Forex Fundamental Analysis for September 21, 2011

EUR/USD Daily Fundamental Analysis for September 21, 2011

The EUR/USD tried to recover as we expected on Tuesday to cover the opening bearish gap and on needed relief amid the mixed market sentiment and focus on the news to come from Greece and the Federal Reserve.

The euro was hammered early on Tuesday with Standard & Poor’s move to cut Italy’s credit rating by one notch to A from A+ with a negative outlook added to prevailing fears over the euro area’s ability to contain the crisis and prevent the contagion risk.

Fears of the contagion spread are now seen materialising with other nations suffering the growing market heat, and for Italy it is one of the economies surely labelled “too big to fail” which intensifies the general downbeat pressure on the  euro.

We still saw the euro regain some strength on a relief rally with progress in Greek talks with lenders unwinding some of the pressure and the focus on the Federal Reserve decision on Wednesday also playing a role in helping the recovery.

The market on Wednesday will regain the volatility and choppy trading with the pair expected to continue the tight and mixed trading until the FOMC rate decision which will be the main focus for the day.

The lack of news from the euro area will keep the focus on news from Greece as it continues the second day of discussions with lenders late on Tuesday and comments on positive progress will be supportive to the euro.

As for the major event, it will surely be the Federal Open Market decision with expectations that the Feds will announce new stimulus measures that are around “Operation Twist” a new measure less invasive than another round of QE amid high inflation, where the feds will invest in longer term assets to keep rates low to stimulate investments and lending to businesses and consumers to revitalize the stalling economy.

The U.S. existing home sales for August will start the FOMC day at 14:00 GMT which is expected with 1.7% rebound to 4.75 million from 4.67 million.

Wednesday will surely as we said will be dedicated to the Federal Reserve with eyes on the Federal Open Market Committee with the decision due 18:15 GMT. The FOMC is expected to keep rates at their historic low near zero while investors await the range of options to be discussed to ease the economic slump and support the recovery according to Bernanke’s comments earlier about the possibility for further monetary easing from the Feds.

AUD/USD Daily Fundamental Analysis for September 21, 2011

Aussie rose against its US counterpart after the RBA minutes signaled RBA worries about inflation which suppressed expectations for any rate cuts in the coming period. Moreover, Australia’s currency pared earlier losses after minutes of the central bank’s policy meeting this month said the Reserve Bank is “well placed” to respond to global and domestic economic risks or inflation. Australian exports and domestic spending supported economic growth rates to rebound, pushing Australia’s economy to recover from the natural disaster crisis that damaged the nation’s industry sector. The basic components of the economy improved, where the Australian services rose as the mining sector rebounded, which is expanding to meet the Chinese demand for raw materials, helping the labour market to recover. On the other hand, the Reserve Bank of Australia sees the economy is well positioned to counter the global crisis, domestic economic risks and higher inflation rates that threaten the nation’s recovery, prompting the bank to hold interest rates at 4.75%. On Wednesday, the AUD consumer inflation expectations index for September is due 01:00 GMT after rising by 2.7%. The U.S. existing home sales for August will released at 14:00 GMT, which is expected with 1.7% rebound to 4.75 million from 4.67 million. At 18:15 GMT, the Federal Reserve Bank will release its Federal Open Market Committee Rate Decision which expected to stay at 0.25% as eyes are on the Feds decision on new stimulus measures to revive the faltering recovery.

EUR/CHF Daily Fundamental Analysis for September 21, 2011

The EUR/CHF finally moved and edged to the upside to regain the lost appeal and once again on expectations for another move from none other than the Swiss National Bank. The pair has been trading in a dull tight trading range for the past period around 1.2050 areas since the intervention took the pair above the new floor set at 1.20, where the prevailing risk aversion, euro weakness, and deepening debt woes failed to force the pair to alter its trend amid a vigilant and ready to act SNB. On Tuesday the pair finally moved with upside tendency and not on mere euro strength on altered debt outlook but rather on prevailing rumours that the SNB might act again on Wednesday and raise the EUR/CHF ceiling to 1.25! Surely the news from the euro area were not strong enough to move the pair earlier even as the common currency recuperated from the recent bearishness against its major rivals, where the move was seen as a needed relief and rationalized on upbeat expectations for ongoing talks with Greece, where seemingly the general sentiment remains pessimistic since the pair only responded to intervention rumours. The market on Wednesday will focus on the SNB expectations especially after the abysmal trade figures reported on Tuesday that reflected the deep agony of Swiss exports from the franc alongside slowing global demand. The only news due on Wednesday is at 07:00 GMT Swiss M3 Money Supply for August is due after the reported 5.9% rise in July.  And as we said the volatility will be based on anticipation for a surprise from the SNB amid vigilant markets ahead of the FOMC decision.                                                                

NZD/USD Daily Fundamental Analysis for September 21, 2011

New Zealand dollar plunged against their major counterparts after the S&P downgraded Italy’s credit rating, reducing demand for higher yielding investments, and bolstering fears about global growth. The Kiwi declined as the European crisis escalates and concern over slowing global growth boosted demand for safer assets, supporting the kiwi to return to the downside. On Wednesday, NZD credit card spending S.A. for August is due at 03:00 GMT following July’s 1.0% rise. The U.S. existing home sales for August will released at 14:00 GMT, which is expected with 1.7% rebound to 4.75 million from 4.67 million. At 18:15 GMT, the Federal Reserve Bank will release its Federal Open Market Committee Rate Decision which expected to stay at 0.25% as eyes are on the Feds decision on new stimulus measures to revive the faltering recovery.

