EUR/USD Fundamental Analysis March 19, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is holding at 1.3174 up almost 1 cent, from the opening at 1.3080.

The greenback traded lower after a report on inflation was seen as giving policy makers more reason to maintain ultra-accommodative monetary measures. Also investors feeling more confident spread out to more risky assets.

With U.S. economic data improving and inflationary pressures starting to rise, [the Fed] may not be able to maintain its ultra-accommodative monetary policy for much longer. Today’s U.S. CPI data could prove to be the main catalyst for trade if it rises above the key 3% level on a year-over-year basis.

U.S. consumer prices increased 0.4% in February, owing mainly to the surging cost of gas, the Labor Department said Friday. The government also reported that inflation-adjusted hourly wages, on average, fell 0.3% in February as higher prices outstripped a 0.1% gain in earnings.

The output of the nation’s factories, mines and utilities was flat in February, the Federal Reserve said Friday. This was well below Wall Street expectations of a 0.4% gain. 

Consumer sentiment in March declines for the first time since August, as rising gasoline prices cause a downturn in expectations, according to a key gauge released on Friday.

  

Released Economic Reports for March 16, 2012 actual v. forecast

 

 

EUR

 

 

 

Italian Trade Balance 

-4.35B

 

1.62B 

 

1.15B 

   

 

 

EUR

 

 

 

Trade Balance 

5.9B

 

6.2B 

 

7.4B 

   

 

 

USD

 

 

 

Core CPI (MoM) 

0.1%

 

0.2% 

 

0.2% 

 

 

 

 

USD

 

 

 

CPI (MoM) 

0.4%

 

0.4% 

 

0.2% 

 

 

 

 

CAD

 

 

 

Foreign Securities Purchases 

-4.19B

 

6.27B 

 

7.38B 

 

 

 

 

CAD

 

 

 

Manufacturing Sales (MoM) 

-0.90%

 

0.60% 

 

0.60% 

 

 

 

Economic Events for March 19, 2012

01:01     GBP      Rightmove House Price Index (MoM)    

The Rightmove House Price Index (HPI) measures the change in the asking price of homes for sale. This is the U.K.’s earliest report on house price inflation, but tends to have a mild impact because asking prices do not always reflect selling prices.                                                                                

01:01     GBP      Nationwide Consumer Confidence        

Nationwide Consumer Confidence measures the level of consumer confidence in economic activity. It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. Higher readings point to higher consumer optimism.                                                                                     

13:30     CAD       Wholesale Sales (MoM)

Wholesale Sales measures the change in the total value of sales at the wholesale level. It is a leading indicator of consumer spending.

 

Government Bond Auctions (this week)   

                                                                          
Mar 19  n/a   Greece  CDS Auction

Mar 19  10:10  Slovakia  Bond auction

Mar 19  10:10  Norway  T-bill auction

Mar 20  09:30  Spain  12 & 18M T-bill auction

Mar 21  10:10  Sweden  Nominal bond auction

Mar 21  10:30  Germany  Eur 5.0bn Mar 2014 Schatz

Mar 21  10:30  Portugal  Eur 0.75-1.0bn 4 & 6M T-bills

Mar 22  10:10  Sweden  I/L bond auction

Mar 22  10.30  UK  Auctions 0.625% 2042 I/L Gilt

Mar 22  15:00  US

Announces auctions of 2Y Notes on Mar 27, 5Y Notes on Mar

28 & 7Y Notes on Mar 29

EUR/USD Forecast March 16, 2012, Technical Analysis

 

The EUR/USD pair rose during the session on Thursday as the 1.30 level held firm as support. The area is a 200 pip “zone” of support that continues to frustrate the bears, and shows just how supportive this market is at the moment. However, the overall problems in Europe are far too worrisome for us to think of buying this pair, and as such we have just a couple of options in this pair.

The first option for us is to sell on a breakdown below the support area. If we get this, we think it could lead us down to 1.25 or so, and perhaps even lower before it is all said and done. With the Portuguese bonds spiking lately, there is a real chance that we are going to see another Greece happen, except this time it will revolve around things going on in Lisbon, not Athens. The bond markets there are already beyond sustainable, and this is a situation that the Europeans are going to have to address soon. In order for us to sell in this scenario, we need to see a daily close sub-1.29 as it is the “bottom” of support for us.

The other trading opportunity that we see is to sell rallies. The 1.3250 level is an area that we have seen act as resistance lately, so a bounce back to that area has us looking for weak price action. We will sell right away if we see it, but the market will have to bounce first to get there. The 1.35 level above is even more resistive, so we are comfortable selling on signs of weakness at that area as well. If we manage to smash through the level, it would manage to change our minds, but with all of the trouble we see coming out of Europe, this is a very unlikely event in our mind.

We like selling this pair every chance we get, but we need to do it carefully. The trades have paid well, but are mainly of the short-term variety in most cases. Whether or not this changes that remains to be seen, but a break under 1.29 is a great start to it.

EUR/USD Forecast March 16, 2012, Technical Analysis
EUR/USD Forecast March 16, 2012, Technical Analysis

EUR/USD Fundamental Analysis March 16, 2012, Forecast

Analysis and Recommendations:

The EUR/USD has moved up in end of the day trading to reach 1.3104 after opening at 1.3032. There has been no economic news to support the euro move and no weakness exhibited by the greenback.

In Europe today, The ECB said isn’t currently considering or discussing future cuts to its interest rates, ECB Governing Council member Ewald Nowotny said Thursday in an interview.

Earlier in the day an economic report release showed real wages fell again in the 17 countries that use the euro in the fourth quarter of last year, while employment also declined; confirming consumption and confidence are likely to remain weak as the region teeters on the brink of a return to recession.

These two items should have given the euro some weakness but not today.

In the US the economic news was positive as volumes of releases and data flowed today.

The number of Americans who filed requests for jobless benefits fell by 14,000 last week to 351,000, matching a four-year low, the U.S. Labor Department said Thursday. Claims from two weeks ago were revised up to 365,000 from 362,000.

The Empire State manufacturing index rose to 20.2 in March, the New York Federal Reserve Bank said Thursday. This is the fourth straight increase after the index had sunk below zero from June through October.

U.S. wholesale prices rose a seasonally adjusted 0.4% in February, the fastest increase in five months, sparked by higher petroleum costs, the Labor Department said Thursday.

Foreign investors were buyers in January of a net $94.7 billion of long-term U.S. securities, Treasury Department data released Thursday showed. This is much stronger than the revised $19.4 billion of net sales in December. 

Manufacturing activity in the Philadelphia region edged higher in March to its highest reading since last April, the Philadelphia Federal Reserve reported Thursday. The bank’s business condition index rose to 12.5 in March from 10.2 in February

A RealtyTrac report showed that foreclosure activity fell 8% nationally, compared with a year ago.

The markets were hit by a rumor this afternoon, when reports came out saying the President Obama and UK Prime Minster Cameron reached agreement to release strategic fuel reserves, which was not true, they did have a meeting to discuss the issue but no decisions were made nor any plans. The rumor was later retracted but not until after crude had plummeted over 1.00. This might also be the cause in the inequity of the euro/usdollar.

