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  • #31
    Emerging markets: what’s the problem?

    There were a lot of concerns about emerging markets during the recent days. Why there are problems in so many countries simultaneously? There are the following general reasons behind the depreciation: a contraction in Chinese manufacturing, concerns about the impact of the Fed’s stimulus tapering, a variety of more local problems, ranging from troubled economic institutions to political unrest.

    Argentina

    Argentinean peso survived the biggest depreciation 12 years. In lost 15% of its value last week when the central bank briefly stopped supporting the national currency. Earlier the central bank spent huge sums to slow down peso’s fall. These efforts reduced Argentina’s foreign-currency reserves to about $29 billion from around $43 billion a year ago. Inflation is believed to account for 30%. There’s a big gap between the official exchange rate (around 8 peso per USD) and the black market rate (more than 12 peso per USD). This gap reinforces expectations that peso will devalue even more.

    Turkey

    Turkish lira has lost about 16% against dollar since Dec. 17, when the arrest of the sons of 3 cabinet ministers exposed a corruption investigation which threatens Prime Minister Tayyip Erdogan and his government’s standing. The nation’s central bank has persistently refused to raise interest rates to defend the currency. Erdogan was opposing the hike, because he wanted low rates to boost economic growth as elections approach. As a result, the central bank had to reduce its foreign currency reserves to give lira some support. Still, it’s clear that it doesn’t work and the regulator has an emergency meeting today. A rate hike’s widely expected.

    Currencies likeSouth African rand, Russian ruble, Unraine hryvnia, Chilean peso continue their fall. Pimco thinks that once the risk aversion abates, people will start to differentiate again and currencies would recover. Others say the declines are sowing the seeds of problems for developing nations because weaker currencies would push up overseas debt payments for countries, damping the outlook for their economies.

    Comment


    • #32
      Key currency options

      Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

      Here are the key options expiring today:

      EUR/USD: $1.3590, $1.3670, $1.3680, $1.3700;

      USD/JPY: 102.00, 102.40, 102.90, 103.00, 103.80, 104.00;

      AUD/USD: $0.8700, $0.8875;

      USD/CAD: 1.0940;

      EUR/GBP: 0.8265;

      EUR/JPY: 141.20;

      AUD/JPY: 91.30.

      Comment


      • #33
        China: the imminent debt crisis?

        The risk of a credit crunch is hanging over China. The pace of the nation’s debt increase is extremely high. China’s local governments have public debt of $3 trillion. This week one of Chinese trusts has managed to avoid default, presumably, thanks to a bailout. Still, this raises many questions about the nation’s financial future. The nation’s extraordinary economic growth used to be a wonder and an example for others. However, it seems that this growth is now being built on the growing reliance on debt that will be difficult to repay. The existence of a huge shadow banking sector which, according to some estimates, equals 40% of GDP, makes the problem ever more serious.

        Comment


        • #34
          Morgan Stanley: short on USD/JPY

          USD/JPY extends the upside, breaking above the sell orders around 102.80. Will the buyers manage to push through the 103.00 mark or the bearish correction will deepen further?

          Morgan Stanley expects the pair to move even lower. They opened a sell-limit USD/JPY order at 103.00, with a stop at 104.00 and a target at 100.60. "We expect JPY to regain support as broader risk appetite is tested. Signs of Chinese growth slowing are likely to impact Asia regional risk appetite in particular, which will be JPY-supportive, in our view", analysts clarify.

          Comment


          • #35
            FX BAZOOKA: technicals (Jan. 28)

            EUR/USD

            EUR/USD remained between $1.3700 and $1.3650, 50% and 38.2% Fibo of the decline from $1.3890 to $1.3507. MAs remain horizontal, so do the lines Tenkan and Kijun. MACD is in the positive area, but below the signal line and declining. The desire of the bulls to move higher is confronted by the expectations of another $10B reduction in the Fed’s QE. The pair needs some additional drivers.

            Resistance: $1.3700, $1.3750, $1.3800

            Support: $1.3670, $1.3640, $1.3600


            Chart. H4 EUR/USD

            Upcoming events

            EUR - All day - ECOFIN Meetings

            USD - 13:30 GMT - Core Durable Goods Orders, Durable Goods Orders

            USD - 14:00 GMT - S&P/CS Composite-20 HPI

            USD - 15:00 GMT - CB Consumer Confidence

            Comment


            • #36
              GBP/USD

              GBP/USD extends growth for a second day in a row, breaking above $1.6600. The pair is moving towards the recent high of $1.6670. Cable remains supported by the January rising trend line ($1.6515 as of writing). General market sentiment is bullish. MACD histogram rose above the signal line. RSI is close to the overbought zone. Watch the UK Q4 GDP today – the forecast is a little bit to the downside.

              Support: $1.6600/6590, $1.6565, $1.6470

              Resistance: $1.6670, $1.6740


              Chart. H4 GBP/USD

              Upcoming events:

              GBP – 9:30 GMT – Preliminary Q4 GDP, Index of Services

              Comment


              • #37
                USD/JPY

                USD/JPY keeps consolidating below 102.80. The pair needs to rise above 102.85 to extend the recovery. The negative MACD crossed the signal line to the upside (bullish signal). On the daily chart the pair is supported by the bullish Cloud.

                Support: 102.40, 102.00, 101.75, 101.60

                Resistance: 102.85, 103.00, 103.60


                Chart. H4 USD/JPY

                Comment


                • #38
                  USD/CHF

                  The pair still looks bearish as long as it holds below $0.8985. We expect the greenback to extend the downside. The negative MACD crossed the signal line to the upside (bullish signal). Ichimoku Cloud remains bearish. 55-period MA crossed the 100-period MA to the downside.