USD/JPY Daily Fundamental Analysis for September 21, 2011

The USD/JPY pair traded lower early Tuesday as investors increased demand for lower yielding currencies, after Standard & Poor’s cut Italy’s credit rating which reflected negatively on financial markets. Italy’s credit rating downgrade increased concerns over the EU debt crisis, especially as Greece default risks rise which drove investors to abandon higher yielding currencies and focus on the yen to push the USD/JPY pair further to the down side. On Wednesday at 23:50 GMT (Tuesday), Japan will issue merchandise trade balance total for August, where the previous reading showed a surplus of 72.5 billion yen while it is expected to show a deficit of 300.0 billion yen. The adjusted merchandise trade balance for August is expected to show a deficit of 22.1 billion yen from the previous deficit of 130.5 billion yen. At 04:30 GMT Japan will release All Industry Activity Index for July, where it’s expected to come at 0.5% from the previous 2.3%. The U.S. existing home sales for August will released at 14:00 GMT, which is expected with 1.7% rebound to 4.75 million from 4.67 million. At 18:15 GMT, the Federal Reserve Bank will release its Federal Open Market Committee Rate Decision which expected to stay at 0.25% as eyes are on the Feds decision on new stimulus measures to revive the faltering recovery.

GBP/USD Daily Fundamental Analysis for September 21, 2011

On Tuesday, the pound continued its decline against the dollar, hovering around eight-month low, as worries regarding the escalating European debt crisis and sluggish growth pace in major economies eroded demand on high-yielding currencies.

Standard & Poor’s cut Italy’s credit rating by one notch to A from A+ with a negative outlook on fear the weakening growth and the “fragile” government will not be able to cut the second biggest debt load in the euro area according to the statement from S&P last night, adding to worries that crisis would intensify in the euro area amid speculations would face a default.

In the U.S., housing starts data showed a 5.0% drop in August from the prior 2.3% fall, adding to concerns that the sluggish growth pace would continue in the third quarter.

On Wednesday, at 08:30 GMT, attention will be toward BoE minutes release which may show a split among policy makers as some may support Adam Posen in adding to the APF after the slowdown in the economy. At the same time public finance excluding interventions will be due.

Thereafter, eyes will be on MBA mortgage applications for Sep. 16 at 11:00 GMT while will be followed by existing home sales at 14:00 GMT. Existing home sales report is predicted to advance 1.7% from the prior 3.5% drop. However, the main highlight of the day will be the FOMC rate decision due at 18:15 GMT.

USD/CAD Daily Fundamental Analysis for September 21, 2011

The USD/CAD pair extended its gains on Tuesday amid concerns in markets over the outlook of the European debt crisis, as the rating agency Standard & Poor’s downgraded Italy’s credit rating by one notch, which spread pessimism in markets and boosted demand for lower yielding assets, and accordingly, pushing the USD/CAD pair to the upside. Moreover, the leading indicators from Canada for the month of August came out flat and below estimates, which put downside pressures on the Canadian dollar, and allowed the USD/CAD pair to rise. We expect the pair to trade within a limited range on Wednesday, as traders will be eyeing the FOMC meeting, where the FOMC is expected to announce more monetary easing, however, traders are still anxious amid the uncertainty of the exact measure that the FOMC will announce, although if the Fed announce more monetary easing, we should expect the USD/CAD pair to drop. Wednesday September 21: Canada will release the consumer price index for August at 11:00 GMT, where CPI is expected to rise by 0.1% compared with 0.2% in July, and yearly CPI is expected to rise by 2.9% compared with 2.7% in the prior estimate. Core CPI is expected to rise by 0.2% in line with the prior rise, and yearly core CPI is expected to remain unchanged at 1.6%. The existing home sales index will be released at 14:00 GMT for the month of August, where existing home sales are expected to rise by 1.7% to an annual rate of 4.75 million, compared with the prior estimate of 4.67 million. Wednesday will surely be dedicated to the Federal Reserve with eyes on the Federal Open Market Committee with the decision due 18:15 GMT. The FOMC is expected to keep rates at their historic low near zero while investors await the range of options to be discussed to ease the economic slump and support the recovery according to Bernanke’s comments earlier about the possibility for further monetary easing from the Feds.

USD/CHF Daily Fundamental Analysis for September 21, 2011

On Tuesday, the franc retreated against majors, including the dollar, on speculation the SNB would to raise the ceiling target against the euro to 1.25 from 1.20 on Wednesday.  The SNB still insists to halt the franc’s rally where it referred earlier this month that the bank will enforce this minimum rate with the “utmost determination.” On the other hand, the SNB lowered growth forecasts to 1.9% and 0.9% in 2011 and 2012 from the previously forecasted 2.1% and 1.5% in June, citing the impact of the franc’s surge on Swiss growth, thereby enhancing expectations that the SNB will continue its measures to halt the franc’s rally. In the U.S., housing starts data showed a 5.0% drop in August from the prior 2.3% fall, adding to concerns that the sluggish growth pace would continue in the third quarter. On Wednesday, The Swiss economy will start the day with the release money supply M3 for the year ending August at 07:00 GMT.  Thereafter, eyes will be on MBA mortgage applications for Sep. 16 at 11:00 GMT while will be followed by existing home sales at 14:00 GMT. Existing home sales report is predicted to advance 1.7% from the prior 3.5% drop. However, the main highlight of the day will be the FOMC rate decision due at 18:15 GMT.

 

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