Comments and forex-analytics from FBS Brokerage Company

[fallenDC]

Commerzbank: bearish on NZD/USD

 

NZD/USD remains strong after a FOMC meeting minutes didn’t give any clear hint on the additional policy easing in the nearest future. Analysts at Commerzbank, however, remain bearsh on NZD/USD and expect the pair to decline to 0.7844 (38.2% Fib of 2012 downtrend) and 0.7825 (55-day MA) after a 2-month upward movement.

 

In their view, a break below 0.7825 would pave ground for a drop to a 0.7469/0.7371 support zone. According to specialists, the New Zealand currency will remain under pressure while it trades below 0.8319 (April maximum). However, resistance at 0.8085 and 0.8255 (78.6% Fib) looks too strong for the pair to overcome it, so NZD/USD is likely to move on a downside.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/nzdusd_1207.gif

 

Chart. Daily NZD/USD

 

 

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[fallenDC]

Bank of Japan: no easing, only technical changes

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/bank-of-japan3.jpg

 

REUTERS/Issei Kato (JAPAN)

 

 

The Bank of Japan has made a technical change to its asset purchase and lending program. The total size of the program was maintained at 70 trillion yen ($879 billion). The BOJ expanded its asset-purchase program by 5 trillion yen to 45 trillion yen ($564 billion) cutting the loan facility by the same amount to 25 trillion yen. As a result, the total amount of the asset purchase and lending program remained unchanged at 70 trillion yen.

 

The BOJ pledged to increase its purchases of short-term public debt – previous extensions of the program had been mostly for long-term government bonds. As for the benchmark rate, the central bank left it in the 0-0.1% area.

 

Japanese Finance Minister Jun Azumi called for more support from the central bank for growth and inflation to meet a 1% price goal. Azumi expects BOJ policy effect to emerge gradually.

 

The market weren’t much impressed by the move which is not regarded as monetary easing. USD/JPY has briefly spiked to 79.96 before sliding to the levels below today’s opening around 79.50 yen. Investors bought yen as a refuge ahead of the release of the euro zone’s industrial production later today and important Chinese data tomorrow.

 

The pair remains supported above 200-day MA at 79 yen. Some market players say that Japanese exporters will sell the currency above 80 yen.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/daily_usdjpy_9-56.gif

 

Chart. Daily USD/JPY

 

 

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[fallenDC]

Key options expiring today

 

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 (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD: $1.2200, $1.2215, $1.2225, $1.2230 (large), $1.2400, $1.2550;

 

USD/JPY: 78.75, 79.00, 79.85, 80.00;

 

AUD/USD: $1.0200, $1.0350;

 

EUR/AUD: 1.2065;

 

EUR/GBP: 0.8020, 0.8030, 0.8070;

 

NZD/USD: $0.8000.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/09_07_12/flatline.jpg

 

 

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[fallenDC]

Aussie hit by poor jobs data

 

Australian dollar dropped versus the greenback from the levels close to the 200-day MA breaching uptrend support line from the beginning of June.

 

Aussie got hurt due to the discouraging Australian labor market data: the number of jobs contracted by 27K last month (vs. + 0.2K expected). Australian currency is also affected by the expectation of Chinese growth slowdown. China’s GDP is released tomorrow and its growth rate is forecasted to decline from 8.1% in the first 3 months of the year to 7.9% in Q2.

 

Analysts at Westpac claim that Australian jobs report is “pretty horrible”. The specialists underlined that all jobs that were added were part-time and that’s a bad sign. Strategists at NAB, on the other hand, think that things as not as gloomy as they seem. In their view, the unemployment rate of 5.2% remains low by historical standards. The odds of another RBA rate cut increased, but such move in August still seems unlikely as Australia’s monetary authorities will like to watch for the effects of their recent rate cuts. The central bank cut rates in May and June to 3.5% and stayed on hold in July.