 

Released Economic Reports for March 15, 2012 actual v. forecast

Date

Time

 

Currency

 

 

 

Event

Actual

 

Forecast

 

Previous

 

 

Mar. 15

09:30

 

CHF

 

 

 

Interest Rate Decision 

0.00%

 

0.00% 

 

0.00% 

 

 

 

10:00

 

EUR

 

 

 

ECB Monthly Report 

 

 

 

 

 

 

 

 

11:00

 

EUR

 

 

 

Employment Change (QoQ) 

-0.2%

 

-0.2% 

 

-0.2% 

   

 

13:30

 

USD

 

 

 

Core PPI (MoM) 

0.2%

 

0.2% 

 

0.4% 

 

 

 

13:30

 

USD

 

 

 

PPI (MoM) 

0.4%

 

0.5% 

 

0.1% 

 

 

 

13:30

 

USD

 

 

 

Initial Jobless Claims 

351K

 

356K 

 

365K 

   

 

13:30

 

USD

 

 

 

NY Empire State Manufacturing Index 

20.2

 

17.4 

 

19.5 

 

 

 

13:30

 

USD

 

 

 

Continuing Jobless Claims 

3343K

 

3405K 

 

3424K 

   

 

14:00

 

USD

 

 

 

TIC Net Long-Term Transactions 

101.0B

 

29.3B 

 

19.1B 

   

 

15:00

 

USD

 

 

 

Philadelphia Fed Manufacturing Index 

12.5

 

11.4 

 

10.2 

 

 

 

Economic Events for March 16, 2012

Time      Currency        Event                                                          Forecast               Previous

13:30     CAD      Foreign Securities Purchases                     6.27B                     7.38B      

Foreign Securities Purchases measures the overall value of domestic stocks, bonds, and money-market assets purchased by foreign investors.     

 13:30    CAD      Manufacturing Sales (MoM)                         0.60%                   0.60%

Manufacturing Sales measures the change in the overall value of sales made at the manufacturing level.             

13:30     USD      Core CPI (MoM)                                            0.2%                      0.2%                     

13:30     USD      CPI (MoM)                                                     0.4%                      0.2%     

The Consumer Price Index (CPI) measures the change in the price of goods and services from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.

14:15     USD       Industrial Production (MoM)                       0.4%                      0.0%

Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.

14:55     USD       Michigan Consumer Sentiment Index        75.7                       75.3

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.

Government Bond Auction Schedule     (this week)

Mar 15 16:00 US Announces auction of 10Y TIPS on Mar 22

 

 

EUR/USD Forecast March 15, 2012, Technical Analysis

The EUR/USD pair fell for most of the session on Wednesday to test the 1.30 support level. The area is actually a 200 pip “thick” zone, and as such we don’t consider it broken until we get below the 1.29 handle. The Euro has an amazing ability to completely ignore bad news, so we are cautious about this market at the moment. A daily close sub-1.29 will be needed to short it going forward. If we see a bounce, we prefer selling, but only after the pair stalls, perhaps at the 1.3250 level. Until we get one of these signals, we can hold tight.

EUR/USD Forecast March 15, 2012, Technical Analysis
EUR/USD Forecast March 15, 2012, Technical Analysis

EUR/USD Fundamental Analysis March 15, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is trading at 1.3014 down from 1.3022 this morning’s opening. The USD has maintained strength against all of its trading partners, having gained energy post FOMC minutes. Earlier yesterday investors positioned themselves for any possible scenario from the Feds and by doing so depressed the USD. The dollar has steadily made a comeback regaining throughout the day. The greenback was supported also by positive data and economic events.

Fed Chairman Bernanke today said again that the pace of the economic recovery has been “frustratingly slow.” Bernanke said that “the condition of community banks is improving” despite economic uncertainties. “Profits of smaller banks were considerably higher in 2011 than in the previous year, nonperforming assets were lower, provisions for loan losses fell appreciably, and capital ratios improved,” In his address Bernanke said. The Fed is trying to listen and understand small banks’ concerns about regulation.

The U.S. current account deficit, on trade in goods and services, income, and donations, widened to $124.1 billion in the fourth quarter, or 3.2% of gross domestic product, much larger than expected. Import prices rose 0.4% in February due to oil, the Labor Department reported. It’s the first increase in since December and biggest gain since April 2011.

U.S. consumers’ pushed up retail sales rose 1.1% to $407.8 billion.

In the FOMC statement released yesterday, the minutes stated. “The recent increase in oil and gasoline prices will push up inflation temporarily, but the FOMC anticipates that subsequently inflation will run at or below the rate it judges most consistent with its dual mandate,” and continued “But the labor market has improved at a faster pace than expected, given the current pace of growth. First-quarter gross domestic product is expected to decelerate to roughly 2% from the 3% pace in the fourth quarter.”

Business inventories climbed in January as car dealers correctly anticipated a strong pickup in demand, according to data released Tuesday.

Inventories rose a seasonally adjusted 0.7% to $1.57 trillion, the largest increase since October, the Commerce Department said.

Today, the first-ever release of GDP data covering all the Group of 20 countries showed the world economy slowed to a quarter-on-quarter growth rate of 0.7% in the fourth quarter from 0.9% in the third quarter.

 

Economic Reports and Events March 14, 2012 actual v. forecast

 

AUD

 

 

 

Westpac Consumer Sentiment 

-5.00%

 

 

 

4.20% 

 

 

 

JPY

 

 

 

BSI Large Manufacturing Conditions 

-7.3

 

1.3 

 

-6.1 

 

 

 

JPY

 

 

 

Industrial Production (MoM) 

1.9%

 

2.1% 

 

2.0% 

 

 

 

JPY

 

 

 

BoJ Monthly Report 

 

 

 

 

 

 

 

 

GBP

 

 

 

Average Earnings Index +Bonus 

1.4%

 

1.9% 

 

1.9% 

   

 

GBP

 

 

 

Claimant Count Change 

7.2K

 

6.0K 

 

7.0K 

   

 

EUR

 

 

 

CPI (YoY) 

2.7%

 

2.7% 

 

2.7% 

 

 

 

EUR

 

 

 

Industrial Production (MoM) 

0.2%

 

0.7% 

 

-1.1% 

 

 

 

EUR

 

 

 

Core CPI (YoY) 

1.5%

 

1.6% 

 

1.5% 

 

 

 

USD

 

 

 

Current Account 

-124.1B

 

-114.0B 

 

-108.0B 

   

 

USD

 

 

 

Import Price Index (MoM) 

0.4%

 

0.6% 

 

0.0% 

   

 

Economic Events Scheduled for March 15, 2012

09:30     CHF       Interest Rate Decision                                 0.00%                    0.00%

Swiss National Bank (SNB) governing board members come to a consensus on where to set the target range for the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation.                      

10:00     EUR        ECB Monthly Report      

The European Central Bank’s (ECB) monthly report contains the statistical data that policymakers evaluate when setting interest rates. The report also provides detailed analysis of current and future economic conditions from the bank’s perspective.                                                        

 11:00    EUR        Employment Change (QoQ)                         -0.2%                     -0.1%    

Employment Change measures the change in the number of people employed. Job creation is an important indicator of consumer spending.      

13:30     USD       Core PPI (MoM)                                            0.2%                      0.4%                     

 13:30    USD       PPI (MoM)                                                     0.5%                      0.1%     

The Core Producer Price Index (PPI) measures the change in the selling price of goods and services sold by producers, excluding food and energy. The PPI measures price change from the perspective of the seller. When producers pay more for goods and services, they are more likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation.                

 13:30    USD      Initial Jobless Claims                                   356K                      362K     

13:30     USD      Continuing Jobless Claims                                                        3416K

Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This is the earliest U.S. economic data, but the market impact varies from week to week. Continuing Jobless Claims measures the number of unemployed individuals who qualify for benefits under unemployment insurance.

13:30     USD      NY Empire State Manufacturing Index         17.4                        19.5       

The Empire State Manufacturing Index rates the relative level of general business conditions New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York State.