                  Support: $0.8900, $0.8800

                  Resistance: $0.8985,$0.9030, $0.9090, $0.9130


                  Chart. H4 USD/CHF

                  Comment


                  • #39
                    AUD/USD

                    AUD/USD recovered to the 55-period MA just below $0.8800. Aussie was supported by higher NAB business confidence. The pair’s trying to rise above the horizontal Kijun-sen. MAs are sloping down. All in all, the pair was quite oversold after hitting a multiyear low last week and it may correct a bit more within the general downtrend. The Ichimoku Cloud represents a hurdle at $0.8825. The upper Bollinger band lies here as well.

                    Resistance: $0.8800, $0.8825, $0.8865, $0.8890

                    Support: $0.8758, $0.8740, $0.8700, $0.8663


                    Chart. H4 AUD/USD

                    Upcoming events

                    USD - 13:30 GMT - Core Durable Goods Orders, Durable Goods Orders

                    USD - 14:00 GMT - S&P/CS Composite-20 HPI

                    USD - 15:00 GMT - CB Consumer Confidence

                    AUD - 23:30 GMT - MI Leading Index

                    Comment


                    • #40
                      USD/CAD

                      USD/CAD is consolidating within its medium-term upward trend. Tenkan-sen and Kijun-sen are horizontal and act as support. USD/CAD is trading around the middle Bollinger band. The pair has made a lower high at 1.1118 and the bulls have lost momentum. They might need a day to gather strength.

                      Resistance: 1.1118, 1.1175, 1.1230

                      Support: 1.1050, 1.0100, 1.0950


                      Chart. H4 USD/CAD

                      Upcoming events

                      USD - 13:30 GMT - Core Durable Goods Orders, Durable Goods Orders

                      USD - 14:00 GMT - S&P/CS Composite-20 HPI

                      USD - 15:00 GMT - CB Consumer Confidence

                      Comment


                      • #41
                        Jan. 29: Asian session

                        Asian markets rallied on Wednesday after Turkey raised the benchmark interest rate from 7.75% to 12%, stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets and revive risk appetite generally. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 1.2% after three sessions of falls.

                        Nikkei rose by 2.2%. USD/JPY recovered to 103.44. Commodity currencies strengthened on the Turkish rate hike. AUD/USD extends the recovery for a third day in a row. Aussie rose to $0.8830 before retracing in the late Asia. NZD/USD also remains supported, but was unable to overcome the $.8300 handle for now. Investors wait for the RBNZ meeting at 20:00 GMT (an hour after the FOMC announcement). There is a market expectation for a rate hike or at least for a rate hike promise by the RBNZ Governor Wheeler.

                        EUR/USD is testing $1.3650 to the downside. GBP/USD is little changed in the $1.6575 area.

                        Comment


                        • #42
                          RBA won't cut rates

                          The recent article in Wall Street Journal argues that the Reserve Bank of Australia wouldn’t cut interest from the record low of 2.5% on Feb. 4.

                          Recent data showed Australia’s inflation cam at 0.8% in Q4 (forecast: 0.5%). For the full year, inflation ran at 2.7%, toward the top of the RBA’s 2%-3% target band. NAB business confidence showed that business conditions are at their best levels in close to 3 years. Housing construction and house prices also are responding to the low rates, and there’s compelling evidence that retail sales are growing quickly, says WSJ.

                          Surely, not everything is well. Economic growth this year is still forecast to be below its long-term average of 3.0%. The biggest problem is the slowdown in the mining sector: falling commodity prices have forced mining companies to cancel investment plans, shut mines and lay off workers. Australian payrolls contracted in Dec.

                          Still, even if the RBA’s still thinking about cutting the benchmark rate it wait for now and take time to plan its next move.

                          Comment


                          • #43
                            Commerzbank on AUD/USD

                            Commerzbank says AUD/USD visit $0.8870 (20-day MA) before resuming decline.

                            Analysts say that the pair has reached its interim target at $0.8710/.8671 (the base of the channel in 2011-2014 and the 38.2% retracement of the advance from 2001 to 2011) and is correcting higher.

                            After visiting $0.8870 AUD/USD will continue its descent to the next target at $.8550 (50% retracement of the move from 2008) and then to $.8068 and $0.7950/25. The outlook for Aussie will remain negative as long as it’s trading below the resistance line at $0.8957.

                            Comment


                            • #44
                              NZD/USD: 2 meetings ahead

                              NZD/USD was initially supported by the decision of the Turkish central bank to make an aggressive rate hike. However, the pair’s vulnerable to uncertainty ahead of the Fed’s decision (19:00 GMT) and the Reserve bank of New Zealand’s meeting (20:00 GMT).

                              There’s some speculation about a possible rate hike in New Zealand. However, consensus is that the RNBZ will keep benchmark rate at 2.50%. Note though that the regulator’s governor Graeme Wheeler may hint on plans to begin the tightening cycle in March. We’ll examine the prospects of the FOMC announcement in a different article.

                              Resistance is at $0.8295, $0.8345, $0.8400. Support is at $0.8245, $0.8215, $0.8178. As you may see from the chart the pair will soon have to move beyond either support or resistance.

                              Comment


                              • #45
                                ANZ: long-term bulls on USD/JPY

                                According to ANZ strategists, USD/JPY remains in a long-term rising trend. However, a close above 103.65 would be required to provide some conviction that the uptrend with a next target of 106.50 might have resumed.

                                "A resumption of the uptrend should allow for a push through the 105.50-106.50 area (retracement and downtrend) within a push towards the broader retracement level of 111.50 (50% of the range of the past 20 years)," ANZ projects.

                                Comment

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