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Dukascopy Forex Overview: 05-04-2012 - Morning

Dukascopy Bank analytic desk report
Published: 05/04/2012 10:00
Dukascopy Fundamental Analysis
"The results are a far cry from the blowout auctions we saw between December and February, which will no doubt be interpreted as the LTRO bid having dried up"
- Peter Chatwell, Interest Rate Strategist at Credit Agricole in LondonSpain’s cost of borrowing surged after the first auction since the country presented its austerity budget. Yields on 10-year sovereign bonds soared by 11 basis points to 5.52%.

"I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing"
- Dennis Lockhart, Atlanta Fed President
Federal Reserve policymakers believe that improving US economy reduces the need for further monetary accommodation, with reference to minutes of the central bank’s March meeting.

"The last five years have shown that downside risks predominate. But the news this week has been as good as anyone could have hoped realistically"
- Philip Shaw, Investec economist
Halifax House Price Index has increased by 2.2% in March after a -0.4% contraction in February.

"Minutes from the Fed meeting “were not encouraging if you are a bull who’s hoping to hear that the door is still open for further possible stimulus"
- Simon Denham, managing director of Capital Spreads in London
Swiss stocks fell on Wednesday as Federal Reserve’s last meeting minutes diluted hopes for extra monetary stimulus amid climbing Spanish borrowing costs.

"It would be hard to say [the Australian data] is the only reason ... but the market is looking for any bad news that can move it"
- Naomi Fink, Jefferies Japan head of Japan strategy
Australia’s unexpected trade deficit amid Federal Reserve’s decision to abandon additional monetary stimulus sent the Nikkei 225 index 2.29% or 230.4 points lower to 9,819.99, the sharpest daily drop since November 2011.
Dukascopy Technical Analysis
"We reiterate our euro-U.S. dollar forecast of $1.28 by end of the second quarter"
- BNP Paribas (based on Marketwatch)
EUR/USD is currently facing a support at 1.3136. In case this level is breached, we might observe a dip to extend to 1.3004 or 1.2974/54.

"The market focus is shifting and so there is downside risk for the euro"
- Bank of America Corp. (based on Bloomberg)
Being that the currency pair has dropped down to 108.03, it is now expected to reach 107.73 in the short run.

"The news [on UK economy] this week has been as good as anyone could have hoped realistically"
- Investec (based on Reuters)
The Cable is likely to continue falling down, given its recent failure at a key resistance located at 1.6067.

"Higher U.S. rates and concern on Spanish debt could be the short-term drivers, opening up room for higher volatility"
- CitiFX (based on CNBC)
Even though the general long-term outlook for USD/PY remains positive, at the moment the pair is making a downside correction, which may result in a dip to 80.11.

"Currencies that are paired with the U.S. dollar are going to stay within defined ranges for the next few months until we get more confirmation on what the Fed plans to do this year"
- RJO FUTURES (based on CNBC)
While supports at 0.9140, 0.9114 and 0.9066 prevent the currency couple from losing ground, USD/CHF is likely to carry on recovering.
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Expert Commentary
"We believe that the Fed will be laying the groundwork for additional growth supporting measures around the middle of the year"
Sean Callow, Senior Currency Strategist at Westpac, shared with Dukascopy Westpac’s market outlook for April 2012. we believe that the Fed will be laying the groundwork for additional growth supporting measures around the middle of the year. >>

"For EUR/USD our forecast for the 2Q is 1.32"
Carolin Hecht, Currency Strategist at Commerzbank, favors bullish scenario for the Euro/Greenback pair. >>

"For USD/JPY our forecast for the 2Q is 85"
Michael Sneyd, the FX strategist at the UK-based BNP Paribas branch, shares his views on the dollar-japanese yen currency pair>>
Press Review
Draghi Scotches ECB Exit Talk as Spain Keeps Crisis Alive
European Central Bank President Mario Draghi quashed talk of an early exit from emergency stimulus measures as Spain struggled to borrow in financial markets, a reminder of the risk that the region’s debt crisis could flare again.

Iran, oil, Europe pose risk to economy: Geithner
Treasury Secretary Timothy Geithner said on Wednesday that fallout from the European debt crisis along with fears of Iran and higher oil prices posed the biggest threats to the U.S. economy.

Asia & Pacific
Japan policy seen as key for stock gains
Japanese stocks rocketed to some of the strongest gains in recent memory over the first three months of this year, but a further advance for the market will likely depend in large part on where government policy goes.
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Market Research
Currency Index & Volatility
The US Dollar has been relaively stable throughout the last five trading days due to anicipaion of FOMC Meeing Minutes release. For the most of the ime, however, greenback’s currency index has been hovering below a base value of 100.
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 500 index retreated on Tuesday as Federal Reserve muled the hopes for extra monetary stimulus.

Dow Jones Industrial Average
Dow Jones Industrial Average index dropped on Tuesday ater Fed executives expressed concerns about slower hiring and refused to purchase more bills to boost economy.

FTSE 100
FTSE 100 index extended losses on Wednesday driven by miners as commodity prices tumbled.
Commodity Overview
Precious Metals
Precious metals tumbled on Tuesday amid fading hopes for new rounds of quantitative easing in the world’s largest economies.
Industrial Metals
Industry metals were mixed on Tuesday amid broadly stronger US Dollar and weaker equities.
Energy commodities apart from natural gas were lower on Tuesday following the news on absence of any changes in the US monetary policy.
Rural commodities were mixed as grains moved higher while coffee and sugar declined amid stronger US dollar. 
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Trade Pattern Idea
USD/JPY Emerging Pattern: Channel Down
USD/JPY was consolidating during last two days and formed a triangle pattern on a 1D chart. The formation has 73% quality along with 50% magnitude in a 34-bar period.

The pair eased after it touched the resistance around 84.17 on March 15, and now is trading in 82.00 to 82.30 range. The formation would not last long, so traders may expect support or resistance breakout. The Stochastic indicator spiked its oversold area, and recoiled back to 40% value, giving a Buy signal. If the pair recovers, the possible target for bulls could be around 82.38.

Economic Research
Commodity Currencies: AUD
The Dukascopy Bank research department continues its research on commodity currencies. In the first issue we have established that the relationship between CAD/AUD and commodities is rather strong, yet inverse. That is, the AUD strengthens against the CAD as commodity prices go up, and weakens when they go down. This allows us to expect the AUD exchange rates to be more closely linked with commodity price changes. Therefore we make the Australian dollar the subject of our current research.
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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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