Thread: OcaFX.Com - Financial News and Analysis

Gold slips as euro zone worries lift dollar


LONDON (Reuters) - Gold slipped on Monday as concerns over Greece's progress on completing a debt restructuring deal and poor euro zone data lifted the dollar versus the euro, and as appetite for assets seen as higher risk, like commodities, suffered after China set its lowest annual growth target in eight years.


Spot gold hit a low of $1,694.24 an ounce and was down 0.5 percent at $1,702.86 an ounce at 1259 GMT, while U.S. gold futures for April delivery were down $5.30 an ounce at $1,704.50.


Spot prices fell 3.9 percent last week, their worst weekly performance since mid-December, after Federal Reserve chairman Ben Bernanke gave no further hints, in a key speech, of a third round of quantitative easing in the United States.


"Markets had really hoped for QE3, and that did create a plunge for gold, because all of a sudden traders and investors abandoned risky assets, we've seen the U.S. dollar strengthening and stock markets (easing)," said Peter Fertig, a consultant at Quantitative Commodity Research.


Although extreme risk aversion was a key factor lifting gold last year at a time when the dollar was strengthening, it has since reestablished its usual inverse relationship to the U.S. unit as investor appetite for the dollar as a safe haven outweighed that for gold, and as panic in the markets subsided.


From a technical perspective, analysts said gold is vulnerable to further losses after last week's rout, particularly if prices break through $1,690 an ounce. Gains in the dollar, which make commodities priced in the U.S. currency more expensive for holders of other currencies, are pressuring the metal.


The U.S. unit strengthened as the euro and growth-linked currencies fell on Monday, undermined by concerns over Greece's progress on completing a huge debt restructuring deal and poor euro zone economic data, although dealers said the dollar was ripe for some profit-taking.


European shares fell, while German Bund futures hit record highs after euro zone services sector PMI data missed expectations and as nerves grew before a Thursday deadline for investors to voluntarily take part in Greece's debt swap deal. A signal from China that it would accept a slower growth rate increased risk aversion.


Although immediate wider market pressures and near-term technical factors spell short-term weakness in gold, in the longer run it remains firmly underpinned by the United States' ultra loose monetary policy, portfolio diversification, and strong physical demand from Asia, analysts said.
"Negative real interest rates and accommodative monetary policy were and remain the key drivers of investment demand," Morgan Stanley said in a note. "Bernanke's testimony did nothing to remove this benefit."
"Under these circumstances, QE3 would have been icing on the cake for the monetary easing trade, but not the fundamental driver of bullish investor positioning," it added.


Mar 05, 2012 13:09

Australian Dollar Sold as Dovish RBA Cuts Hopes for Future Rate Hike



The Aussie fell as traders were forced reexamine their positions after the RBA indicated it was not shy toward interest rate easing in the event market conditions warranted such a move.


THE TAKEAWAY: Reserve Bank of Australia Maintains Cash Rate at 4.25% > Dovish Rhetoric Cuts Hope for Traders Anticipating Future Rate Hike > AUDUSD Drops as Low as $1.061








The Reserve Bank of Australia (RBA) decided to hold its key interest rate unchanged at 4.25 percent. Though the RBA’s action was no surprise to traders, the accompanying statement was markedly dovish and placed the AUDUSD under significant selling pressure.


The central bank’s Board of Governors cited a soft labor market, falling inflation rates, and carbon price effects as major prompts for its decision. Forecasting improving productivity growth over the next few months, the RBA judged that maintaining the cash rate at 4.25 percent was “appropriate for the moment.” However, the statement noted that if the country’s demand conditions were to decline, then the Board would move to foster economic growth by easing its monetary policy on the basis of cutting interest rates.


Traders expected that the cash rate would remain at 4.25 percent, but the RBA’s dovish rhetoric led many to allocate their portfolios away from the Aussie dollar. Bearish traders pushed the AUDUSD exchange down as low as $1.061.

Mar 06, 2012 04:09

Euro, Aussie dollar hit by growth, Greece worries



LONDON (Reuters) - The euro slipped to a two-week low versus the dollar and higher-yielders like the Australian dollar fell on Tuesday on worries over euro zone debt and the global economy, pushing investors towards the safety of the yen and the dollar.


Concerns about whether Greece would be able to complete a major debt restructuring deal with private sector creditors before Thursday knocked the euro, which was vulnerable to more falls before that deadline.


This weighed on riskier assets, causing the Australian and New Zealand dollars to extend losses begun on Monday when China announced its lowest annual growth target in eight years.


