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

European leaders bolstered their crisis-fighting toolbox with a plan that may generate only limited relief for stressed sovereigns  unless it can be fleshed-out within weeks.“It remains a deal long on intentions and short on details,” said Jens Larsen, chief European economist at RBC Capital Markets in London. “Until we know how the mechanisms will work, it will be hard to judge whether this will be sufficient to entice investors to provide support to European governments.”Europe’s currency, stocks and bonds rose after 10 hours of talks ended in Brussels with governments boosting the heft of their rescue fund to 1 trillion euros ($1.4 trillion) and persuading bondholders to take 50 percent losses on Greek debt.Measures also included a recapitalization of European banks and a potentially bigger role for the International Monetary Fund in strengthening the bailout fund.Still to be worked out in negotiations, which may fall prey to fresh bouts of political infighting and investor revolt, is just how the firepower of the 440 billion-euro rescue facility will be leveraged and what banks will get in return for accepting the Greek haircut. As next week’s Group of 20 summit looms, nations from Greece to Italy remain under pressure to restore fiscal order and the onus is on a Mario Draghi-run European Central Bank to keep buying bonds.



GBP/USD

U.K. banks including Royal Bank of Scotland Group Plc and  Barclays Plc  won’t need to raise extra capital to insulate themselves against losses on government debt, the European Banking Authority  said. The shares soared.RBS, Britain’s biggest government-owned bank, rose 10 percent to 27.27 pence in London trading. Barclays advanced 18 percent to 210 pence, marking its biggest rise since March 2009,while HSBC Holdings Plc increased 5.5 percent to 555.3 pence.Banks elsewhere in Europe will need to raise 106 billion euros ($148 billion) in fresh capital under tougher rules being introduced in response to the crisis, the EBA said yesterday.Lenders will need to have core Tier 1 capital equal to at least 9 percent of assets after writedowns on sovereign debt.“U.K. banks are well above the fray,” wrote Ian Gordon, an analyst at Evolution Securities Ltd. in London in an e-mailed note to investors today. “All the nonsense which has been written suggesting that Barclays, RBS (and others) may need to  raise fresh capital can be safely ignored.”Greek banks will need to raise 30 billion euros of additional capital, Spanish banks 26.2 billion euros, Italian lenders 14.8 billion euros, French firms 8.8 billion euros and German banks 5.2 billion euros, the EBA said. The lenders have until Dec. 25 to submit their plans for raising the money to national supervisors. After 10 hours of brinkmanship at the second crisis summit in four days, European leaders meeting yesterday in Brussels agreed to boost the firepower of the region’s rescue fund to 1trillion euros and persuaded bondholders to accept a 50 percent loss on their holdings of Greek government debt.



USD/JPY

Steven A. Cohen, head of the $14 billion SAC Capital Advisors LP, plans to open an office in Tokyo in the first quarter of 2012 because he sees increased opportunities in Japan, according to two people who attended the firm’s investor day meeting yesterday.SAC executives told investors, who gathered at New York’s St. Regis hotel, that they added four portfolio managers in Asia this year, bringing the total to 13, according to the people,who asked not to be named because the fund is private. SAC has offices in Hong Kong, Singapore and Beijing.“Japanese long-short equity funds, particularly those that are market neutral, have done fairly well this year, so it makes sense that SAC might be interested in that market,” said Pierre Merillon, who heads research on global macro funds at Paris- based Darius Capital Partners, which helps institutions invest in hedge funds.Jonathan Gasthalter, a spokesman for Stamford, Connecticut- based SAC, declined to comment on the hedge fund’s plans.SAC has returned about 7 percent this year through September, according to investors, compared with a loss of 10 percent for the Standard & Poor’s 500 Index and a drop of 9.5 percent for Chicago-based Hedge Fund Research Inc.’s index of equity hedge funds.SAC’s portfolio is positioned with a very low net exposure,meaning it has roughly the same amount of money betting onstocks Cohen and his other portfolio managers expect to rise as stocks they expect to fall, the people said. The firm is borrowing about $1 for every dollar of assets. SAC’s leverage generally averages between 3 and 3.5 times net assets.



USD/CAD

Canada’s dollar rose through par with the greenback after European leaders agreed to steps for checking the region’s debt crisis, sparking a risk-asset rally.The currency  rose to the highest versus the greenback in more than a month, headed for the biggest two-day gain since May 2010, as the U.S. economy grew in the third quarter at the fastest pace in a year. Canada’s dollar fell relative to most of its major counterparts after the Bank of Canada cut its forecast this week for the nation’s economic growth. “The Canadian dollar is being swept up in the euphoria of the perceived solution to the European debt crisis, without any evidence to support it,” said Michael O’Neill, vice president of foreign-exchange trading at RJOFX Canada, a unit of RJ & O’Brien & Associates Inc., by phone from Toronto. “There are so many details that nobody knows about. My suggestion would be looking to sell the Canadian dollar on strength here.” Canada’s currency  climbed as much as 1.5 percent to 98.92 cents per U.S. dollar, the strongest level since Sept. 20, and traded at 99.09 cents, up 1.3 percent, at 5:02 p.m. in Toronto. One Canadian dollar buys $1.0092.“The positive reaction to the European deal is the overriding factor in the appreciation of all currencies against the U.S. dollar,” said Jack Spitz , managing director of foreign exchange at National Bank of Canada in Toronto, in a telephone interview. “There’s a lot of enthusiasm right now in the market, but the reality check is going to hit at some point.”