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Dukascopy Forex Overview: 30-04-2012 - Morning

Dukascopy Bank analytic desk report
Published: 30/04/2012 10:12
Dukascopy Fundamental Analysis
EUR
"Once we hit the 6.5 per cent mark [in Spanish bond yields], the alarm bells will go off loudly in Brussels and more rhetoric will be coming from the European Central Bank"
- Adrian Miller, a global markets strategist at GMP
The rating agency Standard & Poor’s has downgraded Spain’s credit rating by two notches to BBB-plus with a negative outlook from A, citing expectations the government finances will deteriorate.


USD
"While the economy continued to grow in the first quarter, the expansion remains modest in pace and subpar from a historical perspective"
- Jim Baird, chief investment strategist at Plante Moran Financial Advisors
The U.S. economy grew at a slower pace than forecast in the first quarter as businesses cut on investment. Gross domestic product increased at a 2.2 per cent annual rate, the Commerce Department said on Friday.


GBP
"It is clear that much like the economy as a whole, consumer confidence is in the doldrums"
- Nick Moon, Director of Social Research at GfK
U.K. consumer confidence remained in the negative territory in April as consumers were mostly pessimistic on the outlook of the country’s economy, showed a survey conducted by pollster GfK NOP. An index of sentiment remained unchanged at -31 from March.

CHF
"After the euphoria of the ECB capital injection, we’ve come back to reality"
- Matthieu Giuliani, a fund manager at Banque Palatine SA
Swiss stocks closed little changed on Friday after the S&P has cut Spain’s credit rating and a report showed the U.S. economy expanded less than forecast.

JPY
"Investors are worried the BOJ may tighten its monetary policy, not ease it"
- Koichi Kurose, chief economist at Resona Bank Ltd.
The Nikkei 225 fell 0.43%, or 40.94 points, to 9,520.89. The broader Topix retreated 0.72%, or 5.83, to 804.27.
Dukascopy Technical Analysis
EUR/USD
"There are no real underlying fundamentals that are supporting the euro at these levels. I’m fairly bearish on Spain and the broad euro zone as a whole"
- Rochford Capital (based on Bloomberg)
Last week was positive for EUR/USD, though the next barrier the pair has to test is located near 1.3287/91 zone as the 5-month downtrend and the 8-month channel. There is a high probability that these levels will not be pierced and they will trigger a bearish correction.

EUR/JPY
"Watching Spain now is exactly like watching Ireland around October 2010 before Ireland was forced into its bailout"
- Roubini Global Economics (based on Bloomberg)
EUR/JPY slumped lower last week as the market aims to stick to the near-term support level at 106.49. It might approach the 55-day MA located and higher Boilinger band around 107.80/99 and a breach here would reiterate a bullish momentum for the pair.

GBP/USD
"Technically the UK is in recession but the pound has not sold off massively, which suggests maybe it has found a new range ... Sterling is benefiting from people diversifying out of euros and there aren't many choices out there"
- Investec (based on Reuters)
GBP/USD shows strong performance for the second consecutive week and it shows no signs of stopping for now. The market is aiming at the next target placed in the 1.6261/1.6318 zone, however the RSI standing in the “over-buy” section shows the pair might face a strong resistance ahead at those levels.

USD/JPY
"The amount isn’t much as a percent of Japan’s economy, so the impact on the yen was limited, but it “has added a slight risk-on tone to the markets in general"
- Société Générale (based on MarketWatch)
USD/JPY is trapped between the 81.33 and 80.10 levels and if the pair fixes today below the latter level, it could expose the further support lines at 79.80/79.99, where the pair could recover, hitting the lower boilinger band.

