Forex Fundamental Analysis for October 6, 2011

EUR/USD Daily Fundamental Analysis for October 6, 2011

The EUR/USD traded cautiously on Wednesday with anticipation to what the ECB will bring on Thursday and the U.S. jobs report on Friday. The market remains strained from the implication of the debt crisis, especially after Moody’s lower Italy’s rating three notches and signaled the risk of downgrade for other nations, stepping up the pressure on European leaders struggling to contain the crisis. Caution is seen in trading with investors speculating again for a new hope where they see the possibility Europe will add new measures to shelter its lenders and fuel banks to prevent a financial meltdown from the rising exposure to sovereign debt and risk of Greek default. Still, the market is anticipating Thursday’s announcement from the ECB which will be the main attraction. Expectations are for steady rates from the ECB in the farewell meeting for Trichet, yet still the expectations are high for more measures to be taken by the ECB to ease the market strain and ensure the flow of liquidity. The highest possibility is for the bank to restart the 12-month liquidity provisions while other options include reactivate the covered-bond purchases program that was administered for a year from mid-2009 with the intensification of the financial crisis. Surely the ECB is now looked at to calm the nerves especially as leaders did not take any concrete action and the data is clearly reflecting the downside pressure on growth and any strong commitment from the ECB and extra measures that assure to markets that someone is looking out for the euro will help trigger some EUR/USD relief gains. German factory orders for August are due at 10:00 GMT and expected flat following a drop of 2.8% and on the year to rise 2.8% following 8.7%. Eyes will be definitely on the ECB rate decision as we said at 11:45 GMT although rates are expected steady at 1.50%. More focus will be directed towards Trichet’s last press conference as President of the ECB at 12:30 GMT where investors expect to see the bank announce new measures to ease the market strain and also look for hints for futures policy moves by the bank. From the United States the weekly jobless claims are due at 12:30 GMT for the week ending September 30 after the previous week they unexpectedly eased to 391 thousand.

AUD/USD Daily Fundamental Analysis for October 6, 2011

The market is trading within a narrow range, while the low yielding assets grabbed investors demand amid the current negative sentiment that dominate the market movements after Moody’s Investor Service issued yet another downgrade for an indebted European nation, moving Italy’s government bond rating three notches lower to A2 from Aa2. On the other hand, the US dollar gained against most of its major peers after Federal Reserve Chairman Ben S. Bernanke signaled willingness to step up measures to spur growth in the U.S. The Australian dollar witnessed some improvements against the major currencies after the RBA”s statement that showed the economy has many resources and the ability to face the global financial crisis with low unemployment, a strong banking system and big investments, increasing demand for Aussie. Currently, Aussie trades in a very tight range as the global economic slowdown and the Australian strong position, where Australia showed some good signs as retail sales unexpectedly rebounded for a second month, adding that the economic recovery is on track. On Thursday at 12:30 GMT, U.S. economy will report the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance is expected to rise to 410 thousand from 391 thousand the previous week.

EUR/CHF Daily Fundamental Analysis for October 6, 2011

The EUR/CHF continued the upside trading on Wednesday with not confirmations from the SNB that it entered the market again to keep the franc weak. The market is still focused on the developments in the euro area and we saw markets release some steam on speculation the leaders are considering means to support banks and recapitalize the lenders to prevent a financial meltdown as the debt crisis intensifies and Greece is at risk of default. The better than expected ADP also helped ease the market jitters on Wednesday yet the focus remained still on what we have waiting the rest of the weak. On Thursday the focus is on the rate decision from the ECB which will be the main attraction. Expectations are for steady rates from the ECB in the farewell meeting for Trichet, yet still the expectations are high for more measures to be taken by the ECB to ease the market strain and ensure the flow of liquidity. The highest possibility is for the bank to restart the 12-month liquidity provisions while other options include reactivate the covered-bond purchases program that was administered for a year from mid-2009 with the intensification of the financial crisis. Switzerland will release the inflation data for September at 07:15 GMT where the CPI index on the month is expected to rebound by 0.1% following a drop of 0.3% and on the year to rise marginally to 0.3% after 0.2% rise. Eyes will be definitely on the ECB rate decision as we said at 11:45 GMT although rates are expected steady at 1.50%. More focus will be directed towards Trichet’s last press conference as President of the ECB at 12:30 GMT where investors expect to see the bank announce new measures to ease the market strain and also look for hints for futures policy moves by the bank.

NZD/USD Daily Fundamental Analysis for October 6, 2011

The greenback continued to gain grounds against its major counterparts as Fed Chairman Ben Bernanke could spark a shift in the sentiment as market participants weigh the outlook for monetary policy amid heightened risk that influences major currencies. Meanwhile, rating agencies such as Moody’s and S&P continue the downgrades for European nations, where Moody’s downgraded the Italy’s government credit rating by three notches to A2 from Aa2, increasing the negative outlook for the global economic recovery during this period and reducing demand for higher yielding currencies like Kiwi. Kiwi could rebound as the economy is benefiting from demand from developing nations, where the demand for raw materials is increasing, especially from China, which is supporting the rebound in the manufacturing sector, and supporting Kiwi’s upside movement. On the other hand, the New Zealand dollar advanced for a second week against greenback as Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, maintained its forecast payout to farmers. On Thursday at 12:30 GMT, U.S. economy will report the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance is expected to rise to 410 thousand from 391 thousand the previous week.

