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

EUR/USD

Banks and ratings companies are sounding their loudest warnings yet that the euro area risks unraveling unless its guardians intensify efforts to beat the two-year-old sovereign debt crisis. As European finance chiefs prepare to meet this week, and Italy seeks to raise as much as 8.8 billion Euros ($11.7 billion) in bond sales, economists from Morgan Stanley, UBS AG, and Nomura International Plc say governments and the European Central Bank must step up their crisis response. Moody’s Investors Service said today the “rapid escalation” of the crisis threatens all of the region’s sovereign ratings. “Skepticism has grown that euro-area policy makers can deal effectively with the key challenges they face,” Pier Carlo Padoan, the chief economist at the Paris-based Organization for Economic Cooperation and Development, said today as he cut forecasts for European and global growth. Serious downside risks remain, linked to “loss of confidence in sovereign-debt markets and the monetary union itself.”What Deutsche Bank AG calls “a new stage of the crisis “and Nomura labels a “far more dangerous phase” is dawning as signs mount that investors are even concerned about top-rated Germany, the euro’s linchpin economy. Chancellor Angela Merkel’s government failed to draw bids for 35 percent of 10-year bunds sold last week and the yield on its 30-year securities had the biggest weekly gain in 14 months.



GBP/USD

U.K.  Stocks rose the most in a month, paring last week’s slump, as concern eased that Europe’s debt crisis will curb company profits. Royal Bank of Scotland Group Plc climbed 5.3 percent, pacing gains among lenders. BP Plc advanced 2.9 percent, leading commodity producers higher. Randgold Resources Ltd. fell 7.9 percent as strikes and wet weather in Ivory Coast affected mining. The benchmark FTSE 100 Index added 148.11, or 2.9 percent, to 5,312.76 at the close, the largest gain since Oct. 27. The gauge retreated 3.7 percent last week as rising bond yields across the euro area added to concern the region’s debt crisis is deepening. The FTSE All-Share Index gained 2.8 percent today, while Ireland’s ISEQ Index rose 3.2 percent. “In the last few days, it seems some European leaders are moving faster,” said Herbert Perus, who helps oversee about $36 billion as head of global equities at Raiffeisen Capital Management in Vienna. “The fundamentals are good for companies, most stocks are cheap. We are positive and happy to be invested   in equities. But most of our peers are not.”The FTSE 100 will rally 24 percent to 6,400 through the end of next year, according to a forecast by Deutsche Bank AG strategists. Even if the euro area enters a recession, U.K. stocks can surge as London-listed companies get only 15 percent of their sales from Europe, Gareth Evans and Michael Biggs wrote in a report.  




USD/JPY

Japanese automakers will compete for a dwindling number of local buyers at this week’s Tokyo Motor Show as the domestic market fails to provide a haven from a strong yen that’s eroding profits from overseas sales. Toyota Motor Corp.  and Honda Motor Co. will unveil fuel-efficient cars targeting cost-conscious consumers at the event, whose press days start tomorrows. After 24 years at Japan’s largest exhibition hall in neighboring Chiba prefecture, the carmakers have moved to a smaller venue in central Tokyo. Formerly one of the world’s five biggest car shows, Tokyo has been eclipsed in recent years by Beijing and Shanghai, which alternate in hosting the top annual exhibition in China, the world’s largest auto market. An estimated 800,000 people will attend the event in Japan’s capital, compared with 1.5 million visitors in 2005, according to the organizers. “The Japanese market has become too small,” said Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association. “In order to avoid a hollowing out of the Japanese automobile industry, we need domestic sales to grow.” Japan’s economic recovery from the March 11 earthquake has slowed as the yen traded near a record high against the dollar, eroding profits of exporters. Overseas shipments in October slid the most since May, while consumer confidence has failed to recover to pre-disaster levels, government data show. 




USD/CAD

Canadian stocks rose the most since Nov. 3, led by energy and raw-materials companies, as European leaders drafted a framework for the region’s bailout fund and U.S. Thanksgiving-weekend retail sales jumped to a record. Canadian Natural Resources Ltd., the country’s second-largest energy company by market value, advanced 3.7 percent as crude oil rose. Barrick Gold Corp., the largest producer of the precious metal, climbed 2.4 percent as gold gained the most in two weeks. Royal Bank of Canada, the nation’s biggest lender, jumped 2.1 percent to follow gains in European lenders. The Standard & Poor’s/TSX Composite Index advanced 178.15 points, or 1.6 percent, to 11,640.21.Retail data out of the U.S. was “very encouraging for people,” while the lack of negative news out of Europe allowed for some recovery, Doug Davis, vice chairman of money manager Davis-Rea Ltd., said in a telephone interview. The firm oversees about C$480 million ($465.7 million). “They know what they have to do to solve their problems, and hopefully they will start to do some of these things.”   The S&P/TSX completed a fourth straight week of losses on Nov. 25, the longest streak of declines since July 2008. The benchmark gauge of Canadian stocks has lost 5 percent since Oct.31, heading for its eighth monthly loss this year. Europe’s bailout fund may insure bonds of debt-stricken countries with guarantees of 20 percent to 30 percent, depending on financial markets, according to guidelines that finance ministers will discuss this week. Treaty change is necessary to give veto power over member-state budgets to the European Union Commission, Germany’s Finance Minister Wolfgang Schaeuble said on ARD television in Berlin yesterday.