EUR/USD: Euro awaits strong catalyst to grow again

The pair EUR/USD goes up slightly at the Forex currency market on Tuesday morning after yesterday’s fall.

By 9.30 MSK the Euro is at 1.3778 against yesterday’s closing level of 1.3736.

Investors are waiting for the U.S. economic news today, in particular indicator of primary housing market that can sustain interest in risky currencies, bring tranquility in the market and restore confidence in stability of American economy.

However, taking account yesterday’s dynamics of the Euro it is getting ever more apparent that previous growth of the pair EUR/USD was based purely on expectations which have not been backed by practical steps.

Therefore, strong catalyst is required for the Euro to continue its growth, which is not yet available.

Most likely the pair EUR/USD will not leave the range of 1.3700-1.3810 at the trading session on Tuesday.

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GBP: British Pound tends to continue its growth

At the Forex currency market the British Pound Sterling rate resumed its growth on Tuesday after yesterday’s drawdown.

Forex forecast: MACD indicator for the pair GBP/USD started to grow moderately in the negative area, shaping a buy signal; however volumes are decreasing. Stochastic Oscillator tends to come out of the overbought zone, and started to shape a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of break down at the level of 1.5790, target for purchase will be the levels of 1.5810 and 1.5830. However, if external negative factor intensifies, the level of 1.5711 will become the target for sale.

Macro- economic background in the UK remains mostly unchanged this morning.

It was plainly obvious yesterday that the pair GBP/USD correlated with EUR/USD based on the external negative factors.

As it became known earlier retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. According to the data released earlier volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

Statistics released this morning showed that house price index Rightmove in the UK rose by 2.8% m/m (+1.2% y/y) against preliminary expectations of grow by 0.7% m/m. The survey demonstrated that there is a huge gap between the house prices in the North and South, as in the Southern part of the country the price is still twice as high as in the North.

We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the drastic crisis now.

Deputy head of the Bank of England Mr. Bean said last week that British regulator is ready for follow-up actions in addition to the expansion of the asset purchase program to stg75 billion, adopted last week. Bean has clarified that the Bank of England will agree to additional economic stimulus if economic outlooks will suddenly worsen, for example if recovery rate will slow down significantly.

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CHF: Swiss Franc consolidates at the achieved levels

Swiss Franc rate is making efforts to grow slightly at the Forex currency market on Tuesday, remaining at the levels achieved this week. 

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal. Stochastic Oscillator is coming out of the oversold zone, and started to shape a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.8990, the pair USD/CHF will go to 0.9010 and 0.9030. If upward breakdown does not take place, the pair will remain close to the current levels.

In regards to macro-economics, significant changes in the economy of Switzerland did not take place.

Last week kick-start to consolidation was  triggered when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could be interpreted as follows: regulator’s power to maintain the Franc is fading away. We would remind that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc.

As it became known earlier, producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September Franc barely reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible. Index of PMI SVME fell to 48.2 points in September against the level of 51.7 points in August. In addition retail sales in Switzerland fell by 1.9% y/y in August against  +1.9% y/y a month earlier. It is not known precisely yet what volumes SNB currently has at the trades.

According to the annual report of the SNB, over the next 6 month economy of the country will come to a standstill due to the impact of the expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute 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.

 

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JPY: Japanese Yen is rising in price again

At the Forex currency market the Japanese Yen rate continues ascending trend on Tuesday which started yesterday.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and is going up, giving a buy signal; volumes are increasing. Stochastic Oscillator started to reverse in the neutral zone, shaping a sell signal.

Forex recommendations: in case of breakdown at the level of 76.70, the pair will go to 76.50 and 76.40. If downward breakdown does not take place, the pair will consolidate at the current levels.

It became known today that final orders for industrial equipment in Japan increased by 20.1% in September against the growth of 20.3% in August. Association of machine-tool construction industry of Japan stated that last month the index had reached the lowest level since 2009. According to the data released yesterday revised industrial production in Japan rose by 0.6% m/m (+0.4% y/y) in August; below expectations.

In other respects macro economic situation in the Country of the Rising Sun remains almost unchanged.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen.

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. Large information block released at the end of last week included the following piece of information about inflation: base national CPI amounted to +0.2% y/y in August. In addition, it also became known that unemployment fell to 4.3% in August against the forecast of 4.7% and previous level of 4.7%.

As it became known earlier, money supply M2 in Japan increased by 2.7% y/y, which agreed with the forecast. In addition, corporate goods price index rose by 2.5% y/y in September, which agreed with expectations. Tankan business survey published this week, showed that expectations of the large industrial enterprises amounted to +2 points in September against the forecast of +3 points. Expectations of large non-industrial enterprises demonstrated decline of 11 points versus the forecast of -14 points and -21 points previously. Total current account surplus in Japan amounted to Y407.5 billion in August against the forecast of Y462 billion. In addition, consumer confidence index in Japan declined to 38.6 points in September against the forecast of 37.2 points.

