Forex Morning Comments: euro, l’outlook di lungo periodo rimane ribassista a 1,3050
Nonostante i guadagni di ieri sui mercati azionari, le incertezze relative al potenziamento del fondo Salva-stati e quelle che circondano il debito italiano (con i rendimenti ancora intorno al 6% pur in presenza degli acquisti della Bce) potrebbero portare a delle prese di profitto, soprattutto considerando la scarsità di volumi in acquisto (elemento che porta a credere di essere di fronte più a ricoperture di breve periodo che ad acquisti convinti e duraturi).
Attualmente il mercato sta prezzando un pacchetto europeo che possa rivelarsi risolutivo, tuttavia la percentuale di haircut che verrà applicata ai bondholder privati, l’ammontare della ricapitalizzazione effettiva delle banche e la leva che verrà accordata al fondo Efsf rappresentano gli elementi in grado di confermare o invertire il trend di acquisti in atto. La seconda incognita degli investitori riguarda quanto upside rimanga ancora dopo i recenti rialzi: le trimestrali americane migliori del previsto e la volatilità contenuta (indice Vix sotto 30) lasciano pensare che vi sia spazio per un ‘ulteriore risalita, pur in presenza di un rischio contagio che, soprattutto qualora non si sistemasse la situazione sul debito italiano, potrebbe presto deflagrare, configurando la classica correzione”buy on the rumor, sell on the fact” .
In questo contesto, l’Euro, sul rally degli ultimi giorni, potrebbe avere vita dura nel riagguantare $1,40: tuttavia, per riaprire lo scenario ribassista, dovrebbe scendere sotto 1.3520. Il nostro outlook di lungo periodo rimane ribassista a 1,3050. Oggi riflettori puntati anche sulla Sterlina sulla testimonianza del Governatorr Mervyn King, che illustrerà i motivi alla base della decisione di proseguire nel Quantitative Easing nonostante un livello di inflazione al 5%. Nessuma indicazione direzionale per il cambio DollaroYen: una chiusura sotto i 76 renderebbe nuovamente possibile i minimi recentemente toccati. Prevista
FOREX MORNING COMMENTS
London – 25th October 2011
(Comments below have been provided by CMC Markets Analyst Michael Hewson)
Financial markets continue to push higher with equity markets hitting two month highs despite the continued uncertainty with respect to this weeks EU leaders summit. On Wednesday Angela Merkel will go to the Bundestag to ask them to vote on leveraging up the EFSF from the current €440bn to around €1trn using financial engineering, on the basis that Germany would not have to put any more money up. This is somewhat ironic given that this is exactly the sort of “smoke and mirrors” that political leaders claimed had been a major cause of the subprime crisis, and had criticised the banking sector for.
Attention has also remained focussed on Italy in light of continued concerns about Berlusconi’s government’s political appetite to do what is necessary to get its finances in order.
The Italian prime ministers assertions that his government will push through
significant structural changes has been met with scepticism in some quarters not least
by Merkel and Sarkozy themselves. Italian 10 year bond yields continue to remain elevated despite continued bond buying by the ECB, just below 6%.
Yesterday’s disappointing economic data has raised fears that the European economy may be falling back into recession, with all the problems that may bring with respect to growth, and today’s latest German Gfk consumer confidence figures are expected to reinforce that with a reading of 5.1, while French consumer confidence is also expected to decline from 80 to 78.
In the UK the main focus this morning will be on Bank of England governor Mervyn King’s testimony to the House of Commons Treasury Select committee to explain his thinking behind this month’s rather controversial decision to embark on the latest round of asset purchases despite inflation being at multi year highs, above 5%.
The main concern remains is that the Bank is rapidly losing its inflation credibility mandate, especially given that it has maintained consistently for the last 3 years, that inflation will fall back towards target, and has so far been woefully wrong at every count. With core price inflation also above target at 3.3% it is hard to argue that inflation is as transitory as the bank says it is given that their recent record on it has been so woeful.
With the UK being a net importer and oil prices rising again inflation could well prove to be much less transitory as the Bank thinks. Today’s latest BBA mortgage approvals are expected to hit their highest levels for six months at 36k but still remain at fairly anaemic levels, highlighting the tightness in the housing market. In the US the latest consumer confidence numbers for October are expected to show a slight improvement to 46.5, from the previous months 45.4.