 

AUD/USD set the daily minimum at $1.0135 and then recoiled up to $1.0150. Support lies at $1.0125 (June 28 maximum), $1.0090 and $1.0055. Resistance lies at $1.0200, $1.0225 and $1.0240.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/h4_audusd_12-15.gif

 

Chart. H4 AUD/USD

 

 

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[fallenDC]

Commerzbank: forecast for GBP/USD

 

Technical analysts at Commerzbank note that GBP/USD has recently completed consolidation.

 

In their view, British currency will return to $1.5600 and then slide from this point firstly to $1.5403 (June 8 minimum) and eventually to $1.5268/33 (June 1 minimum and 2012 minimum) and then possibly to $1.5000/1.4990.

 

According to the bank, resistance lies at $1.5593/1.5600 (June 25 maximum, June 7 peak) and $1.5750/85 (200-day, 200-week MAs, 50% Fibo retracement of the decline in May).

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/daily_gbpusd_12-56.gif

 

Chart. Daily GBP/USD

 

 

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[fallenDC]

Barclays Capital: bearish on USD/JPY

 

Analysts at Barclays Capital are bearish on USD/JPY and recommend going short on the pair at 79.6, setting a stop at 80.0 and targeting at 78.0. In their view, slowed global growth and European woes are likely to push the Japanese currency up, while the BoJ is unlikely to extend the asset purchase program.

 

However, improving risk sentiment and more aggressive BoJ easing could threaten the yen’s strength. Japan’s monetary authorities claim they are ready to loosen policy in order to reduce the deflationary pressure on the economy. Core consumer prices contracted for the first time in 4 months sliding by 0.1% y/y in May, while Tokyo core CPI fell by 0.6% in June – the BOJ’s 1%-inflation target seems like very hard to attain.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/daily_usdjpy_11.07._13-13.gif

 

Chart. Daily USD/JPY

 

 

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[fallenDC]

NAB: AUD/USD to fall below parity

 

Analysts at NAB expect AUD/USD to drop below parity by the end of 2012 on the back of the slowed global growth and lower prices on raw materials.

 

Specialists devote considerable attention to weak economic releases coming from China lately. China’s slowed economic growth could pull AUD/USD to $0.97.

 

According to CFTC report, traders remain in net short positions on AUD for six consecutive weeks (the longest stretch since 2009) as falling export prices raise concerns the RBA will cut rates further.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/daily_audusd_12.07._14-28.gif

 

Chart. Daily AUD/USD

 

 

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[fallenDC]

EUR/USD: fundamental & technical

 

Fundamental

 

- Spanish Prime Minister Mariano Rajoy announced yesterday 65 billion euro ($80 billion) of new austerity measures in a renewed effort to meet EU budget targets after the nation was granted another year to reduce the budget deficit. Now Spain has until 2014 to bring its deficit within the EU’s 3%. This is Spain’s fourth austerity package in 7 months and the new flashpoint for supports and the opposition.

- Finland is in discussions to get shares in Spanish banks as collateral in exchange for its contribution to the bailout.

- Euro zone May industrial output +0.6% m/m, -2.8% y/y, better than consensus forecast.

- ECB monthly bulletin: heightened uncertainty, some downside risks to growth outlook have materialized.

 

Spanish 10 year yields are up by 3 bps on day at 6.61%.

 

Technical

 

Strategists at RBS recommend selling EUR/USD up to $1.2290 (June minimum) targeting $1.1875 (2010 minimum) stopping above $1.2350 (the recent cluster of daily maximums).

 

Analysts at UBS claim that key support for EUR/USD lies at $1.2152. If euro breaches this level, it will slide to $1.2000. Resistance lies at $1.2336 and $1.2402.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/h4_eurusd_14-41.gif

 

Chart. H4 EUR/USD

 

 

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[fallenDC]

China's GDP is to disappoint markets

 

China’s GPD release on Friday attracts investors’ attention as will define the risk sentiment and influence the commodity currencies. Most analysts expect the second largest economy in the world to grow below the expectations in Q2 (consensus: 7.9%; previous print: 8.1%).

