AUD/USD Weekly Fundamental Analysis February 13-17, 2012, Forecast

Economic Events: (GMT)

Please check the daily forecast for details on all economic events.

Major Economic Events of the Week

Feb. 14

10:00

 

EUR

 

 

German ZEW Economic Sentiment 

 

 

 

13:30

 

USD

 

 

Core Retail Sales (MoM) 

 

 

 

13:30

 

USD

 

 

Retail Sales (MoM) 

 

 

Feb. 15

07:00

 

EUR

 

 

German GDP (QoQ) 

 

 

 

09:30

 

GBP

 

 

Claimant Count Change 

 

 

 

10:30

 

GBP

 

 

BoE Inflation Report 

 

 

 

10:30

 

GBP

 

 

BoE Gov King Speaks 

 

 

 

19:00

 

USD

 

 

FOMC Meeting Minutes 

 

 

Feb. 16

13:30

 

USD

 

 

Initial Jobless Claims 

 

 

Feb. 17

09:00

 

EUR

 

 

German Ifo Business Climate Index 

 

 

 

09:30

 

GBP

 

 

Retail Sales (MoM) 

 

 

 

12:00

 

CAD

 

 

Core CPI (MoM) 

 

 

 

13:30

 

USD

 

 

Core CPI (MoM) 

 

 

 

13:30

 

USD

 

 

CPI (MoM) 

   

 

Rule:

The Australian dollar still isn’t in its good old days, but the performance is definitely improving. Resistance lines tend to work in a smoother manner than support lines, but they also work well. The pair move well together, not much volatility, but easy to chart and easy to trade with low risk factors

Weekly Analysis and Recommendation:

The AUD/USD ended the week at 1.0673 down from the high earlier of 1.0844

This past week was an amusement park ride for the markets. The RBA in an unexpected move held interest rates and then ANZ increased its lending rate to customers. Pushing the Aussie up. Global factors weighed on the USD throughout the week. Prime Minister Gillard says the AU economy is strong and blooming. The dollar continues to trade stronger.

The Greek Finance Minister was sent packing back to Greece. The original news stated that the EU was demanding final legislation of the austerity measures before they would consider the approval of the bailout and that they did not want promises. Further news seemed to indicate that the political agreements were short, even with the ECB’s added contributions and agreements to reduce their asset valued.

Most recent reports said that Germany made it clear that Greece missed its debt target and must increase its austerity measures to qualify for the second economic bailout package.

The German Finance Ministry went on to state, “The Greek offer is not sufficient and they have to go away to come back with a revised plan.” 

All eyes will be on the Federal Reserve officials to determine if the current policy is viable given the strong recent jobs reports, many Fed watchers are skeptical that the current stated policy to keep interest rates low until 2014 will in fact come to pass. Speeches Tuesday by Philadelphia Fed President and Atlanta Fed President may give insight if there is any concern within the Federal Reserve about the stated policy.

The Federal Open Market Committee also releases minutes of its Jan. 26 meeting on Wednesday, and Fed Chairman Ben Bernanke will speak at the Federal Deposit Insurance Corp. conference on community banking Thursday. (Watch gold)

Retail sales figures are due Tuesday, housing starts and Philadelphia Fed index data Thursday and consumer price index figures Friday. It will be a busy week for the USD.

This coming week, investors will be watching, Greece carefully, but many observers, think that a default has already been factored in the markets and that all the banks have been secured and alternative arrangements made. The problem comes about with contagion, and the future of other countries needing bailout. Ireland has already stated that based on successful negotiations with the Greeks that they want to go back to the table and renegotiate their bailout arrangements, not looking for more funding but they want the same interest and arrangements made with the Greeks.

The USD should remain up this week and should continue off the back of the unemployment reports last week, but with the Fed Chairman speaking, you never know exactly what will happen. This week keep an eye on Greece and an ear on the Fed.

The Strength

1) Initial Jobless Claims fall to 358k, 12k less than expected and the 4 week average drops to 366k, the least since May ’08
2) Job Openings in monthly BLS data rise to match the highest since Sept ’08
3) MBA said avg 30 yr mortgage rate falls to new low of 4.05% and refi’s jump 9.4%
4) German Factory Orders in Dec rise a bit more than expected
5) China’s PPI moderates to a gain of just .7% y/o/y, the slowest rate since Nov ’09
6) Indonesia unexpectedly cuts rates to 5.75% while RBA and SK sit pat

The  Weakness

1) Greece on brink, AGAIN, unemployment rate in Nov hits 20.9% from 18.2% in Oct
2) German exports in Dec, the main driver of their economy, falls 4.3% m/o/m vs an expected decline of just 1%, German IP falls 3% vs est of flat from Nov
3) Euros being redeposited with the ECB overnight remain around 500b, matching the amount borrowed under the LTRO
4) BoE votes for more QE, brings asset purchase program up to 325b pounds.

