31 January 2013: Euro/USD steady as FED sticks to stimulus

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The US-Federal Reserve (FED) will continue its aggressive monetary easing stance. In the minutes from yesterday’s meeting FED pledged to stick to its ambitious 6,5% unemployment and 2% inflation targets as the US Gross Domestic Product (GDP) dropped by 0,1% in fourth quarter of 2012. The negative GDP number was somewhat of a cold shower for markets which dropped substantially both in the US, Europe and this morning in Asia. Asian markets fell off a 17 months high.

FED’s statement and the GDP numbers had little impact on the currency markets. Euro/USD reached 1.3588 upon FED’s announcement and keeps steady at 1.3569. Yen gained some ground trading at 90,80 yen against USD. Oil prices are up. Brent crude trades at USD 115 a barrel. Gold and silver prices regained ground and reached the highs for 2013 seen last week. Swedish and Norwegian krones trade at levels not seen against the dollar since before the financial crisis in the autumn of 2008.

The cautious FED statement which pledged to continue a monthly USD 85 billion bond-buying stimulus plan to encourage employment came few hours after the news that the US economy unexpectedly contracted in the fourth quarter. The weakness was mainly due to a plunge in defence spending, suggesting that the underlying fundamentals were better than the headline figures indicated.

European data showed an improved economic sentiment for a third straight month along with news that 100 billion Euros of private funds flowed back into the Eurozone periphery late last year. These capital flows have strengthened the Euro which broke through the 1,35 technical resistance level yesterday. 1,37 – 1,38 seems a reasonable short term target for the Euro/USD. Recent capital flows shall, however, not be read as an end of the Euro crisis. Economic fundamentals are still very weak with 25% unemployment levels in the European periphery threatening the delicate social balance. It is a question for how long the strong Euro policy will continue. Major international banks see a Euro/USD at 1,25 during the second half of 2013. 

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30 January 2013: EURO/USD eyes 1.37 – 1.38 level

ImageThe Euro/USD has strengthened further trading at 1.3493 close to the critical 1.35 level eyeing 1.37 – 1.38. The US dollar has except for Japanese Yen lost ground against most currencies. USD/JPY trades steady in the range between 90,50 – 91 yen a dollar near the peak of 91.32 reached on Monday. This is the lowest level seen for yen since June 2010. Euro also gained 0,3% to 122,78 against the Yen. The prospect of a weaker yen and increased risk appetite lifted the Australian dollar and the New Zealand kiwi to a four year high against yen. GBP/USD fell back to 1.5745.

Stock markets continue to see new highs not seen for years. The Asian indexes led by the South Pacific MSCI rose to the highest levels in 18 months. A strong US housing market and stabilization inside the Euro zone boosted investor confidence and the global economic outlook. Commodity prices continue to raise with copper adding another 0,6%. Oil prices reached its highest level seen in months. Brent crude trades above USD 114 and the New York, NYMEX, is steady in the range of USD 97 – 98 a barrel.

The US Federal Reserve (FED) ends its two days meeting on Wednesday. It is expected that FED will continue with its monetary easing policies. This amidst speculation that the better prospects for US economy might soon end FED’s aggressive asset buying program. Investors will focus on the final statement and look for any clues to a change in FED’s policies. A continuation of FED’s policies will strengthen the continued rotation of funds from the bond market into shares, boost emerging markets and weaken the attractiveness of safe-haven assets.

The US stock market was very strong yesterday. Dow Jones was close to reaching the 14 000 index level. European stocks delivered better than in months as US companies continue to beat earnings forecasts. The leading on line book store, Amazon, delivered upbeat results which lifted the share 10%. Car maker, FORD, saw excellent results in the US, but sales in Europe disappointed. Most European equities rose to fresh two-years high. Together with US and Asia these increases boost stock markets as the favorite place for investments in 2013. 

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28 January 2013: Euro/USD bounces to 11 months high

EURO/USD bounced to its highest level in 11 months amidst mounting signs of recovering economic confidence in the Euro zone. Euro/USD is trading at 1.3459 after hitting 1.2480 on Friday. The Euro is also gaining ground against the Japanese Yen which continues to fall also against the USD on expectations on active monetary easing. The strength of the Euro is supported by a more positive business sentiment in Germany and by European banks actively paying back credits given by the European Central Bank (ECB) since 2011.

