Yen and CHF Slid after BoJ and SNB Interventions

As governments became more concerned about the markets conditions, both the Swiss National Bank and Bank of Japan intervened yesterday and early this morning in an attempt to put an end to the rising value of their currencies which is damaging their exports and their economic recovery.

The Swiss National Bank cut the interest near zero yesterday and expanded the banks’ deposits to 80 billion CHF. Meanwhile BoJ spent 1 trillion yen ($13 billion) to sell the yen and might pump some extra liquidity into the markets, since they pledged to ease the monetary policy further.

The yen fell sharply today against the USD, and the pair recorded the highest of 80.00 from the lowest of 76.96, while the USD/CHF pair reached the highest of 0.7799 this morning. However as pessimism about the global economic growth persists, these downside movement may be short lived.

Now the Feds are expected to adopt a third round of quantitative easing as the economy is on the verge of falling into recession, while the European Central Bank may be put under pressures to buy more bonds to ease the credit crisis that seams to have no resolution.

Today the ECB and BoE will hold their monetary policy meetings, and neither is expected to rise the interest rate, however both economies still face difficult circumstances, therefore BoE might continue to be dovish, while Trichet will continue to face difficult questions during his press conference later today.

These decision coupled with the labor data from the U.S. today and tomorrow, caution, volatility and swift movements will persist. Concerns about the faltering U.S. economic recovery are still prevailing, especially after the U.S. released more disappointing data yesterday via the ISM services and factory orders reports.

Today the U.S. will release the weekly jobless claims and tomorrow the non-farm unemployment report will be on schedule. Till then investors will take all their precautions and demand on safe haven may continue. Thereby the U.S. dollar rose sharply today reaching the highest of 74.82.

Oil fell towards the $91.50 level as questions about demand continue to be asked since growth is jeopardized. Gold is consolidating around the $1663.00 level, while the euro fell to the lowest of 1.4210 and the pound fell to the lowest of 1.6330 ahead of the monetary policy meetings.

AUD/USD Daily Fundamental Analysis for August 05, 2011

The Australian dollar declined sharply against the greenback with the sluggish economic recovery fears, adding that the Reserve Bank of Australia will leave the interest rates unchanged until the end of the year.

The Australian dollar, nicknamed the Aussie, continues the downside movements against the dollar as investors prefer to buy safe heaven currencies like the U.S. dollar over the Australian currency.

The fears are dominating the market movements as the European debt crisis is hurting the outlook for the global economic recovery, while investors are still afraid about European Central Bank inability to contain the crisis, damping the demand for high yielding currencies.

The focus those days remains on the slowing global recovery and expectations for more actions from central banks to support the recovery, especially after the surprise intervention from the SNB and the BoJ. The jitters are keeping risk aversion more evident and the focus now is on the United States and the state of the economy.

On Friday, The United States of America will release a number of economic data on Friday, starting with the non-farm payrolls at 12:30 GMT, which is expected to show that the U.S. economy added 100 thousand jobs during the month of July compared with the previous 18 thousand jobs.

Unemployment is expected to be steady at 9.2%, while the yearly average hourly earnings index is expected to hold at 1.9%.

The U.S. economy will end the week at 19:00 GMT with the consumer credit index for June, where the prior reading was $5.077 billion and expected to come at $5.050 billion.

NZD/USD Daily Fundamental Analysis for August 05, 2011

The New Zealand dollar, nicknamed Kiwi, held its gains against its major counterpart the dollar after the New Zealand economy reported that unemployment declined to 6.5% during the second quarter through June, matching expectations.

Moreover, the New Zealand currency reached to the lowest level in two weeks against the U.S. dollar as Asian stock markets declined for the third day in a row, reducing demand of Kiwi.

Further, the New Zealand government noted that Kiwi has gained to high levels that may hurt the nation’s exporters, so they should find ways to curb the currency’s gain.

The New Zealand economy wouldn’t release any fundamental data on Friday, but the United States of America will issue a number of economic data on Friday starting with the non-farm payrolls at 12:30 GMT, which is expected to show that the U.S. economy added 100 thousand jobs during the month of July compared with the previous 18 thousand jobs.

Unemployment is expected to be steady at 9.2%, while the yearly average hourly earnings index is expected to hold at 1.9%.

