, since it is going to continue its work on improvement in economic system. According to the head of the RBNZ, NZD has been overvalued because of high export prices for raw materials, therefore, national currency rate, which has increased over the last two months, has adverse impact on the rebalancing of the economy in New Zealand. Bollard expressed confidence that decline of the NZD will be gradual because currency intervention will not be able to change the trend.

 

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[LF.Anastasia]

EURO/USD: Euro continues to decline

The pair EUR/USD continues to decline at the Forex currency market on Thursday morning – the Euro sank for more than two figures yesterday and this is clearly not the limit.

By 9.20 Moscow time the Euro is at 1.4132 against yesterday’s closing level of 1.4179.Major pair is under pressure from Greece again - the decision on the second aid package to the country has not been made yet by EU and IMF, in addition, yesterday’s rally of the opposition was concluded by the demand of resignation of the Prime-Minister of Greece. However, today’s comments demonstrated that his resignation has not been planned.

Due to the long approval process of the second phase of the aid package for Athens, market became more concerned that the country will not be able to avoid default which puts pressure on the Euro and helps to close positions both in the major pair and in the others.

The day is going to be quiet in terms of macro-statistics today; however it is too early to expect the end of the sales for the pair EUR/USD.

Most likely the pair EUR/USD will not go beyond the range of 1.4050-1.4190 at the trading session on Thursday.