Feb. 06

15:00

 

CAD

 

 

Ivey PMI 

64.1

 

57.8 

 

63.5 

 

 

Feb. 07

03:30

 

AUD

 

 

Interest Rate Decision 

4.25%

 

4.00% 

 

4.25% 

 

 

 

03:30

 

AUD

 

 

RBA Rate Statement 

 

 

 

 

 

 

 

 

15:00

 

USD

 

 

Fed Chairman Bernanke Testifies 

 

 

 

 

 

 

 

Feb. 08

21:45

 

NZD

 

 

Unemployment Rate 

6.3%

 

6.5% 

 

6.6% 

 

 

Feb. 09

01:30

 

CNY

 

 

Chinese CPI (YoY) 

4.5%

 

4.0% 

 

4.1% 

 

 

 

12:00

 

GBP

 

 

Interest Rate Decision 

0.50%

 

0.50% 

 

0.50% 

 

 

 

12:45

 

EUR

 

 

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

 

 

 

13:30

 

USD

 

 

Initial Jobless Claims 

358K

 

370K 

 

373K 

   

 

13:30

 

EUR

 

 

ECB Press Conference 

 

 

 

 

 

 

 

Feb. 10

13:30

 

CAD

 

 

Trade Balance 

2.7B

 

0.7B 

 

1.2B 

   

 

13:30

 

USD

 

 

Trade Balance 

-48.8B

 

-48.4B 

 

-47.1B 

   

 

Sovereign Bond Auction Schedule Feb 13-17

Feb 13  10:10  Italy   BOT auction

Feb 13  10:10  Norway  T-bill auction

Feb 13  10:30  Germany  Eur 4.0bn Aug 2012 Bubill

Feb 13  12:00  Norway  Details bond auction on Feb 20

Feb 14  09:30  Netherlands Eur 3.0bn-4.0bn Jan 2017 DSL

Feb 14  09:30  Spain  12 & 18M T-bill auction

Feb 14  10:10  Greece  3M T-bill auction

Feb 14  10:10  Italy   BTP/CCTeu auction

Feb 14  10:30  Belgium  Auctions 3 & 12M T-bills

Feb 15  10:10  Sweden  Auctions T-bills

Feb 15  10:30  Portugal  Eur 1.5-1.75bn May & Aug T-bills

Feb 16  09:30  Spain  Obligacion auction

Feb 16  10.30  UK  Auctions 4.5% 2034 conventional Gilt

Feb 16  10:50  France  BTA/OATi auction

Feb 16  16:00  US

Announces auctions of 2Y Notes on Feb 21, 5Y Notes on Feb

22 & 7Y Notes on Feb 23

Feb 16  18:00  US  Auctions 30Y TIPS

AUD/USD Forecast February 13, 2012, Technical Analysis

AUD/USD fell on Friday as the concerns out of Europe came back into the forefront again. The pair is very sensitive to risk, and the fall should have been expected. Also, the shooting star at the 1.08 level on Wednesday was the start of weakness in the pair that shorter-term traders jumped on. However, the uptrend is very strong, and we are looking for support to come back into the market. The 1.06, 1.05, and 1.04 levels all could act as support going forward. With this in mind, we are looking for supportive price action at these levels in order to buy the Aussie, which is one of the most loved currencies so far in 2012.

AUD/USD Forecast February 13, 2012, Technical Analysis
AUD/USD Forecast February 13, 2012, Technical Analysis

AUD/USD Forecast for the Week of February 13, 2012, Technical Analysis

AUD/USD initially pierced the 1.08 level during the week, but found that the upward momentum finally ran out of steam as the move had been a bit too parabolic at that point. The pullback saw this pair fall to the mid-1.06 handle, and this could be the start of a continued fall. However, we feel that the uptrend is still intact, and that longer-term traders shouldn’t sell this pair as there is significant support at 1.04 or so. With this in mind, we are going to wait on longer-term trades for a supportive candle around the 1.05 to 1.04 levels. If we get a sub-1.04 close, we would become aggressive sellers. 

AUD/USD Forecast for the Week of February 13, 2012, Technical Analysis
AUD/USD Forecast for the Week of February 13, 2012, Technical Analysis

AUD/USD Fundamental Analysis February 13, 2012 Forecast

Economic Events: (GMT)

There are no major economic events scheduled for New Zealand, Australia or the USA on Monday. Note the schedule below is GMT time.

23:50     JPY        GDP (QoQ

 Gross Domestic Product (GDP) measures the annualized change in the inflation-adjusted value of all goods and services produced by the economy. It is the broadest measure of economic activity and the primary indicator of the economy’s health.                                  

 23:50    JPY        GDP Price Index (YoY) 

The Gross Domestic Product (GDP) Price Index measures the change in the price of all goods and services included in GDP. It is the broadest measure of inflation and is the primary indicator the Bank of Japan uses to gauge inflation.

A higher than expected reading should be taken as positive/bullish for the JPY, while a lower than expected reading should be taken as negative/bearish for the JPY.

23:50     JPY        Tertiary Industry Activity Index (MoM)

The Tertiary Industry Index measures the change in the total value of services purchased by businesses. It is a leading indicator of economic health.

A higher than expected reading should be taken as positive/bullish for the JPY, while a lower than expected reading should be taken as negative/bearish for the JPY.

 

Analysis and Recommendation: ( close of Asian session )

AUD/USD was trading at 107.13 US cents, down from 108.13 cents on Thursday afternoon.

The Australian dollar has fallen slightly, despite news that Greek ministers have reached an agreement on an austerity package as part of the country’s debt bailout.

The Aussie dollar and currency markets were generally very quiet overnight. Any moves we did see were within the bounds of recent ranges.

 The Reserve Bank of Australia trimmed its near-term growth and inflation forecasts Friday and said it has scope to cut interest rates if needed, just days after stunning markets by keeping its cash rate steady at 4.25% instead of an expected cut.

Forecasting core inflation to remain within its 2%-3% target band through 2012 and 2013 the bank painted a mixed outlook for the domestic economy split between a red-hot resources boom while industries such as tourism and manufacturing suffer from a high exchange rate.

It noted investment is continuing to pour into resources projects at a rapid pace while conditions in the non-mining economy are subdued, with consumer demand particularly weak.