 14:00    USD      TIC Net Long-Term Transactions                  29.3B                     17.9B    

Treasury International Capital (TIC) Net Long-Term Transactions measures the difference in value between foreign long-term securities purchased by U.S. citizens and U.S. long-term securities purchased by foreign investors. Demand for domestic securities and currency demand are directly linked because foreigners must buy the domestic currency to purchase the nation’s securities.

15:00     USD       Philadelphia Fed Manufacturing Index       11.4                       10.2

The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. A level above zero on the index indicates improving conditions; below indicates worsening conditions. The data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district.

Government Bond Auction Schedule     (this week)

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

EUR/USD Forecast March 14, 2012, Technical Analysis

The EUR/USD pair fell again for the Tuesday session as the Federal Reserve failed to suggest that further quantitative easing is on the way. This strengthened the Dollar, and the Euro took it hard. The 1.31 level has been the start of serious support, and this level goes all the way down to the 1.29 level to form a “super cluster” of buyers. This pair remains bearish overall, but it is going to take something a bit special to break it down at this point. Because of this, we are flat until we get a daily close below the 1.29 level, at which time we would sell. Rallies can be sold as well, on the first signs of weakness.

EUR/USD Forecast March 14, 2012, Technical Analysis
EUR/USD Forecast March 14, 2012, Technical Analysis

EUR/USD Fundamental Analysis March 14, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is trading at 1.3112 after falling to 1.3052 in early trading brought about on worries over the Spanish deficit. Later in the day the markets rose on new of a positive German ZEW report, the euro began to climb but was stopped midway when US retail sales were released exceed market expectations.

Investors are now positioning themselves for the FOMC decision and minutes due later in the day on Tuesday. There was little news from Europe today, with states and a few indications

Van Rompuy claims that the conclusion of a debt relief program for Greece was the strongest evidence yet that the continent is getting its debt crisis under control.

 German investor sentiment jumped sharply in March to its highest level since June 2010. The ZEW, said its sentiment indicator rose to 22.3 from 5.4 in February

Spain will implement further budget cuts requested by EU — Spain says EU “largely accepted” its arguments for leniency on targets.

 US Retail sales climbed to a five-month high in February, as rising gasoline prices weren’t enough to choke off demand for cars, clothing and other goods. The Commerce Department said Tuesday that retail sales rose a seasonally adjusted 1.1%

 

Economic Data March 13, 2012 actual v. forecast

 

JPY

 

 

 

Tertiary Industry Activity Index (MoM) 

-1.7%

 

0.4% 

 

1.8% 

 

 

 

GBP

 

 

 

RICS House Price Balance 

-13%

 

-14% 

 

-16% 

 

 

 

AUD

 

 

 

Home Loans (MoM) 

-1.2%

 

-0.1% 

 

2.1% 

   

 

AUD

 

 

 

NAB Business Confidence 

1

 

 

 

 

 

 

JPY

 

 

 

Interest Rate Decision 

0.10%

 

0.10% 

 

0.10% 

 

 

 

EUR

 

 

 

French CPI (MoM) 

0.4%

 

0.4% 

 

-0.4% 

 

 

 

HUF

 

 

 

Hungarian CPI (YoY) 

5.9%

 

5.8% 

 

5.5% 

 

 

 

CHF

 

 

 

PPI (MoM) 

0.8%

 

0.3% 

 

0.0% 

 

 

 

SEK

 

 

 

Swedish CPI (YoY) 

1.9%

 

1.8% 

 

1.9% 

 

 

 

GBP

 

 

 

Trade Balance 

-7.5B

 

-7.8B 

 

-7.2B 

   

 

EUR

 

 

 

German ZEW Economic Sentiment 

22.3

 

10.5 

 

5.4 

 

 

 

EUR

 

 

 

ZEW Economic Sentiment 

11.0

 

3.8 

 

-8.1 

 

 

 

USD

 

 

 

Core Retail Sales (MoM) 

0.9%

 

0.8% 

 

1.1% 

   

 

USD

 

 

 

Retail Sales (MoM) 

1.1%

 

1.0% 

 

0.6% 

   

 

Economic Calendar March 14, 2012

10:30     GBP      Average Earnings Index +Bonus                                1.9%                      2.0%       

10:30     GBP       Claimant Count Change                                               6.0K                       6.9K

The Average Earnings Index measures change in the price businesses and the government pay for labor, including bonuses.  Claimant Count Change measures the change in the number of unemployed people in the U.K. during the reported month. A rising trend indicates weakness in the labor market, which has a trickle-down effect on consumer spending and economic growth.              

 11:00    EUR       CPI (YoY)                                                                      2.7%                      2.7%                     

 11:00    EUR        Industrial Production (MoM)                                        0.7%                      -1.1%                    

 11:00    EUR       Core CPI (YoY)                                                              1.6%                      1.5%       

This is a triple report covering all of the eurozone. The Consumer Price Index (CPI) measures the change in the price of goods and services from the perspective of the consumer. Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities.         

13:30     USD       Current Account                                                             -114.0B                                 -110.0B

The Current Account index measures the difference in value between exported and imported goods, services and interest payments during the reported month. The goods portion is the same as the monthly Trade Balance figure. Because foreigners must buy the domestic currency to pay for the nation’s exports the data can have a sizable affect on the USD.

13:30     USD      Import Price Index (MoM)                                                0.6%                      0.3%

The Import Price Index measures the change in the price of imported goods and services purchased domestically.

15:00     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       

               

Government Bond Auction Schedule     (this week)

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

In The Eyes of the Experts – 13/3/2012

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
  • CAD
  • GBP

 

Currencies watch for Short:

  • JPY
  • EUR
  • CHF

 

Today’s important times (GMT+2):

  • 11:30 GBP
  • 12:00 13:30 EUR
  • 14:30 20:15 USD

 

Important rates:

Pair R2 R1 Pivot S1 S2
EURUSD    1.3045    1.3107    1.3139    1.3201    1.3233   
GBPUSD 1.5555 1.5602 1.5648 1.5695 1.5741
USDJPY 81.97 82.16 82.29 82.49 82.61
USDCHF 0.9106 0.9129 0.9173 0.9196 0.9240
USDCAD 0.9871 0.9892 0.9919 0.9940 0.9967
AUDUSD 1.0433 1.0481 1.0520 1.0568 1.0608

EUR/USD Forecast March 13, 2012 Technical Analysis

The EUR/USD pair fell at the open for the Monday session, but bounced in order to form a hammer at the top of serious support. The support level, which runs from the 1.29 to 1.31 levels, should continue to be the “lift” that this pair has needed. The area has a focal point at 1.30, and as a result it seems that the area is rapidly becoming a major support and resistance cluster.

The pair looks as if it wants to rise a bit, and the recent “voluntary” haircut that the Greek bondholders took should provide a little bit of relief for the Euro, but the long-term structure and outlook for the Euro hasn’t changed, and therefore this pop will only be temporary at best. We will look to sell rallies on the first signs of weakness at this point. Buying isn’t considered at the moment as there is simply far too much headline risk. If we were to take a long position, it would only be for a short-term trade, maybe a scalp. The breaking of the 1.35 level would change that for us though as it would show that there was real strength. 

EUR/USD Forecast March 13, 2012 Technical Analysis
EUR/USD Forecast March 13, 2012 Technical Analysis

EUR/USD Fundamental Analysis March 13, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is trading at 1.3153 slightly up as markets anticipated the FOMC due late on Tuesday. It is pair should remain in a close range until Tuesday’s meeting. Mid day, ECB Draghi will make his statement following the decision of the ECB to hold rates. This statement might give some strength to the euro, but all ears and eyes will be waiting for the FOMC.

