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Nomura: bearish on EUR/GBP
(2012-07-05)

Nomura: bearish on EUR/GBP





Analysts at Nomura are bearish on EUR/GBP ahead of the ECB and BoE meetings. They recommend selling the pair at current levels, targeting at 0.7700 and with a stop at 0.8170.

According to specialists, both banks are likely to ease monetary policy on Thursday. In their view, the downside risk for GBP is rather limited as the British currency is no longer being sold off on QE announcements. The ECB meeting, on the contrary, is expected to be euro-negative: a larger-than-expected rate cut would be good for the currency at least in a short-term, but it is not likely. Moreover, Mario Draghi on a press-conference is not expected to hint on the new unconventional measures.

Chart. Daily EUR/GBP




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RBC: technical comments for USD/CAD
(2012-07-05)

RBC: technical comments for USD/CAD





Technical analysts at RBC underline that the greenback failed to overcome resistance at 1.0353 after last week’s EU summit revived the market's risk sentiment making loonie strengthen.

The specialists claim that all attention is fixed on 1.0119 (uptrend pivot, 200-day MA). If USD/CAD closes the week below this level, bearish trend will return and the pair will get vulnerable for a slide to 1.0050 (100-day MA) and 0.9955 (May 11 minimum). For the uptrend to continue US currency has to overcome 1.0341/62 (late June maximums) and 1.0425 (June 5, December 14 maximums).

Chart. Daily USD/CAD




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Spanish bond auction results
(2012-07-05)

Spanish bond auction results





Spanish government managed to raise 3.001 billion euro in auctions out of the 2.5-3.5 billion euro target amount. Cover ratios were lower. Average yield on 10-year bonds rose to 6.430% from 6.044% during the previous auction, while shorter-term maturities have posted lower yields.

France also sold 10-year bonds with yields up from 2.46% to 2.53% and cover ratio down from 2.0 to 1.9.

EUR/USD is trading down by about 20 pips from the opening level. More volatile moves are expected later today with the ECB meeting and press conference on the agenda.

Photo Reuters




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Monetary easing at all fronts
(2012-07-05)

Monetary easing at all fronts





The central banks have come up to the market’s expectations… and even more.

The Bank of England decided to increase the size of its Asset Purchase Program by 50 billion pound to 375 billion. As for the benchmark interest rate, it was left unchanged at 0.50%.

The ECB cut its benchmark interest rate to a record low of 0.75%. In addition, the central bank reduced deposit rate from 0.25% to 0%.

The People’s Bank of China cut benchmark lending rate by 31 bps to 6% and deposit rate by 25 bps to 3%.

We’re waiting for more info and comments.

GBP/USD initially soared to the levels above $1.5600, but then slid to the $1.5560 area. Sterling’s supported by yesterday’s minimum at $1.5554.

Chart. Daily GBP/USD

EUR/USD fell by 70 pips below today’s opening level. Support for the pair is situated at $1.2406 (last week’s minimum). Although the economists were expecting monetary easing in China in the foreseeable future, today’s move was definitely a surprise – good timing on the part of Chinese central bankers.

Chart. Daily EUR/USD




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"Commerzbank: bearish on GBP/USD"(2011-07-06)

Commerzbank: bearish on GBP/USD




Commerzbank analysts recommend selling GBP/USD on rallies to $1.5550 and adding at $1.5580.

The pair is expected to continue a bearish movement as long as it's trading below $1.5611 and slide to $1.5407 (June 8 minimum). If the pair breaks this level, a further decline to 1.5268 (June 1 minimum) and 1.5233 (2012 minimum) will become possible.

Chart. Daily GBP/USD


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Monday, July 9: events to watch
(2012-07-06)

Monday, July 9: events to watch





Japan: Current account is to increase to 0.42T in May from 0.29T in April. Core machinery orders, a leading indicator of private capital spending, is forecasted to decline by 2.4% in May compared with a 5.7% growth in April. Economists, however, see a forecasted drop as an exception, and expect machinery orders to remain in a moderate increasing trend, supported by reconstruction-related demand.

China: China's annual consumer price inflation in June likely eased to a 29-month low with producer prices falling for the fourth month in a row, giving the monetary authorities more room to stimulate the economy. CPI may increase by 2.4% in June compared with a 3.0% growth in May, while PPI - to fall by 2.0% compared with a 1.4% decline.

