Currency Tips

Currency Tips: (30/04/2012) 2:25PM Book partial profit in USDINR at 52.92 (30/04/2012) 2:06PM All targets achieved in GBPINR. Current High for USDINR...

Currency Tips

Currency Tips: (30/04/2012) 9:18 AM Buy USDINR at 52.84, Target 52.94 and 53, SL 52.72 (30/04/2012)9:18 AM Buy GBPINR at 85.90 to 85.93 , Target 86.0...

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Market Overview: Forex Exchange Morning Report (27/04/2012) Market wrap US equities rallied for the third consecutive day , fuelled m...

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Currency Tips: (25/04/2012) 10:51AM 1st target achieved in USDINR at 52.55, Next target is 52.50 (25/04/2012) 10.20 AM Sell JPYINR at 64.59 to 62 Targ...

Currency Tips

Currency Tips: (25/04/2012) 10.20 AM Sell JPYINR at 64.59 to 62 Target 45 and 40 SL 64.78 (25/04/2012) 10.16AM Sell USDINR at 52.66-68 Target 52.55 a...

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Market Overview: Forex Exchange Morning Report (25/04/2012) The dollar traded mixed amid mixed US economic data and as the Fed began its 2-day ...

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Currency Tips: (24/04/2012) 1:34PM All Targets achieved in USDINR current low is 52.65 (24/04/2012) 1:30 PM Sell EURINR at 69.37-40 Target 69.25 and ...

Currency Tips

Currency Tips: (24/04/2012) 12.58 PM Book partial profit at 52.70 (24/04/2012) Sell USDINR at 52.80 target 52.70 and 65 Sl 52.92 (24/04/2012) 4th T...

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Market Overview: EUR/USD Breaks Higher, China PMI (23/04/2012) U.S. Dollar  Trading (USD) the market sold the USD into the weekend as the EUR/USD r...

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EUR/USD Breaks Higher, China PMI

U.S. Dollar Trading (USD) the market sold the USD into the weekend as the EUR/USD recovery extended higher. With little data out the market reacted to news flow from the Eurozone and in particular the increases to IMF funding pledged from G20 which amounted to 400bn. Looking ahead, No US Data to start the week.

The Euro (EUR) the EUR/USD broke above 1.3150 and we moved to 1.3220 as the IMF news combined with the better than expected German IFO to push higher. April German IFO increased to 109.9 vs. 109.5 forecast. EUR/JPY kicked to Y108 and is enjoying the upside in recent days. The Sterling (GBP) the GBP/USD rally extended on Friday kicking above 1.6100 and opens up 1.6500 this week with many seeing the downside over and all the GBP crosses moving technically higher. GBP/AUD moved above 1.5500. The EUR/GBP remained offered and closed under 0.8200 and is targeting the 0.8000 level going forward. Looking ahead, April German Manufacturing PMI forecast at 49 vs. 48.4 previously. Also ahead, Eurozone Manufacturing PMI forecast at 48 vs. 47.7 previously.

The Japanese Yen (JPY) USD/JPY held in a tight range above Y81.50 but is of risk of once again falling back as USD weakness usually moves across onto the USD/JPY if sustained. Crosses are supported for the time being but need sustained risk appetite to move higher. Australian Dollar (AUD) the AUD/USD was supported by the move higher in the EUR/USD but the market was hesitant at 1.0380 and we saw the Aussie fall behind. The GBP/AUD and EUR/AUD took advantage of the lagging Major to push higher with week highs on both and more gains expected. Looking ahead, April HSBC China PMI forecast at 49 vs. 48.4 previously.

Oil & Gold (XAU) Gold spent the whole day in a $5 dollar range above $1640 and is waiting for further inspiration. OIL/USD rallied with stocks and the Euro up above $104 and near $105 before easing into the weekend. The $105 level is a big resistance and could prove the pivot in coming days.

Forex Exchange Morning Report

Market wrap

Markets remained on a nervous footing. Although the Spanish 3yr and 10yr bond auctions went well (raising EUR2.54bn vs 2.50bn target) and more countries pledged contributions to boost the IMF's rescue firepower, markets focused on a Moody's warning that Spain and Italy are vulnerable to rising borrowing costs. There was also a US bank research note opining Moody's will probably place France's Aaa rating on review for a downgrade, and there was market chatter regarding the Netherlands' rating. US data (home sales, jobless claims, and Philadelphia manufacturing) was underwhelming. All this has left the S&P500 down 0.9%. Commodities are little changed, while the US 10yr treasury yield fell from 2.00% to 1.95% in London. There was decent demand at the US 5yr inflation-linked auction, awarded at a -1.08% (real yield) record low.