Eurozone ministers, in a conference call on Friday, already approved releasing part of the €130 billion that is helping finance the debt swap. A final meeting has been set in Brussels to give their final approval to the second Greek bailout and to discuss tightening measures to prevent a repetition of the crisis. The ministers are expected to sign off on the €130 billion ($A162.56 billion) rescue program after Greece’s private creditors approved wiping off some €100 billion from Athens’ debt.

Spanish officials are expected on Monday to seek support of their European counterparts for the country’s recent announcement that the 2012 budget deficit would reach 5.8%, overshooting an EU target of 4.4%, media reports said.

Italy’s gross domestic product declined by 0.7% in the fourth quarter, compared to the three months in the prior quarter, Italy’s statistical office, ISTAT, said on Monday. Compared to the year-ago quarter, GDP fell 0.4%. Italy is now in a “technical” recession.

Greek bonds issued after the country’s massive bond-swap deal last week start trading with their yields the highest in the euro zone.

 

March 12, 2012 Economic Releases actual v. forecast

Mar. 12

00:50

 

JPY

 

 

 

CGPI (YoY) 

0.6%

 

0.6% 

 

0.5% 

 

 

 

00:50

 

JPY

 

 

 

Core Machinery Orders (MoM) 

3.4%

 

2.3% 

 

-7.1% 

 

 

 

05:01

 

MYR

 

 

 

Malaysian Industrial Production (YoY) 

0.2%

 

4.1% 

 

2.9% 

   

 

06:00

 

JPY

 

 

 

Household Confidence 

39.5

 

40.6 

 

40.0 

 

 

 

06:30

 

INR

 

 

 

Indian Industrial Production (YoY) 

6.8%

 

2.1% 

 

2.5% 

   

 

08:00

 

EUR

 

 

 

German WPI (MoM) 

1.0%

 

1.1% 

 

1.2% 

 

 

 

10:00

 

EUR

 

 

 

Italian GDP (QoQ) 

-0.7%

 

-0.7% 

 

-0.7% 

 

 

 

11:30

 

EUR

 

 

 

German 6-Month Bubill Auction 

0.053%

 

 

 

0.076% 

 

 

 

Scheduled Economic Events for March 13, 2012

US                                                                 

 13:30  USD     Core Retail Sales (MoM)                     0.8%                0.7%     

 13:30  USD     Retail Sales (MoM)                             1.0%                0.4%

(Core and ) Retail Sales measures the change in the total value of sales at the retail level in the U.S., excluding automobiles. It is an important indicator of consumer spending and is also considered as a pace indicator for the U.S. economy.        

19:15   USD    Interest Rate Decision                        0.25%             0.25%            

 19:15  USD    FOMC Statement                                                                               

Federal Open Market Committee (FOMC) members vote on where to set the rate. Traders watch interest rate changes closely as short term interest rates are the primary factor in currency valuation. Along with the Decision the U.S. Federal Reserve’s Federal Open Market Committee (FOMC) statement is the primary tool the panel uses to communicate with investors about monetary policy. It contains the outcome of the vote on interest rates, discusses the economic outlook and offers clues on the outcome of future votes.

Europe

01:01   GBP    RICS House Price Balance                 -14%                -16%   

The Royal Institution of Chartered Surveyors (RICS) House Price Balance measures the percentage of surveyors reporting a house price increase in their designated area. A level above 0.0% indicates more surveyors reported a rise in prices; below indicates more reported a fall. The report is a leading indicator of house price inflation as surveyors have access to the latest price data.   

 09:15  CHF    PPI (MoM)                                          0.3%                0.0%

The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation                   

10:30   GBP    Trade Balance                                   -7.8B                 -7.1B    

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.   

 11:00 EUR     German ZEW Economic Sentiment      10.5                5.4

 11:00  EUR    ZEW Economic Sentiment                     3.8                  -8.1       

The Zentrum fur Europaische Wirtschaftsforschung (ZEW) Economic Sentiment Index rates the relative six-month economic outlook for the euro zone. On the index, a level above zero indicates optimism, below indicates pessimism. It is a leading indicator of economic health. The reading is compiled from survey of about 350 German institutional investors and analysts.

 13:30  EUR     ECB President Draghi Speaks

Mario Draghi (born 3 September1947) is an Italian banker and economist who has been governor of the Bank of Italy and succeeded Jean Claude Trichet as President of the European Central Bank starting November 2011. As head of the ECB, which controls short term interest rates, he has more influence over the EUR value than any other person. His comments may determine a short-term positive or negative trend.                            

Government Bond Auction Schedule     (this week)

Mar 13  09:30  Netherlands Eur 2.5bn-3.5bn re-opened Apr 2015 DSL

Mar 13  10:10  Italy   BOT auction

Mar 13  10:30  Belgium  Auctions 3 & 12M T-bills

Mar 13  15:30  UK  Details gilt auction on Mar 22

Mar 13  18:00  US  Auctions 10Y Notes

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

EUR/USD Forecast March 12, 2012, Technical Analysis

The EUR/USD pair fell hard on Friday as the Non-Farm Payroll number came out better than expected. The Greeks we also finally labeled as being in default, and the CDS markets saw the insurance policies triggered. The fall was consistent with what one would expect, but the 1.31 level did in fact hold as support, and the area runs all the way down to the 1.30 mark. Because of this, we aren’t ready to sell yet, even with the bearish action. In order to do this, we need to see the market close below the 1.30 level on a daily close. Buying isn’t a thought at the moment as there are still many concerns in the European Union. 

EUR/USD Forecast March 12, 2012, Technical Analysis
EUR/USD Forecast March 12, 2012, Technical Analysis

EUR/USD Forecast for the Week of March 12, 2012, Technical Analysis

The EUR/USD pair fell for the week as the markets continue to worry about the various debt markets around the region. The late hours of Friday finally saw the Greeks officially called to be “in default”, but by the time it happened: there was almost no reaction as the market largely expected this.

The shooting star for the week shows that we may see continued weakness, and we are in a downtrend channel. The 1.30 level below seems to be supportive tough, so we are looking for a daily close below that level in order to get short. This buying of this pair isn’t even a thought at the moment, and if we get a bounce from this area we will look to see if we get weakness at the 1.35 level. 

EUR/USD Forecast for the Week of March 12, 2012, Technical Analysis
EUR/USD Forecast for the Week of March 12, 2012, Technical Analysis

EUR/USD Weekly Fundamental Analysis March 12-16, 2012, Forecast

Rules: Out of the major currency pairs the most popular and easy to trade currency pair is the EUR/USD. It has become so popular with traders these days that even when there is no visible trade to be had it is yet traded as a matter of habit. This is of course something that should be avoided and any investor who trades this currency pair wisely can do so successfully with sizable profits at the end of the day.

The first thing with trading currencies is to realize that the EUR/USD is made up of two separate currencies although considered to be one unit when taken as a pair. The weaknesses and strengths of each currency have to be taken into consideration when trading the unit as it influences the final outcome. Another factor that is often overlooked by traders or investors is that the weakening of one currency along with the strengthening of the other currency in the pair results in the generation of pips. It is according to this that entry and exit from the Forex market has to be done in order to maintain profitability.

  • The interest rate differential between the European Bank(ECB) and the Federal Reserve(FED)
  • Dollar strength drives EUR/USD lower
  • FED intervention to weaken the dollar the sends EUR/USD higher

 

Analysis and Recommendation:

The EUR/USD is currently trading at 1.3123, hitting a high this week of 1.3278 on news of Greek bond swap participation passing the required acceptance. And then plummeting once the markets had time to review and analyze. This was followed by strong jobs reports in the US surpassing forecast. Earlier in the week when problems were mounting in Greece, the euro took a nose dive to trade at 1.3106.

