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Dukascopy Forex Overview: 25-05-2012 - Morning

Dukascopy Bank analytic desk report
Published: 25/05/2012 09:57
Dukascopy Fundamental Analysis
"The euro zone is being buffeted by major headwinds."
- Howard Archer, chief European economist at IHS Global Insight
European manufacturing and services industries contracted in May. A composite index based on a survey of purchasing managers in manufacturing and services sectors declined to 45.9 from 46.7 in April, said the Markit Economics on Thursday.

"It looks more and more like businesses are hesitating to invest in the face of worsening uncertainties in the and global economy."
- Pierre Ellis, a senior economist at Decision Economics
The number of Americans claiming for unemployment benefits declined slightly by 2,000 to a seasonally adjusted 370,000 in the week ended May 19 from the week before, said the Department of Labor on Thursday.

"[U.K.] employment remains fragile and wage growth weak."
- Ross Walker, chief U.K. economist at Royal Bank of Scotland Group
The U.K. economy shrank by more than expected in the first quarter of the year, revised figures have shown. Gross domestic product fell 0.3 per cent from a revised drop of 0.2 per cent, the Office for National Statistics said on Thursday.

"European markets are rebounding, supported by a short squeeze, especially on banking shares."
- John Plassard, director at Louis Capital Markets SA
Swiss stocks rose for a third day in four on Thursday.

"Investors are so sensitive about European debt that they are swayed by every remark on the issue."
- Naoki Fujiwara, a fund manager at Shinkin Asset Management Co.
Japanese stocks gained on Thursday on speculation they are undervalued.
Dukascopy Technical Analysis
"Europe’s economy is showing clear signs of a slowdown. People can’t buy the euro even from the perspective of its fundamentals."
- FX Prime Corp. (based on Bloomberg)
EUR/USD has stalled near 1.2509 and is currently attempting to recover, as a result we may observe a shallow rally, which should be capped by 1.2640/42. Accordingly, we expect the major bearish trend to persist, being that almost all of the daily indicators imply continuation of a fall. After 1.2509 is breached, the dip may extend down to 1.2377, although the long term goal still lies at 1.1704.

"The downward revision to UK first quarter GDP, dire retail sales data, UK CPI inflation, worrying German survey data and strengthening headwinds from the euro zone all suggest the case for more QE from the BoE is mounting."
- Rabobank (based on Reuters)
The Cable is pushing through another support at 1.5654 and is likely to maintain its downward course until a key level situated at 1.5263/59 is reached. However, while advancing towards the latter line, the currency pair has to overcome 1.5616, 1.5553, 1.5497 and 1.5427. Therefore the slide down should not be straightforward and in a very first attempt.

"You still have massive problems in Europe and there are a lot of concerns about the slowdown in China. There’s pressure on all Asian currencies at the moment."
- Standard Chartered Plc. (based on Bloomberg)
USD/JPY is challenging a downtrend resistance at 79.81 yet another time, but these attempts are expected to continue to fail as long as the pair does not encounter a tough support situated at 77.04/76.94, where, in turn, a strong bullish momentum should be reignited.

"Selling pressure has been strong. It's from dollar-buying amid the risk-aversion."
- Resona Bank (based on WSJ)
USD/CHF carries on ignoring all the obstacles on its way upwards, implying attainment of even higher levels in near future. Nonetheless, it should soon start another bearish correction, presumably in the vicinity of 0.9596 or 0.9692, before adding to gains.
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Expert Commentary
"USD/JPY is somewhere close to the comfortable area for the time being."
An expert from a Japanese investment bank shares his outlook for the USD/JPY and EUR/JPY>>

"EU summit is not going to be an event that will trigger a very sharp moving in EUR/USD."
N. Christensen, Chief Currency Strategist at Nordea Bank, on the Euro>>

"There is no reason to buy the Yen for the time being."
Masafumi Yamamoto, Chief Currency Strategist at Barclays Bank, on the Yen>>
Press Review
Big European Funds Dump Euro Assets
Some of Europe’s biggest fund managers have confirmed they are dumping euro assets amid rising fears over a possible Greek exit from the eurozone and single currency turmoil.

Frozen Europe Means ECB Must Resort to ELA
The European Central Bank is trying to limit the flow of information about so-called Emergency Liquidity Assistance, which is increasingly being tapped by distressed euro-region financial institutions as the debt crisis worsens.

Asia & Pacific
India warns EU over airline carbon tax
India has threatened to ban European airlines from its airspace if Brussels sanctions Indian carriers in a dispute over an EU plan to charge carriers for their pollution.
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Market Research
Currency Index & Volatility
Despite some of the massive sell-offs of the Greenback within the previous five trading days, bullish sentiment towards the currency persisted, allowing the US Dollar to appreciate by 1% from May 16 till May 22 amid the overall search for refugees from global instability and increasing risks.
Dukascopy Bank Sentiment Index
The current and the three-year global economic sentiment indices deteriorated slightly in April to 0.49 and 0.64 points respectively. The six month economic sentiment index improved to 0.54 from 0.52 in March, according to a poll conducted by Dukascopy Bank SA.
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Dukascopy Aggregate Technical Indicator
Dukascopy Bank presents a new research product - the aggregate technical indicator. The new tool will indicate the strongest signals on major currency pairs .
Commodity Overview
Precious Metals
Precious metals  extended previous losses on Wednesday, being pressured by broadly stronger US Dollar and unfruiful talks between the EU leaders.
Industrial Metals
Industry metals  fell on Wednesday as economic instability in the Euro Zone remained the main threat to global expansion.
Energy markets were mostly lower on Wednesday as Iranian talks are likely to bring posiive results. At the same ime, demand may drop amid dismal manufacturing performance worldwide.
Agricultural commodities went down despite the fact that weather condiions in the US and Russia may deteriorate thus restricing global supplies
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Trade Pattern Idea
GBP/USD Emerging Pattern: Falling Wedge
The pattern started rebounding slightly below SMA200 at 1.612 and after testing support and resistance levels at 1.573 and 1.583 slowed near 1.565 where the pair is currently trading. Indicators on 1H and 4H time horizons do not suggest any clear market outbreak. In addition, current market sentiment is almost equally divided between bulls and bears. Long traders could focus on the resistance level at 1.567.
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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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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