Australia 4Q Business Confidence Index Up 4 Points To +1 -NAB,

Overall, confidence rose four points to one index point from the third quarter, while business conditions gained five points to two index points, according to the quarterly National Australia Bank business survey.

the broader mood among executives remains subdued, with a large disparity across sector performance. Mining, transport and utilities all posted strong business conditions and confidence, while retail, manufacturing and construction were weak — further solidifying a growing gap between those areas benefiting from an ongoing mining boom against those hit by a corresponding rally in the country’s currency

 Australian & New Zealand Banking Group Ltd. risked a hostile public reaction Friday by increasing the cost of its home loans despite no move in the country’s official cash rate.

Australia’s third-largest bank said it has increased its standard variable interest rate by 6 percentage points to 7.36%. The move is to ease pressure on margins caused by soaring funding costs.

China’s trade surplus widened more than expected in January amid a sharp drop in imports, although analysts cautioned against alarm, saying the data may reflect holiday-related distortions rather than deterioration in underlying economic trends.

China’s trade surplus totaled $27.3 billion for the month, according to data reported Friday by the state-run Xinhua news agency, outpacing expectations for a $10.6 billion surplus according to a poll compiled by Dow Jones Newswires.

Imports for the month were down 15.3% from a year earlier, while exports contracted a 0.5%, according to the Xinhua-reported figures. Despite repeated pledges by China’s top leaders that they will stick to their two-year-long property-tightening campaign, expectations of various forms of easing have surfaced after the Chinese central bank said Tuesday it will support financing for social housing projects and first-time home purchases.

The Asian currency markets should remain fairly calm until the JPY reports are released early Monday morning. This may move the JPY and with it the AUD.

 

Economic Data Thursday Feb 9, 2012 ( actual v forecast )                                                                                             

 

AUD

NAB Quarterly Business Confidence 

1.00

 

 

 

-3.00 

 

 

 

KRW

South Korean Interest Rate Decision 

3.25%

 

3.25% 

 

3.25% 

 

 

 

CNY

Chinese CPI (YoY) 

4.5%

 

4.0% 

 

4.1% 

 

 

 

CNY

Chinese PPI (YoY) 

0.7%

 

0.8% 

 

1.7% 

 

 

 

GBP

Industrial Production (MoM) 

0.5%

 

0.2% 

 

-0.5% 

   

 

GBP

Manufacturing Production (MoM) 

1.0%

 

0.3% 

 

-0.1% 

   

 

GBP

Trade Balance 

-7.1B

 

-8.4B 

 

-8.9B 

   

 

GBP

Interest Rate Decision 

0.50%

 

0.50% 

 

0.50% 

 

 

 

EUR

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

 

 

 

USD

Initial Jobless Claims 

358K

 

370K 

 

373K 

   

 

EUR

ECB Press Conference 

 

 

 

 

 

 

 

 

USD

Continuing Jobless Claims 

3515K

 

3525K 

 

3451K 

   

 

MXN

Mexican CPI (YoY) 

4.0%

 

4.0% 

 

3.8% 

 

 

 

GBP

NIESR GDP Estimate 

-0.2%

 

 

 

-0.2% 

   

 

Sovereign Bond Auction Schedule Feb 13-17

Feb 13  10:10  Italy   BOT auction

Feb 13  10:10  Norway  T-bill auction

Feb 13  10:30  Germany  Eur 4.0bn Aug 2012 Bubill

Feb 13  12:00  Norway  Details bond auction on Feb 20

Feb 14  09:30  Netherlands Eur 3.0bn-4.0bn Jan 2017 DSL

Feb 14  09:30  Spain  12 & 18M T-bill auction

Feb 14  10:10  Greece  3M T-bill auction

Feb 14  10:10  Italy   BTP/CCTeu auction

Feb 14  10:30  Belgium  Auctions 3 & 12M T-bills

Feb 15  10:10  Sweden  Auctions T-bills

Feb 15  10:30  Portugal  Eur 1.5-1.75bn May & Aug T-bills

Feb 16  09:30  Spain  Obligacion auction

Feb 16  10.30  UK  Auctions 4.5% 2034 conventional Gilt

Feb 16  10:50  France  BTA/OATi auction

Feb 16  16:00  US

Announces auctions of 2Y Notes on Feb 21, 5Y Notes on Feb

22 & 7Y Notes on Feb 23

Feb 16  18:00  US  Auctions 30Y TIPS

 

AUD/USD Forecast February 10, 2012, Technical Analysis

 

The AUD/USD pair had a fairly quiet session on Thursday, but is struggling at the 1.08 resistance area. The Aussie has enjoyed a massive rally lately, and the pair simply needs to rest as the bullishness will need to slow down in order for those that haven’t participated to get involved.

Because of this, we think a pullback is coming, and would welcome it as a buying opportunity. The 1.04 level is what we need to see broken below in order to consider selling, and we would like to see supportive action before that area in which to buy. The 1.05, 1.06, and 1.07 levels are all candidates for support, and we will look for supportive daily candles in these areas from which to go long.

AUD/USD Forecast February 10, 2012, Technical Analysis
AUD/USD Forecast February 10, 2012, Technical Analysis

In The Eyes of the Experts – 9/2/2012

What is this report?

In the morning the experts meet in the dealing room in order to prepare themselves for another trading day. They read the business press, and note relevant economic announcements expected during the day. They also consider the support and resistance lines and discuss the important rates in the major pairs; they indicate which pairs may strengthen and those which could weaken. Afterwards they wish everyone a successfully day of trading and turn on the computer screens…

Below you can find pairs the experts assume may be strengthen and weaken during the trading day; support and resistance lines relevant to the day’s trading and critical time for trading each day (important news etc.).