The euro will find support and resistance at 1.3100 and 1.3160, and should trade this week towards the bottom of this channel. We might see news of Spain or Italy move to the front pages, along with Hungary.

This week should be a week for the markets to breathe.

Highlights of the past week

USA

The U.S. created 227,000 jobs in February and more people found work in the prior two months than previously reported, suggesting the economy’s recent momentum is likely to continue.

The unemployment rate, meanwhile, was unchanged at 8.3% as nearly half-a-million workers reentered the labor force in search of job, the Labor Department.

Household debt edged up 0.3% in the fourth quarter, the Fed reported in its flow-of-funds report, as consumer credit surged at a 7% annualized rate. Household debt had declined for 13 consecutive periods before the slender fourth-quarter advance.

The U.S. trade deficit widened sharply in January, driven higher by record imports of autos, capital goods and food, government data reported.  The trade gap expanded 4.3% in January to $52.6 billion from $50.4 billion in December.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

The Canadian Central Bank held rates today at 1% following the lead of banks around the world.

The Institute of Supply Management said its non-manufacturing PMI climbed to 57.3 in February from a reading of 56.8 the previous month. Economists had expected the index to decline to 56.1.

Another report showed that U.S. factory orders fell, but at a slower than forecast rate in January, declining by a seasonally adjusted 1.0%, compared to forecasts for a 1.3% slide.

Europe

The International Swaps and Derivatives Association said Friday that the Greek government’s use of collective-action clauses, or CACs, to amend to terms of Greece-issued bonds qualifies as a “credit event” for Greece. A credit event requires a payout to those who held credit default swaps as insurance to protect them in the event of a Greek default.

The Fitch ratings agency downgraded Greece to “restricted default” over the bond swap — a move that had been expected. Fitch was the third agency to downgrade Greece into default, after Moody’s and Standard & Poor’s.

The deal is done, finally. Greece finished their debt swap with private creditors. Bondholders representing some 85% of Greece’s outstanding private-sector debt, well above the government’s minimum threshold, have agreed to the swap, easing pressures on the eurozone.

Conditions are in place for Greece to get its second bailout, said Eurogroup President Jean-Claude Juncker in a statement released Friday. “I welcome the significant progress achieved in the preparation of the second Greek adjustment program,” said Juncker, after a teleconference between euro-zone finance ministers on Friday

The Bank of England announced their current rate decision which was as expected to hold rates. No new additions to their monetary easing policies announced in February.

The European Central Bank committee held lending rates at the current rate of 1% and made no comments on any additional lending policies.

Prices for Italian government bonds jumped and Spanish bonds also rose Thursday, sending yields lower on expectations Greece will successfully complete its voluntary debt swap with private investors. Italy’s 10-year bond yield fell 0.20

 German production climbed 1.6% from December. Economists were expecting an increase of 1.1% in the euro zone’s largest economy. 

In the UK, house prices fell by 0.5% in February from January and were down 1.9% in the three months to February from the same period a year ago, according to the Halifax House Price Index. Prices were down 1.1% in the latest three months to February from the previous 3-month period.

EU’s Rehn: Eurozone Currently in a Mild Recession but Signs of Improvement but, risk of credit crunch in European economy has been prevented largely due to long-term liquidity offer of ECB. The Commission supports combining remaining resources of EFSF with ESM to make sturdier European firewall.

UK services sector saw growth slow in February after the surge in January, the CIPS/Markit index shows. The headline service sector CIPS/Markit index fell to 53.8 in February from an unrevised 56.0 in January, well below analysts’ median forecast for a 55.0 outturn. The detail, however, was more encouraging showing a rise in business expectations and easing inflation pressure.

Business expectations rose to their highest level for a year while output charges declined. Markit said sales were supported by discounting, with margins squeezed as input cost continued to rise.

Spanish Prime Minister Mariano Rajoy on Friday announced a new deficit to gross domestic product target for the country of 5.8% in 2012, against a prior target of 4.4%, according to media reports. Rajoy made the comments in Brussels. Spanish media has been reporting for days that the government would raise its target.

 

Historical:

Highest: 1.5091 USD on 03 Dec 2009.

Average: 1.3709 USD over this period.

Lowest: 1.19 USD on 07 Jun 2010.

The week ahead brings a vast assortment of economic indicators. A busy week with the news dominated by the US interest rate decision and inflation data.

Monday sees data on credit card lending and debt released by the RBA in Australia.

Also we have housing finance data and new car sales figures will be released. As well as the Reserve Bank of Australia will release its March quarter bulletin.

The Bank of Japan will make its interest rate decision for March.

In Europe, European Union finance ministers are scheduled to meet.

Monday sees the United Nations economic and social council hold its annual spring meeting

The US treasury budget data will be released. 

On Tuesday, the Australian Bureau of Statistics will release housing finance data for January. National Australia Bank is due to release its business confidence and conditions index for the month of February. 

IN the US, the Federal Reserve hold its March meeting, where it will decide on the current level of interest rates in the country. Also January business inventories and February retail sales data are also due.

Also on Tuesday, The World Trade Centre committee on budget, finance and administration will hold a meeting.

Chinese Premier Wen Jiabao will hold his annual press briefing at the China National People’s Congress.

Wednesday sees the ABS release December housing starts data. Westpac Banking Corporation and the Melbourne Institute will release their consumer sentiment index for March.

In the United Kingdom, average earnings data for the three months to March will be released. Also February claimant count data and ILO unemployment rate figures for March will also be released.

Across the Atlantic US import and exports price data released, while current account balance data for the December quarter is due.

The weekly Energy Information Administration petroleum status report is also on tap, as well as weekly Mortgage Bankers Association mortgage applications data.

Wednesday afternoon sees World Bank deputy vice finance minister for international affairs Masatsugu Asakawa address a eurozone crisis conference hosted by the Asia Development Bank Institute.

US Federal Reserve chairman Ben Bernanke will speak at the 2012 Independent Community Bankers of America national convention

Thursday brings January lending finance data for the month of January in Australia also new car sales data for February is also set for release.

Elsewhere, the Melbourne Institute will release both its consumer inflation and employment expectation surveys for March.

Thursday morning delivers US jobless claims data and the February producer price index in the US.

 Along with several other releases in America including, The Philadelphia Federal Reserve survey and the US Treasury international capital data is on tap, alongside the New York Empire State Manufacturing Survey.

Friday brings highly anticipated consumer price index data for February in the US. 

The Reuters/Michigan consumer sentiment index for March and industrial production for February data will also be released.

On Saturday, the Organization for Economic Co-operation and Development will release its interim assessment.

