Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD

EUR/USD

Prime Minister Silvio Berlusconi vowed to raise 5 billion euros ($8 billion) annually from asset sales, increase the retirement age and relax labor laws to convince European leaders Italy can reach its budget goals.“We are aware of the need to present a comprehensive plan of reforms,” Berlusconi said in the letter that he presented to European Union leaders at a summit in Brussels. “We are aware that our debt is too high and our growth too limited.” The asset-sales plan will be completed by Nov. 30, he said.The letter of intent fell short of the comprehensive plan European leaders had sought. Bickering within his Cabinet this week over pensions and other issues prevented the premier from complying with EU requests to deliver a blueprint to boost growth and tackle the euro-region’s second largest debt at the Brussels summit.The pressure on Italy underscored a push by leaders to  prevent the Greece-fueled debt crisis from swamping the third-biggest euro economy and piling risks onto France and Germany.Policy makers, pressed by politicians and investors around the world, are struggling to devise a plan that persuades markets they can stamp out the contagion.

GBP/USD

The pound fell against the dollar,snapping five days of gains, and gilts rose amid mounting concern Europe’s leaders will be unable to find a solution to the euro-region debt crisis at a summit today in Brussels.Sterling pared declines versus the euro after an EU official said talks between European Union leaders and banks on bondholder losses as part of a second Greek rescue package have been suspended. Confederation of British Industry data showed an index of factory orders fell and business optimism plunged to the lowest level in 2 1/2 years this month.“The market is very uncertain and sterling-dollar reflects the slide in the euro as the market starts to lose some confidence” in euro-area policy makers fixing the debt crisis,said Steven Barrow, head of Group of 10 currency strategy at Standard Bank Plc in London. “As far as gilts are concerned,it’s exactly the same reasons. We shouldn’t underestimate to impact of the data as well. The CBI numbers were pretty shocking.”The pound was 0.6 percent weaker at $1.5909 at 4:52 p.m.  London time after strengthening to $1.6042, the highest level since Sept. 8. Sterling was little changed at 87.03 pence per euro after weakening to 87.22 pence. The euro slid 0.5 percent to $1.3844.The pound has depreciated 0.2 percent in the past month,extending a 12-month decline to 3.5 percent, according to Bloomberg Correlation-Weighted Indexes.

USD/JPY

Japanese investors are increasing holdings of foreign securities at the slowest pace in four years while overseas money managers are scooping up yen-denominated assets, contributing to gains in the currency.Domestic fund managers bought a net 6.45 trillion yen ($85 billion) in overseas bonds , money-market instruments and stocks in 2011 through September, Ministry of Finance data show, down 72 percent from the year earlier period. Overseas investors purchased 20.9 trillion yen of Japanese securities in the period, more than double the 2010 pace.The yen’s climb to a postwar record against the greenback reached yesterday has driven dollar-based gains on Japanese government bonds to 8.8 percent this year, surpassing the 7.2 percent in U.S. currency terms for global sovereign debt , Bank of America Merrill Lynch data show. Demand for yen assets as a haven has surged amid the prolonged debt crisis in Europe and signs that the Federal Reserve will add to monetary easing that debases the U.S. currency.“What’s behind demand for Japan’s bonds is not their   return or attractiveness as financial products but the sense that Japan is the least volatile market,” said Akio Kato , team leader for Japanese debt in Tokyo at Kokusai Asset Management Co., which manages the equivalent of $52 billion. Europe’s debt problem and the U.S. malaise are “narrowing investment options for fund managers,” he said.Kokusai’s Global Sovereign Open, Japan’s biggest mutual fund with $27 billion under management, said in September it boosted yen-denominated assets and cut holdings of Italian debt.   

USD/CAD

Canada’s dollar strengthened versus its U.S. counterpart amid increased demand for riskier assets such as stocks after European leaders said they reached agreement to recapitalize the region’s banks. Canada’s currency briefly pared gains after the nation’s central bank cut its growth outlook through mid-2012, reducing chances of interest rate increases next year. The currency was the best performer today among its 16 most-traded peers. The Standard & Poor’s 500 Index rose 1.1 percent. Gains in stocks, “coupled with headlines out of Europe is giving an edge to risk appetite,” said Mary Nicola, a currency strategist at BNP Paribas SA in New York, referring to the European summit. “That’s boosting the Canadian dollar.”Canada’s currency  climbed as much as 1.3 percent to C$1.0037 per U.S. dollar and traded at $1.0042, up 1.2 percent,at 5 p.m. in Toronto. It appreciated through parity yesterday for the first time since Sept. 21 before dropping 1.3 percent on the day. One Canadian dollar buys 99.58 cents. The premium charged for the right to buy the U.S. dollar  versus the Canadian dollar in three months over contracts to sell rose to 3.16 percentage points today after falling to 3.01 yesterday. So called risk-reversal rates reached a record 4.43 percentage points on Oct. 4.

Please see the attached chart below.