Currencies to watch for Long:

  • EUR
  • NZD

 

Currencies watch for Short:

  • USD

 

Today’s important times (GMT+2):

  • 14:00 GBP
  • 14:45 EUR
  • 15:30 USD EUR

 

Pair R2 R1 Pivot S1 S2
EURUSD    1.3175    1.3211    1.3249    1.3284    1.3323   
GBPUSD 1.5709 1.5758 1.5842 1.5891 1.5976
USDJPY 76.50 76.78 76.97 77.25 77.45
USDCHF 0.9084 0.9108 0.9129 0.9153 0.9175
USDCAD 0.9907 0.9935 0.9962 0.9990 1.0017
AUDUSD 1.0722 1.0753 1.0798 1.0829 1.0874

AUD/USD Forecast February 9, 2012, Technical Analysis

AUD/USD rose for most of the session on Wednesday, but pulled back to form a shooting star. The fact that this happened at the 1.08 level is very interesting as it was seen as a “barrier” of sorts by the markets in general. Being as the Aussie is a currency that traders will buy in a risk positive environment, this isn’t a mistake in our opinion.

The pair is like all others in the fact that it will be influenced just as much by things going on in Athens than things going on in Washington or Sydney. The fact that the market couldn’t settle above the handle and formed a shooting star suggests that we will see a pullback at the least, and a selloff could be coming in short order. If the Europeans don’t get a move on – this could happen right away.

The Aussies are still buoyed by the Chinese and their expansion demanding more and more Australian commodities, but if the European Union falls in to a massive recession, this will certainly slow down the Chinese expansion as well. In turn – this comes to Australia. As long as the EU holds together though – this pair should have an overall bullish bias.

None the less, a pullback would be welcomed. The real test is if we get down to the 1.04 level, and fight it out down there. This level has to hold in order to keep the bullish bias in this pair. If it were to give way – we could see a massive rout. However, this is far below the current price, and we think the markets will continue to rise after any pullback. The pair looks to have support at the 1.06, 1.05, and the obvious 1.04 levels.

We are currently waiting for a pullback, as the market looks overbought. We were willing to buy on a daily close that cleared the 1.08 level if we had to, but it looks like we will be able to get a better price if we let the market fall a bit. A daily close above the top of the shooting star has us buying – even if it is toppy looking.

AUD/USD Forecast February 9, 2012, Technical Analysis
AUD/USD Forecast February 9, 2012, Technical Analysis

Contagion from the EU could damage Asian Banks says Moody’s

Banks in Australia, New Zealand, South Korea and Vietnam are among the “most exposed” in the Asia-Pacific region to a sudden worsening of Europe’s sovereign debt crisis, Moody’s Investors Service said.

 Bloomberg News reported that “The Australian, New Zealand and Korean banking systems’ dependence on foreign funding puts them at risk of increased costs in the event of wholesale market stress”, Stephen Long, a managing director at Moody’s financial institutions group, said in a statement. Vietnam’s weak financial system and dependence on cheap dollar loans subjects its banks to tightening foreign- currency liquidity.

These banking systems are “more vulnerable to the first- round impact of a further worsening of the euro area crisis than other systems in Asia Pacific,” Long wrote after Moody’s released a report the topic. “Our base case is that the resilience of banks in Asia Pacific will generally persist. However, the risks to that scenario have increased, warranting a closer examination of how banks could be affected under more adverse scenarios.”  These countries are also closely tided to China who might see huge problems if the EU crisis explodes. Europe is one of China’s major trading partners.

Australian and New Zealand lenders’ proportion of total external funding stands at 19 percent and 16 percent respectively, New York-based Moody’s said. Korea’s banking system has a foreign currency-to-deposit ratio of 328 percent and relies on external markets for 9 percent of its funding, the report said.

These banks are not part of the ECB or the EU community and their respective governments have the ability to print money or issue monetary policy indendently, an overflow from Europe could have contagion throughout the region.

Today, the Greek agreements became disagreements after early morning meetings failed to move anyone closer to a final deal. The EU and ECB have set a new deadline for a completed deal, not just an agreement. Everything must be done and concluded no later the February 15th. Yesterday, the ECB gave in and agreed to take a loss on their Greek assets hoping that this would end the political problems with Greece but nothing has come out of these new talks.

AUD/USD Fundamental Analysis February 10, 2012 Forecast

Economic Events: (GMT)

00:30     AUD       RBA Monetary Policy Statement

The Reserve Bank of Australia’s (RBA) quarterly monetary policy statement provides valuable insight into the bank’s perspective on economic conditions and inflation                                                                                             

 13:30    USD       Trade Balance                                                   -48.4B                   -47.8B

The Trade Balance measures the difference in value between imported and exported goods and services over the reported period. A positive number indicates that more goods and services were exported than imported.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.                           

 14:55    USD       Michigan Consumer Sentiment Index     74.3                       75.0

The University of Michigan Consumer Sentiment Index rates the relative level of current and future economic conditions. There are two versions of this data released two weeks apart, preliminary and revised. The preliminary data tends to have a greater impact. The reading is compiled from a survey of around 500 consumers.

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.                          

 17:30    USD       Fed Chairman Bernanke Speaks

Federal Reserve Chairman Ben Bernanke (February 2006 – January 2014) is to speak. As head of the Fed, which controls short term interest rates, he has more influence over the U.S. dollar’s value than any other person. Traders closely watch his speeches as they are often used to drop hints regarding future monetary policy.