The U.S. economy will end the week at 19:00 GMT with the consumer credit index for June, where the prior reading was $5.077 billion and expected to come at $5.050 billion.

USD/JPY Daily Fundamental Analysis for August 05, 2011

The USD/JPY pair advanced sharply early Thursday, as BOJ intervened in the FX market and unilaterally sold the yen after it reached its highest level against the dollar since March 11 quake.

The Japanese Finance Ministry unilaterally intervened in the foreign exchange market selling the Japanese yen, while the BOJ kept the interest rate steady near zero and indicated that the current volatility in the FOREX market hammers the Japanese economic recovery.

The Bank of Japan expanded its asset-purchase fund by 5 trillion yen, in addition to increasing the lending program by another 5 trillion yen, aiming to pump more liquidity into the market.

On Friday at 05:00 GMT, the Japanese economy will release the coincident index for June, where the previous reading was 106.3, while the leading index for June had a previous reading of 99.6.

The United States of America will release a number of economic data on Friday, starting with the non-farm payrolls at 12:30 GMT, which is expected to show that the U.S. economy added 100 thousand jobs during the month of July compared with the previous 18 thousand jobs.

Unemployment is expected to be steady at 9.2%, while the yearly average hourly earnings index is expected to hold at 1.9%. 

The U.S. economy will end the week at 19:00 GMT with the consumer credit index for June, where the prior reading was $5.077 billion and expected to come at $5.050 billion.

EUR/USD Technical Analysis August 4, 2011

The EUR/USD continued its schizophrenic behavior on Wednesday as trader bought the currency, mainly in the US session to retest the 1.4350 resistance area. The issues in the Euro zone keep us from owning this currency, and quite frankly – the only reason this pair is remaining slightly afloat is that the debt ceiling deal out of DC wasn’t very impressive. We like selling rallies in this pair, but prefer to short the Euro against many other currencies.

USD/JPY Technical Analysis August 4, 2011

USD/JPY fell again on Wednesday as traders continue to take risk off in the markets. The pair is certainly oversold, but then again – it has been for a very, very long time. The Bank of Japan has been jawboning this pair again, and as such – we think they are going to get involved if this keeps up. Because of this, we are staying out of this pair, save a supportive candle to the upside. But until then – this is getting dangerous to the account if you are in this pair.

GBP/USD Technical Analysis August 4, 2011

The GBP/USD pair shot straight up in Wednesday trading, and closed the day towards the top of the range. This is a very bullish sign for cable, but now it is nearing the 1.65 area – an area that has given it trouble in the past. As we stated yesterday – any longs would be short-term at best. If you took that trade, you should have stop losses at break even by now, if not taking some profit off of the table. We need to see a daily close above the 1.65 handle to get long again.

USD/CHF Technical Analysis August 4, 2011

USD/CHF rose sharply after SNB rate cuts on Wednesday, but only to fall again. The candle shape shows how weak this pair really is, and that the Swiss National Bank has lost all control of its currency. At this point, it looks like nothing will stem the flow of money into Switzerland except taking the Franc off of the exchanges! We still like selling rallies.

EUR/CHF Technical Analysis August 4, 2011

The EUR/CHF pair rose after the Swiss National Bank cut rates in a surprise move on Wednesday, but fell shortly afterwards as the problems in Europe are simply too worrisome to keep traders away from the Franc at this point. The 1.12 level held as resistance, and the 1.10 level got targeted again. At the end of the day, the candle looks pretty ugly. Selling the rallies has been the way to go for a few years – a strategy that seems to still be in vogue.

AUD/USD Technical Analysis August 4, 2011

The AUD/USD pair fell, and then bounced on Wednesday to form a hammer. This is a very bullish sign, and since it is basically at the 1.0750 area – it is at the right place as well. If we can break the highs for Wednesday, this would be a classic buy signal. If we break the lows – we will see 1.05 sooner, rather than later. The trend is up, so a buying set up is preferred.

USD/CAD Technical Analysis August 4, 2011

The USD/CAD pair had a wild day on Wednesday as traders went back and forth during the session. Because of this, the pair does look a bit supported at the moment, but it is in a massive downtrend – so you could take a buying signal as only so reliable at the moment. We like staying out until we get a sell signal at the right place. These would include 0.97 and 0.98, as well as parity.

