Analysis prepared by:

Arkady Nagiev
Forex4you analyst

   The dollar ended the day flat against most counterparts: in the morning it fell but then recovered; there was little data from the U.S and volumes remained low as many traders extended their breaks after Monday’s public holiday. Early optimism over the Greek deal led to a continuation in the rally in risky currencies and weakness in the dollar, however it soured after details emerging from confidential documents, belonging to the eurogroup, which revealed immense private cynicism at Greece’s ability to overcome its economic problems and meet its targets. The report cited “prolonged financial support” might be necessary for Greece and that the growth projections used in modelling the bailout of 2.3% in 2014, for example, were unrealistic. U.S equities had a strong day with the Dow Jones reaching 13,000 for the first time since the financial crisis in 2008, as prices reflected the relief felt by many shareholders at the Greek bailout, however, shares also dipped towards the end of the day and ended only slightly higher. The focus for Wednesday’s data will be Home Sales – with a rise expected to support the U.S recovery narrative.

   The euro continued to appreciate on Tuesday after E.U finance ministers finally agreed on the terms for bailing out Greece. The details were as expected, with a 130bn bailout, private sector expected to take  a 53.5% haircut, ECB involvement through interest repatriation and separate escrow account for Greece’s repayments. Initial optimism, however, soon faded after a confidential ‘debt sustainability’ document which had been circulated amongst E.U finance ministers was leaked to the Financial Times. The private dossier gave a much bleaker assessment of Greece’s credit worthiness. It’s projections of a rise in the debt-to-GDP of 160% in 2020 compared starkly to the fall to 120.5% given officially. The report also argued that Greece would continue to rely on aid for several years to come even after the current bailout. The euro stopped rising and seemed to begin topping out as the new info came to light, backing up many cynics’ views and explaining Germany’s previous reluctance to sign. On the data front euro-zone consumer confidence fell to -20.2 versus -20.1 expected. The next major event for the euro will be the ECB’s sale of 3-year LTRO’s at the end of the month, which may help extend the euro’s rebound higher into the 1.30s versus the dollar.  

   The pound ended the day down despite an early rally following stonger data and a boost to risk appetite after the Greek bailout deal was finally agreed in Brussels. Sterling weakened as the day progressed, however, as market participants grew cynical about Greece’s ability to bring down its debts over the long-term and the forecasts used to tailor the deal were criticised for being over-optimistic. In the U.K data released on Tuesday showed a positive fall in public borrowing although the fillip it gave to markets was short-lived. The amount of money financed to the government fell by -16.8bn in January when it had been expected to fall by -24.7bn. New debt taken on by the Government fell by -10.7bn vs -9.1bn expected and 11.1bn previous – showing a net surplus. Whilst the figures were encouraging they still failed to lift sterling very much. Stronger growth will be required to compliment the austerity shown by the public purse if the country is to recover and so far it has been lacking, and the continued expectation of more QE because of slow growth continue to weigh down the pound.

   The yen traded mixed on Tuesday after risk appetite rose strongly  following news of the finalization of the Greek debt deal but then fell as investors continued to have lingering doubts about the sustainability of the agreement. The yen, so sensitive to risk dynamics, weakened initially but then recovered as risk appetite backtracked. The negative affects of recent data which showed the trade deficit growing to 1.48tr yen in January, as well as heightened expectations of further monetary easing seemed to have worn off temporarily as yen pairs plateaued. However, it appears that a multitude of factors are beginning to undermine the currency, including a decline in exports, a ?new reliance on imported fuel post-Fukushima, loose monetary policy and current account surplus erosion. As a result of which the outlook remains unclear for the yen, possibly even bearish, despite ongoing risks in Europe still fuelling safety demand. Meanwhile on the data front the All Industry Activity Index rose by only 1.3% vs the 1.5% expected on Tuesday.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

Benchmark crude was up $1.61 to $104.85 per barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Monday it traded at $105.44, the highest since May. The contract last settled on Friday when it rose 93 cents to $103.24 per barrel in New York.

Brent crude was up 15 cents at $120.20 per barrel in London.

US markets were closed Monday for the Presidents Day holiday.

European Union officials agreed early Tuesday to hand Greece a second massive bailout to help save it from bankruptcy. Private bondholders will take a 53.5 percent loss on their holdings which, along with tough austerity measures, is hoped will lower Greece’s debt level to about 120 percent of gross domestic product.

