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

EUR/USD

The euro fell from almost a one-week high versus the dollar as European inflation slowed and Italy’s biggest bank said it needs to raise more capital, fueling bets Europe’s debt crisis is worsening. It dropped versus most major peers as a 7.5 billion-euro ($9.7 billion) share offer from UniCredit SpA spurred concern European banks may struggle to raise more capital. The euro fell 0.9 percent to $1.2936 during afternoon in New York after rising to $1.3077, the highest level since Dec. 28. Europe’s shared currency slid 5.6 percent over the past six months, the worst performance among the 10 developed-nation currencies. Milan-based UniCredit said will sell shares at a 43 percent discount from yesterday’s closing price, excluding the value of rights. That exceeds the 30 percent discount from Commerzbank AG on its 5.3 billion-euro rights offer last May and the 39 percent when HSBC Holdings Plc raised about $17.7 billion in March 2009. The euro also weakened amid speculation Spanish Prime Minister Mariano Rajoy’s government may apply for loans from the EU’s rescue fund and the International Monetary Fund. Meanwhile, the shared currency may weaken to $1.20 by year-end as the European cuts interest rates. The ECB may lower its 1 percent refinancing rate to 0.5 percent this quarter.



GBP/USD

Yesterday morning we witnessed the good run on global financial markets has ceased, the pound continues to hold its ground. When UK manufacturing PMI came in at 49.6, well above expectations of 47.4 and the previous month's read of 47.7 the figures supported the bullish bias that washed over financial markets overnight. Having ended Australian session around the 1.5540 mark, the pound rose steadily over the course of European and US trade to eventually close at 1.5649.  Upon reopening for Asian trade, the pound is fractionally lower but still trading in the 1.5640 level with the next obvious directional catalyst being UK construction PMI and mortgages approval data. The number of mortgages approved in November totaled 52,854 up from 52,786 a month ago, the Bank of England said. The expected figure for November was 52,800.  Total lending to individuals rose by GBP 1 billion in November in line with the previous six-month average. The annual growth rate was unchanged at 0.9 percent. Within total lending, lending secured on dwellings climbed GBP 0.6 billion, less than the GBP 0.9 billion expected by economists. At the same time, consumer credit increased GBP 0.4 billion in November, bigger than the GBP 0.2 billion forecast by economists. As a result, pound regained the Tuesdays’ high of 1.5669.

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USD/JPY

The Japanese yen extended gains versus its American counterpart, outperforming the USD even in the face of increased risk appetite, a correlation the Japanese Ministry of Finance surely does not welcome.  USD/JPY fell as low as 76.60 from an earlier high of 76.82, ending trade in New York at 76.72. From a technical perspective, bigger time frames show persistent lower lows and lower highs, pointing for more bearish pressure in the cross after it broke below 100 DMA, currently around 77.20 and strong resistance level. USD/JPY has traded a tight 76.65/80 range so far during the Asian session, last quoted near opening prices around 76.70. Meanwhile, Japanese stocks fell, with the Topix headed for its first drop in four days, after Italy’s biggest lender said it needs to raise capital, fueling concern Europe’s sovereign-debt crisis is spreading to banks.  Canon Inc. , a camera maker that depends on Europe for almost a third of sales, lost 0.7 percent after the shared currency weakened, cutting the earnings outlook for the exporter. Sumitomo Metal Mining Co. (5713), a copper producer, sank 2.1 percent after metal prices dropped.  The Nikkei 225 Stock Average  fell 0.6 percent to 8,506.72 in Tokyo. The broader Topix lost 0.4 percent to 740.07 with almost twice as many shares declining as advancing.

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USD/CAD

The Canadian dollar fell from its highest level in almost a month versus its U.S. counterpart as European banking concern made higher-yielding assets including stocks less attractive. The loonie dropped for the first time in three days on a decline in crude oil. The loonie depreciated 0.4 percent to C$1.0145 per U.S. dollar early in Toronto yesterday. One Canadian dollar buys 98.57 U.S. cents. Meanwhile, Canadian 10-year government bonds were little changed, with the yield down less than one basis point, or 0.01 percentage point, to 1.98 percent today, compared with 1.94 percent at the end of 2011. The price of the 3.25 percent security maturing in June 2021 increased 7 cents to C$110.73. The Canadian dollar touched 94.07 cents per U.S. dollar on July 26, the highest level in more than three years, on prospects for higher interest rates and as investors sought shelter from the U.S. debt-ceiling impasse. The loonie then fell, touching C$1.0658 on Oct. 4, the weakest in more than a year, as the euro region’s debt crisis sapped demand for higher-yielding assets.

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