NZD/USD Technical Analysis August 4, 2011

The NZD/USD pair had a fairly quiet and even day on Wednesday as the markets rocked back and forth all around the world. The Kiwi has enjoyed a different dynamic lately as the Chinese are currently buying up bonds out of New Zealand. This puts support under the currency and as such keeps it afloat even when the risk is being taken off in the markets. We like going long if we can break the highs from Wednesday.

USD/CAD Daily Fundamental Analysis for August 04, 2011

The USD/CAD pair retreated earlier on Wednesday after the ADP employment report showed U.S. private employers added more jobs than expected in July, where the ADP employment report showed 114,000 jobs were added, better than median estimates of 100,000 added jobs, which eased some of the concerns over the health of the U.S. labor market.

Nonetheless, the USD/CAD pair erased some of its losses after the ISM services index was released, where the ISM services index showed activities eased in July to 52.7 below expectations of 53.5, which spread further concerns over the outlook of the U.S. economy, especially as the ISM manufacturing index for the same month also showed easing activities in July.

The focus in markets will now turn to the outlook for growth, as recent signs suggest economic growth is slowing in both the United States and Canada, while traders will be eyeing data from the U.S. labor market, as the infamous jobs report is due on Friday, and traders will be eyeing the recent developments in the U.S. labor market, and if the data proves disappointing, we should expect the USD to gain more momentum and rise against the CAD.

Thursday August 04:

At 12:30 GMT we have the weekly jobless claims, which are expected to rise to 405,000, where last week jobless claims fell to 398,000, which marked the lowest since early April.

Slowing ISM Services Overshadows Better than Expected ADP Employment Data

Despite earlier optimism that spread through markets on Wednesday after the ADP employment report showed U.S. private employers added 114,000 jobs in July more than expectations of 100,000 added jobs, yet pessimism dominated markets once again, as traders fear the S&P rating agency will downgrade the United States longstanding AAA credit rating despite an agreement to raise the debt ceiling and reduce the deficit, while the ISM non-manufacturing index slowed in July to 52.7 below expectations of 53.5, which boosted worries over the outlook of the U.S. economy.

Meanwhile, the European debt crisis resurfaced again in markets, where traders now fear Italy could be the next victim of the debt crisis, as yields on Italian governmental bonds rose above 6%, the highest in more than 10 years, which spread concerns that Italy could soon tap into bailout funds from the EU and the IMF.

Stocks in the United States extended the drop by opening on Wednesday, where the Dow Jones Industrial Average was down by nearly 0.30% to trade around 11,830, while the S&P 500 index was down by nearly 0.20% to trade around 1251. European stock indexes were also lower before closing on Wednesday, where FTSE 100 was down by nearly 1.55% to trade at 5630 and the DAX was down by nearly 1.45% to trade around 6698.

The U.S. dollar dropped against a basket of major currencies on Wednesday, where the U.S. dollar index was trading at 74.08, compared with the opening level at 74.51. The Euro rose strongly against the Dollar, where the EUR/USD pair traded at $1.4305, compared with the opening level at $1.4183, and the British Pound also gained against the Dollar, where the GBP/USD pair traded around $1.6382, compared with the opening level at $1.6278.

Gold prices continued to rise on Wednesday reach a new record high above $1670 an ounce, where gold was trading around $1669 an ounce, and crude oil prices dropped to trade around $92 a barrel.

EUR/USD Daily Fundamental Analysis for August 04, 2011

The EUR/USD rallied on Wednesday amid choppy trading as investors were mixed following the surprise SNB decision which lifted the euro versus the franc and accordingly versus the dollar on expectations that the European central banks might actually take action today.

Eased U.S. debt ceiling woes did not much relief the market as the focus shifted to slowing global growth and the fear of the era of sluggish growth and extended fiscal tightening that will further weigh on the fragile recovery.

The euro was powered by expectations that the ECB might take action to ease the tension after the sudden move from the SNB, which was also support for the euro to regain its appeal.

In an unexpected move, the Swiss National Bank cut the target range for the three month Libor Interbank rate to 0.00-0.25% from 0.00-0.75% and also said it will increase the supply of francs to the money market over the coming days.