"The risk reward is for people who are long equities, long Australian dollar and short yen to cut those positions," said Nick Beecroft, senior markets consultant at Saxo Bank, adding that equities were poised to fall after "an extraordinary run."


"The euro has been remarkably resilient, but I think we've seen the top of the range for the next few weeks and there are mines out there that could push it back below $1.30."


The euro was down 0.5 percent at $1.3147, having dropped to around $1.3130, its weakest since February 17, after triggering sell orders on the break of Monday's $1.3160 low.


Technical support was expected from the 55-day moving average around $1.3071.


Concerns about a faltering euro zone economy helped push the euro down 1 percent on the day against the yen.


Revised GDP data confirmed the euro zone economy looked set for recession after contracting in the fourth quarter of 2011. This followed purchasing manager surveys on Monday which highlighted a weak outlook for the region.


Greece and its creditors are in the final stages of talks aimed at a deal that would cancel more than 100 billion euros of its private sector debts - a key part of a 130 billion euros bailout, the second rescue Athens has required.


"Indications the bond swap will succeed are modest EUR positive, while any clear evidence it will not will be dramatically negative," BNP Paribas said in a note.


AUSSIE FALLS
Investors used China's decision to cut its growth target to 7.5 percent as an excuse to take profits on long positions in equities, commodities like copper and currencies linked to global growth.


"We're in risk-off mode at the moment and it's starting to gather momentum. Sentiment has turned towards China which has unnerved people generally," said Gavin Friend, FX strategist at National Australia Bank.
The Aussie fell around 0.8 percent to $1.0573, its lowest in a month, extending falls after breaking below stop loss sell orders around $1.0600 and the February 23 low of $1.0597. It also shed more than 1 percent versus the yen.


A Reserve Bank of Australia decision to keep rates on hold but leave the door open for a cut should the economy weaken materially also weighed on the Australian dollar, which analysts said may have further to fall.
"A decisive break through $1.0600 points to a deeper pullback as this potentially completes a double top, warning of a return to the $1.0400/50 area before we look for a base," said Phil Roberts, technical analyst at Barclays Capital.


The New Zealand dollar also lost more than 1 percent to hit a near 6-week low of $0.8122.


The low-yielding yen outperformed against the dollar, which retreated after failing for a second time to break above a nine-month high of 81.86 yen. It was last at 81.06 yen, down 0.4 percent on the day.


The dollar has gained nearly 7 percent versus the yen since late January, helped by a surprise Bank of Japan easing and a record Japanese trade deficit.


The dollar index <.DXY> was up around 0.5 percent on the day at 79.664 after hitting a 2-1/2 week high of 79.739.
Mar 06, 2012 13:10

Risk currencies on defensive on fresh Greece doubts



TOKYO (Reuters) - Risk currencies were on the defensive while the Japanese yen held firm on Wednesday as doubts over whether Greece can pull together a bond swap deal with creditors prompted players to cut exposure to risky assets.


Among the biggest casualties, the Australian dollar slid to a near six-week low against the U.S. dollar, while the country's growth in October-December also turned out to be lower than expected.


A clutch of Greek pension funds and some foreign investors are holding back on the bond swap deal, raising fears that Greece may not secure a deal with private creditors to cut its mountainous debt by the Thursday deadline.


A low participation in the bond swap plan, a key part of a bailout program to help Greece manage its wrecked finances and meet a debt repayment on March 20, could lead to the disorderly default policymakers have been toiling to avoid.


"I think we are at a watershed now. If the Greek debt swap goes well and the U.S. job data points to continued recovery, then the market could return to the risk-on mood," said a trader at a Japanese bank.


"But if Greece could not get the deal, then that would be a game changer," he added.


The euro plumbed a three-week low at $1.3103 on EBS late on Tuesday, but has managed to stay above solid supports around $1.31, including the cloud top of daily Ichimoku charts at $1.3097 and the 76.4 percent retracement of its rally in mid to late February at $1.3095.


It bounced back in Asia to around $1.3142, up 0.2 percent from late U.S. levels as the disappointing Australian data prompted unwinding of short positions against the Aussie, a popular trade this year.


The euro rose 0.2 percent to A$1.2460. It hit a record low around $1.2124 last month as investors sold the euro for the Aussie on the view that a high-yielding Aussie will benefit from a massive fund injection from the European Central Bank.


The Aussie fell to a six-week low against the U.S. dollar after disappointing Australian GDP data, shedding some 3 U.S. cents from a seven-month high set just last week.