 

Experts at Development Research Centre expect China’s economy to grow by 7.5% in Q2. In the second half of 2012, however, the economy is likely to recover modestly as the monetary policy measures will bear fruit. China’s economy could grow around 8% in 2012. Specialists believe the world's second-largest economy is entering a phase of more modest expansion in comparison to the 10% annual average rate in the past three decades, but it could still maintain a 7-8% annual rate in the next 10 years. Still, any reading below 8% tomorrow will hit the market's risk sentiment.

 

According to Barclays Capital forecasts, China’s June industrial production may exceed the 9.8% forecast, but this small positive result will be offset by the negative GPD surprise. In their view, the weaker-than expected GDP will hurt the Aussie.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/12_07_12/china_gdp.jpg

 

Chart. China's GDP (2003-2012)

 

Source: forexfactory.com

 

 

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[fallenDC]

July 13: economy and currencies

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/13_07_12/utro_eng.jpg

 

The markets were apathetic to China’s GDP release: everyone has already submitted to the fact that the growth pace of world’s fastest growing economy is slowing down. Even the consensus was dragged lower before the release from 7.9% to 7.7%. The data released today showed that Chinese GDP increased by 7.6% in Q2 after extending by 8.1% in the first 3 months of the year. Chinese industrial production and retail sales grew a bit less last month than in May, while the advance in fixed asset investment was slightly bigger.

 

Investors are now much more preoccupied with what’s happening in Europe, particularly in Italy. The nation holds a 10-year bond auction. Overnight Moody's ratings agency downgraded Italy's government bond rating by two notches to Baa2 from A3. According to experts, Italy’s near-term economic outlook has worsened: weaker growth and higher unemployment creates risk of failure to meet fiscal consolidation targets. On Thursday, however, Italy raised 7.5 billion at a lower rate than previously, indicating improved investor confidence.

 

US is to release PPI (forecast: a 0.5% decline in June), core PPI (forecast: a 0.3% growth in June) and preliminary UoM consumer sentiment index (expected to increase to 73.5 in July).

 

Risky currencies are trading on the upside today, though they are set for the weekly declines due to the general pessimism. The MSCI Asia Pacific Index of shares added 0.6% after falling by 0.2%. Analysts at Westpac underline that the growth momentum is still slowing down, though there may be more of a short squeeze in the currencies like Aussie in the near term.

 

 

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[fallenDC]

Analysts: trading EUR/USD

 

Analysts at Commerzbank expect EUR/USD to decline to $1.2053 (200-month MA) after having reached $1.2187. According to specialists, the descending triangle figure paves the ground for a decline to $1.1934 and to $1.1876 (2010 minimum). Resistance for the pair lies at $1.2287 (June 1 minimum), $1.2367 (200-day MA) and $1.2475 (triangle support line).

 

Strategists at Aspen Trading Group are also bearish on EUR/USD and recommend going short at $1.2150 with a stop at $1.2300 and a target of $1.1850. In their view, this level is close to fair value of the pair.The specialists claim that being bearish on euro is the best risk-off trade these days.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/13_07_12/daily_eurusd_13.07._11-17.gif

 

Chart. Daily EUR/USD

 

 

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[fallenDC]

Key options expiring today

 

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 (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD: $1.2135, $1.2170, $1.2175, $1.2200 (large), $1.2235, $1.2300, $1.2350, $1.2375;

 

USD/JPY: 79.00, 79.25, 79.75, 80.00;

 

AUD/USD: $1.0000, $1.0100, $1.0195, $1.0200, $1.0220;

 

AUD/JPY: 83.00;

 

GBP/USD: $1.5500, $1.5650;

 

EUR/GBP: 0.7900;

 

USD/CAD: 1.0150.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/09_07_12/flatline.jpg

 

 

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[fallenDC]

GBP/USD: technical comments

 

GBP/USD touched a new 5-week minimum in Thursday due to a risk-off market mode ($1.5392), but then started an upward correction to the $1.5440/50 area. Most technical indicators show the descending trend is likely to continue. Yesterday the pair broke through a flagpole of a bear flag pattern. All in all, GBP/USD trades in a downward channel since June 20.