The US dollar index (DXY) is little changed. EUR carved a wide sideways range for little net change, between 1.3069 and 1.3166. USD/JPY ground a little higher, from 81.40 to 81.74. The commodity currencies responded most to the risk averse atmosphere. AUD fell from 1.0391 to 1.0314. NZD fell from 0.8198 to 0.8122. AUD/NZD extended its mutli-day corrective rebound slightly, from 1.2690 to 1.2705.

Economic wrap

US Philadelphia Fed index down 4 pts to 8.5 in April, its lowest reading since January. That is the fifth regional Fed factory survey in a row to fall away, following the Richmond, Dallas and Kansas City March surveys, and the April NY Fed reading, adding to the range of data pointing to some loss of economic momentum since the start of the year. The April Philly detail included modest declines in orders and shipments, both now sitting a little under 3; however jobs jumped for the second month running to their highest since May last year.

US existing home sales down 2.6% in March, further unwinding the 5.7% spike in sales back in January (highest since May 2010). Indeed sales have now fallen in three of the four most recent months. None of the four major regions of the US recorded a sales rise in March. This series measures previously agreed sale closings; next week's pending sales report for March will show how many sales were agreed last month: we expect a fall there too. Today's report also showed median house prices rising 2.5% yr in March, the first positive reading in over a year, but the National Association of Realtors noted that there were more higher-priced properties transacted in the month.

US initial jobless claims down 2k to 386k in week ended 14/4, but the previous week was revised up 8k to 388k, the highest since the first week of January. The BLS noted that it was trying to determine the cause of recent significant revisions to the series, but as the data stand they suggest that layoff s have increased sharply since March. Other US data included a 0.3% rise in the March leading index, down from 0.7% in Feb.

European consumer confidence slipped from -19.1 to -19.8 in the advance April report, its first fall for 2012. Between June and Dec 2011 the confidence index fell from -10.0 to -21.3.

Spain meets issuance target at bond auction, selling just over €2.5bn worth of 2 and 10 year bonds. While the investor appetite was there, the 5.74% yield on the 10yr was up from 5.40% at the previous auction in January - yet another reflection of the increased concern about the sustainability of sovereign debt in Europe, as the economy recedes, the banking system's fragility is exposed, and the policy response is feared to be sub-optimal.

Forex Exchange Morning Report

Market wrap

The overnight session was a muted affair, although commodities and the NZD fared poorly. Equity markets halted afive-day rally after IBM and Intel results disappointed. There was also data from Spain showing banks' bad loans had reached a record high, and ECB member (and German central bank head) Weidmann implied it won't be Spain's white knight. The Eurostoxx 50 closed down 1.7% and the S&P500 is currently down 0.2%. The CRB commodities index is down 1.0%, oil -1.4%, copper -0.4%, gold -0.6%. US 10yr treasury yields are 2bp lower at 1.98%, as are Australian 3yr yields.

The US dollar index (DXY) rose during the London morning and then fell for little net change. EUR fell from 1.3130 to 1.3067 but rebounded to 1.3137 early NY. GBP outperformed after the BOE minutes revealed votes for further QE slipped from 2 at the previous meeting to 1. USD/JPY consolidated recent gains between 81.20 and 81.60. AUD fell from 1.0400 to 1.0341 by noon London and then ranged sideways. The day's underperformer was NZD, possibly due to bearish positioning ahead of today's CPI report, falling from 0.8218 to 0.8149. AUD/NZD rose as a result, from 1.2660 to 1.2695.

Economic wrap

The Bank of Canada published its monetary policy report detailing the upgrading forecasts noted in yesterday's statement, refl ecting diminished European and US risks, compared to those assessed in the January report. Editorial note: US jobs data were improving by mid Jan, and the ECB's Dec LTRO was being recognised as a circuit breaker for fragile, near frozen European banking system. In the lead up to this BoC MPR, US economic data have softened across a range of indicators and the sovereign data crisis seems to be building in intensity once more. On our view, the BoC may well downgrade their forecasts and drop their slight tightening bias by the time of the next report on July 18.