Crude has jumped from $96 earlier this month and $75 in October as signs of an improving US economy bolstered investor confidence. However, analysts are concerned higher fuel costs could stifle consumer spending and undercut economic growth.

“A significant run-up in oil prices are an important contributor to an economic malaise,” energy trader and consultant The Schork Group said in a report. “With the US economy starting to show signs of life, high prices now just might kill this recovery in the cradle.”

In other energy trading, heating oil added 2.1 cents to $3.20 per gallon and gasoline futures rose 2.5 cents to $3.21 per gallon. Natural gas slid 4.0 cents to $2.64 per 1,000 cubic feet.

The Aussie was down around half a cent at $1.0720 in late trade, though that was up from a session low of $1.0680 hit earlier when market began to lose patience with the interminable Greek talks.

The New Zealand dollar dipped 0.25 percent on the session to $0.8374, having traded a range of $0.8397 to $0.8341.

Both currencies pared losses late in the day after Euro zone finance ministers finally approved a second bailout for debt-laden Greece that could resolve Athens’ immediate repayment needs.

The long-awaited news perked up a market that was growing increasingly frustrated over a lack of a deal. It also sparked a broad rise in the euro.

Earlier, minutes of the Reserve Bank of Australia’s February policy meeting revealed nothing new and merely reiterated that a benign inflation outlook meant the RBA could cut rates if necessary.

Analysts, however, said further gains may be limited for the Aussie on relief over Greece.

“Bottom line is a lot is already priced in and the market is well long the Australian dollar. There is also devil in the details that the market is sweating on,” said Greg Gibbs, strategist at RBS in Sydney.

“So the Aussie is probably not going to generate much juice in a positive direction out of this, at best it’ll grind a little higher.”

Immediate support for the Aussie is seen at $1.0689, Friday’s low and resistance at the Feb. 9 high of $1.0825. However, a break of the 2012 high of $1.0845 could open up the way for a re-test of the 29-year peak of $1.1081 set last July.

Resistance in the kiwi was seen around $0.8420, after it was unable to sustain its rally above that region the previous day, with support at $0.8360/70.

The euro gained ground against both Antipodean currencies, rising 0.5 percent to A$1.2370 and 0.4 percent to NZ$1.5819.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst

The dollar bought 79.05 yen in afternoon trade, compared with 78.90 yen late Thursday in New York, while the euro rose to 103.79 yen from 103.63 yen.

The euro was at $1.3129, compared with $1.3132 in New York.

Earlier on Friday the greenback had climbed at one point to 79.17 yen, its highest since an October 31 intervention by Japanese authorities, while the euro had also surged to as much as 104.03 yen.

The Bank of Japan said Tuesday that it would pump $130 billion more into its ailing economy, the latest push to combat stubborn deflation as domestic and global uncertainty intensifies.

“This move has paved the way for a sustained rally” of the dollar against the yen over the course of 2012, Christopher Vecchio, currency analyst at DailyFX, told Dow Jones Newswires.

The dollar may climb up to 90.00 yen by the end of this year, he added.

The yen was also weighed by market forecasts that Japan’s trade balance in January will be negative again, said Masafumi Yamamoto of Barclays Capital in a note to clients.

Traders were also buying the dollar after the weekly report of new claims for US unemployment benefits fell to their lowest level since March 2008 while data on January housing construction confirmed a pickup in the sector.

The euro firmed on news reports that the European Central Bank has moved to exchange its holdings of Greek bonds for new ones issued by Athens.

The news “raised expectations that the second batch of supportive measures for Greece will be approved on February 20,” said Yamamoto of Barclays Capital.

The dollar was lower against other Asian currencies. It fell to 1,124.00 South Korean won from 1,127.20 won on Thursday, to Tw$29.55 from Tw$29.57, to Sg$1.2604 from Sg$1.2663 and to 42.65 Philippine pesos from 42.79 pesos.

The dollar also eased to 9,057.00 Indonesian rupiah from 9,060.00 rupiah and to 30.79 Thai baht from 30.84 baht.

The euro benefited from hopes that Greece was close to clinching a second bailout package.

“It remains to be seen whether the recovery in the euro will be sustainable,” said Antje Praefcke, forex strategist at Commerzbank.

“At the moment, market sentiment is positive for the euro. That is why euro-franc is a bit firmer this morning but everything depends on Greece. I would stay flat (on euro-franc) today and wait (to see) what decisions will be taken next week,” she said.