 

It makes sense to sell GBP/USD on a pullback higher, targeting $1.5267 (June 1 minimum). The next support for the pair lies at $1.5233 (2012 minimum), while resistance – at $1.5450, $1.5510 (23.6% Fib. retracement of a May decline) and 1.5662/45 (38.2% Fib. retracement and a resistance of a downward channel).

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/13_07_12/daily_gbpusd_13.07._13-15.gif

 

Chart. H4 GBP/USD

 

 

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[fallenDC]

BoA Merrill Lynch: delusions about euro area

 

Analysts at Bank of America Merrill Lynch looked at the euro zone’s problems from the point of view of the game theory. The specialists analyzed the economic situation in each of the 11 largest euro zone countries and assessed the likely impact of their exit from the currency bloc.

 

Delusion #1: Strong countries like Germany and Austria could leave the euro zone without too much pain, while the weaker peripheral countries need the stability of the euro.

 

BoA has found out that “Italy and Ireland have the highest relative incentive to voluntarily exit the euro, while Germany has the lowest incentive of any country to leave.”

 

Conclusion: Italy has a stronger incentive to leave the euro zone than Greece and, consequently, will be less likely to accept tough conditions to stay.

 

Delusion #2: The euro zone will hang together because it's to the member countries’ collective advantage.

 

BoA recalls the famous prisoner’s dilemma (the game theory problem, in which individuals’ own incentives outweigh their joint interests) in the context of Germany and Greece and austerity-Eurobonds debate. It would be in both countries' interests to cooperate – for Greece to adopt austerity and Germany to agree to Eurobonds – but each country will ultimately try to maximize its own benefit: Greece would be better off with Eurobonds but no austerity, while Germany would benefit more from the opposite.

 

Conclusion: countries have not so many incentives not to cooperate on resolving the crisis, so euro’s future is really under threat.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/09_07_12/prisoners_dilemma_2.gif

 

 

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[fallenDC]

July 16: events to watch

 

Japan: Bank holiday

 

Euro area: CPI growth is to remain at 2.4% in June, while core CPI – at 1.6%. According to the ECB report, inflation rate will fall below the regulator’s 2% ceiling next year.

 

US: Core retail sales are expected increase by 0.1% in June, what is much better than a 0.4% drop in May, but still points at the weakness of the US economy. Retail sales demonstrate the similar dynamics: 0.2% growth in June vs. a 0.2% decline in May. Weak figures will add to investor’s concerns about a new QE.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/13_07_12/6a00d8341d417153ef01348687f598970c-800wi.jpg

 

Cartoon: jeffreyhill.typepad.com

 

 

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[fallenDC]

July, 16: economy and currencies

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/utro_eng.jpg

 

On Monday the single currency remains close to a two-year low vs. the greenback ahead of today’s releases. European inflation is likely to stagnate, while consumer confidence – to weaken. According to the latest comments of Angela Merkel, Germany hasn’t changed her position about the austerity measures for the problem European nations. However, Merkel said she is confident the majority of German members of parliament will support aid package for Spain’s ailing banking sector.

 

The MSCI Asia Pacific added 0.3% as Asian shares rose. Japan’s financial markets are closed for a holiday. Safe currencies benefit from a risk aversion as markets are expecting more easing from the world’s major central banks. Investors are looking forward to Ben Bernanke’s semi-annual report on US economic outlook to Congress tomorrow. Market participants will also pay special attention to today’s IMF growth forecasts.

 

 

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[fallenDC]

UBS: bearish outlook for EUR

 

Analysts at UBS note that euro fell to the record minimums versus Australian, New Zealand and Canadian dollars, but remains well above the all-time lows against US dollar, Japanese yen, British pound and Swiss franc. Such dynamics reflects foreign exchange intervention by the SNB and loose monetary policy of the Fed, the Bank of Japan and the Bank of England.

 

According to specialists, if the Fed and the BoJ continue to disappoint investors looking for further easing then the euro’s further decline will become likely. Analysts continue to target EUR/USD falling to $1.15 this year.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/eur_bloomberg.jpg

 

Image: Bloomberg

 

 

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[fallenDC]

Westpac: the Fed won’t signal easing

 

The Fed Chairman Ben Bernanke is going to testify to the Congress on Tuesday and Wednesday.