Euroland current account deficit €1.3bn in Feb. That's the second deficit since several years of near continuous deficit ended in July last year. The January surplus was €3.7bn. Other data included a 7.1% plunge in construction output in Feb, itsfifth fall in six months, to be down –12.9% yr, about as weak as at the depth of the 2008-9 recession. The monthly data are noisy but that is a seriously weak looking report, with Germany down 17.1%, France off 0.4% and Italy down 9.9%.

Spanish bank non-performing loans now account for 8.2% of lending, up from <1% five years ago, according to Bank of Spain data.

UK unemployment rises 3.6k in Mar and Feb revised down from 7.2k to 4.5k. The most interesting news in the UK labour report was the quarterly jobs story which showed 50k jobs growth in Mar-May 2011, fell 178k in Jun-Aug and since then +18k and now +53k in the latest qtr Dec-Feb. Consequently the jobless rate eased from 8.4% back to 8.3%. So jobs collapsed during the summer when markets were tanking on European and slower US growth concerns, even though the economy was still growing at a 0.6% pace in Q3, but jobs were already recovering when GDP contracted in Q4 last year. Not the typical relationship you would expect between growth and jobs, but we are comfortable leaving our GDP forecast for Q1 at 0.0% in the qtr.

Bank of England minutes to the April MPC meeting showed 8:1 support for maintaining the asset purchase program at £325bn compared to 7:2 at the March meeting. It is significant that long term dove Adam Posen no longer supports immediate further QE and the other one remaining voter in favour David Miles was “finely balanced”. It is true that the infl ation outlook has been pressured by commodity price gains and the majority were not convinced the May projections would provide the justification for a further QE extension. But since the meeting European concerns have intensifi ed, China has slowed and the US economy softened, so we aren't dropping our May +£50bn call just yet.

Merchandise Trade Balance In Japan Recorded Lower Than Expected Deficit

Merchandise trade balance total in Japan released its reading for March to come less than expected deficit, where the reading came with higher annual exports in March to add signs of recovery to the world's third largest economy.

Japanese economy released its merchandise trade balance total for March, where the actual reading show a deficit with 82.6 billion yen compared with a previous reading of 32.9 billion yen revised to 29.4 billion yen, while expectations was leading to a deficit by -223.2 billion yen.

While the adjusted merchandise trade balance for Japanese economy in March recorded a deficit of 621.3 billion yen, compared with a previous surplus of 313.2 billion yen revised to deficit of 321.4 billion while expectations was -491.1 billion yen

Moreover, Japanese economy released exports trade balance for March where the reading inclined with 5.9, compared with a previous decline of 2.7 while expectations was leading to incline with 0.2.

While annually Japanese exports in March inclined with 10.5, compared with previous incline with 9.2 while expectations were leading to 7.0.

Yet the Bank of Japan is to modify its monetary policy in order to support the nation's growth, but the bank is monitoring closely the Japanese Yen to maintain at suitable levels to Japanese companies during the upcoming period.

Finally, the International Monetary Fund increased its global growth expectations for 2012 which supported consumers confidence about global growth, as well as Japanese economy is expected to grow with 2% during this year, while Yen decline moderately in February after the rising in stimulus plans by BOJ in February.

Markets In Asia Feed Off The Risk-On Sentiment From Overnight

Equity markets in Asia are following the positive lead of US and European stock markets on the back of a reasonably positive Spanish bill auction, strong Eurozone data, the IMF raising its forecasts and a hawkish tone from the Bank of Canada. The Spanish Treasury sold a total of EUR3.18bn, which was above the target size but yields were higher than those seen previously. The euro was also bolstered by the German April survey, with the current situation index rising to 40.7 from 37.6 and the economic sentiment index advancing to 23.4 from 22.3, representing the fifth consecutive rise.

Gains in the FX market were more muted than equities, with the dollar index barley falling as investors clearly remain wary of risk currencies. But the aussie managed to claw back some losses (around 5%) and pushed through 1.0400 against the dollar. The euro, however, was broadly unchanged overnight, but price action was fairly choppy following the German data and the Spanish bill auction.

The lack of market moving data may keep a few investors in Asia on the sidelines given the nervousness in the market surrounding tomorrow’s Spanish bond auction. Thus, it will be interesting to see if the aussie can hold its ground against the dollar.

