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Dukascopy Forex Overview: 14-03-2012 - Morning

Dukascopy Bank analytic desk report
Published: 14/03/2012 09:39
Dukascopy Fundamental Analysis
EUR
The eurozone crisis appears to have "taken a pause for breath"
- Wolfgang Franz, ZEW president
An index of German investor confidence rose to 22.3 in March, the highest level in more than 20 months, from 5.4 in February, said the ZEW Centre for European Economic Research on Tuesday. ZEW sentiment is based on a survey conducted among 350 German investors and analysts, who are asked to assess the six-month economic outlook.


USD
"The economy is moving towards a self-sustaining recovery"
- Jeffrey Saut, chief investment strategist at Raymond James & Associates
U.S. month on month retail sales grew at a fastest pace in five months in February, suggesting the worlds largest economy is gaining steam even despite rising gasoline prices, said the Census Bureau on Tuesday. Total retail sales rose 1.1 per cent from January.


GBP
"Exports are growing more quickly than imports, and it is reassuring that the economy is gradually rebalancing"
- David Kern, chief economist at the British Chambers of Commerce
U.K. trade deficit widened less than expected - to 7.5 billion pounds in January from 7.2 billion pounds in December, said the Office for National Statistics on Tuesday.

CHF
"For the short term, it [approval of a bailout for Greece] means the Greek problem is behind us and that investors can now focus on the real economy"
- John Plassard, director at Louis Capital Markets SA
Swiss stocks gained for a fifth consecutive day after the euro area's finance chiefs approved a second bailout package for Greece.

JPY
"Today’s policy decision [to keep asset purchase program on hold] is a bit disappointing"
- Masamichi Adachi, a senior economist at JPMorgan Chase & Co.
"Today's policy decision is a bit disappointing" to investors anticipating further expansion in liquidity, said Masamichi Adachi, a senior economist at JPMorgan Chase & Co. who used to work at the BoJ.
Dukascopy Technical Analysis
EUR/USD
"There is nothing for risky assets not to love about the Fed stance; either the economic outlook will continue to improve, or the Fed will take action to inject more liquidity into markets"
- BNP Paribas (based on CNBC)
EUR/USD is currently headed towards 1.3055, which is unlikely to be able to negate bearish momentum. Therefore the next levels in focus are expected to be 1.2974/54 and 1.22624. From above the pair is capped by resistances located at 1.3192/1.3291 and 1.3487.

EUR/JPY
"The BOJ’s decision may look disappointing to some market participants. That’s leading to some buying back of the yen as the market was leaning toward shorting the Japanese currency"
- JPMorgan Chase & Co. (based on Bloomberg)
An uptrend line at 106.89 should contain short-term dips, while the overall outlook for EUR/JPY is positive. After overcoming 108.75 the currency pair is anticipated to target 109.32/58 (55 week ma) next.

GBP/USD
"The UK numbers have been encouraging and sentiment is clearly improving"
- Lloyds (based on Reuters)
Even though GBP/USD has rallied from a support at 1.5650/43, the bias for the Cable remains bearish, due to a tough resistance area situated at 1.5752/1.5833. Additional supports may be found at 1.5599, 1.5581 and 1.5500.

USD/JPY
"The fear is that as long as the Fed keeps the possibility of more QE on the table, the dollar’s rally against the yen will falter and the Bank of Japan will come under more pressure to start easing again"
- Dow Jones Newswires
USD/JPY breaking through a resistance at 82.83 reinforces the view that the currency couple is aiming for 83.80 in the longer term. Supports are located at 82.23, 81.87 and 81.15, though a key level is at 80.94.