The Aussie touched a low of $1.0508, briefly breaking below a major support of $1.0525, before paring losses to fetch $1.0550.


A clean break of $1.0525 could pave the way for a move to the $1.0370-00 major pivot, traders said.


GROWTH WORRIES
Apart from Greece, there are other risk events ahead, not least closely watched Chinese inflation and U.S. jobs data on Friday.


China cut its growth target to the lowest level in eight years and Brazil announced a disappointing economic performance for 2011, raising doubts on the rosy scenario that emerging market powerhouses will offset weak growth in the advanced economies.


Nervous investors unwound some of the recent bearish positions placed on the Japanese currency, helping the yen firm across the board.


The dollar fell as low as 80.56 yen, well down from a nine-month peak of 81.87 set earlier this month, although it handily held above a key support from 23.6 percent of its February rally at 80.50.


"Since the yen had been sold sharply recently, there is room for more adjustment. But I do think there's pretty strong dollar demand at around 80 yen," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ.


Traders said a break above 81.60 is now needed to reset the upwards momentum for dollar/yen and put 82.20 back in focus.
The euro also pulled further away from a recent high of 109.95 yen to stand at 106.25 yen.


Renewed pressure on the single currency saw the dollar rise 0.7 percent against a basket of major currencies on Tuesday to its highest since Feb 16.
The dollar index <.DXY> stood at 79.68 in Asia, not far from Tuesday's high of 79.867, and it now eyes a test of a very thin cloud on daily Ichimoku charts, a break above which could be considered as a major bull sign.


On Wednesday, the bottom of the cloud comes at 79.854 and the top at 79.867, which means the index needs to rise above Tuesday's high to break above the cloud.

Mar 07, 2012 03:23

Euro rises but vulnerable to Greece uncertainty



LONDON (Reuters) - The euro recovered from a three-week low against the dollar on Wednesday but was vulnerable to further losses on uncertainty about whether Greece would win sufficient support for a debt restructuring.


A clutch of Greek pension funds and some foreign investors are holding back on a bond swap deal which would enable Greece to meet a debt repayment on March 20, sparking concerns about a chaotic default if participation is low.


Given the uncertainty, gains in the single currency were expected to be limited. Analysts and traders said the market was pricing in an assumption that the debt deal would be agreed, leaving scope for disappointment.


Greek private creditors have until late Thursday to say whether they will take part. Further hints of hesitance could see the euro retest Tuesday's three-week low at $1.3103.


"There's a negative skew for the euro because most of the good news is priced in terms of getting an agreement on private sector involvement," said Carl Hammer, chief currency strategist at SEB in Stockholm.


"If it is passed the bounce in the euro would be short-lived." SEB sees the euro at $1.30 by the end of March, though this assumes the debt restructuring goes through.


The euro was up 0.2 percent at $1.3136, with traders citing Middle East and corporate buying as well as talk of reported Asian sovereign bids around $1.3100. Reported offers below $1.3175 may cap its rise, however.


Greece aims to persuade 90 percent of creditors to take part in the bond swap. With two-thirds acceptance or more, however, it may be able to trigger collective action clauses to force bondholders to accept losses.


"The Greek PSI (bond swap) deal might well go through ... But beyond that the outlook for the euro is still weak," said Melinda Burgess, currency strategist at RBS.


She said the psychological $1.30 level was likely to provide strong support and could slow the euro's decline. Once below there, however, it could move lower "fairly rapidly." RBS forecasts the euro to fall to $1.26 by the end of this month.


Others said the euro had short-term chart support around $1.31, including the cloud top on daily Ichimoku charts at $1.3097 and the 76.4 percent retracement of its rally in mid- to late February at $1.3095.


GROWTH WORRIES
Apart from Greece, Chinese inflation and U.S. jobs data on Friday and a European Central Bank policy meeting on Thursday would set the tone for markets, traders said.


China this week cut its growth target to its lowest level in eight years and Brazil announced a disappointing economic performance for 2011, raising doubts that emerging market powerhouses can offset weak growth in the advanced economies.


The higher-yielding and growth-linked Australian dollar was up 0.1 percent at $1.0565, having earlier hit a six-week low of $1.0508 after disappointing Australian economic growth data.


It was also vulnerable as Greece concerns prompted investors to cut exposure to risky assets. The Aussie has shed some 3 U.S. cents since hitting a seven-month high of $1.0857 last week. More losses could see it fall towards $1.0350, analysts said.


