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MARKET DRIVERS – CURRENCIES

FX Research • 27.07.2010 • Jyske Markets

MARKET DRIVERS – CURRENCIES FX Research • 27.07.2010 • Jyske Markets Today’s Comment The English version

Today’s Comment

The English version of our July/August issue of FX-Spot On will be published very soon. We have raised our 3-month forecast for EUR/USD to 1.23, as the worst panic relating to the euro zone debt crisis seems to have abated. We assess, however, that there is a certain risk we will see renewed political turmoil after the summer and maintain therefore our negative view of the cross rate in the short term. However, for the slightly longer term we still expect that the euro will gain further ground as the political risks diminish and the risk premium for the euro will be reduced. Moreover, we think the discussion about fiscal tightening on the other side of the Atlantic will put pressure on the dollar towards the end of the period covered by our forecast.

over the past 13 months. Consumer

confidence is still below the historical average, and that indicates that the US consumers are still cautious. Even though the recent turmoil in the financial markets may have a somewhat negative effect, the headwind that consumers have been facing is gradually changing to a slight tailwind, and therefore we expect a moderate increase in consumer confidence in July. Yet, disappointing figures will add to the budding concerns about another downturn in the US economy (a so-called W-turn), and that may result in renewed pressure on the dollar. Technically, we assess that EUR/USD will see resistance at about 130.25 (equalling last week’s peak), but if this level is breached, there will initially be scope for a decline of the dollar down towards 130.95-131 against the euro.

With respect to economic indicators, consumer confidence in the US will today be scrutinized. The US consumer confidence fell drastically in June, and this led to concerns that the consumers will not be able to take on the role as growth engine when the temporary stimuli expire in the autumn. We point out, however, that the decline is seen after a 3- month period of increases and that consumer confidence is still in the range we have seen

Today’s Key Events

08:00 GfK consumer confidence (DEM)

09:30 Producer prices (SEK)

10:00 M3 money supply (EUR)

15:00 CaseShiller house prices (USD)

16:00 Conference Board Consumer confidence (USD)

Today’s Chart – US Consumer confidence (Conference Board)

150 140 130 120 110 100 Mean 90 80 70 60 50 40 30 20 86
150
140
130
120
110
100
Mean
90
80
70
60
50
40
30
20
86
88
90
92
94
96
98
00
02
04
06
08
10
Index (1985 = 100)

Source: Reuters EcoWin

Publisher

Editor:

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Jyske Markets

Helle Varming

Read more FX and interest rate analyses at www.jyskemarkets.com

FX & Interest Rate Research

FX & Interest Rates

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MARKET DRIVERS – CURRENCIES

FX Research • 27.07.2010 • Jyske Markets

Currency

Spot

Short-term market drivers

 

Technical levels

   

1-month

     

target

Majors

 

EUR/USD

130.04

Focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds sent down EUR

-

Resistance

 
  • 130.25 next

131.00

 
   

The US is somewhat ahead of Europe in the economic cycle, and for some time economic indicators have shown good trends

-

Support:

 
  • 124.80 next

124.00

123

   

The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should

+

         

USDDKK

573.18

Focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds sent down EUR

+

Resistance

597.16

next

601.02

 

The US is somewhat ahead of Europe in the economic cycle, and for some time economic indicators have shown good trends

+

Support:

572.18

next

568.90

606

The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should

-

 

EURGBP

83.89

Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling

+

Resistance

83.95

next

85.30

 
   

Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted

-

Support:

83.15

next

82.10

82.50

   

We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2

-

         

GBPDKK

888.45

Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling

-

Resistance

896.28

next

907.75

 

Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted

+

Support:

887.74

next

873.69

903

We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2

+

 

EURJPY

113.11

Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY

-

Resistance

 
  • 113.45 next

114.40

 
   

Risk of renewed risk aversion supports JPY slightly

-

Support:

 
  • 111.40 next

110.00

110

   

Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme

+

         

JPYDKK

6.59

Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY

+

Resistance

6.69

next

6.78

 