Europe: there’s a scheduled Eurogroup meeting. Troika officials will conduct the first discussion on the mission’s ongoing inspection to Greece and try to develop an approach for the negotiation of the updated bailout agreement. Another item on the agenda will be Spanish and Cyprus requests for entry into the ESM. 

Great Britain: The BoE’s Deputy Governor Paul Tucker will hold a speech where he will no doubt be defending himself from accusations by Bob Diamond that a call to the bank caused the "confusion" that led to the interbank lending rate to be fixed. Tucker hopes to become the next governor at the BoE when Mervyn King quits.

Canada: The BoC is to release its quarterly business outlook survey.

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July 13: economy and currencies
(2012-07-13)

July 13: economy and currencies





The markets were apathetic to China’s GDP release: everyone has already submitted to the fact that the growth pace of world’s fastest growing economy is slowing down. Even the consensus was dragged lower before the release from 7.9% to 7.7%. The data released today showed that Chinese GDP increased by 7.6% in Q2 after extending by 8.1% in the first 3 months of the year. Chinese industrial production and retail sales grew a bit less last month than in May, while the advance in fixed asset investment was slightly bigger.

Investors are now much more preoccupied with what’s happening in Europe, particularly in Italy. The nation holds a 10-year bond auction. Overnight Moody's ratings agency downgraded Italy's government bond rating by two notches to Baa2 from A3. According to experts, Italy’s near-term economic outlook has worsened: weaker growth and higher unemployment creates risk of failure to meet fiscal consolidation targets. On Thursday, however, Italy raised 7.5 billion at a lower rate than previously, indicating improved investor confidence.

US is to release PPI (forecast: a 0.5% decline in June), core PPI (forecast: a 0.3% growth in June) and preliminary UoM consumer sentiment index (expected to increase to 73.5 in July).

Risky currencies are trading on the upside today, though they are set for the weekly declines due to the general pessimism. The MSCI Asia Pacific Index of shares added 0.6% after falling by 0.2%. Analysts at Westpac underline that the growth momentum is still slowing down, though there may be more of a short squeeze in the currencies like Aussie in the near term.

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"Analysts: trading EUR/USD"(2011-07-13)

Analysts: trading EUR/USD


Analysts at Commerzbank expect EUR/USD to decline to $1.2053 (200-month MA) after having reached $1.2187. According to specialists, the descending triangle figure paves the ground for a decline to $1.1934 and to $1.1876 (2010 minimum). Resistance for the pair lies at $1.2287 (June 1 minimum), $1.2367 (200-day MA) and $1.2475 (triangle support line).

Strategists at Aspen Trading Group are also bearish on EUR/USD and recommend going short at $1.2150 with a stop at $1.2300 and a target of $1.1850. In their view, this level is close to fair value of the pair.The specialists claim that being bearish on euro is the best risk-off trade these days.

Chart. Daily EUR/USD

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"Westpac: the Fed won’t signal easing "(2012-07-16)

Westpac: the Fed won’t signal easing




The Fed Chairman Ben Bernanke is going to testify to the Congress on Tuesday and Wednesday.

Analysts at Westpac point out that Bernanke has said he is ready to take action as warranted, but so far he has been vague about what that means. If the Fed’s chief doesn’t signal that monetary stimulus is inevitable, the demand for riskier assets will fall. In this case the specialists recommend selling AUD/USD. On the other hand, if US central banker signals that there may be more easing, one should buy Aussie.

Westpac thinks that the first outcome is more likely as the Fed may decide to wait for more reports on employment and, probably, Greek bond redemption before deciding on a course of action. As a result, the bank’s recommendation is to sell AUD/USD at $1.0250 targeting $1.0100 and stopping at $1.0330.

Ben Bernanke, chairman of the Federal Reserve


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"Key options expiring today"(2012-07-16)

Key options expiring today


Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD - $1.2175, $1.2200, $1.2250, $1.2300, $1.2325, $1.2350
USD/JPY - Y79.25, Y79.70, Y80.00
GBP/USD - $1.5500, $1.5490, $1.5450
AUD/USD - $1.0150, $1.0165, $1.0190, $1.0300
EUR/AUD - A$1.2000

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