The franc fell 0.1 percent against the euro to trade at 1.2075 by 0744 GMT compared to the New York close.

It was also trading 0.1 percent lower against the dollar at 0.9193 per dollar.

Swiss economy minister Johann Schneider-Ammann said on Thursday the Swiss franc remained overvalued despite the cap at 1.20 francs per euro introduced by the Swiss National Bank in September.

“The comments had remarkably little impact on EURCHF. Rightly so, we argue. FX markets concluded that it comes down to the SNB and the SNB only to set the general ramifications … via their monetary operations,” UBS economist Reto Huenerwadel said in a note.

“Instead it is the overriding concerns on fiscal woes in the Eurozone that dominate trading in EURCHF and via EURUSD USDCHF accordingly,” he said, adding volumes in euro-franc had fallen to very low levels.

“Only time will tell whether the reduced price action in the EURCHF exchange rate bores FX investors out of the currency pair or whether they are attracted by the remarkably stable exchange rate at times of heightened political uncertainties globally.”

4-hour time frame suggests further descension too, with the target found at 1.3300 and a little lower. Level 1.3300 is currently considered to be a resistance, which may cancel a downtrend if the price holds above.

Speaking of USD/JPY pair, it’s woth paying attention to 15-minute interval, where we clearly observe a downward structure to be forming with 1.5800 level being its resitance and 1.5700 level is the target. If the price holds above this resistance, the structure will be reconsidered.

GBPJPY currency pair had been in the uptrend last week. This week I anticipate a correction to growth as quite a possibility. 123.00 level should become a resistance, level 121.00 will be the target .

Also, I would suggest to consider selling gold this week. Short-term resistance is found at 1730.00, target at 1700.00.

On 1 hour chart the target for decline will be found lower, at 1660.00.

Successful trading to you all!

Forex4you analyst: Maxim Dmitrievsky

E-mail: dmitrievsky@forex4you.org.

Likewise, the metal for delivery in June lost Rs 53, or 0.19 per cent, to Rs 28,543 per 10 grams in 24 lots.

Meanwhile, the yellow metal rose 0.7 per cent to USD 1,734.57 an ounce at midday today in Singapore.

Analysts said profit-booking by speculators at prevailing higher levels mainly led to the decline in gold futures prices here but a firming trend in global market, capped the losses.

The ‘yes’ vote by Greek lawmakers, while largely expected, provided some relief as any failure to achieve this would have led to a default by Greece, shifting immediate market focus to how the euro zone, especially its paymaster Germany, will react.

“I’m not sure if it’s time for a hurrah. It’s still uncertain whether euro zone finance ministers will agree on the bailout at a meeting planned on Wednesday,” said Masafumi Yamamoto, chief forex strategist at Barclays Capital.

The euro gained about 0.3 percent to $1.3235, recouping some of the losses made on Friday and about a cent below a two-month high of $1.3322 hit last week, with its 90-day moving average of $1.3314 seen as a major resistance point.

Although the austerity bill passed the parliament, violent street protests in Athens and the departure of six Greek cabinet ministers underscored the difficulty of implementing unpopular steps.

Euro zone finance ministers also expect Greece to explain how 325 million euros ($430 million) of this year’s total budget cuts — as yet unspecified — will be achieved before it agrees to the bailout in a meeting planned on Wednesday.

NOT GOOD ENOUGH

Highlighting the exasperation on the side of Germany, the country’s finance minister, Wolfgang Schaeuble, said in an interview with German newspaper Welt am Sonntag that Greek promises on austerity measures are no longer good enough because so many vows have been broken.

In addition, there are also concerns that hedge funds may have built up sufficiently large holdings of Greek bonds to scupper bond swap deals, termed private sector involvement (PSI).

On the other hand, the euro is likely to draw some support from signs of stability in other euro zone countries, with the spread of Portuguese bond yields over German bonds slipping to one-month lows.

Fear of a major banking crisis in Europe has subsided as the European Central Bank is offering to provide an unlimited amount of three-year loans for the second time later this month after the first such operation in December.

Against this backdrop, Institutional investors have been cutting short positions since January, said Kimihiko Tomita, head of forex at State Street.

“If you think there will be no Armageddon, there is no need to take new euro short positions now. But on the other hand, it’s questionable whether investors will become so positive about the euro as to become net long,” Tomita said.