His comments may determine a short-term positive or negative trend.                                                                                                

19:00     USD       Federal Budget Balance                                                -65.2B                   -86.0B  

The Federal Budget Balance measures the difference in value between the federal government’s income and expenditure during the reported month. A positive number indicates a budget surplus, a negative number indicates a deficit. 

A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.           

Analysis and Recommendation: ( close of Asian session )

AUD/USD was trading at 1.0787 down from yesterday’s close of 1.0799. The AUD fell like a rock in mid day trading only to later recover falling all the way to 1.0741. A double whamy seemed to hit at one time, New Zealand unemployment, China’s increased inflation rate and news of no agreement, or news of disagreement in Greece. The pair soon recovered and should stay in this range. The greenback seems to continue to firm and the pair are moving back into a tight range.

 

 

Wednesday’s economic reports ( actual )

GBP

BRC Shop Price Index (YoY) 

1.40%

 

 

 

1.70% 

 

 

JPY

Economy Watchers Current Index 

44.1

 

47.5 

 

47.0 

 

 

CHF

Unemployment Rate 

3.1%

 

3.1% 

 

3.1% 

 

 

EUR

German Trade Balance 

13.9B

 

14.1B 

 

14.9B 

   

EUR

French Government Budget Balance 

-90.8B

 

-90.8B 

 

-97.2B 

 

 

 

Scheduled Sovereign Bond Sales

Feb 10  11:00  Belgium  OLO auction

In The Eyes of the Experts – 8/2/2012

What is this report?

In the morning the experts meet in the dealing room in order to prepare themselves for another trading day. They read the business press, and note relevant economic announcements expected during the day. They also consider the support and resistance lines and discuss the important rates in the major pairs; they indicate which pairs may strengthen and those which could weaken. Afterwards they wish everyone a successfully day of trading and turn on the computer screens…

Below you can find pairs the experts assume may be strengthen and weaken during the trading day; support and resistance lines relevant to the day’s trading and critical time for trading each day (important news etc.).

Currencies to watch for Long:

  • AUD
  • NZD
  • EUR

 

Currencies watch for Short:

  • USD
  • JPY
  • GBP

 

Today’s important times (GMT+2):

  • 17:30 USD
  • 23:45 NZD

 

Important rates:

Pair R2 R1 Pivot S1 S2
EURUSD    1.3020    1.3133    1.3201    1.3314    1.3382   
GBPUSD 1.5742 1.5816 1.5860 1.5977 1.5977
USDJPY 76.29 76.52 76.74 76.97 77.19
USDCHF 0.9035 0.9097 0.9152 0.9196 0.9269
USDCAD 0.9907 0.9928 0.9928 0.9961 0.9982
AUDUSD 1.0650 1.0721 1.0071 1.0842 1.0892

AUD/USD Forecast February 8, 2012, Technical Analysis

AUD/USD rose again for the Tuesday session, and even managed to crack the 1.08 handle in turn. The pair has been very bullish lately, and the RBA holding on rates on Tuesday gave the Aussie a boost. The market had been thinking a 25 basis point cut was to be seen, and the central bank held firm. This propelled the Aussie against most currencies, and as the Federal Reserve is will in an ultra easy mode, this pair should continue to rise over time. The 1.08 is a hurdle to overcome, but it looks like this might be happening. The breaking of the high for the session would have us long in this pair again. Any pullback would be looked at as an opportunity to buy the Aussie on the cheap, and we will look for supportive action at the handles below.

AUD/USD Forecast February 8, 2012, Technical Analysis
AUD/USD Forecast February 8, 2012, Technical Analysis

AUD/USD Fundamental Analysis February 9, 2012 Forecast

Economic Events: (GMT)

There are no major economic events, reports or data expected in Asia on Thursday

13:30     USD      Initial Jobless Claims                                    388K                      367K                     

 13:30    USD      Continuing Jobless Claims                          3525K                    3437K     

Initial and Continuing Jobless claims measures the number of individuals who filed for unemployment insurance for the first time or renewed during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week.

A higher than expected reading should be taken as negative/bearish for the USD, while a lower than expected reading should be taken as positive/bullish for the USD.               

Analysis and Recommendation: ( close of Asian session )

AUD/USD was trading at 1.0829

The Aussie was the surprise of the day yesterday, after the RBA shocked markets and maintained the current interest rate of 4.25%, while all the markets were predicting a drop to 4.00%. Only ANZ called it right. This surprise and the weaker dollar yesterday pushed the AUS to a new recent high. As the markets cooled the Aussie lost some strenght, opening this morning at 1.0808. As today moved on, the USD began generating some steam as investors became worried about Greece. Yesterday, news reports stated that a deal would be finalized Tuesday evening and at the very last minute the meetings were postponed until Wednesday, the elation of the markets waned over night and the USD is moving back up.Today is going to be deal or no deal.

Prior Economic Report Results

 AUD

Interest Rate Decision 

4.25%

4.00% 

4.25% 

 

 

AUD

Westpac Consumer Sentiment 

 

 

2.40% 

 

 

 

 USD

 10-Year Note Auction 

 

1.900% 

 

 

NZD

Employment Cha (QoQ) 

0.4% 

 

0.2% 

 

NZD

Unemployment Rate 

6.5% 

 

6.6% 

 
                   

 

Scheduled Sovereign Bond Sales

Feb 08  10:10  Sweden  Nominal bond auction

Feb 08  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Feb 08  10:30  Swiss  Bond auction

Feb 08  16:30  Italy   Details BOT auction on Feb 13

Feb 08  18:00  US  Auctions 10Y Notes

Feb 09  10:10  Sweden  Sek 0.75bn I/L bond auction

Feb 09  15:30  Sweden  Details I/L bond auction on Mar 23

Feb 09  16:00  US  Announces auctions of 30Y TIPS on Feb 16

Feb 09  16:30  Italy   Details BTP/CCTeu auction on Feb 14

Feb 09  18:00  Italy   Auctions 30Y Bonds

Feb 10  11:00  Belgium  OLO auction

In The Eyes of the Experts – 7/2/2012

What is this report?