The SNB said that the franc was “massively overvalued” and threatens the recovery amid rising downside pressure and worsening state of the economy. The SNB also said they will expand the sight deposits to 80 billion francs from 30 billion and add more measures if needed to support the recovery and prevent swissy from the extensive rally.

Nevertheless, with the ADP jobs numbers the tension somehow eased ahead of the nonfarm payrolls, yet the focus remains on Friday. As for Thursday the ECB is the spotlight with a light load of data from the United States.

Germany will start the major day for the euro zone at 10:00 GMT with June’s Factory Orders which are expected with 0.2% drop following 1.8% surge in May, while n the year to ease to 6.8% following 12.2%.

The highlight for the day will surely be the European Central Bank rate decision and press conference. The decision at 11:45 GMT is expected with steady rates and the main rate to be held at 1.50%.

Trichet’s press conference will follow at 12:30 GMT and investors are looking for hints for the next move, where a rate increase hint is highly unlikely and the president will refrain from strong vigilance. Also more focus will be on the ECB’s plan to deal with the debt crisis, whether the exception given to Portuguese bonds will be delivered to Ireland and what the president has to say about the Greek bond buyback and EFSF bond buying.

At 12:30 GMT we have the usual weekly jobless claims, where last week jobless claims fell to 398,000, which marked the lowest since early April.

EUR/CHF Daily Fundamental Analysis for August 04, 2011

Swissy weakened strongly against its major counterparts and the EUR/CHF surged to the upside after the unexpected move from the Swiss National Bank in a new attempt to halt the franc’s rally.

In an unexpected move, the Swiss National Bank cut the target range for the three month Libor Interbank rate to 0.00-0.25% from 0.00-0.75% and also said it will increase the supply of francs to the money market over the coming days.

The SNB said that the franc was “massively overvalued” and threatens the recovery amid rising downside pressure and worsening state of the economy. The SNB also said they will expand the sight deposits to 80 billion francs from 30 billion and add more measures if needed to support the recovery and prevent swissy from the extensive rally.

This unexpected move from the SNB is likely to keep the pair biased to the upside in the coming days, where the EUR/CHF will fluctuate heavily on Thursday especially with the ECB rate decision, yet the intervention move from the SNB the pair will likely be biased to the upside.

The focus is surely on the rate decision on Thursday from the ECB, where the bank is expected to hold rates steady as the focus turns to what Trichet has to say. The decision is at 11:45 GMT and expected with steady rates and the main rate to be held at 1.50%.

Trichet’s press conference will follow at 12:30 GMT and investors are looking for hints for the next move, where a rate increase hint is highly unlikely and the president will refrain from strong vigilance. Also more focus will be on the ECB’s plan to deal with the debt crisis, whether the exception given to Portuguese bonds will be delivered to Ireland and what the president has to say about the Greek bond buyback and EFSF bond buying.

GBP/USD Daily Fundamental Analysis for August 4, 2011

On Wednesday, the pair advanced as the sterling got a boost after a report showing that U.K., services sector accelerated in July to 55.4 from the prior 53.9, beating analyst’s forecasts of 53.2, while the dollar was negatively affected by Moody’s warns that theU.S.may still lose its AAA top rating.

With regard to fundamentals from the U.S., the ADP report showed that the private sector added 114,000 jobs in July, lower than 157,000 jobs added in June yet better than forecasts of 100,000.

On the Thursday, at 11:00 GMT, the UK will release the waited rate decision for the month of August, where forecasts refer to no change in both interest rate and APF. The decision may not have a significant impact as the latest announcements by policy makers showed that they will keep loose monetary policy for a while, thus the decision will probably hold no surprises.

At 12:30 GMT, the U.S economy will release initial jobless claims for the week ended July 30 and continuing claims for the week ended July 23, while the Swiss economy lacks fundamentals.

The data is predicted to have an impact on the pair as it comes after the ADP report and before the release of the awaited non-farm payrolls report due on Friday.

