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Dukascopy Forex Overview: 15-02-2012 - Morning

Dukascopy Bank analytic desk report
Published: 15/02/2012 10:12
Dukascopy Fundamental Analysis
"With confidence returning, the fundamentally very sound German economy can return to growth quickly"
- Christian Schulz, an economist at Berenberg Bank
An index of German investor confidence rose to 5.4 in February from -21.6 in January, 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 rate the six-month economic outlook.

"Retail sales are being driven by the improving confidence but also by decent income gains"
- Millan Mulraine, a senior U.S. strategist at TD Securities
U.S. retail sales grew less than expected January as vehicle purchases tumbled. Total retail sales rose 0.4 per cent the previous month from December, when sales stagnated, said the Census Bureau on Tuesday.

"The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief"
- U.K. Treasury
Inflation in the U.K. declined sharply in January. The consumer price index fell to 3.6 percent in January from 4.2 percent in December, said the Office for National Statistics.

"While the rollercoaster that is the euro zone continues to keep investors on the edge of their seat, progress is being made, albeit very slowly"
- Bill O’Neill, chief investment officer at Merrill Lynch Wealth Management
Swiss stocks fell on Monday after S&P cut ratings on six European countries and a report showed U.S. retail sales increased less than expected.

Decision to ease monetary policy ''shows the BOJ bowed to political pressure''
- Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co.
The Bank of Japan on Tuesday eased its monetary policy by boosting asset purchases and defined a near-term inflation goal of 1 per cent amid calls to help the struggling economy.
Dukascopy Technical Analysis
"We strongly believe European countries can work together to handle the challenges. They are able to solve the sovereign debt crisis"
- Zhou Xiaochuan, PBOC (based on CNBC)
EUR/USD has plummeted down to 1.3067 (55 ma) and is expected to trade near this level for some time. Gains are likely to be mild, as the price is capped by a resistance at 1.3322. Below 1.3067 the pair should target 1.2891/54.

"I don't think in the long run [a weak yen is] going to be sustainable, with the prospect of QE3 [by Fed] still on the table"
- Chris Fernandes, vice president at Bank of the West (based on WSJ)
As long as the currency couple remains above a key support at 101.11/05 the bias will be bullish for the pair. Recent violation of a resistance line at 102.55/60 allows further advancement up to 104.30 with the possibility of extending rally up to 107.52 (200 day ma).

"The BoE inflation report will presumably be fairly dovish and may set sterling back a little"
- Standard Bank (based on Reuters)
The Cable continues to lose ground, as it has already breached a support at 1.5730. In the short-term the pair is expected to challenge 1.5660 and 1.5601 (55 day ma). In case these supports are broken, the following levels are situated at 1.5580 and 1.5546/44.

"We think dollar/yen will struggle to get through the 80 yen area, which has capped recent moves higher"
- Societe Generale (based on CNBC)
USD/JPY has cleared 78.06 (200 day ma) and 78.29 as well, as it is targeting 79.17 (55 week ma) at the moment. Beyond the latter level we might see a rally up to 79.55 or even 80.00/25, should the current bullish momentum prove to be strong enough.

"[US] manufacturing is growing at a fairly solid pace amid improvements in consumer and business demand"
- Ameriprise Financial Inc. (based on Bloomberg)
Dips should be limited by a formidable support line at 0.9080/66, above which the pair is expected to consolidate. Rallies might extend up to 0.9250/63 and up to 0.9316 (55 day ma).
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Expert Commentary
"4Cast: Pound at 1.40-1.60 in 2012, Euro at around 1.10 by the end of the year"
The Pound showed an immediate reaction on the Moody’s negative outlook on the Euro area. >>

"Westpac: AUD/USD will be attempting to go back closer to parity"
I assume the Australian Dollar and the New Zealand Dollar are going to enjoy the hard correlation with each other. >>

"Mizuho Corporate Bank: USD/JPY at 80 at the end of Q4"
For the Yen to move significantly higher the Japanese investors have to start selling the currency and to look for higher yields overseas. >>
Press Review
Greece has made 'superhuman' sacrifices, says minister
Greece's public order minister has said the government has made "superhuman" efforts to comply with austerity demands made by the Eurozone.

Retail sales point to underlying strength
Retail sales picked up last month after a sluggish December, providing a firm foundation for the economy's recovery.

Asia & Pacific
China Pledges to Invest in Europe Bailout Funds
China pledged to invest in Europe’s bailout funds and sustain its holdings of euro assets, spurring gains in the currency and Asian stocks on optimism the region’s debt crisis will be overcome.
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Market Research
Currency Index & Volatility
Last Tuesday, perhaps, was determining in forming the trend of the single currency during the previous week, as the Euro appreciated by 1% amid the testimony of Ben Bernanke, while Greece was considered to be working on the final bailout document. In the end, however, this proved to be far from the truth due to several subsequent postponements of the decision.
Dukascopy Bank Sentiment Index
Current global economic outlook
Current and six-month global economic outlook improved modestly by 0.03 to 0.46 in January from December, according to a poll conducted by the Dukascopy Bank SA. Three-year global economic  outlook remains fairly positive with a mean value of 0.64, up 0.01 from December.
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Global Stock Market Review
S&P 500 index erased gains during Monday trade on news Greek parliament finally approved austerity plan to secure bailout funding. US benchmark jumped 0.68% or 9.13 points and settled at 1,351.77.

Dow Jones Industrial Average
Dow Jones Industrial Average Index rebounded from previous drop on Monday on Greece vote. Blue chip index added 0.57% or 72.81 points and closed at 12,874.04, supported by banks and other growth dependent stocks.

FTSE 100
British FTSE 100 index started lower on Tuesday on news Moody’s cut sovereign ratings for 6 European nations and also threatened to downgrade UK. British index fluctuated between gains and losses during session on UK inflation data and German investor confidence report.
Commodity Overview
Precious Metals
Silver prices rose on Monday on optimism over the Euro area and Greece having reached an agreement with the “troika” leaders over the country’s austerity plan. The prices proliferated 0.35% at COMEX, but remained stable at MCX because of the rupee growth.
Industrial Metals
Aluminium turned out the top loser on Monday. Aluminium prices shrank 1.52% at LME and 1.90% at MCX owing to augmenting production costs.
Crude oil futures were enjoying a bullish trend on Monday improving by 2% at NYMEX. The main factor driving crude oil prices was the Greek parliament’s approval of austerity measures.
Coffee futures for March delivery were traded around 212 cents per lb on Monday. India’s coffee production is forecast to drop by 0.70%, the Coffee Board reported
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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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