USD/CHF
"The dollar has proven to be very sensitive to relatively minor shifts in economic news and Fed thinking"
- BNP Paribas (based in WSJ)
In the nearest future the US Dollar is expected to carry on appreciating relative to the Swiss Franc. As a result, USD/CHF is likely to move northwards. The initial goal is at 0.9317, while a subsequent target lies at 0.9595.
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Expert Commentary
"One would be overconfident to think that the problem will disappear in the long run"
Dukascopy is carrying out a research to evaluate the current Libor-setting system, find out whether new measures proposed by the BBA can combat the potential future manipulations. The bank interviewed H. Shefrin, Professor of Finance at Santa Clara University and author of numerous books on behavioural finance. >>

"We expect the NZD to re-strengthen as New Zealand economic growth begins to ramp up and the RBNZ raises interest rates"
Mike Jones, Currency Strategist at Reserve Bank of New Zealand on the performance of NZD. >>

"The US is going through a very slow recovery, with several unanticipated difficulties, if compared to previous recessions"
In light of a steady recovery of the US economy, Dukascopy decided to interview Olivier Morand, Professor of Economics at University of Connecticut, who shared his opinion on the present economic situation in the US and its prospects. >>
Press Review
Europe
Bailout can make Greek debt sustainable, but risks remain: EU/IMF
Greece's second bailout package can make its debt sustainable, but Athens will have to stick firmly to agreed policies until 2030 and may need more money after 2014, an updated debt sustainability analysis by international lenders shows.

USA
Republican Santorum Scores Crucial US Deep South Wins
Republican Rick Santorum won a pair of crucial Deep South primaries on Tuesday, staking a claim to leadership of the party's conservative wing and dealing a severe setback to presidential rival Newt Gingrich.

Asia & Pacific
China's Wen Jiabao says 'reforms urgent'
China's Premier Wen Jiabao has delivered a strong warning about the ''urgent'' need for reforms, without which, he said, tragedies such as the Cultural Revolution could still happen.
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Market Research
Currency Index & Volatility
Even though the Euro’s value has been wavering within the limits of -0.5% and +0.5% for the last five trading days, the single currency has ended the preceding week exactly at the base value along with the Swiss Franc due to their strong correlation.
Dukascopy Bank Sentiment Index
Current global economic outlook
The current and six-month global economic outlooks improved for a second consecutive month in February. Gauges assessing the economic expectations advanced to 0.48 and 0.52, according to a poll conducted by Dukascopy Bank SA. The three-year economic outlook rose to 0.66 from 0.64 in January.
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Global Stock Market Review
S&P
S&P 500 index traded almost flat on Monday, facing the thinnest volumes in 2012 as investors awaited what effect China’s slowdown will have on monetary easing. S&P 500 added 0.02% or 0.22 points and finished at 1,371.09.

Dow Jones Industrial Average
Dow Jones Industrial Average index appreciated for the fourth consecutive session, lifted by upcoming monetary policy decision from Fed as investors expect forthcoming economic data may limit Fed’s incentives to stick to low interest rates.

FTSE 100
British FTSE 100 index advanced on Tuesday lifted by financial sector which added 1.7% after UK PM Cameron said the government will boost construction through supporting buyers with small cash deposits to purchase new homes.
Commodity Overview
Precious Metals
Precious metals were mostly lower on Monday amid broadly weaker US Dollar and stronger equities. Precious metals were balancing between improved commodity imports in China and wider China’s trade deficit. The slowdown of China’s economy may impact middle class that is major consumer of gold jewelry.
 
Industrial Metals
Base metals apart from zinc tumbled on Monday along with pessimistic trade balance data from China and widening federal budget deficit in the US. The sluggish economic performance of China dampened traders’ confidence in growth-sensitive assets.
 
Energy
Energy commodities fell on Monday amid signs of stagnation of China’s and Italy’s economies. Even high energy commodity imports did not managed to offset worries over record high trade deficit in China and capped any upswing of the group.
 
Agriculture
Rural commodities except for coffee were higher on Monday amid broadly weaker US Dollar and improved investors’ appetite for agricultural commodities after weather setbacks. Grains gained support as speculation on strong China demand persist
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Disclaimer:
This overview can be used only for informational purposes. Dukascopy Bank SA is not responsible for any losses arising from any investment based on any recommendation, forecast or other information herein contained.
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