Economic Events in Europe this week

Mar. 12

06:45

 

EUR

 

 

 

French CPI (MoM) 

   

 

08:15

 

CHF

 

 

 

PPI (MoM) 

   

 

09:30

 

GBP

 

 

 

Current Account 

   

Mar. 13

00:01

 

GBP

 

 

 

RICS House Price Balance 

   

 

08:15

 

CHF

 

 

 

Industrial Production (QoQ) 

   

 

09:30

 

GBP

 

 

 

Trade Balance 

   

 

10:00

 

EUR

 

 

 

German ZEW Economic Sentiment 

   

 

10:00

 

EUR

 

 

 

ZEW Economic Sentiment 

   

Mar. 14

09:30

 

GBP

 

 

 

Average Earnings Index +Bonus 

   

 

09:30

 

GBP

 

 

 

Claimant Count Change 

   

 

10:00

 

EUR

 

 

 

CPI (YoY) 

   

 

10:00

 

EUR

 

 

 

Industrial Production (MoM) 

   

 

10:00

 

EUR

 

 

 

Core CPI (YoY) 

   

Mar. 15

00:01

 

GBP

 

 

 

Nationwide Consumer Confidence 

   

 

08:30

 

CHF

 

 

 

Interest Rate Decision 

   

 

09:00

 

EUR

 

 

 

Employment Change (QoQ) 

   

 

09:00

 

EUR

 

 

 

ECB Monthly Report 

   

Mar. 16

08:00

 

EUR

 

 

 

French Manufacturing PMI 

   

 

08:30

 

EUR

 

 

 

German Manufacturing PMI 

   

 

09:00

 

EUR

 

 

 

Manufacturing PMI 

   

 

11:00

 

GBP

 

 

 

CBI Industrial Trends Orders 

   

 

Economic Events in the USA this week

Mar. 12

19:00

 

USD

 

 

 

Federal Budget Balance 

 

 

Mar. 13

12:30

 

USD

 

 

 

Core Retail Sales (MoM) 

 

 

 

12:30

 

USD

 

 

 

Retail Sales (MoM) 

 

 

 

18:00

 

USD

 

 

 

10-Year Note Auction 

 

 

 

18:15

 

USD

 

 

 

Interest Rate Decision 

 

 

 

18:15

 

USD

 

 

 

FOMC Statement 

 

 

Mar. 14

12:30

 

USD

 

 

 

Current Account 

 

 

 

12:30

 

USD

 

 

 

Import Price Index (MoM) 

 

 

Mar. 15

12:30

 

USD

 

 

 

Core PPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

PPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

Initial Jobless Claims 

 

 

 

12:30

 

USD

 

 

 

NY Empire State Manufacturing Index 

 

 

 

12:30

 

USD

 

 

 

Continuing Jobless Claims 

 

 

 

13:00

 

USD

 

 

 

TIC Net Long-Term Transactions 

 

 

 

14:00

 

USD

 

 

 

Philadelphia Fed Manufacturing Index 

 

 

Mar. 16

12:30

 

USD

 

 

 

Core CPI (MoM) 

 

 

 

12:30

 

USD

 

 

 

CPI (MoM) 

 

 

 

13:15

 

USD

 

 

 

Industrial Production (MoM) 

 

 

 

13:55

 

USD

 

 

 

Michigan Consumer Sentiment Index 

   

 

Government Bond Auction Schedule     (this week)

Mar 12  10:30  Germany  Eur 4.0bn new Sep 2012 Bubill

Mar 12  18:00  US  Auctions 3Y Notes

Mar 13  09:30  Netherlands Eur 2.5bn-3.5bn re-opened Apr 2015 DSL

Mar 13  10:10  Italy   BOT auction

Mar 13  10:30  Belgium  Auctions 3 & 12M T-bills

Mar 13  15:30  UK  Details gilt auction on Mar 22

Mar 13  18:00  US  Auctions 10Y Notes

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

EUR/USD Fundamental Analysis March 12, 2012, Forecast

Analysis and Recommendations:

The EUR/USD is down at 1.3105 falling from 1.3274. The USD was up today against most of its trading partners. The U.S. created 227,000 jobs in February and more people found work in the prior two months than previously reported, suggesting the economy’s recent momentum is likely to continue. The USD remained strong based on the unemployment rate, meanwhile, was unchanged at 8.3% as nearly half-a-million workers reentered the labor force in search of job, the Labor Department reported Friday. That’s usually a good sign because it means people believe more work is available.

The U.S. trade deficit widened sharply in January, driven higher by record imports of autos, capital goods and food, government data reported.  The trade gap expanded 4.3% in January to $52.6 billion from $50.4 billion in December.

 The deal is done, finally. Greece finished their debt swap with private creditors. Bondholders representing some 85% of Greece’s outstanding private-sector debt, well above the government’s minimum threshold, have agreed to the swap, easing pressures on the eurozone.

Conditions are in place for Greece to get its second bailout, said Eurogroup President Jean-Claude Juncker in a statement released Friday. “I welcome the significant progress achieved in the preparation of the second Greek adjustment program,” said Juncker, after a teleconference between euro-zone finance ministers on Friday

Economic Releases actual v. forecast

Mar. 09

 

AUD

 

 

Trade Balance 

-0.67B

 

1.51B 

 

1.33B 

   

 

 

CNY

 

 

Chinese CPI (YoY) 

3.2%

 

3.6% 

 

4.5% 

 

 

 

 

CNY

 

 

Chinese PPI (YoY) 

0.1%

 

0.0% 

 

0.7% 

 

 

 

 

CNY

 

 

Chinese Fixed Asset Investment (YoY) 

21.5%

 

19.6% 

 

23.8% 

 

 

 

 

CNY

 

 

Chinese Industrial Production (YoY) 

11.4%

 

12.4% 

 

12.8% 

 

 

 

 

CNY

 

 

Chinese Retail Sales (YoY) 

14.7%

 

17.4% 

 

18.1% 

 

 

 

 

EUR

 

 

German CPI (MoM) 

0.7%

 

0.7% 

 

0.7% 

 

 

 

 

GBP

 

 

Industrial Production (MoM) 

-0.4%

 

0.4% 

 

0.4% 

   

 

 

GBP

 

 

Manufacturing Production (MoM) 

0.1%

 

0.4% 

 

1.1% 

   

 

 

GBP

 

 

PPI Input (MoM) 

2.1%

 

0.7% 

 

0.1% 

   

 

 

Upcoming Economic Events

06:45     EUR        French CPI (MoM)

The French Consumer Price Index (CPI) measures the changes in the price of goods and services purchased by consumers.                                                                                                              

 08:15    CHF       PPI (MoM)

The Producer Price Index (PPI) measures the change in the price of goods sold by manufacturers. It is a leading indicator of consumer price inflation, which accounts for the majority of overall inflation. 

09:30     GBP      Current Account

The Current Account index measures the difference in value between exported and imported goods, services and interest payments during the reported month. The goods portion is the same as the monthly Trade Balance figure. Because foreigners must buy the domestic currency to pay for the nation’s exports the data can have a sizable affect on the GBP.

19:00     USD       Federal Budget Balance

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.                         

 Government Bond Auction Schedule    (this week)

Mar 12  10:30  Germany  Eur 4.0bn new Sep 2012 Bubill

Mar 12  18:00  US  Auctions 3Y Notes

Mar 13  09:30  Netherlands Eur 2.5bn-3.5bn re-opened Apr 2015 DSL

Mar 13  10:10  Italy   BOT auction

Mar 13  10:30  Belgium  Auctions 3 & 12M T-bills

Mar 13  15:30  UK  Details gilt auction on Mar 22

Mar 13  18:00  US  Auctions 10Y Notes

Mar 14  10:10  Italy   BTP/CCTeu auction

Mar 14  10:10  Sweden  Auctions T-bills

Mar 14  10:30  Swiss  Bond auction

Mar 14  15:30  Sweden  Details nominal bond exchange auction on Mar 21

Mar 14  18:00  US  Auctions 30Y Bonds

Mar 15  09:30  Spain  Obligacion auction

Mar 15  09:50  France  BTAN auction

Mar 15  10.30  UK  Auctions 4.5% 2042 conventional Gilt

Mar 15  10:50  France  OATi auction

Mar 15  16:00  US  Announces auction of 10Y TIPS on Mar 22

Do We Really Think That The Greek Crisis Is Behind Us…

The Greek ministry announced the result of its bond restructuring early Friday morning. The government claimed 83% of bondholders had willingly submitted to the deal, and that it would invoke supposed collective-action clauses to force the exchange on almost all of the rest, bringing collaboration up to 96%.