USD/Yen fell to 91,26 yen to a dollar on Friday which is the lowest level seen since June 2010. Since last November Yen has fallen 13% against the USD and a record 17% versus Euro. The Japanese Nikkei stock index reach new record levels while the South Korean Kospi is falling back mainly due to a stronger Won. Over the last days there has been growing dissatisfaction with the strong fall in the Yen both from South Korea and China and from the Russian and German central banks.

Historically speaking Yen is still relatively strong. During the early 1990’ies USD/Yen was trading at 158 and apart from a brief period in 1995 it has traded below 90 yen a dollar only since the middle of 2010. Stocks in Asia are except for South Korea still up on better US economic news on jobless rate, manufacturing, better housing and retail spending. Chinese data continue to confirm that the Chinese economy is turning around.

The British Pound (GPB) has fallen below the technical resistance level at 1,58 against the dollar trading at 1.5754. Data before the weekend showed that the UK economy shrank more severely than expected in the fourth quarter shrinking with 0,3% rising fear of a third dip recession. The market expectation was a decrease of 0,1% in the gross domestic product, GSDP. The number was particularly disappointing taken into consideration the robust 0,9% growth in the third quarter. It now seems that this strong growth was entirely down to the boost given by the London Olympics.

The short term prospect for GBP is negative.

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25 January 2013: The Japanese yen updates minimum levels

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Asian stock markets again don’t show uniform dynamics today, and again “independently” there is a Japanese Nikkei index with growth more than for 2%. The reason is still the same, decrease in national currency was resumed, and today USD/JPY pair already bargains around level 90,5. Statements of the deputy minister of economy of Japan, Yasutosi Nisimura, that decrease of currency isn’t finished yet, and the level of 100 yens for dollar seems quite achievable, added interest to speculative sale of yen.

During the today’s Asian session the British pound continued to decrease against US dollar and at the moment practically approached yesterday minimum. The British pound bargains at the level of 1,57884. Today gross domestic product of Great Britain for the 4th quarter is published: the forecast of -0,1% against 0,9% in the 3rd quarter. In case of a release of weak data, the price will continue to fall.

Thanks to signs of improvement of economic activity in the Euro zone, EUR/USD pair continued correctional movement and grew to level of 1,3393 euros against US dollar at the trading on Thursday, and positive data from a labor market of the USA only strengthened tendency of investors to risk, having added an impulse in growth of the European currency. This morning we see pair bargaining at the level of 1,3337.

Yesterday trading volumes of oil were 30% higher than the monthly average. This morning Brent bargains at level of $113,08, and WTI at $95,93. As for a technical picture, due to yesterday’s growth the alignment of forces exchanged a little. Quotations on Brent rose above a key mark of $113, having updated thereby three-month maximum. In case of lack of a general negative in the market, growth continuation is expected for the purpose of achievement of level of $117 for barrel.    

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24 January 2013: USA indexes updated 5-year maxims

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On Wednesday, January 23, the stock market of the United States finished trading session by the moderate growth of the main indexes, S&P500 and Dow Jones appeared on fresh 5-year maxims. The positive information background on stock markets was provided by quarterly reports of representatives of hi-tech sector and favorable forecasts of a number of industrialists.

However the reporting of the Apple company which came after closing of the trading session disappointed investors. Within the additional session price of shares of Apple fell in price for 11%. Futures for the Nasdaq 100 index at the morning electronic trading are decreasing by 1,4%. Thus, the technological sector appeared under pressure today.

Asian stock indexes today “is in a fever”, session began with decrease, subsequently the Chinese statistics allowed to resume purchases and helped indexes to reach profitable zone, but at a present moment sales again reign in the markets, and only Japanese Nikkei continues growth. Purchases in Japan are caused by the renewed decrease in yen, USD/JPY pair grew by 0,7% to level 89,2, after a release of data on trade balance. According to these data, in 2012 Japan recorded annual deficiency of foreign trade the second time in a row, thus the negative balance this year was maximum for all history and made 6,927 trillion yens.

Coming back to China, it should be noted that the production index PMI, from HSBC bank, increased the fifth month in a row, and according to preliminary data, it was in January at the level of 51,9, against December value 51,5. In the moment this news was apprehended by traders very positively, the Chinese continental SSE index came in plus of 2% and pulled for itself other Asian indexes, however so sharply growth was leveled.