USD/CHF
"The latest economic statistics suggest that the international economic recovery will continue, although growth rates are likely to be on the low side by comparison with typical recovery phases"
- Swiss National Bank (based on CNBC)
As the currency pair currently remains under the downward pressure, 0.9066—Friday’s key support—is being tested at the moment. If this level is successfully pierced, 0.9000 and 0.8933 (200 day ma) could become the next targets in focus. However, in case these supports are tested, a positive outlook is likely to be restored and then the focus could be shifted to the 0.9317/42 area.
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Expert Commentary
"I am not sure right now whether gold is actually considered by the broader market as a safe haven"
Nick Trevethan, Senior Commodity Strategist at ANZ, shared his view on gold>>

"Lower interest rate in Australia and softer global commodity prices—these are probably the two main drivers why the Aussie Dollar is weaker from where we are at the moment"
Jonathan Cavenagh, Currency Strategist at Westpac, shares his outlook on the Aussie and Kiwi Dollars>>

"According to Purchasing Power Parity, the Swiss Franc is overvalued at this point, thus the EUR/CHF is undervalued by 12 %"
Recently Thomas Jordan was appointed as a new interim president of the Swiss National Bank. Are there  going to be any significant changes in the policy of SNB regarding the Swiss Franc? Where the EUR/CHF will be heading? What will be the main drivers for the EUR/USD movement? All these questioned were addressed to Sonja Marten, Currency Strategist at DZ Bank AG>>
Press Review
Europe
Europe Seeks to Restore Calm After Spanish Downgrade
European leaders will seek to restore market calm this week after Spain was cut by Standard & Poor’s and a German-led austerity agenda to resolve the debt crisis came under fire ahead of elections in France and Greece.

USA
Small business hiring takes step back in April
Small business hiring slowed considerably in the April and employees saw a reduction in their hours, an independent survey showed on Monday, adding to signs of weakening in labor market conditions.

Asia & Pacific
Bank of Japan’s ‘Head Fake’ Easing Fails to Move Yen
The monetary easing on Friday by Japan's central bank failed to have the desired effect in weakening the yen after it increased the size of its asset purchases by 10 trillion yen ($123 billion), but also cut liquidity in the financial system by 5 trillion yen.
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Market Research
Currency Index & Volatility
Despite major obstacles the British Pound continues to outperform and appreciate relative to most of its counterparts. On average the price of the Sterling increased by 0.5% across the board from Apr 20 to Apr 26, as demonstrated by its currency index.
Dukascopy Bank Sentiment Index
The current global economic outlook improved for a third straight month in March, while the six-month economic outlook stagnated at 0.52. Current economic expectations advanced to 0.50, up by 0.02 points from the previous month. The three-year economic outlook improved to 0.67 from 0.66 in February.
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Global Stock Market Review
S&P
S&P 500 index extended gains on Thursday as supported by earnings and almost four times increase in pending home sales in March.

Dow Jones Industrial Average
Dow Jones Industrial Average index traded higher on Thursday as steady jobless claims data were overshadowed by strong home sales data.

FTSE 100
FTSE 100 index fluctuated sharply on Friday. It slipped in the morning on Spain’s downgrade but retreated and climbed 0.3% as Italy successfully auctioned bonds.
Commodity Overview
Precious Metals
Precious metals found support on the escalating concerns over the US economy that may stimulate new round of quantitative easing in the country.
 
Industrial Metals
Industry metals managed to climb despite weak US industry data as news on further China’s easing bolstered the base metals pack.
 
Energy
Energy markets balanced between easing supply concerns and more pessimistic demand outlook. Investors are cautious ahead of the Fed meeting due next week.
 
Agriculture
Rural commodities  caught momentum on the expectation for strong China’s demand and slightly better situation in the Euro Zone
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Trade Pattern Idea
Emerging Pattern: EUR/USD
EUR/USD rebounded from the support level at 1.3157 forming a channel up pattern on the 4H chart. The formation has 77% quality along with 52% magnitude in a 42-bar period. The price recovered from its two-month low around 1.2994, then grew to 1.3262, and has slowed near its present support level around 1.3267. The Stochastic indicator touched its overbought level at 80% and bounced off to the 60% value, increasing the possibility of the bearish short-term rebound. If the EUR/USD decreases, the present target for bearish traders could be around 1.3189, where the 200SMA indicator stands.
Economic Research
Commodity currency: Norwegian Krone
The Dukascopy Bank research department presents the final part of its research on commodity currencies. In the current issue we consider commodity sectors’ influence on Norwegian krone exchange rates. Norway is the second largest non-OPEC oil exporter, and energy products make up more than 50% of its exports. It gives us an opportunity to establish whether the exports’ share can be named as one of the relationship-defining factors.
 
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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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