USD/CHF Daily Fundamental Analysis for August 4, 2011

On Wednesday, the Swiss franc lost ground against majors, including the dollar, where the pair rebounded from a record low after the Swiss National Bank (SNB) unexpectedly cut the three-month Libor interbank rate to a range between 0.00-0.25 percent compared with the prior 0.00-0.75 percent range. Also, the SNB said it would increase the supply of francs in the market over the next few days to halt the franc’s rise which is deemed as overvalued according to the SNB which pledged to use further measures if necessary. The dollar, on the other hand, was downwardly affected by Moody’s warns that the U.S. may still lose its AAA top rating. Regarding fundamentals, U.S. ADP report showed that the private sector added 114,000 jobs in July, lower than 157,000 jobs added in June yet better than forecasts of 100,000. On Thursday, at 12:30 GMT, the U.S economy will release initial jobless claims for the week ended July 30 and continuing claims for the week ended July 23, while the Swiss economy lacks fundamentals. The U.S. data is predicted to have an impact on the pair as it comes after the ADP report and before the release of the awaited non-farm payrolls report due on Friday. With the expansionary monetary policy seen by the SNB along with the other possible interventions, the pair is predicted to show some rise, to halt its southern bearish direction.

Losses for the USD and CHF After Switzerland Unexpectedly Cuts Rate

As the U.S. presents every day more evidence that the economy is in trouble and a recession could be a possible scenario, investors don’t have any reasons to feel optimistic, thereby they continue to avoid risky assets.

Since the U.S. is on the verge of falling into recession while Europe is not doing any better either, the Asian and European stock markets started Wednesday’s trading session with big losses.

The same happened in the currency market, however an unexpected decision by the Swiss National Bank to cut the interest “as close to zero as possible”, expand the banks’ deposits to 80 billion CHF and repurchase SNB bills, brought panic.

This determined the Swiss franc to retreat from its record highs and the dollar index to weaken, opening the way for the other currencies to rise although pessimism about the global economic growth is still present.

Switzerland eased its monetary policy to counter the franc’s rise. Today the CHF reached a new record high against the USD at 0.7607. The SNB sees its currency as “massively overvalued”, and this will start hurting the economy.

Now investors will start eyeing the safe haven Japanese yen, after authorities warned today they are “uncomfortable with a rising yen”, since it rose to a record high this week. This means BoJ could ease its monetary policy later this week.

However the developments that are taking place around the world and the fears from a slowing global economy, could bring only limited losses to those low-yielding/safe-haven currencies.

Investors will be eyeing now Friday’s non-farm from the U.S. for more evidence about the health of the economy, especially after two credit rating agencies said that the deal to raise the debt ceiling and cut spending might not be enough to maintain the AAA rating.

Yesterday the U.S. personal spending fell in June for the first time in almost two years, while earlier this week the ISM manufacturing index showed that activities eased in July to the lowest in two years.

Today the ADP employment change, the ISM services, and the factory orders will be released from the States. All are expected to have lackluster outcomes. This would boost pessimism even more.

However for now the dollar index is still affected by Switzerland’s decision. The greenback fell to the lowest of 73.95 as of this writing. The yen is stable around the 77.00 level, while Gold recorded a new record high at $1672.82.

The euro rose today to the highest of 1.4344 and as of this writing is trading around the 1.4330 level, especially after Germany and Europe released a better than expected PMI services report in July and a rise in the retail sales in June.

The pound followed the euro’s footsteps and expanded its gains reaching the highest of 1.6407, and as of this writing is trading around 1.6390, especially after the economy reported a good improvement in July’s PMI services to 55.4 from 53.9 previous.

NZD/USD Daily Fundamental Analysis for August 04, 2011

The New Zealand dollar (Kiwi) slumped to a 2-week low versus the dollar as the European debt crisis escalates once again with fear of spreading to Italy and Spain, so investor’s fears escalate which is a negative impact on the market’s movements.

Furthermore, the market is moving into the hurdle phase as the fears dominate the investors and pushing them to increase the investment in safe haven assets such as the Gold and the Yen.

The New Zealand dollar is pressured with downbeat growth signals with signs the U.S. economic recovery is losing momentum all worsening the outlook for the global recovery and denting demand for the commodity currency.

On Thursday, the New Zealand economy will release the employment change during the second quarter at 22:45 GMT (Wednesday), where the previous reading was 1.4%.

The Unemployment rate in New Zealand for the second quarter will be published at 22:45 GMT, and is expected to improve to 6.5% from the previous 6.6%.

At 12:30 GMT the U.S. economy will release the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance which is expected at 405 thousand following the unexpected drop to 398 thousand last week.