Prices of oil between the Brent and WTI brands considerably differ. Brent raised to 112,83 dollars for barrel while the price of WTI fell almost by 1,5% and bargains at the level of 95,57. So essential distinction is caused with the advent of news about an operational malfunction on the key oil pipeline – Seaway. Through this branch oil is delivered from Cushing storage in Oklahoma to key oil processing regions on the coast of the Gulf of Mexico. Capacity is reduced from 400 thousand to 175 thousand barrels per day. Stocks are in Cushing at maximum levels, and at such technical failures they can only continue to increase. It also is at present the main factor of sales of a WTI contracts.    

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23 January 2013: Increased risk appetite drives global markets

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Asian shares edged higher on Wednesday as investors’ appetite for riskier assets improved. The MSCI-index for Asia-Pacific outside Japan reached a 17-and-a-half month high after recent positive data from United States and China improved investor sentiment. Revenue from the world’s largest internet research company Google’s core internet business outpaced analyst’s expectations pushing the stock 5% up. Google benefited from a new product listing during fourth quarter and business growth in international markets.

The Japanese yen is up for the second day after the monetary easing announced by Bank of Japan (BOJ) failed to meet market expectations. A US-Federal Reserve inspired aggressive bond buying was postponed to 2014. USD/JPY is trading at 88,50 down from its above 90 yen a dollar peak. BOJ’s 2% inflation target boosted, however, commodities and precious metals. BOJ’s move is seen as supportive for global economic recovery and boosted gold and silver as a hedge against rising prices.

The stronger yen had a negative impact on the Japanese stock market. BOJ’s delay of action disappointed exporters, and Japan’s benchmark Nikkei average fell 0,8%. Experts see a stronger yen as a technical correction to its rapid and sharp decline. After consolidation it is most likely that the yen would continue its downward trend. The yen has over the last two months declined from 81,69 to a bottom of 90,25. 95 yen against the dollar is seen as realistic. The fact that BOJ is joining other central banks to support growth is generally seen as positive for the global economy.

Euro/USD is steady above 1.33 level. The Euro was helped by better investor sentiment in Germany and by successful bond auctions in Portugal and Spain. Spain has succeeded to reach 14 percent of its 2013 funding target. GBP is still under downward pressure, USD/GBP is fighting to keep above the 1,50 level. Prime Minister David Cameron is today making his much awaited speech on UK’s relations to EU. It is expected that Cameron will offer a Euro critical British public a referendum on the EU if he is re-elected in 2015. The wording of his speech might have an impact both on the strength of the GBP and the future direction of the Euro.

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22 January 2013: Asian stocks drop on BOJ easing delay

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Bank of Japan (BOJ) at its meeting yesterday delayed to set a 2 percent inflation target and will wait until January 2014 to start Federal Reserve-style open ended asset purchases. This had the immediate effect that Asian stocks retreated and USD/JPY turned around. After trading above 90 yen a dollar, USD/JPY has dropped to 89,18. A closer scrutiny of the BOJ records would, however, be necessary to decide whether this represents a more permanent change back towards a stronger yen.

The big open question is how the combined fiscal and monetary stimulus presented by the new Abe-government will work. Observers stress that the Japanese Nikkei stock exchange seems overbought. The yen on the other hand does not seem to be oversold. Asia’s benchmark equities index is poised to gain for a third month amid signs the US and Chinese economies are recovering and as Japanese stocks have rallied on Prime Minister Shinzo Abe’s more aggressive stimulus policies.

At the opening of the yearly Davos conference among the world’s leading business and political leaders the sentiment was more upbeat reflecting belief in a turnaround in markets and a bullish attitude towards stocks. In spite of the somewhat confused reports from the BOJ meeting both the South East Asian Pacific, MSCI, Hong Kong Seng and the Shanghai indexes were slightly up. It was a good day for stocks in Europe yesterday while the US markets were closed due to the Presidential inauguration.

Euro/USD trades at 1.3341 slightly up from yesterday, while GBP is under continued downward pressure. Both EURO and USD are up against the British Pound. Prime Minister David Cameron is Wednesday going to deliver his most expected speech on England’s future relation to the EU. Cameron is under strong pressure from EU-critics inside his own party to renegotiate the EU-treaty. The US government is pressing for stabile relations and no changes in England’s relations to the EU. The German chancellor Angela Merkel suffered a setback in local elections during the weekend. With her strong position in the EU and EURO-cooperation this might have a negative long term impact on the Euro.

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