Dukascopy Fundamental Analysis
“[Spanish] borrowing costs are at eye-popping levels”
– Jo Tomkins, a strategist at 4Cast consultancy
Yields on Spanish government bonds rose to record highs on Monday as election victory by the conservative People’s Party failed to calm the markets and after the European Central Bank said it will not purchase bonds in unlimited quantities.
“We should see a little bit of a bounce in the fourth quarter”
– Nariman Behravesh, chief economist at IHS
U.S. economic growth slowed to 2.0 percent in the third quarter 2011 from 2.5 percent the quarter before, said the Bureau of Economic Analysis on Tuesday.
“These figures [public borrowing] demonstrate the government’s progress in cutting the deficit”
– Treasury spokesman
U.K. public borrowing decreased more than expected to 3.4 billion in October from 10.2 billion in September, said the Office for National Statistics on Tuesday. Economists expected the reading to decline to 4.1 billion.
“There are practically no investors in the markets at the moment”
– Benno Galliker, a trader at Luzerner Kantonalbank
Swiss stocks extended losses on Tuesday as yields on Spanish government bonds rose to “eye-popping levels” and after U.S. economic growth slowed in the third quarter 2011.
“Investors are a bit fed up with politicians generally”
– Prasad Patkar, portfolio manager at Platypus Asset Management Ltd.
Japanese stocks closed mixed on Tuesday, after U.S. debt committee failed to reach a consensus on budget cuts. The Nikkei 225 decreased 0.40%, or 33.53 points, to 8,314.74, while the broader Topix gained 0.10%, or 0.71 points, to 717.79.
Dukascopy Technical Analysis
“Anything that threatens France’s credit status is likely to be taken as negative for the euro”
– Citi (based on CNBC)
The initial resistance is situated at 1.3562, followed by higher level at 1.3616. Even if the pair manages to overcome these lines, the outlook will nevertheless remain bearish, as a key resistance area is at 1.4250/85.
“Overall, the euro-zone economy is looking weak and trending weaker, and we’re expecting they’re going to recession sometime maybe next year”
– Westpac Banking Corp (based on Bloomberg)
As long as the currency couple is capped by resistances at 104.75, 105.32 and 106.60/78, the price is likely to carry on moving sideways. In case a support level at 103.08 is breached, the dip then might extend down to 100.77.
“The truth is that [UK] banks can strengthen their balance sheets without harming the economy”
– Robert Jenkins (based on WSJ)
While resistances at 1.5785, 1.5872 and 1.5888/90 prevent the pair from moving upwards, the outlook is bearish, with the possibility of GBP/USD plummeting down through 1.5463 and 1.5272 to 1.5050.
“The yen may rally through 70 per dollar next year as global financial stability in the second half damps investor appetite for the greenback”
– JPMorgan Chase & Co (based on Bloomberg)
Current weakness of the pair is temporary and soon USD/JPY is expected to commence advancing. To affirm its bullish momentum the pair will have to climb over 77.21 and then rise up to 79.56. Supports are at 76.22 and 75.94.
“We could get a really good fourth-quarter growth rate but much more modest gains in 2012, and that will keep the Fed pushing as hard as it can”
– Naroff Economic Advisors (based on Reuters)
USD/CHF is anticipated to rise, as currently it is being underpinned by a rather tough support located at 0.9068. The primary target for the pair lies at 0.9317, followed by 0.9341/99, which is likely to hold the initial test.