Greece had estimated 206 bn. ($273 bn.) in bonds for the exchange.

Just over a hundred bln will be cut from the amount Greece owes.

While a consummated debt swap has been on the horizon for at least a weeks. The result of the debt exchange had been getting more and more clear over the previous several days, however it remains a major point for the EU Union’s common currency, and for the debt crisis that started in Greece more than 2 years back and has threatened the union ever since then.

Demonstrators raise a Greek flag in front of parliament in a rally against austerity and industrial measures and corruption in Athens ‘ Syntegra Square in June 2011.

It’s also a critical landmark for Greece, which may get some alleviation from its debt, and, crucially, secure more help from Europe. But the country is still devastated by austerity and years of recession.

Few think its economic future, at least in the shorter term, is any brighter. Greece’s debt burden now more than 160% of its annual GDP. The ECU stepped in with rescue loans and put Greece on an economic diet. Still the debt mountain grew.

EU leaders maintained for over a year that Greece would not be permitted to fail and would pay back its creditors ; then, last year, it became obvious the costs of keeping her  floating were too much for the remainder of the eurozone  to bear.

At first offer for a debt restructuring, in July, asked non-public creditors to forsake roughly ten percent of the face value of their holdings. As Greece’s finances deteriorated, that plan evaporated. The restructuring now set to be executed will see Greece axe 53.5% from the face value of around two hundred bln in bonds held by private creditors.

Greece’s other major creditors include its fellow euro-zone countries, which have lent 53 bill, the other international financial organizations including the IMF, which lent twenty bn., and the ECB and state central banking institutions, which acquired more than fifty bln of its bonds.

None of those loans are covered by the restructuring.

Of the 206 bn. in total instruments in private hands, 177 bn. are central authority bonds issued under the laws of Greece, about ten bln are bonds issued by state owned corporations and warranted by Greece and eighteen bln are executive bonds issued under the laws of foreign jurisdictions, where Greece’s reach is more limited.

Greece’s laws changed in February which permit the country to bind all Greek-law holders to the exchange with the acceptance of two thirds. That threshold was simply cleared, and Greece asserted all 177 bill will be pushed into the exchange. Of the foreign-law bonds, 69% accepted the exchange, as did the majority of the state-owned-company bonds. Greece stated that it would give resistant bondholders 2 weeks to switch their minds; nevertheless it implied it might play tricky. There are therefore around nine billion of bonds belonging to creditors who may challenge the exchange thru courts or settlement panels.

Bondholders who submit to the swap or are compelled to do so will get a package of instruments including money or short term bonds issued by the euro-zone rescue fund valued at 15% of the value of whatever they exchange, and a collection of Greek bonds maturing over the following eleven to thirty years priced at 31.5%. Those bonds have just started trading in a theoretical “gray market,” expounded folk acquainted with the problem. The new 30-year bond was quoted between fifteen and seventeen cents, and an 11-year bond at between twenty and twenty-two cents. Those levels imply that financiers think Greece will not meet its obligations in the future and a further rescue will be required.

EUR/USD Forecast March 9, 2012, Technical Analysis

 

The EUR/USD pair got a nice boost for the session on Thursday as traders tried to get in front of the announcement of participation rates in the Greek bond swap. The market looks as if it is trying to assume that the deal will go through, and this will lift the value of the Euro in general. However, the spike in price could simply be short-term at best, as the day also sees the Non-Farm Payrolls number out of the United States, which of course is always a market moving event.

The pair has been stuck between the 1.30 and 1.35 levels, and there is nothing in the charts at the moment to suggest this is going to change. There is a bit of a “midpoint” at 1.3250 that has caused some reactions as well, so there is that minor level to pay attention to. With the Non-Farm Payroll number coming out, there is a real chance that any reaction to the Greek swap deal may be a bit muted, as the market seems to assume all has gone well. Having said that, it would make sense that the biggest risk of shock is for a downside move as a failure to make the levels needed of participation in the deal would be a bigger surprise.

The 1.31 level starts the support level down to the 1.30 level, and in times like this we prefer to see a solid daily close below the “bottom” of the area: In other words – sub-1.30 handle. The upside is going to see choppiness as well. The 1.35 level is without a doubt going to be a struggle to get over, but perhaps if the jobs number is well over 200,000 added, and the situation in Greece is agreeable – we might just be able to break out.

With the high probability of massive volatility during the session, this pair is probably better left alone until we break out of this consolidation phase, or at least Monday morning as all of the weekend headlines will be known by then.

EUR/USD Forecast March 9, 2012, Technical Analysis
EUR/USD Forecast March 9, 2012, Technical Analysis

EUR/USD Fundamental Analysis March 9, 2012, Forecast

Analysis and Recommendations:

The EUR/USD trended up all day, as the euro continued to gather strength on positive news from Greece. The ECB held rates today and positive data from Germany. The euro opened trading today at 1.3150 and has climbed to hold at 1.3263. The US today had a disappointing jobs release, while household debt eased up and the Fed’s started to talk about a new plan called “Sterilization”

ECB President Mario Draghi said higher-than-expected energy prices, along with increases in various state-administered prices, meant that “inflation is expected to remain above 2% in 2012, with upside risks prevailing.” The central inflation forecast for 2012 is now 2.4%, up from 2% three months ago, Mr. Draghi said.

At the same time, ECB forecasters now expect the bloc’s economy to shrink by 0.1% this year. For 2013, the ECB now expects growth of 1.1%, compared with a prior forecast of 1.3%.

In America:

U.S. employers announced workforce reductions totaling 51,728 during February, down 3.3% from January levels, according to the latest job-cut report released Thursday by global outplacement firm Challenger.

Jobless claims in the U.S. rose to the highest level in five weeks, climbing by 8,000 to a seasonally adjusted 362,000, the Labor Department said Thursday. Markets had estimated claims would rise to 355,000 in the week ended March 3. Continuing claims – payments to people already approved for jobless benefits – increased by 10,000 to a seasonally adjusted 3.42 million in the week ended Feb. 25. 

Household debt edged up 0.3% in the fourth quarter, the Fed reported in its flow-of-funds report, as consumer credit surged at a 7% annualized rate. Household debt had declined for 13 consecutive periods before the slender fourth-quarter advance.

The Fed is considering a new form of “sterilized” quantitative easing that would allow asset purchases despite high oil prices, according to a report in The Wall Street Journal. Under the new approach, the Fed would print new money to buy long-term mortgage or Treasury bonds but effectively tie up that money by borrowing it back for short periods at low rates. The aim of such an approach would be to relieve anxieties that money printing could fuel inflation later, a fear widely expressed by critics of the Fed’s previous efforts to aid the recovery.

In northern America, the Canadian Central Bank held rates today at 1% following the lead of banks around the world.

In Europe:

The Greek government will announce early Friday the results of investors’ participation in the country’s ambitious debt-restructuring plan. More than 75% of private creditors have agreed to participate in Greece’s debt swap deal, the Associated Press reported Thursday, citing an unnamed Greek government official close to the situation.

The Bank of England announced their current rate decision which was as expected to hold rates. No new additions to their monetary easing policies announced in February.

The European Central Bank committee held lending rates at the current rate of 1% and made no comments on any additional lending policies.

ECB President Draghi said in his monthly press conference in Frankfurt on Thursday that the central bank’s long-term refinancing operation has had a positive effect on markets and sentiment in the euro zone but that “all non-standard measures are temporary.” He also said that the three-year LTROs have been an “unquestionable success.”