In the morning the experts meet in the dealing room in order to prepare themselves for another trading day. They read the business press, and note relevant economic announcements expected during the day. They also consider the support and resistance lines and discuss the important rates in the major pairs; they indicate which pairs may strengthen and those which could weaken. Afterwards they wish everyone a successfully day of trading and turn on the computer screens…

Below you can find pairs the experts assume may be strengthen and weaken during the trading day; support and resistance lines relevant to the day’s trading and critical time for trading each day (important news etc.).

Currencies to watch for Long:

  • NZD
  • AUD
  • CAD

 

Currencies watch for Short:

  • CHF
  • JPY
  • GBP

 

Today’s important times (GMT+2):

  • 12:45 CHF
  • 15:30 CAD
  • 17:00 USD

 

Important rates:

Pair R2 R1 Pivot S1 S2
EURUSD    1.2981    1.3049    1.3094    1.3162    1.3208   
GBPUSD 1.5681 1.5746 1.5793 1.5857 1.5904
USDJPY 76.30 76.43 76.61 76.73 76.91
USDCHF 0.9127 0.9160 0.9211 0.9244 0.9295
USDCAD 0.9895 0.9929 0.9960 0.9993 1.0025
AUDUSD 1.0644 1.0681 1.0718 1.0755 1.0793

The RBA Seems To See Global Recovery In A Different Light

Recent economic data from the US and around the globe in general are starting to indicate recovery, albeit slow but positive, the global economy is in better shape as European officials roll out more debt crisis measures.

Or at least the fairy tale version of the current global economic situation would have us to believe along with the Director of the Royal Bank of Australia.

This morning in a surprise move, the RBA held current rates.

The move defied expectations of a third consecutive cut, with 13 of 14 leading economists surveyed by AAP forecasting that the central bank board would lower rates. In the prior to meetings in 2011 the RBA reduced interest rates by .25% and were expected to follow the same guidance in today’s meeting.

ANZ bank was the only major financial institution to predict the RBA would stay on the sidelines but it expects a rate cut in March.

Fresh global optimism outweighed the central bank’s concerns about the strength of the Australian dollar, weak business confidence and struggling retail and construction sectors.

Over the past few weeks there have been some positive signs of recovery and some solid economic data and even those that came in below forecast, had bright spots if you looked into the data. This is the responsibility of the RBA and they evidently have done their homework looking deep into global economic data to come up with their own interpretation.

At least the RBA did not cave to public and political pressures.

Unfortunately no matter how you interpret the data, no matter what bright spots you find, no matter how many clouds will silver linings are out there, the is an elephant in the room, called Greece or more precisely known as Greece, Spain, Ireland, Portugal and Italy, more fondly called (PIIGS). Each of these countries is exhibiting economic problems, with little growth and growing unemployment and shrinking economies. Sooner or later they will have to be dealt with. These countries or economies are putting a dent in the global economic recovery.

Last week, Prime Minister Gillard at a breakfast speech before the Israel-Australia Chamber of Commerce came out publicly and stated that the eurozone was causing problems for the economic health of nations around the globe.

The Prime Minster stated that the European crisis was of a different nature – one stemming from concern about sovereign risk and the need for eurozone governments to undertake “long-term fiscal repair”.

“If anything of value can be retrieved from the wreck of failed economic approaches in Europe … it is the lesson to the world: fiscal discipline matters,” she said.

“My firm conclusion is that handing down a budget surplus in May is the right call in the present economic circumstances.

“Our fiscal policy must be disciplined and must be seen to be disciplined as well. It’s in our interest to keep ourselves well ahead of the pack.”

She concluded today another driver for the currency had been investors using it as a substitute for betting directly on growth in the region, especially in China.

This was Australia’s reward of the Government’s fiscal discipline, she said.

“Add the relative woes of European economies – touching even traditional currency strongholds like Switzerland – and for the first time in history Australia is being referred to as something of a global ‘safe haven’,” she said.

Just a few days ago Federal Reserve Bernanke noted that the US economy was still fragile and in a slow recovery and was not necessarily protected from Europe and that it was too soon to tell if the US would escape unscathed from the EU crisis.

Bernanke also noted that the Fed was in daily contact with their counterparts throughout the world monitoring the Europe and Global Crisis closely…

Everyone should be watching the EU closely, as there is no clear path, no roadmap to recovery. There seems to be no plan, no agreement no direction.

Just yesterday, it seems that Merkel and Sarkozy have put their collective foot down and told Greece it is time for them to deal with their own problems that the EU and the ECB would not offer any additional help or changes to earlier guidelines.

RBA governor Glenn Stevens said todays statement that acute financial pressures on banks in Europe were alleviated considerably late in 2011, following actions by eurozone leaders. This is not the overall opinion, many economists think that this caused additional problems that are being masked by the funding provided to banks.

“Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made,” Mr Stevens said.

“Financial market sentiment, though remaining skittish, has generally improved since early December.

“Share markets have risen and term funding markets have reopened, including for Australian banks, albeit at increased cost compared with the situation prevailing in mid 2011.”

