The loonie had a third week of losses as a fall in U.S. stocks and crude oil decreased the attractiveness for the high-yielding profile of the Canadian currency.
Canada is one of the world’s most important commodity producers, and being the U.S. its main exporting destination, a fall in their main stock indexes affected directly the outlook for the Canadian currency. Since signs of economic recovery started to appear two months ago, the price of crude oil and equities market around the world witnessed a sharp increase in their levels, and being the loonie a commodity-linked currency more attractive as risk appetite grows due to its high-yielding profile, it posted the highest gains in 59 years during the month of May following the rally in the crude oil price. As the price of stocks failed to continue its gains, Canada’s dollar entered its third week of losses, since risk aversion rebounded slightly, and commodities prices did not provide the necessary support for the loonie to maintain its high levels.
Economists refer the weak performance for the Canadian dollar also with a more solid outlook for the U.S. dollar, as investors realize that an economic chaos will not be installed in the U.S. and that the Federal Reserve stills in the control of the nation’s finances, the greenback rose, also forcing the Canadian currency further down.
Visiters Data
Monday, June 22, 2009
Canadian Dollar Falls as Stocks Decline
Yen Rises as Crisis in Iran Deepens
The yen, considered as a refuge investment for moments of instability, rose as the political crisis in Iran deepens, creating tension in the international financial scenario.
The Japanese currency started this week’s session stronger than all of the main traded currencies due to rising concerns about the political crisis around the eventually irregular elections in Iran, which resulted so far in 17 casualties in popular protests since the riots started to take place in the nation’s capital, Tehran, 2 weeks ago. A World Bank report stated that the global recession will be deeper than it predicted before, and that a flux of capital out of developing nations will increase the world unemployment figures. High-yielding currencies like the Australian dollar and the South African rand lost the most against the yen, in an expected chart movement that follows rising tensions of economic and political aspects.
The economic analysis towards the yen is always favorable when moments of uncertainty about the world economic health appear through reports or official statements, the situation in Iran added to the unexpected World Bank report made the Japanese currency to climb for the first time supported by actual events since the swine flu concerns, around 2 months ago. The yen may continue its climb if negativity on markets increase risk aversion among traders.
Pound Falls on U.K. Home Prices Drop
The British pound fell against the U.S. dollar as a report indicated the first fall in U.K. home prices in five months, increasing risk aversion towards the pound sterling outlook.
The pound had another day of losses as stocks declined snapping the previous days gains, adding pessimism to the already nebulous equities markets scenario. Rightmove Plc, one of the most relevant British real estate websites, indicated a fall of 0.4 in home prices within Great Britain, being that the first fall in five months, which until now have been witnessing a recovery in the average real estate prices. A part from the negative news in the domestic scenario, the pound also lost ground as currencies like the yen and the U.S. dollar became more attractive to investors as risk appetite decreased this Monday among traders.
The pound outlook, according to currency specialist, is being negatively affected by days of confusion about the global recession, which led to several sessions of losses in stock markets, decreasing attractiveness for the British currency. Domestic reports in the U.K. have not been as positive as expected previously, and the return of demand for refuge currencies like the yen created perfect conditions for a pound downtrend, which may continue further, if equities markets remain bearish.
Friday, June 19, 2009
GBP/USD Technical Analysis
The Pair fell sharply yesterday following an unexpected fall in UK retail sales, but recovered most losses in the U.S. session. Seasonally adjusted retail sales fell 0.6% in May, below market expectations for sales to increase by 0.5%. On a separate report, the Confederation of British Industry (CBI) said manufacturing conditions remained tough in June as exports orders continue to weaken. The CBI industrial survey came in at -51%, compared to -56% in May. The outlook for economic recovery is mixed, however most analysts point to growth by the end of the year or early 2010.
Looking at the 4hour chart, GBP/USD continues to show both strong supply and demand levels. near its 38.2% Fib retracement level at 1.6450 (supply) and 1.6200 area as support. Wall Street performance should be key for the pair's next move as it could benefit from risk appetite; however, yesterday's session proved little as far as price action. The next level of resistance lies at 1.6454, followed by 1.6510 and 1.6600.
Gasoline market sell-off drags crude oil price lower
Oil prices fell 2.5% to below $70 a barrel yesterday, pulled lower by a sell-off in the gasoline market as dealers bet there would ample fuel supply in the United States to meet demand from summer vacationers.
US crude fell $1.82 to settle at $69.55 a barrel. Gasoline futures fell 10.51 cents, or 5.18%, to $1.9244 a gallon. Brent crude fell $1.87 to settle at $69.19 a barrel.
"Gasoline is under siege here, with the supply build after production rose last week," said Andy Lebow, broker at MF Global in New York.
US gasoline supplies rose unexpectedly last week as refiners boosted output to prepare for an expected seasonal uptick in demand, according to government data issued on Wednesday.
