Forex Fundamental Analysis for October 4, 2011

EUR/USD Daily Fundamental Analysis for October 4, 2011

Investors started a new week with strong pessimism amid renewed fears over Greek default as the nation confirmed it will miss the fiscal targets for this year and next. The euro lost heavy grounds as investors saw Greece nearing default and the leaders further away from finding a solution. Greece said it will miss this year’s target as they expect a deficit of 8.5% of the GDP above the target of 7.6% as the economy is to contract 5.5% opposed to the June forecast of 3.8% contraction. The nation will also miss next year’s target with the deficit expected at 6.8% of the GDP compared to the 6.5% target. Investors saw the figures abysmal and the economy too weak which will prevent the nation from acquiring the new tranche of last year’s bailout and prevent the completion of a new bailout. With the euro area finance ministers discussing the worsening state of the Greek economy investors were jitter and ready for any comments that will surely fall short of any action. This downbeat EUR/USD outlook is likely to continue on Tuesday as the EU finance ministers meet in Luxembourg and investors see little hope for any breakthrough as they will only discuss the available options for the next step and how to contain the escalating crisis. Regarding the awaited data on Tuesday, the euro area August Producer Price Index is due at 09:00 GMT and expected with 0.3% drop after rising 0.5% a month earlier and on the year to fall back to 5.7% after 6.1%. As we said the focus will remain on the EU finance chiefs meeting in Luxembourg to discuss the progress made so far after the parliaments pass the EFSF expanded powers and also discuss the permanent rescue facility and the possible leveraging powers of the EFSF to contain the expanding crisis amid the risk of Greek disorderly fallout. From the United States Factory Orders for August are due at 14:00 GMT and expected with a slight 0.2% rise after 2.4% rise.

AUD/USD Daily Fundamental Analysis for October 4, 2011

The Australian dollar dropped to the lowest level in a year against the dollar as fears returned to pressure markets that European leaders won’t be able to contain the crisis that threatens the global recovery. Moreover, the dollar and the yen strengthened as growing evidence that the global economy is slowing boosted investor demand for haven currencies. Aussie continues its downside movement against majors as the market is waiting comments from the euro area finance chiefs to get a solution to solve the crisis, reducing demand for higher yielding currencies. On the other hand, Asian currencies had their biggest monthly loss in more than a decade as a global slowdown and concern some European nations will struggle to pay their debt bolstered demand for the relative safety of the dollar. On Tuesday at 00:30 GMT, Australia will release the Trade Balance for August, where the previous reading showed a surplus of A$ 1826 million. The Building Approvals for August are due at 00:30 GMT, which had a prior reading of 1.0%. On the other hand, the annual Building Approvals had a previous reading of – 15.0%. At 03:30 GMT, the Reserve Bank of Australia will announce its interest rate decision, where it’s expected to keep the rate unchanged at 4.75%, trying to support the Australian economy amid the current crisis in EU and slowing U.S. growth. On Tuesday at 14:00 GMT, Fed Chairman Bernanke will testify before the JEC, while Factory Orders Index for August will be released at 14:00 GMT with a prior reading of 2.4% and expected to come at 0.2%.

EUR/CHF Daily Fundamental Analysis for October 4, 2011

The EUR/CHF continues to trade within a tight range but with a clear downside bias amid the risk aversion and clear jitters in the euro area. Investors are again focusing on the rising risk of disorderly Greek default which pressured the market and triggered a new wave of risk aversion, especially as the reaction from the leaders is now seen far behind the curve to contain the crisis. The euro lost heavy grounds as investors saw Greece nearing default and the leaders further away from finding a solution. Greece said it will miss this year’s target as they expect a deficit of 8.5% of the GDP above the target of 7.6% as the economy is to contract 5.5% opposed to the June forecast of 3.8% contraction. The nation will also miss next year’s target with the deficit expected at 6.8% of the GDP compared to the 6.5% target. The franc also was pressured by the unexpected contraction in the manufacturing sector which added to the pressure on the SNB to act further to contain the crisis and that forced the pair to maintain the tight trading range. The EUR/CHF is likely to continue to trade in a tight range this week and on Tuesday more volatility is expected as the EU finance ministers meet to discuss the worsening state of the market and what to do next and prepare for the mid October leaders summit to ease the market strain. The euro lacks momentum now amid rising fears and that will not take the pair higher and fear of SNB action or nearing the 1.20 floor set also is preventing the franc from heavy moves and accordingly the trading range will remain limited. Also on Tuesday the euro area August Producer Price Index is due at 09:00 GMT and expected with 0.3% drop after rising 0.5% a month earlier and on the year to fall back to 5.7% after 6.1%.

NZD/USD Daily Fundamental Analysis for October 4, 2011

New Zealand’s dollar extended its second week of losses against its U.S. counterpart after Fitch and Standard & Poor’s cut the nation’s credit ratings from AA+ to AA last week, which has a heavy negative impact on the currency’s movement. Kiwi declined to the weakest in nearly 6 months versus the dollar as the European debt crunch expands and the global growth outlook worsens, damping demand for higher-yielding investments. Currently, the low yielding assets (greenback & Yen) are the most attractive investments these days amid the global slowdown, as the fears dampen investors’ confidence. New Zealand’s currency plunged vs. the US dollar as Asian stocks fell after U.S. consumer spending slowed and income unexpectedly dropped, affecting earnings outlook for exporters. On Tuesday at 14:00 GMT, Fed Chairman Bernanke will testify before the JEC, while Factory Orders Index for August will released at 14:00 GMT with a prior reading of 2.4% and expected to come at 0.2%.