AUD/USD Fundamental Analysis February 8, 2012, Forecast

Economic Events: (GMT)

No economic indicators in the US or AUD today

Analysis and Recommendation: ( close of Asian session )

AUD/USD was trading at 1.0808

In a surprise move Tuesday, the RBA maintained interest rates, many believe that there would be a small change, but only a few economist predicted a hold. The RBA said that it decided to keep its policy rate at 4.25% since, “with growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy was appropriate for the moment.” Analysts had widely expected the central bank to follow the quarter-point rate cuts made at the last two meetings of 2011.

The forex markets reacted to the comments by pushing the AUD to a high not seen since early last August.

The Aussie traded as high as $1.0821 after the announcement although it later eased back slightly to $1.0809. Before the RBA decision, the dollar sat at $1.0707.

The AUD is expected to drop slightly to level off after the comments are digested and interpreted by the markets.

Economic Data results prior trading

 AUD

Retail Sales (MoM)

-0.1% 

      0.2%  

    0.1% 

EUR

German Factory Orders (MoM) 

1.7%

0.5% 

-4.9% 

CAD

Ivey PMI 

64.1

57.8 

63.5 

NZD

Labor Cost Index (QoQ) 

0.7%

0.5% 

0.5% 

 

Scheduled Sovereign Bond Sales

Feb 08  10:10  Sweden  Nominal bond auction

Feb 08  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Feb 08  10:30  Swiss  Bond auction

Feb 08  16:30  Italy   Details BOT auction on Feb 13

Feb 08  18:00  US  Auctions 10Y Notes

Feb 09  10:10  Sweden  Sek 0.75bn I/L bond auction

Feb 09  15:30  Sweden  Details I/L bond auction on Mar 23

Feb 09  16:00  US  Announces auctions of 30Y TIPS on Feb 16

Feb 09  16:30  Italy   Details BTP/CCTeu auction on Feb 14

Feb 09  18:00  Italy   Auctions 30Y Bonds

Feb 10  11:00  Belgium  OLO auction

AUD/USD Forecast February 7, 2012, Technical Analysis

AUD/USD fell initially in Monday trading, only to bounce in the later hours as the Americans bid it back up. The “risk off” trade dominated most of the session, and as a result the Aussie got hit slightly. However, the pair has been in a massive uptrend lately, and the momentum is obviously far too strong for the bears to overcome at the moment.

The Reserve Bank of Australia has a rate decision coming this morning that could certainly push this pair along in one way or another. The market in general seems to count on a 25 basis point cut in the rate, but the recently signs point to a possible disappointment. If this is the case, the AUD should gain in general. If the central bank cuts rates, there could be a knee-jerk reaction, but the real focus will be on the statement and any hints as to the direction of rates going forward. If the central bank is willing to cut going forward, this could really weigh on the Aussie. However, if the cut looks to be the end of the rate cut cycle – this pair will more than likely rise in value.

The 1.08 level is a massive barrier, and breaking above that could open the route to the 1.10 level going forward. We mentioned that the former triangle at the 1.04 area measured as a possible move to the 1.12 level, and as such we are expecting this level to give way sooner or later. The Federal Reserve is keeping interest rates at rock bottom lows until the end of 2014, and this will continue to press upon the Dollar in general. As long as this happens, the odds will favor the Aussie as it is so tied to gold and commodities such as copper. The idea of traders wanting to buy “stuff” to replace Dollars is a thought that should continue to catch on unless some kind of meltdown happens in the European Union. The markets aren’t in a position that we are willing to sell at this point. Yes, if the bottom of the hammer from Monday gets broken, it would technically be a “hanging man”, but there are so many supportive levels below that mark we are willing to simply wait until we get supportive action below. We wouldn’t sell until the daily chart closes below 1.04 level. In the meantime, we love buying pullbacks. 

AUD/USD Forecast February 7, 2012, Technical Analysis
AUD/USD Forecast February 7, 2012, Technical Analysis

AUD/USD Fundamental Analysis February 7, 2012 Forecast

Economic Events: (GMT)

03:30     AUD       Interest Rate Decision                                 4.00%                    4.25%                   

 03:30    AUD       RBA Rate Statement     

Reserve Bank of Australia (RBA) board members come to a consensus on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.

A higher than expected rate is positive/bullish for the AUD, while a lower than expected rate is negative/bearish for the AUD.                                                                                    

 15:00    USD      Fed Chairman Bernanke Testifies

Federal Reserve Chairman Ben Bernanke (February 2006 – January 2014) is to testify on the economic outlook and recent monetary policy actions before the Joint Economic Committee, in Washington DC. The testimony is in two parts; the first is a prepared statement, then the committee conducts a question and answer session. The Q&A portion of the testimony can see heavy market volatility for the duration.                                                                                                             

23:30     AUD       Westpac Consumer Sentiment                                 2.40%   

The Westpac Consumer Sentiment Index measures the change in the level of consumer confidence in economic activity. On the index, a level above 100.0 indicates optimism; below indicates pessimism. The data is compiled from a survey of about 1,200 consumers which asks respondents to rate the relative level of past and future economic conditions.

A higher than expected reading should be taken as positive/bullish for the AUD, while a lower than expected reading should be taken as negative/bearish for the AUD.           

Analysis and Recommendation:  ( close of Asian session )

AUD/USD was trading at 1.0714 The Australian dollar fell against its U.S. counterpart Monday after weaker-than-expected retail sales numbers reduced the trend of the Aussie.