 

Analysts at Westpac point out that Bernanke has said he is ready to take action as warranted, but so far he has been vague about what that means. If the Fed’s chief doesn’t signal that monetary stimulus is inevitable, the demand for riskier assets will fall. In this case the specialists recommend selling AUD/USD. On the other hand, if US central banker signals that there may be more easing, one should buy Aussie.

 

Westpac thinks that the first outcome is more likely as the Fed may decide to wait for more reports on employment and, probably, Greek bond redemption before deciding on a course of action. As a result, the bank’s recommendation is to sell AUD/USD at $1.0250 targeting $1.0100 and stopping at $1.0330.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/ben_bloomberg.jpg

 

Ben Bernanke, chairman of the Federal Reserve

 

Photo: Bloomberg

 

 

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[fallenDC]

Key options expiring today

 

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 (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD - $1.2175, $1.2200, $1.2250, $1.2300, $1.2325, $1.2350

USD/JPY - Y79.25, Y79.70, Y80.00

GBP/USD - $1.5500, $1.5490, $1.5450

AUD/USD - $1.0150, $1.0165, $1.0190, $1.0300

EUR/AUD - A$1.2000

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/09_07_12/flatline.jpg

 

 

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[fallenDC]

Westpac: NZD/USD and the Fed

 

NZD/USD remains flat and close to a 200-day MA since July 9 after trading in an upward channel since the end of May. Specialists at Westpac expect the pair’s further movement to depend on the Ben Bernanke’s testimony on Tuesday and Wednesday.

 

According to analysts, NZD/USD will move higher to $0.8075 before Wednesday. Any positive outcome (a hint on QE3 or a verdict) would likely push it to $0.8200, while negative – to pull it down to $0.7840 and then to $0.7000 during the weeks ahead.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/daily_nzdusd_16.07._12-59.gif

 

Chart. Daily NZD/USD

 

 

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[fallenDC]

Analysts: USD/CHF will reach parity

 

On Monday the greenback keeps strengthening vs. the Swiss franc as risk aversion dominates the global markets and concerns continue to weigh on the euro area. According to analysts at largest Swiss banks, USD/CHF is moving up towards parity following the depreciating euro.

 

Credit Suisse: If the euro weakens due to global risk aversion toward $1.20, we would expect USD/CHF to reach parity.

 

UBS: If the SNB is intervening to defend the cap, they are essentially recycling the euros into a series of other currencies, 50% of which are going to be dollars, what is going to push USD/CHF higher.

 

Last week the pair reached its highest level since December 2010. The next resistance for USD/CHF lies at 0.9873 and 0.9904, while support - at 0.9838, 0.9807, 0.9772 and 0.9741.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/daily_usdchf_16.07._14-07.gif

 

Chart. Daily USD/CHF

 

 

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[fallenDC]

HSBC: currency outlook

 

Analysts at HSBC gave the following comments on the currency pairs:

 

AUD/USD: Aussie is dominated by changes in risk appetite. There are plenty of external headwinds for a highly “risk-on” currency out there, and global developments will continue to be the main determinants of the price action, so AUD seems vulnerable.

 

USD/CAD: CAD has stabilized and recovered following its risk-related declines in May. Recent Canadian economic data shows the economy holding up fairly well. Other factors also seem quite positive for loonie: stabilization and partial recovery in oil prices and the fact that Canada is one of the only triple-A credits left in the world.

 

USD/JPY: Everyone expects USD/JPY to rise. This has fostered a prejudice that interprets most breaking Japanese news in terms of potential adverse implications for the JPY. The latest example is the recent weakness of the JPY as Japan moves ever closer to a possible consumption tax hike. The logic behind the resultant rally in USD/JPY is flawed and will reverse. Looking further out 2012 will finish with a lower dollar.