USD/JPY Daily Fundamental Analysis for October 6, 2011

The USD/JPY pair traded lower early Wednesday at yesterday’s trading range, as the lack of confidence in financial market pushed investors to shift to lower-yielding currencies such as the yen and the greenback. The Japanese yen continued to trade near its highest levels against the US dollar, which fuelled worries among traders about the possibility of another intervention from the Bank of Japan, since the strong Japanese currency hurts the nation’s recovery. The latest comments from the EU leaders tried to provide confidence in the financial market, but since there is no clear plan till now, the pessimistic sentiment prevails which increased demand for lower-yielding currencies, giving the yen more momentum against its major counterparts. On Thursday at 12:30 GMT, U.S. economy will report the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance is expected to rise to 410 thousand from 391 thousand the previous week.

GBP/USD Daily Fundamental Analysis for October 6, 2011

On Wednesday, the pair showed a drop to continue the major downside trend after having a breather on Tuesday. The pair was affected by the jittery sentiment which eroded demand on high-yielding currencies on concerns stemming from the European debt crisis. Moody’s rating agency downgraded the Italian government bonds’ rating by three notches to A2 from Aa2 with negative outlook due to rising risks for euro-area sovereigns. News from the U.K., on the other hand, showed that the second quarter figures were revised down to 0.1% on the quarter from the preliminary of 0.2% and to 0.6% from the preliminary of 0.7% on the yearly basis. Also, a U.K. services gauge showed an ease in expansion to 51.1 in Sep. compared with 52.9 in Aug. The grim reports added to speculations that the BoE may add to the stimulus in its rate decision meeting on Thursday which weighed on the pound. On the flip side, data from the U.S. showed that U.S. companies added 91,000 jobs in September compared with both revised and expectations of 89,000 and 75,000. ISM non-manufacturing composite showed a widening expansion to 53.0 in September compared with 53.3 recorded in August. On Thursday, the British economy will be focusing on BoE rate decision for October 6, yet expectations refer to no change in the bank’s monetary stance as policy makers will keep both interest rate and APF quantity steady at 0.50% and 200 billion pounds. In the U.S., initial jobless claims for the week ended September 30 and continuing claims for the week ended September 24 will be under scrutiny before the release of the jobs report on Friday.

USD/CAD Daily Fundamental Analysis for October 6, 2011

The USD/CAD pair retreated to the downside on Wednesday, as optimism spread in markets that EU leaders are preparing a plan to support the banking sector in Europe, while the ADP employment report from the United States showed private companies added jobs in September, as U.S. private companies added 91 thousand jobs better than median estimates, while the ISM services index slowed in September but was still better than expectations, which supported confidence in markets and pushed demand for higher yielding assets, which provided the Canadian dollar with some bullish momentum to cover some of the losses acquired over the last few days. Nonetheless, we maintain our bullish projection for the USD/CAD pair, as we expect the 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. Traders will be eyeing the European rate decisions on Thursday, as the Bank of England and the European Central Bank will both announce their monetary policy decisions, and markets will be highly anticipating the rate decisions. Thursday October 06: Eyes will be definitely on the ECB rate decision at 11:45 GMT although rates are expected steady at 1.50%. More focus will be directed towards Trichet’s last press conference as President of the ECB at 12:30 GMT where investors expect to see the bank announce new measures to ease the market strain and also look for hints for futures policy moves by the bank. From the United States the weekly jobless claims are due at 12:30 GMT for the week ending September 30 after the previous week they unexpectedly eased to 391 thousand. Canada will release the building permits index for August at 12:30 GMT, which declined by 0.6% back in July. Canada will release the Ivey PMI for the month of September at 14:00 GMT, where the index is expected to expand to 58.0 from 56.4 in the prior estimate.

USD/CHF Daily Fundamental Analysis for October 6, 2011

On Wednesday, the pair showed an upside tendency as the negative sentiment in the market stemming from the escalating European debt concerns, gave some advance to the dollar which recently has become a favourite safe haven amid the latest interventions by the SNB to curb the franc’s runaway.
Moody’s rating agency downgraded the Italian government bonds’ rating by three notches to A2 from Aa2 with negative outlook due to rising risks for euro-area sovereigns.
Regarding fundamentals, data from the U.S. showed improvement as jobs report showed that U.S. companies added 91,000 jobs in September compared with both revised and expectations of 89,000 and 75,000. ISM non-manufacturing composite showed a widening expansion to 53.0 in September compared with 53.3 recorded in August.
On Thursday, the Swiss economy starts the day with the release of CPI data for September at 07:15 GMT, as forecasts refer to 0.3% rise in the annual gauge from the preceding 0.2% increase.
In the U.S., initial jobless claims for the week ended September 30 and continuing claims for the week ended September 24 will be under scrutiny before the release of the jobs report on Friday.

 

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