The U.S. dollar was down 0.1 percent at 80.75 yen as investors unwound recent bearish positions placed on the Japanese currency.


It held above support at 80.50 yen, the 23.6 percent retracement of its February rally. The euro pulled further away from a recent high of 109.95 yen to trade up 0.1 percent at 106.12 yen.
Mar 07, 2012 11:50

Euro rises vs dollar ahead of Greek bond swap
Euro turns higher against the dollar as traders wait for results from Greek bond swap deal



NEW YORK (AP) -- The euro turned higher against the dollar as more investors agreed to participate in Greece's debt restructuring deal.


Greece needs to complete the bond swap to get its second package of bailout funds and avoid default. Investors who agree to participate will have to trade their Greek government bonds for new ones with lower value and lower returns.


Private investors who own nearly half of Greece's debt have already committed to the swap. The rest have until Thursday to do so. Traders are still cautious that not enough bondholders will participate, which is keeping the euro from rising higher against the dollar.


The euro rose to $1.3148 in midday trading Wednesday from $1.3110 Tuesday.


In other trading, the British pound rose to $1.5741 from $1.5711. The dollar fell to 0.9168 Swiss franc from 0.9190 Swiss franc and to 99.96 Canadian cents from 1.0021 Canadian dollar.




Mar 07, 2012 17:30

Japanese Yen Uninspired by Eco Watchers Survey Release
Traders’ response to the Eco Watchers Survey was muted as a slight shortfall of expectations leads to no major portfolio changes


THE TAKEAWAY: Eco Watchers Survey Slightly Below Expectations > Traders Unfazed by Small Deviation from Forecast > USDJPY Trades Sideways

Data released by the Japanese Economic and Social Research Institute showed that business confidence rose in the month of February among workers in cyclical market sectors. The Eco Watchers Survey current index rose to 45.9 from 44.1, falling slightly short of analysts’ expectations of 46. The outlook index rose to 50.1 from 47.1.


Traders had already priced in their expectations regarding the figures, so the data’s release led to no major portfolio rebalancing. The slight shortfall of the current index did not faze the markets. The USDJPY maintained its trendless trading.


Mar 08, 2012 05:18
OctaFX.Com News Updates

Euro holds gains on Greek relief; yen slips

SINGAPORE (Reuters) - The euro dipped on Friday but held on to the bulk of the previous day's gains after Greece moved closer to securing fresh funds needed to avoid a messy debt default.


The single currency eased 0.1 percent to $1.3267 after rallying about 1 percent on Thursday, its losses limited after Greece successfully closed its bond swap offer to private creditors.


"The euro has reacted positively to the removal of near-term anxiety (over Greece)," said a trader for a major Japanese bank in Singapore, adding that the ECB's comments on inflation the previous day were also lending the single currency support.


The ECB left interest rates unchanged at 1 percent on Thursday but gave a surprise warning on inflation, suggesting further policy easing was unlikely.


The yen dipped to a 9-1/2 month low versus the dollar of 81.899 yen on trading platform EBS at one point, pressured by yen-selling by Japanese importers and stop-loss selling, traders said.


The positive news on Greece was another factor that weighed on the yen, a safe haven currency that tends to come under pressure when investors' risk tolerance increases.


The dollar last stood at 81.80 yen, up 0.3 percent from late U.S. trade on Thursday.


Commodity currencies were steady to firmer with the Australian dollar holding flat at $1.0644 after having risen around 0.6 percent on Thursday, while the New Zealand dollar rose 0.2 percent to $0.8263.


With Greece's debt swap headed for success, analysts said they expected investors' appetite for risky assets to hold firm in the near term.


Such positive risk sentiment can weigh on funding currencies including the dollar and the yen, while supporting currencies leveraged to global growth like the Australian dollar.


To be sure, the exact take-up of Greece's debt swap was unknown and it was not yet clear whether Greece could avoid activating collective action clauses (CAC), which would enforce the debt exchange on recalcitrant holdouts.


If they are, that could trigger payouts on credit default swaps (CDS) that some investors hold on Greece's bonds.
Rob Ryan, FX strategist for BNP Paribas in Singapore, said the take-up for Greece's debt swap may not be high enough for Greece to avoid activating the enforcement clauses, but added that market players were likely prepared for that possibility.


"We think that they're not going to have the 90 plus percent that they want and that they will have to activate the CAC," Ryan said.
"That's what we assume is going to happen, and in fact there's an argument now that says that if it's not triggered, there's going to be worries about who bought CDS as insurance and now finds that the insurance is useless," he said.