EURUSD – yesterday’s push higher continues to push the single currency towards the 55 day and 55 week MA resistance between 1.3920 and 1.3940, closing in New York last night around 1.3930. Beyond these two barriers targets 1.4000 which is the 200 week MA, this will be a pretty tough nut to crack. The euro needs to break back below 1.3820 to retarget last week’s lows at 1.3650, which is the main obstacle to a test towards 1.3520. To reopen the downside the euro needs to get back below 1.3520. The outlook remains for a longer term move towards 1.3050, which is the 61.8% retracement level of the 1.1880/1.4940 up move.
GBPUSD – continues to remain fairly well supported pushing back above 1.6000 yesterday. The pound has potential to head towards 1.6105 which is 61.8% Fibonacci retracement of the down move from 1.6620 to 1.5270. To reopen the downside the pound needs to break back below last week’s 1.5850 resistance which was the 50% retracement of the same move. Back below 1.5850 retargets the 1.5670/80 area as well as last weeks low at 1.5630.
EURGBP – the single currency continues to struggle near the range highs at the 0.8790/00 area. Only below the 0.8650 area has the potential to see a retest of this month’s lows at 0.8530. A break below 0.8530 looks for a test of 0.8455, 61.8% retracement of the 0.8065/0.9085 up move.
USDJPY – continues to trade 76.00/78.00 with little indication of which direction the likely breakout will occur, despite another dip below 76.00 to 75.90 on Friday the second such failure this year. The recovery in US bond yields, while generating some uplift more hasn’t generated the momentum needed for a move beyond 78.00. Only a close below 76.00/30 targets 74.50.
Aussie Market Retreats Despite Strong Overnight Leads
(Comments below have been provided by CMC Markets Sales Trader Ben Taylor)
The Australian sharemarket is retreating despite strong gains posted overnight. All sectors have moved into the red with the exception of mining which has helped mitigate the losses of the broader market.
Strong rallies around the globe in risk assets, pre-empting a nearing European financial resolution and better-than-expected US data, has seen traders closing shorts yesterday and overnight ahead of Wednesday’s EU meeting. The overnight gains were, however, met by selling pressure today as conviction still remains low.
A stable flow of economic data and corporate earnings results that have been above market forecasts have given US markets a recent boost. As the VIX is now holding below 30 we may just have the right environment for our next leg higher. Yesterday’s strong result in the Chinese PMI data release had our commodity based market on a ‘sugar rush’, and the overnight moves have helped our mining sector add to yesterday’s gains. The market’s low volumes on the upside suggest we are seeing short covering rather than a strong conviction from buyers. The sell off today is a classic pull back after yesterday’s euphoria.
The producer price figure released yesterday should put downward pressure on tomorrow’s CPI number which is a key read to determine the RBA’s stance on interest rates. A November interest rate fall may be the catalyst for the next leg higher.
The risk for an upswing remains with European developments. The market is currently pricing in a financial rescue package, however the size of response is what short term markets are currently betting on. The percentage haircut for the bond holders, the dollar value of European bank recapitalisations and the leverage for the EFSF are what the market is currently interested in. If the numbers are worse than the current expectations we could see this market turn from peacocks to rubber ducks in the flash of a feather.
World Markets Adjust To Improved Profit Outlook
(Comments below have been provided by CMC Markets Chief Market Analyst Ric Spooner)
Investors around the globe are scrambling to adjust to the increased probability that, as in 2009, markets have been priced for a worst case outcome that may not eventuate. Despite the battering to consumer and business confidence in recent months, investors have in recent weeks seen a steady flow of data suggesting that economic growth and corporate profitability has held up quite well in the circumstances.
The latest evidence includes yesterday’s PMI index in China which rose back above 50 and triggered a large rise in the copper price last night. The US reporting season is proceeding well with a large number of companies beating forecasts. Market valuations still have price earnings multiples based on forward earnings well below the average levels that have applied in the low growth environment since the GFC. This implies further upside in valuations unless there is a significant deterioration in earnings flowing from contagion of the European debt situation.
The profit reports of 3 of the major Australian banks will be released over coming days and will have an important bearing on the ASX 200 index which is heavily weighted towards the 4 major banks. The deteriorating outlook for credit growth and the international finance sector has weighed on the overall performance of the index in recent months. However, the strong rally in recent days is getting to the stage where investors may begin to consider how much upside remains following the upcoming announcement of European plans to deal with its sovereign debt risk. To the extent that the announced plans leave open the possibility of a run on Italian debt there is an increasing risk of some short term disappointment and a “buy the rumour, sell the fact” correction.