Experts have been mixed on how strong consumption for the motor fuel will be this summer as the effects of the recession counter-balance relatively low prices at the pumps.
The US Transportation Department said yesterday, Americans drove more miles in April than they did a year earlier, marking the first monthly rise in US highway travel in more than a year.
Oil prices had been in positive territory earlier in the day as rebel attacks in Nigeria hit output from the Opec-member country and economic optimism propelled equities markets higher.
Nigeria's main militant group Mend said it had attacked a pipeline operated by Italy's Agip, close on the heels of previous attacks on facilities operated by Royal Dutch Shell and Chevron. Together, the attacks have cut at least 133,000 barrels of daily output.
Rebels in Nigeria, the world's seventh-largest oil exporter, have been carrying out attacks on the oil industry for years in what they claim is a struggle aimed at spreading the region's energy wealth to the poor local communities.
Oil prices also got some support from political turmoil in Iran, the world's fifth- largest exporter, in the wake of its presidential election.
"We will see support continue to come from Iran and Nigeria. There is no immediate supply threat from Iran, but in Nigeria, (there) is an actual physical disruption," oil analyst Olivier Jakob of Petromatrix said.
Oil prices have nearly doubled since February on signs of a potential economic recovery but the pace of the rally has sparked concerns prices are not well supported by fundamentals.
Moves away from safe havens hit dollar
The dollar drifted lower Friday as investors showed more confidence in world economic prospects, moving away from the safe-haven US currency.
The euro rose to 1.3934 at 2100 GMT from 1.3901 dollars late Thursday in New York.
The dollar edged down to 96.31 yen against 96.55.
With little in the way of market-moving data, currency traders took a cue from equities, which suggesting a further rise in confidence about prospects for recovery from the prolonged recession.
This encouraged traders to follow the trend into riskier assets, hurting the greenback.
"All in all, the market still does not seem to be in an intense and sustained 'sell dollar' mode as it had been until the beginning of the month, a bit of a relief as consolidation brings an increasing sense of the returning stability to forex markets," said Sacha Tihanyi at Scotia Capital.
"An eventual resumption in dollar weakness is in our forecast throughout the next quarter."
"The euro should continue to climb against the dollar as investor confidence is restored," said analysts at BNP Paribas bank.
They pointed to recent encouraging reports from the United States suggesting that a recovery may be starting to take hold in the world's largest economy.
On Thursday, the Conference Board's index of leading economic indicators, a measure of economic conditions in the coming months, rose 1.2 percent in May from the prior month. Most analysts had expected a rise of 1.0 percent.
As chances for a rebound in the United States strengthen, investors are emboldened to take positions in currencies seen as riskier than the dollar, notably the euro.
The euro also drew strength from recent stability on world financial markets, which further encourages investors to venture into currencies apart from the dollar.
"As the level of panic in financial markets is falling, traders are changing gears on buying currencies that attest to strength in the global economy," said Sumitomo Trust and Bank foreign exchange strategist Jitsuo Tachibana.
At the same time, other analysts cautioned that concerns over the health of US public finances, notably the country's massive budget deficit, were likely to cast a shadow over the recent encouraging data.
Washington will issue a record 104 billion dollars in new bonds next week and traders "will be nervously watching for how this jump in supply is absorbed with implications for the dollar and bond yields," NAB Capital strategists wrote in a note to clients.
Investors will also be waiting for the Federal Reserve monetary policy meeting beginning Tuesday for clues on the outlook for interest rates, another
factor that could affect currencies. Some see a possible rate hike by the end of the year.
"A rate hike in our view is relatively far off into the future, but there are numerous other means by which the Fed with possible assistance of the Treasury could pull back on various stimulus plans," said Gregory Drahuschak at Janney Montgomery Scott.
In late New York trade, the dollar stood at 1.0810 Swiss francs from 1.0861 Thursday
GBP/USD Technical Analysis
The Pair fell sharply yesterday following an unexpected fall in UK retail sales, but recovered most losses in the U.S. session. Seasonally adjusted retail sales fell 0.6% in May, below market expectations for sales to increase by 0.5%. On a separate report, the Confederation of British Industry (CBI) said manufacturing conditions remained tough in June as exports orders continue to weaken. The CBI industrial survey came in at -51%, compared to -56% in May. The outlook for economic recovery is mixed, however most analysts point to growth by the end of the year or early 2010.
Looking at the 4hour chart, GBP/USD continues to show both strong supply and demand levels. near its 38.2% Fib retracement level at 1.6450 (supply) and 1.6200 area as support. Wall Street performance should be key for the pair's next move as it could benefit from risk appetite; however, yesterday's session proved little as far as price action. The next level of resistance lies at 1.6454, followed by 1.6510 and 1.6600.