The question is with the AUD is what will the RBA due in tomorrows meeting. Australian retail sales disappoint in December, -0.1% MoM against expectations of +0.2%, increasing liklihood of RBA rate cut tomorrow

Job ads on other hand show biggest rise in 2 years, up by 6%, which might convince RBA to stay on hold

One Australian newspaper thinks RBA may leave rates on hold tomorrow on back of strong US data on Friday

General consensus in market is that RBA will stick by previous signals and cut by 25bps

Australian TD-MI inflation gauge steady at 0.2% MoM

The chance of another interest rate cut by the Reserve Bank tomorrow is decreasing. Until recent  local economic data, the odds were heavily in favour of the RBA making it three rate cuts in a row when its monetary policy board meets.

Scheduled Sovereign Bond Sales

Feb 07  09:00  Netherlands Eur 5.0bn Jul 2022 DSL

Feb 07  10:10  Greece  6M T-bill auction

Feb 07  10.30  UK  Auctions 1.75% 2017 conventional Gilt

Feb 07  15:30  UK  Details gilt auction on Feb 16

Feb 07  18:00  US  Auctions 3Y Notes

Feb 08  10:10  Sweden  Nominal bond auction

Feb 08  10:30  Germany  Eur 4.0bn Feb 2017 Bobl

Feb 08  10:30  Swiss  Bond auction

Feb 08  16:30  Italy   Details BOT auction on Feb 13

Feb 08  18:00  US  Auctions 10Y Notes

Feb 09  10:10  Sweden  Sek 0.75bn I/L bond auction

Feb 09  15:30  Sweden  Details I/L bond auction on Mar 23

Feb 09  16:00  US  Announces auctions of 30Y TIPS on Feb 16

Feb 09  16:30  Italy   Details BTP/CCTeu auction on Feb 14

Feb 09  18:00  Italy   Auctions 30Y Bonds

Feb 10  11:00  Belgium  OLO auction

Asia Monday View

Amid signs of strength in the U.S. economy, copper and crude-oil futures jumped in regular trading on Friday and commodity-linked stocks were broadly higher today in Asia. Gold continued to decline. The USD surged on Friday with the release of the economic data but peaked and then began to drop losing steam quickly

Asian shares climbed on today, with commodity producers, exporters and financials higher after indications that the U.S. economy is improving.

Japan’s Nikkei Stock Average was up 1%, South Korea’s Kospi marched 0.4%, while Australia’s S&P/ASX 200 index shot up 1.1%. Hong Kong’s Hang Seng Index moved upward 0.6% while the Shanghai Composite pushed up 0.2%.

U.S. stocks ended Friday’s session with sharp gains after the release of data showing the U.S. economy added more jobs than expected in January and the jobless rate fell to a three-year low of 8.3%

The better-than-expected U.S. January jobs report released at the end of last week helped to buoy risk appetite as securities continued to rise. However, there is plenty of event risk on the docket this week, not least of which is the Greek debt and bailout negotiations, which have yet to be agreed upon.

Falling unemployment in the U.S. is likely to be good news for Asia, as it suggests stronger consumer demand for the region’s exports of clothing, cars, consumer electronics and other goods.

In Tokyo, the Nikkei hit 8,949.32— its highest intraday level since Oct. 31 — before settling slightly lowers. Hong Kong’s Hang Seng was also off its daily high, as investors began to cash in some of their investments as talks to prevent Greece from defaulting on its massive debt pile dragged on.

Hitting 21,000 and now falling as there is profit-taking, because there is still potential bad news from Greece. The Greek debt talks are still going on, and no one knows if significant bad news will come out of there.

The Dow Jones rose 1.2 percent to close at 12,862.23, its highest mark since May 19, 2008, about four months before Lehman Brothers investment bank collapsed.

The S&P added 1.3 percent to 1,344.90, its highest close since last summer. The Nasdaq Composite added 1.6 percent, to 2,905.66, its highest since in 11 years.

Past, Present and Future.. Central Banks Decisions

During a speech before the House Budget Committee held by Ben Bernanke in Washington this past week, the Federal Reserve Chairman stated the importance of pushing the US fiscal policy on a sustainable path. “Interest rates can sour quickly if investors lose confidence in the ability of the government its fiscal policy,” he pointed out.

Bernanke warned that the strength of recovery in the US was “frustratingly slow” and that reducing debt should be of crucial importance, as its current levels make the economy more susceptible to shocks. The Chairman emphasized that attaining a sustainable government debt to national income ratio should be a top priority on the fiscal policymakers agenda.

Bernanke also listed the Eurozone crisis as an important risk to the US economy. He said that all the necessary steps will be taken to protect the US financial system from the fallout.

Bank of Japan Governor Masaaki Shirakawa said presently that he acknowledges that the economy is in a severe situation due to deflation and a strong yen, signalling the central bank’s readiness to offer further monetary stimulus if Japan’s fragile economic recovery is threatened.

 But Shirakawa pushed off criticism that the BOJ was not easing monetary policy as quickly as the Federal Reserve, stressing that both central banks share similar goals and look not just at price growth but at ensuring sustainable economic growth.

“We acknowledge that the problems Japan faces such as the current deflation and yen strength are very severe,” Shirakawa told an upper house budget committee meeting on Monday. “The BOJ will implement appropriate steps through close examination of the economic situation,” he said.

In the near future The chance of another interest rate cut by the Reserve Bank of Australia tomorrow is decreasing. Until recent  local economic data, the odds were heavily in favour of the RBA making it three rate cuts in a row when its monetary policy board meets.

Surprisingly strong jobs news from the US, though, and broad-based market rallies since the start of the year have given the central bank scope to delay another cut.

The Bank of Englands’s Monetary Policy Committee is set to come forward in the future (Thursday)  and state that it is expanding its Quantitative Easing programme from £275bn to £325bn. Several members of MPC signalled at their January meeting that they would vote for a further round of QE this month