Recently, a push above 1.0400 for AUDUSD has sent the pair towards a major resistance line around 1.0450, but we are looking for confirmation from a break of the overnight high around 1.0420 before a technical push towards the 1.0450 level.

Gold is also in an interesting position, as the yellow metal hovers around a sticking point (USD1650). XAUUSD has traded in a fairly tight range all week – except for a slid last night to around 1634.34 – between around 1640.80-1658.01. If the pair breaks through the top of this trading band it may find resistance around 1663.26-1664.04. 

Overnight equity markets had a strong rally due mainly due to solid US company earnings coupled with positive results from a Spanish government bill auction and upbeat German investor sentiment numbers.

The Dow Index soared 194 points to finish the day at 13,115, closing above the psychological level of 13,000for the first time in two weeks while the S&P 500 jumped 21.21 points to close at 1,390. Earlier in the session European shares closed sharply higher after a well-received Spanish debt auction.

The RBA last rate decision minutes were released yesterday which showed that they can justify a rate cut if 1Q inflation data comes in reasonably low as expected, this will be released this coming Tuesday. On this news the AUDUSD traded down to overnight lows of 1.0305 but has subsequently rallied to as high as 1.0415.

On the economic front, the US Commerce Department released figures that showed that housing starts tumbled unexpectedly to 5.8 percent to a seasonally adjusted annual rate of 654,000 units last month. While the Federal Reserve industrial production data was flat for a second consecutive month in March.

WTI crude oil  climbed to a two week high as Spain raised more than its maximum target at a debt auction followed by news that the IMF bolstered its global growth outlook. WTI crude traded up from overnight lows 102.66 to as high as 105.06.

Economic Data

(IN) India Central Bank (RBI) cut the Repo Rate by 50bps to 8.00% (More than the 25bps expected); the Cash Reserve Ratio (CRR) unchanged at 4.75%

(SE) Sweden Mar PES Unemployment Rate: 4.5% v 4.5%e

(EU) Mar EU 25 New Car Registrations: -7.0% v -9.7% prior

(AT) Austria Mar Consumer Price Index: M/M: 1.1 v 0.5% prior; Y/Y: 2.4 v 2.6% prior

(UK) Feb DCLG UK House Prices Y/Y: 0.3 v 0.0% prior

(UK) Mar CPI M/M: 0.3% v 0.3%e; Y/Y: 3.5% v 3.4%e; Core CPI Y/Y: 2.5% v 2.3%e

(UK) Mar RPI M/M: 0.4% v 0.4%e; Y/Y: % v 3.6%e; RPI Ex Mortgage Interest Payments Y/Y: 3.7% v 3.7%e; Retail Price Index: 240.8 v 240.9e

(EU) Euro Zone Mar CPI M/M: 1.3% v 1.2%e; Y/Y: 2.7% v 2.6%e; Core CPI Y/Y: 1.6% v 1.5%e

(DE) Germany Apr ZEW Economy Sentiment: 23.4 v 19.0e; Current Situation: 40.7 v 35.0e

(EU) Euro Zone Apr ZEW Economic Sentiment: 13.1 v 11.0 prior

(IT) Italy Feb Current Account: -€5.1B v -€8.0B prior

Market Morning Briefing

EQUITIES

All A-Pac indices are trading in the red, following the weak close in the Dow on Friday and the ongoing Spanish debt concerns. Importantly, the Shanghai (2349, -11) is still trading well above the crucial 2500 Support region. US Retail Sales will be an important data today, especially after the weak NFP data released on 6th April.

The Sensex (17094.51) has a crucial Support in the 17000-16800 region. This needs to hold in order to avoid a fall towards 16000. The 21-week MA comes in at 16903. That will need to be watched carefully.

COMMODITIES

Stronger Dollar and weak economic data release from China has triggered a sharp sell off in the Commodity space on Friday.

Nymex Crude (102.23) has come off below 103 once again. Failure to sustain the bounce above 103 would keep it pressured on the downside for a test of 100-98 in the coming days.

Brent Crude (120.04) continues to look weak for a test of 117.

Gold (1652.40) is looking mixed and could remain ranged between 1600 on the downside and 1700 on the upside.

Silver (31.42) is retaining its 31-33 sideways range.

Copper (3.58) has dipped below its important 3.65-70 Support region and can extend its fall further towards 3.50. There is threat on the downside now and the chances of the current fall extending further towards 3.30 cannot be ruled out.