Risk of renewed risk aversion supports JPY slightly

+

Support:

6.57

next

6.51

6.77

Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme

-

 

EURCHF

136.48

             
   

Please refer to the publication, CHF: stil moving upwards

         

-

                 

CHFDKK

546.11

Please refer to the publication, CHF: stil moving upwards

 

-

MARKET DRIVERS – CURRENCIES FX Research • 27.07.2010 • Jyske Markets Currency Spot Short-term market driversCHF: stil moving upwards - CHFDKK 546.11 Please refer to the publication, CHF: stil moving upwards - " id="pdf-obj-1-423" src="pdf-obj-1-423.jpg">

MARKET DRIVERS – CURRENCIES

FX Research • 27.07.2010 • Jyske Markets

Currency

Spot

Short-term market drivers

 

Technical levels

   

1-month

       

target

Scandinavia

   

EURNOK

799.25

Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record -high levels

-

Resistance

812

next

818

 
   

Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term

-

Support:

795

next

788

800

   

Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK

+

         

NOKDKK

93.19

Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record-high levels

+

Resistance

93.74

next

94.58

 

Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term

+

Support:

91.78

next

91.11

93.10

Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK

-

 

EURSEK

946.99

Still risk that SEK will suffer a blow in the event of risk aversion

-

Resistance

965

next

980

 
   

Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis

+

Support:

935

next

925

980

   

After GDP for Q2, Q3 and Q4 2009 has been revised up, an interest-rate hike in July is very likely

+

         

SEKDKK

78.67

Still risk that SEK will suffer a blow in the event of risk aversion

+

Resistance

79.71

next

80.57

 

Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis

-

Support:

77.23

next

76.05

76.00

After GDP for Q2, Q3 and Q4 2009 has been revised up, an interest-rate hike in July is very likely

-

 
MARKET DRIVERS – CURRENCIES FX Research • 27.07.2010 • Jyske Markets Currency Spot Short-term market drivers

MARKET DRIVERS – CURRENCIES

FX Research • 27.07.2010 • Jyske Markets

Current Strategies

Currency Strategy Description of Strategy Date of Entry Target Stop READ Entry Level Loss MORE USD/JPY
Currency
Strategy
Description of Strategy
Date of
Entry
Target
Stop
READ
Entry
Level
Loss
MORE
USD/JPY
Option
Due to deflation in Japan, BoJ will keep rates unchanged for quite som time into 2011
Widening of the interest-rate spread to the US and the euro zone, among others, will put the yen under pressure
In the long term, the dollar will strengthen due to a faster economic recovery and stronger rate hikes in the US
16-12-2009
89.68
106 N/A
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Please note: We point out that FX investment is currently associated with extraordinarily high uncertainty. But for long-term risk tolerant investors, there may be good investment opportunities in these turbulent times. This recommendation is only relevant for very risk-tolerant clients with the right risk profile and the overall financial strength to cope with any loss that may be incurred.

 

MARKET DRIVERS – CURRENCIES

FX Research • 27.07.2010 • Jyske Markets

Disclaimer & Disclosure

Jyske Bank is supervised by the Danish Financial Supervisory Authority.

The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the ma terial nor any liability for transactions made on the basis of the information or the estimates of the report. The estimates and recommendations of the research report may be changed without notice. The report is for the personal use of Jyske Bank's custom ers and may not be copied.

This is a recommendation and not an investment report.

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Risk

FX, money market and/or commodity investment involves risk. Movements in the credit market, the sector and/or the news flow, etc. regarding the issuer may affect the exchange rate/the interest rate /the price of the commodity. See the front page of the research report for our view of the risk associated with the currency/interest rate/commodity investment. The risk factors and/or the sensitivity calculations stated in the report should not be regarded as exhaustive.

Update of the research report

Analyses, recommendations, and ad hoc publications are not updated. A new publication will instead be published if and when it is found necessary. Market comments are updated daily.

See the front page for the initial date of publication of the report. All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.

MARKET DRIVERS – CURRENCIES FX Research • 27.07.2010 • Jyske Markets Disclaimer & Disclosure Jyske Bank