USD/JPY Daily Fundamental Analysis for October 4, 2011

The USD/JPY pair dropped with the beginning of the week to cover last week’s profits, as the Tankan economic survey showed a better than expected reading during the third quarter, which open the way for the Japanese yen to record more gains. The Tankan economic survey proved that the manufacturing sector in Japan improved, as the outlook for the Japanese companies enhanced giving the yen an upside push against the dollar and other major currencies. On the other hand, jitters still control the FX market on concerns regarding the EU debt crisis and its negative effects on other economies. The greenback was able to record more gains against its major counterparts, as investors shifted to lower yielding currencies as a safe haven. On Tuesday at 14:00 GMT, Fed Chairman Bernanke will testify before the JEC, while Factory Orders Index for August will released at 14:00 GMT with a prior reading of 2.4% and expected to come at 0.2%.

GBP/USD Daily Fundamental Analysis for October 4, 2011

On Monday, the pair showed decline as tensions in markets that Greece might default on its debt obligations endorsed demand on refuges. Greece announced on the weekend that it will not be able to meet its budget deficit target for the current year and revealed in a budget report released on Monday that the economy will witness contraction of 5.5% this year and 2.5% in 2012 while budget deficit is predicted to mushroom to 172.7% of GDP.
The delay of the disbursement of the sixth tranche of last year’s bailout package from October 3 till mid October, until international inspectors write their assessment regarding the Greek commitment to cut deficit on Wednesday, added to worries and thereby enhancing demand on refuges.
The upbeat manufacturing data released on Monday mitigated some of the pair losses but did not overshadow the negative sentiment as the main attention, meanwhile, is directed on the latest developments from the euro area.
U.K. manufacturing witnessed an expansion of 51.1 in Sep. compared with the revised contraction of 49.4 in August, whereas, on the other hand, U.S. ISM manufacturing showed a widening expansion to 51.6 in September from the prior 50.6.
U.K. Chancellor of the Exchequer referred that keeping interest rate at its low level is the best solution to boosting the sluggish growth, where last month the BoE hinted that there could be an expansion in the APF, which is affecting the pound’s movements negatively.
On Tuesday, U.K. PMI construction will be available at 08:30 GMT, with projections referring to an ease in expansion to 51.2 in Sep. compared with the prior reading of 52.6.
As of 14:00 GMT, the U.S. economy will release factory orders report for the month of August, where analysts’ forecasts are in favour of a 0.2% rise compared with the 2.4% advance recorded in July.

USD/CAD Daily Fundamental Analysis for October 4, 2011

The USD/CAD pair erased some of its earlier gains on Monday, where rising risk aversion in markets led investors to shun risky assets and target lower yielding assets earlier in the day, which provided the U.S. dollar with strong momentum against the Canadian dollar, as fears mounted Greece could default on its debt after the Greek government announced it missed deficit targets. Nonetheless, the pair rebounded to the downside after the ISM manufacturing index was released, which showed manufacturing activities expanded better than estimates, which provided the Canadian dollar with some bullish momentum and led the USD/CAD pair to erase earlier gains. Traders will be following a testimony by the Federal Reserve Bank’s Chairman Ben Bernanke before the Joint Economic Committee, but overall, we still expect the USD/CAD pair to extend its gains over the coming period on rising pessimism over the outlook for growth and mounting fears from the EU debt crisis, although we expect to witness high levels of volatility as well. Tuesday October 04: EU finance chiefs meet in Luxembourg to discuss the progress made so far after the parliaments pass the EFSF expanded powers and also discuss the permanent rescue facility. From the United States Factory Orders for August are due at 14:00 GMT and expected with a slight 0.2% rise after 2.4% rise. At 14:00 GMT, the Fed’s Chairman Ben Bernanke will testify before the Joint Economic Committee, and traders will be following his testimony closely.

USD/CHF Daily Fundamental Analysis for October 4, 2011

On Monday, the pair was little changed as both currencies were demanded as safe havens amid worries that debt crisis may intensify as speculations increased thatGreecewill face a default. Greece announced on the weekend that it will not be able to meet its budget deficit target for the current year and revealed in a budget report released on Monday that the economy will witness contraction of 5.5% this year and 2.5% in 2012 while budget deficit is predicted to mushroom to 172.7% of GDP. The delay of the disbursement of the sixth tranche of last year’s bailout package from October 3 till mid October, until international inspectors write their assessment regarding the Greek commitment to cut deficit on Wednesday, added to worries and thereby enhancing demand on refuges. Data released on Monday from Switzerland showed that retail sales dropped 1.9% in August from a revised of 2.9% recorded in July, while the manufacturing sector showed contraction of 48.2 in September compared with the previous expansion of 51.7 recorded in August. On the other hand, U.S. ISM manufacturing showed a widening expansion to 51.6 in September from the prior 50.6.   Yet, data from both economies did not have much impact on the pair’s movements as the main attention is directed on the latest developments from the euro area. On Tuesday, as of 14:00 GMT, the U.S. economy will release factory orders report for the month of August, where analysts’ forecasts are in favour of a 0.2% rise compared with the 2.4% advance recorded in July.

 

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