 

HSBC points out that as the central banks all over the world are easing their policies. As a result, the market’s sentiment is risk-on even though state of the global economy is deteriorating. “This risk rally comes with contradictions for the USD, because the upswing in financial assets is USD bearish while the worsening economy is USD bullish. The USD resilience may not last. The focus may shift to the fiscal cliff facing the US,” warns HSBC.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/what_is_forex_currency_trading.jpg

 

 

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[fallenDC]

Credit Suisse: sell EUR/USD on a pullback

 

EUR/USD has strengthened after the US retail sales have come out worse than expected. Retail sales contracted in June by 0.5% m/m, while core retail sales (excluding the auto sector) – by 0.4%. The released data added to investors’ concerns about the possibility of new monetary easing by the Fed. NY Empire state manufacturing index jumped to 7.39 in July from 2.29 in the previous month; these positive figures, however, were completely offset by the retail sales contraction.

 

Specialists at Credit Suisse remain bearish on the single currency regardless of a current pullback higher. Analysts recommend going short on EUR/USD at $1.2295, targeting $1.2000 and with a stop at $1.2348. What is more, the pair has all the chances to break $1.2163 and $1.2151 support levels and to reach key support at $1.1985/1.1876. Resistance at $1.2276/89/97 is forecasted to limit the upward correction of the euro. If the EUR/USD manages to overcome $1.2335/40, a surge to $1.2749 will become possible. However, in current economic environment the bearish scenario looks more realistic.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/16_07_12/daily_eurusd_16.07._17-40.gif

 

Chart. Daily EUR/USD

 

 

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[fallenDC]

July 17: economic & forex news

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/17_07_12/utro_eng.jpg

 

Ben Bernanke is once again the hero of the market’s expectations: investors expect to hear his hints on further monetary easing as he testifies to Congress today. It’s obvious that US economic recovery really is stumbling: data released yesterday showed that retail sales fell for a third month in June, contracting by 0.5%. The Fed’s chief is speaking in front of the Senate Banking Committee and the House Financial Services Committee tomorrow. US dollar’s weakening versus the majority of its counterparts on the news.

 

Also watch for US CPI data later today. Median forecast is that US CPI was unchanged last month from May when it declined by 0.3% (m/m). Annual inflation is seen sliding from 1.7% in May to 1.6% in June, below the Fed’s 2% medium-term target – another argument for more QE.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/17_07_12/13322600672.jpg

 

EUR/USD trades on an upside for a third consecutive day ahead of the ZEW economic sentiment release. The release may show today that the index of German investor expectations slid to minus 20 this month (the lowest since January) from minus 16.9 in June. Moody’s rating agency downgraded 13 Italian banks tonight. The IMF has slightly lowered its outlook for global growth in latest report on the world economy.

 

AUS/USD appreciates as the RBA meeting minutes released today made the new rate cuts less likely. The Australian policymakers reveal confidence in economy: national labor market looks stronger, China's economy wasn't slowing as much as previously anticipated and the overall mood in euro area seems to be better on the back of progress made by EU leaders late June. However, the euro zone’s debt woes still threaten the Australian economy. NZD/USD is up despite a CPI release (inflation in Q2 increased by 0.3%, what is below a forecasted 0.5% growth).

 

The MSCI Asia Pacific Index (MXAP) of shares advanced 0.6%. The overall market sentiment is positive ahead of Bernanke’s testimony: demand for USD and JPY vs. the other key currencies has dropped. USD/JPY strengthens after a three-day decline after touching the lowest since June 18 yesterday. According to Japan’s finance minister Jun Azumi, gains in the yen were “speculative” and officials will “take decisive action if needed.”

 

 

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[fallenDC]

Key options expiring today

 

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 (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD: $1.2100, $1.2190, $1 .2200, $1.2250, $1.2300, $1.2400;

USD/JPY: 78.00, 79.00, 79.15;

AUD/USD: $1.0250;

EUR/GBP: 0.7970;

USD/CHF: 0.9800, 0.9900.

 

http://www.fbs.com/sites/default/files/image/analysis/July2012/09_07_12/flatline.jpg

 

 

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If you have any questions to our analysts, you’re welcome to ask them in comments to this article!