Prices for Italian government bonds jumped and Spanish bonds also rose Thursday, sending yields lower on expectations Greece will successfully complete its voluntary debt swap with private investors. Italy’s 10-year bond yield fell 0.20

German production climbed 1.6% from December. Economists were expecting an increase of 1.1% in the euro zone’s largest economy. 

March 8, 2012 Economic Releases actual v. forecast

AUD

 

 

 

Employment Change 

-15.4K

 

5.0K 

 

46.2K 

 

 

AUD

 

 

 

Unemployment Rate 

5.2%

 

5.2% 

 

5.1% 

 

 

KRW

 

 

 

South Korean Interest Rate Decision 

3.25%

 

3.25% 

 

3.25% 

 

 

EUR

 

 

 

French Non-Farm Payrolls (QoQ) 

-0.1%

 

-0.1% 

 

-0.2% 

 

 

CHF

 

 

 

CPI (MoM) 

0.3%

 

0.2% 

 

-0.4% 

 

 

GBP

 

 

 

Interest Rate Decision 

0.50%

 

0.50% 

 

0.50% 

 

 

EUR

 

 

 

Interest Rate Decision 

1.00%

 

1.00% 

 

1.00% 

 

 

CAD

 

 

 

Housing Starts 

201K

 

199K 

 

198K 

 

 

USD

 

 

 

Initial Jobless Claims 

362K

 

350K 

 

354K 

   

USD

 

 

 

Continuing Jobless Claims 

3416K

 

3385K 

 

3406K 

   

 

March 9, 2012 Economic Events Schedule (when possible we will start to incorporate Chinese economic events into our daily calendar)

 01:30    CNY       Chinese CPI (YoY)                         3.6%                      4.5%                     

 01:30    CNY      Chinese PPI (YoY)                          0.0%                     0.7%                     

 05:30    CNY       Chinese Fixed Asset Invest          19.6%                    23.8%     

05:30     CNY      Chinese Industrial Pro                   12.4%                   12.8%                   

05:30    CNY       Chinese Retail Sales (YoY)          17.4%                    18.1%

Beginning this month we will start including China in our economic reports, since their economic data has such a large effect on the global economy. Second only to the USA. The link inserted, will allow you to visit the English section of the Chinese government website where all the details and data are released in English.

07:00    EUR     German CPI (MoM)                          0.7%                 0.7%

The German Consumer Price Index (CPI) measures the changes in the price of goods and services purchased by consumers.

09:30    GBP    Industrial Production (MoM)            0.4%                0.5%

09:30    GBP    Manufacturing Production (MoM)    0.4%                1.0%

09:30   GBP     PPI Input (MoM)                               0.7%                 0.5%

 Industrial Production measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities. Manufacturing Production measures the change in the total inflation-adjusted value of output produced by manufacturers. Manufacturing accounts for approximately 80% of overall Industrial Production. Producer Price Index (PPI) Input measures the change in the price of goods and raw materials purchased by manufacturers. The index is a leading indicator of consumer price inflation.

12:00   CAD     Employment Change                        13.8K                2.3K                

12:00   CAD     Unemployment Rate                         7.6%                 7.6%                

13:30    CAD    Labor Productivity (QoQ)                 0.6%                0.4%

The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.  This is a triple header report giving all details on employment in Canada.

13:30   CAD    Trade Balance                                   2.0B                 2.7B

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.

13:30     USD      Average Hourly Earnings             0.2%                      0.2%                     

 13:30    USD       Nonfarm Payrolls                         210K                      243K                     

13:30     USD       Unemployment Rate                    8.3%                      8.3%                     

 13:30    USD       Average Weekly Hours                34.5                       34.5                       

 13:30    USD      Private Nonfarm Payrolls            215K                      257K

The Nonfarm Payroll report consists of several sections each having its own releases and data, which the markets interpret. This are crucial reports, giving investors and economists deep insight to the American Economy and are excellent predictions of what is to come. 

13:30     USD      Trade Balance                              -49.0B                   -48.8B    

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.

.              

Sovereign Bond Auction Schedule

Mar 12, 10Y Notes on Mar 13 & 30Y Bonds on Mar 14

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

Mar 09  11:00  Belgium  OLO mini bond auction

Mar 09  16:30  Italy   Details BTP/CCTeu on Mar 14 

 

 

BoE and ECB Bank Decisons Up To The Minute

Three years of extremely low interest rates will slide past today with little sign that the Bank of England is set to ease up on its emergency support.

Economists think rates will remain at 0.5% until the end of next year and possibly for as long as three more years, adding to the pain for savers. They seem to be following the guideline of the US Federal Reserve who announced their policy of maintaining low interest rates until the end of 2014.

On the third anniversary of its decision to cut rates to an all time low, todays  meeting of the bank’s monetary policy committee is expected to be low key, with no change expected in rates or its ‘money-printing’ program.

The QE policy adopted last month was also unleashed three years ago and  received a further injection of £50 billion growing to  £325 billion, despite pushing up inflation rates.

The Bank of England offered no surprises in today’s announcement, keeping its key lending rate at a record low, where it’s stood close to 1000 days while making no changes to its quantitative-easing program already in practice. Policymakers also voted to make no changes to the size of the bank’s asset-purchase program, the centerpiece of its quantitative-easing strategy, after boosting the program by 50 billion pounds ($78.8 billion.

The European Central Bank said they will keep the current lending rate unchanged. At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 1.00%, 1.75% and 0.25% respectively.

The panel “has spent the past two years wrestling with the proven fact that although inflation appeared stuck well above the two percent target, the base weakness in the economy meant there were reasons to fret that inflation would become entrenched at ‘too low’ a level in the medium term” Now, with inflation beginning to decline and the committee’s forecasts highlighting fears inflation could fall below target, there seems to be “no powerful momentum behind further policy loosening,” Hayes announced. Annual inflation came in at 3.6% in Feb, down from a top of 5.2% last Sep. Industrial activity over coming months is probably going to be rocky nonetheless, and will dictate policy.

Policy makers will be closely watching the euro-zone to work out if the current stabilizing in the of the crisis can be maintained, strategists said. Council members also need to permit time for the Greek rescue to become effective and also to have enough time to breathe as the markets, judiciary, economic experts and stockholders have been pushed to their limits. The wait and see policy is the very best at this time.

Draghi, in the meantime, is predicted to take a wait-and-see approach after the completion last week of the ECB’s 2nd, three-year long-term refinancing operation, or LTRO. The near term loans program last week saw eight hundred banking establishments borrow some 530 billion euro ( $700.3 billion ) in three-year loans fixed to the ECB’s one percent refi rate. It followed the ECB’s first-ever three-year LTRO in December. The quantity of participation was more than the markets had predicted. 

 

EUR/USD Forecast March 8, 2012, Technical Analysis

The EUR/USD pair has a very slightly positive session on Wednesday as the market took a bit of a breather ahead of today’s important announcement on participation in the Greek bond haircuts. These “voluntary” haircuts will excuse Greece of massive amounts of losses, and this would be Euro positive. That of course is only until other countries demand the same thing. Any pop in this pair will be sold off given enough time. 

However, in the interim, the pair will likely sit very still, and be very volatile after the announcement at 3pm EST. The breaking below the 1.30 level lets us know that things are bad and getting worse, and we are selling below that level. A rise above 1.35 sends this pair to 1.40 going forward, but between there – we have noise, and a lot of it. We are flat of this pair unless one of those levels gives way as the Non-Farm Payroll report is Friday as well. 

EUR/USD Forecast March 8, 2012, Technical Analysis
EUR/USD Forecast March 8, 2012, Technical Analysis