"So at this stage, it may be less damaging to trigger the CACs and therefore the credit default (swaps)," Ryan said.
Preliminary results of Greece's bond swap offer are expected to be announced officially at 0600 GMT, before a conference call with euro zone finance ministers in the afternoon.


U.S. jobs data due late on Friday will also be closely watched, especially after the Wall Street Journal reported earlier in the week that Federal Reserve officials were considering sterilized quantitative easing to further help the economic recovery.


An outcome that bolsters such expectations could be the dollar's undoing.
"Our long-term view is still that the EUR/USD will be higher and the relative hawkishness of comments from ECB President Mario Draghi is a reminder that at its heart, the ECB 'wants' to normalize policy while Ben Bernanke 'wants' to buy more protection against disaster," said Kit Juckes, strategist at Societe Generale.

Mar 09, 2012 05:17
OctaFX.Com News Updates

OctaFX.Com - British Pound At Risk Amid Weakening Labor Market, Slowing Trade


Fundamental Forecast for British Pound: Neutral

The British Pound pared the sharp selloff from Friday to maintain the range carried over from the previous month, and the sterling should continue to track sideways in the following week as market participants weigh the outlook for monetary policy. Indeed the Bank of England refrained from releasing a policy statement after the central bank kept the benchmark interest rate at 0.50% while maintain its asset purchase program at GBP 325B, and we may see the GBPUSD works its way back towards the top of the range as the exchange rate continues to hold above the February low (1.5644).


As market participants look forward to the BoE Minutes due out on March 21, the range-bound price action could ultimately lead to another run at 1.6000, but we may see the sterling struggle to hold its ground next week as the economic docket is expected to highlight a slowing recovery for the U.K. Indeed, fears of a double-dip recession may resurface amid the ongoing weakness in the labor market paired with the slowdown in global trade, and we may see the British Pound quickly give back the advance from earlier this year as currency traders see scope for more quantitative easing in 2012. As the fundamental outlook for Britain remains clouded with high uncertainty, the policy statement could foreshadow a growing rift within the Monetary Policy Committee, but we may see Governor Mervyn King scale back his dovish tone for monetary policy as BoE officials talk down the risk of undershooting the 2% target for inflation. As BoE officials expect to see a stronger recovery later this year, the MPC may see scope to conclude its easing cycle in 2012, and the central bank may lay the foundation to start normalizing monetary policy in the following year as growth and inflation picks up.


As the GBPUSD clears the 50-Day SMA (1.5677), a slew of dismal developments coming out of the U.K. could spark a bearish breakdown in the exchange rate, and we may see the pair work its way back towards the 50.0% Fibonacci retracement from the 2009 low to high around 1.5300 as it searches for support. However, as long as the February low (1.5644) holds up, we should see the pair track sideways ahead of the BoE Minutes, and we may see the sterling move against its major counterparts should the central bank talk down speculation for additional asset purchases. – DS



Mar 10, 2012 00:34
OctaFX.Com News Updates

OctaFX.Com - Copper weakens as China demand worry persists

SINGAPORE (Reuters) - London copper edged lower on Monday as persistent concerns about sluggish demand in China took the momentum out of a three-day rally, but optimism on the global economy after upbeat U.S. jobs data is likely to cushion the price slide.


Copper rallied about 2 percent on Friday, after better-than-expected U.S. labor market data boosted confidence in the recovery of the world's largest economy, and Greece's success with a debt swap deal eased fears about euro zone debt crisis for the time being.


But the dim prospects of copper consumption in China, as reflected in multi-year high stockpiles in warehouses monitored by the Shanghai Futures Exchange, kept investors wary.


"Theoretically we are in the peak consumption season but it doesn't feel like it this year," said a Shanghai-based physical copper trader, "Factories are not in any rush to stockpile the material, as the overall economic situation has weakened."


Prices below 58,000 yuan a tonne have attracted buying, but the current level was not at all attractive, he added.


China, the world's top consumer of raw materials including copper, has cut its 2012 growth target to an eight-year low of 7.5 percent, dampening hopes that its appetite for these materials would continue to expand rapidly.
Three-month copper on the London Metal Exchange lost 0.3 percent to $8,461 a tonne by 0300 GMT, reversing course after three sessions of consecutive rise.


The most-traded June copper contract on the Shanghai Futures Exchange edged up 0.3 percent to 60,700 yuan ($9,600)a tonne.

Mar 12, 2012 03:17
OctaFX.Com News Updates