CURRENCIES

Dollar is trading strong all over following the fresh concerns on the Euro zone debt crisis. The Euro (1.3021) is trading below its significant Support at 1.3040 and could fall further 1.2950-30-00 which is an important Support region to be watched for the week. A break below 1.2900 can see 1.2650-00 on the downside. Dollar-Yen (80.88) remains mixed. A test of its important Support at 80.38 (21-MOnth-MA) is possible while below 81. The Euro-Yen Cross (105.37) is trading below its 200-DMA (currently at 105.75) and can now fall to 104.50-00 on the downside.

Dollar-Swiss (0.9230) has risen further and remains strong. Resistance is seen at 0.9245 and a strong break above it will open doors for a test of 0.9350-400 on the upside. The Pound (1.5831) is trading just above its important Support at 1.5800. Whether this Support holds or breaks will determine the further direction of move. Aussie (1.0322) failed to rise past its important Resistance near 1.0450 last week. It needs to be seen whether it can sustain above its significant Support at 1.0250 this week. We will have to wait and see.

In Asia, the Korean-Won is trading near 1136 and the Sing-Dollar is trading near 1.2516. DOllar-Rupee had closed at 51.29/30 of Friday and is expected to remain bullish for a test of 51.80-52.00 while above 51.00.

INTEREST RATES

Spanish debt concerns have dragged the Euro (1.3020) lower. Spain is asking the ECB to buy Spanish bonds and the Eurozone is asking the IMF for money. The Spanish 10-Yr yield quotes near 5.98%, just below 6.0%. The Italian 10-Yr is 5.52%. Spain has 2-Yr and 10-Yr debt auctions on 19th April.

In India, the market is waiting for, thirsting for a 25bp rate cut tomorrow, hoping that the RBI will act to spur growth, given that the government is not doing its job. The 3-mth Mibor (10.27%) and 3-mth Mifor (8.17%) have dipped over the last few days, but may find it difficult to fall further in the near term, unless the RBI cuts rates more than expected.

Understanding the Basics of Fundamental Analysis in the Forex Market

Traders typically approach financial markets in one of two ways: either through technical analysis or fundamental analysis. The reality is that history is full of traders who have had very successful careers as traders that employed both of these types of analyses.

As stated, successful traders throughout history have employed both technical and fundamental analysis. In this article we are going to break down the basic principles of fundamental analysis in the forex market.

Fundamental Analysis is commonly defined as a method of evaluating a specific security in order to determine its intrinsic value by analyzing a host of economic and financial data. In the foreign-exchange market, a security would be a currency. Market participants are continually analyzing the emerging fundamental from a country in order to determine the intrinsic value of the country's currency. There are several key economic indicators that every trader should understand on a basic level. Fluctuations in the data of these key indicators will generally cause the value of a currency to rise and fall.

Interest Rates

These are the single greatest driver of currency value over the long-term. Most Central Banks announce interest rates each month, and these decisions are watched very scrupulously by market participants. Interest rates are manipulated by Central Banks in order to control the money supply in an economy. If a Central Bank wants to increase the money supply, it lowers interest rates, and if it wants to decrease money supply it raises interest rates.

Gross Domestic Product (GDP)

GDP is the most important indicator of economic health in a country. A country's Central Bank has expected growth outlooks each year that determine how fast a country should grow as measured by GDP. When GDP falls below market expectations, currency values tend to fall and when GDP beats market expectations, currency values tend to rise.

Inflation

Inflation destroys the real purchasing power of a currency, and, therefore, inflation is very bad for the economy in most circumstances. Each year a normal rate of inflation between 2-3% is expected, but if inflation begins moving beyond the upward targets set by the Central Bank, a currency value will actually rise due to expectation of an imminent rate hike. Higher interest rates tend to fight off inflation.

Unemployment

We will discuss consumer demand in a moment, but people are basically what drive economic growth; therefore, unemployment is the backbone of economic growth. When unemployment levels increase, it has a devastating effect on economic growth; consequently, when the labor market contracts and unemployment increases, interest rates are often cut in an attempt to increase the money supply in the economy and stimulate economic growth.

Consumer Demand

As stated in the previous point, people are what drive economic growth; as a result, healthy consumer demand is essential to the normal, healthy functioning of an economy. When consumers are demanding goods and services, the economy tends to move forward, but when consumers are not demanding goods and services, the economy falters.