 

 

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AUD: Sale of Australian Dollar was not long in coming

At the Forex currency market the Australian Dollar rate is losing ground, urged by Chinese statistics.

Forex forecast: MACD indicator USD is in the negative area for the pair AUD/ and is going up steadily, giving a buy signal; however volumes are minimal. Stochastic is leaving overbought   zone, and is giving a start to a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0120, the pair will go to 1.0100 and 1.0090.

If downward breakdown does not take place, the pair will consolidate at the current levels. Morning statistics from China, the main trade partner of Australia showed deceleration of economic growth rate up to 9.1% y/y in Q3 against 9.5% y/y in Q2. The AUD reacts to the index by going down: Overbought of the currency and deterioration of the external background are acting as a catalyst.In general, last week was successful for the AUD, which at first, took advantage of the external background, and later, statistics to regain from losses of September.

Unemployment rate in Australia declined to 5.2% in September versus the level of 5.3% in August. This data demonstrated dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.This data has scored out expectations that the RBA will reduce the rate in the nearest future.

At the last regular meeting the Reserve Bank of Australia decided to leave interest rate unchanged at the level of 4.75% per annum. Thus, the pause in the process of monetary tightening policy of the RBA has been lasting for 11 months. In the follow-up comments the regulator said that monetary policy can mitigate in the future if inflation requires it.

The follow-up statement said that more time can be required to analyze the impact of turbulence in the markets. Apparently, the rate of the RBA is unlikely to be raised until the first quarter of 2012. As it became known last week business confidence NAB in Australia rose to -2 points in September against preliminary level of -3 points. At the same time business conditions increased by 2 points, as per NAB research, against preliminary level of -9 points, which the Research Agency attributed to the sharp fall of the AUD’s rate earlier.

According to the data released earlier, consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. As noted by monetary politician Evans it is possible that the rate will go down in November, since low growth of the index indicates general pessimistic sentiment.

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CAD: Canadian Dollar weakens on Tuesday

The Canadian Dollar rate decreases at the Forex currency market on Tuesday, amid investors’ aversion to risk.

Forex forecast: MACD indicator is in the positive area for the pair USD/CAD and goes down, giving a sell signal. Stochastic Oscillator is going up in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 1.0240, the pair will go 1.0250 and 1.0265.

If upward breakdown does not take place, the pair will remain at the current levels.Canadian companies are going to continue effective work in the future and increase volume of investments, creating new jobs, however not as fast as it was announced earlier. The country has lowered its forecast for sales in 2012; as a result local producers have to temper their personal forecasts.

According to the estimates of the Bank of Canada, sentiment of the leaders of the large companies fell down compared with the summer period, since top management expects the decrease in the U.S. GDP and conservation of uncertainty in respect to global economic outlooks.The Bank of Canada believes that GDP of the country will amount to about 2.8% in 2011 (reduction by 0.1% versus forecast of April); in 2012 it will be 2.6% and 2.1% in 2013. According to the evaluation of the Bank, exports performance in Canada is negative because low demand in the USA prevents the rise of the indicator and expensive CAD makes situation even more complicated. T

he growth in the interest rate in Canada will directly depend on stability in economic development.By the way, CPI in Canada rose by 0.3% m/m (+3.1% y/y) in August.Now, heads of the major Canadian companies have recorded decline in inflationary expectations; it is projected that in 2012 CPI will be in the range of 1-3%.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.Unemployment rate in the country decreased to 7.1%; while employment rate in the country increased by 60.9 thousand. For the Canadian economy that is closely linked with the economy of the USA it is a significant step forward.

Meanwhile earlier unemployment rate in Canada increased to 7.3% in August against the forecast of 7.2% and previous level of 7.2. In addition, labor 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. It is clearly obvious at the moment, that slowdown in the key indicators was caused by the state of the global economy and proximity to the Unites States.

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USD rose in pairing with Rouble on Tuesday

With the start of the trading session at the MICEX currency section, the Russian Rouble rate fell slightly in pairing with the USD, amid some deterioration of the external background. 

Thus, trading session for the USD started at the level of 30.93 roubles, which is 5 kopeks more than yesterday’s closing level; the EUR started at the level of 42.63 roubles (+6 kopeks).  Dual currency basket value amounted to 36.2 roubles today (+5 kopeks) today.

Therefore, deterioration in investor sentiment at the global capital markets has affected exchange rate of the national currency once again.

Presumably, the pair Dollar/Rouble will be in the channel of 30.85-31.05 Roubles for the USD at the trading session on Tuesday.

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