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Dukascopy Forex Overview: 11-02-2016 - Afternoon

Dukascopy Bank analytic desk report
Published: 11/02/2016 15:42
Latest Expert Commentary
"A lot of the credit has been funded in the state-owned enterprises that are not using them very efficiently, which results in increased debt risks."
- Julian Evans-Pritchard, China Economist at Capital Economics Asia Pte ltd, on Chinese economy
China is attempting to shift away from an export-driven and investment-led economy to a more balanced consumption-oriented one. To achieve its goals and double GDP from 2010 levels, the Chinese leadership has set out on an extensive reform agenda. This includes further financial market liberalisation and state-owned enterprise, fiscal, and rural land reform. What will be the major risks for this transition? Can we speak about the full integration of Chinese economy into the global economy?
Dukascopy Technical Analysis

EUR/JPY edges closer to 129.00
“The BoJ's decision to implement a negative rate has contributed to the unfavorable outcome of lifting the volatility of the yen in the near-term.”
- Bank of Tokyo-Mitsubishi (based on WBP Online)
The Euro suffered a massive 220-pip loss against the Yen on Wednesday, as demand for safe-haven assets increased. Even though the pair now faces a support cluster in face of the weekly S3 and the monthly S1 at 127.50, the risk-off sentiment is bound to drive the EUR/JPY even lower. The second target is represented by the 2015 low and the recently formed descending channel’s support line around 126.05, but we might even see a breach and, thus, a slump towards the 125.00 psychological level.
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Dukascopy Fundamental Analysis
US financial conditions, foreign economic developments to weigh on US economy, Yellen says
While addressing Congress, Fed Chair Janet Yellen said that the central bank is unlikely to reverse its plan to hike interest rates further this year. Yellen stressed that even after the December increase, the stance of monetary policy remains accommodative. The actual path of the federal funds rate will depend on incoming economic data, and policy makers regularly reassess what level of the federal funds rate is consistent with reaching and maintaining maximum employment and 2% inflation.
Expert Commentary
"A lot of the credit has been funded in the state-owned enterprises that are not using them very efficiently, which results in increased debt risks."
- Julian Evans-Pritchard, China Economist at Capital Economics Asia Pte ltd, on Chinese economy
China is attempting to shift away from an export-driven and investment-led economy to a more balanced consumption-oriented one. To achieve its goals and double GDP from 2010 levels, the Chinese leadership has set out on an extensive reform agenda. This includes further financial market liberalisation and state-owned enterprise, fiscal, and rural land reform. What will be the major risks for this transition? Can we speak about the full integration of Chinese economy into the global economy?>>
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Press Review
Bloomberg
What Risks Do Emerging Markets Pose to U.S. Economy?
BlackRock Portfolio Manager Gerardo Rodriguez discuss the risks that emerging markets pose to the U.S. economy.
Market Research
Currency Index & Volatility: GBP
The Pound’s fate was determined by the events surrounding the Bank of England on Thursday of the previous week. By turning increasingly dovish on interest rates, the BOE sent the national currency deeper into red and on Thursday-Friday it was the second-worst performing component across the board, just behind the US Dollar.
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Dukascopy Bank Sentiment Index
January Release
The global economy entered into 2016 on a wobbly footing, with China sending jitters around the world. China’s economy in 2015 grew 6.9%, the slowest pace in 25 years. The world's second biggest economy saw a difficult start to the current year, which included financial markets closure on two occasions as steep declines of more than 7% triggered market circuit breakers and a halt to trading. These developments had a devastating impact on business and consumer sentiment in January.
Global Stock Market Review
European shares diminished sharply due to oil weaknesses
The second week of February was fully reversed to the opposite direction, as small gains during the previous week, again were changed by losses, since oil prices continued to fall. The European stock market declined, showing its worst performance since middle of January. Meanwhile, ECB president Mario Draghi resumes to highlight possible monetary easing when the Governing Council meets to set rates in March.
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Commodity Overview
Oil Tumbles on Stronger US Dollar
Crude oil finished lower by the close of a volatile week on Friday, as a broadly firmer US Dollar coupled with worries that crude oil oversupply will remain for longer weighed on investors’ sentiment. A week earlier, indications that OPEC and non-OPEC oil producers may come closer to an agreement to decrease production in order to handle one of the most substantial supply gluts in decades caused prices of oil going up.
Trade Pattern Idea
EUR/USD 1H Chart: Channel Up
The most popular FX cross is gradually moving to the North in order to reach its eventual mid-term target at 1.1412, namely the bullish channel’s upper boundary. This one is guarded by the second daily support on Thursday.>>

GBP/NZD 1D Chart: Falling Wedge
GBP/NZD appears to be trading within the falling wedge, meaning we should be wary of a strong rally once the price is above the red trend-line.>>
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Economic Research

Forecasting Models for Exchange Rate
The science of prognostics has been going through a rapid and fruitful development in the past decades, with various forecasting methods, procedures and approaches flooding the economic world. It is estimated that there are more than 100 prediction methods, and sometimes the diversity makes it difficult to choose the one that would do the trick.
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. Dukascopy Aggregate Technical Indicator for 30 min and 1H time frame charts for major pairs for the last 144 periods till 14:30 GMT.
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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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