Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
ICM Brokers | Nov 08, 2011 05:39AM ET
European stocks dropped, extending last week’s selloff, as Italian Prime Minister Silvio Berlusconi struggled to hold power before a budget vote and Greece worked on plans to form a new government. Carrefour SA fell 2.6 percent as euro-region retail sales fell and Citigroup Inc. downgraded the shares. Metro AG, Germany’s largest retailer, lost 2.1 percent. PostNL NV slid 7.4 percent as the biggest Dutch postal operator said profit decreased. National Bank of Greece SA and Piraeus Bank SA advanced more than 4 percent in Athens. The Stoxx Europe 600 Index dropped 0.6 percent to 238.44 at the close of trading, having earlier climbed 0.3 percent and tumbled as much as 1.8 percent. The measure has still rallied 11 percent from this year’s low on Sept. 22 amid speculation euro- area leaders will contain the debt crisis and the U.S. economy will avoid another recession.“We are all looking for the next policy maker’s speech, “Robert Talbut, chief investment officer at Royal London Asset Management, said in an interview with Bloomberg Television. “There is an enormous amount of uncertainty around how this crisis is going to play out.”In Italy, Berlusconi’s majority is unraveling before a key parliamentary vote tomorrow on the 2010 budget report as contagion from Europe’s sovereign debt crisis pushed the country’s borrowing costs to euro-era records. The yield on Italy’s 10-year bonds surged to as much as 6.68 percent.
GBP/USD
The U.K. tax office added extra checks on negotiations with large companies over their tax bills after forgiving Goldman Sachs Group Inc. as much as 10 million pounds ($16 billion) of interest on unpaid tax. Tax settlements with companies now have to be endorsed by senior managers at Her Majesty’s Revenue and Customs rather than leaving the approval to those who negotiated the deals, the office’s permanent secretary, David Hartnett told a committee of lawmakers in Parliament in London today.“There will be complete separation between those who negotiate and those who approve,” Hartnett said. “We have done that.”Hartnett reached the agreement with Goldman Sachs and approved it, prompting criticism from lawmakers and calls for his resignation. He said the deal with the New York-based investment bank was a “mistake” in previous testimony to the Public Accounts Committee last month. The deal resulted in Goldman Sachs paying back taxes it owed on National Insurance payments for bankers’ bonuses while forgoing interest payments. According to a Guardian report last month, which cited documents leaked to Private Eye magazine, Goldman Sachs had avoided paying National Insurance on bonuses for bankers working in London by setting up an entity in the British Virgin Islands. The offshore unit technically employed the staff, who was seconded to the U.K. capital. The tax office’s senior legal adviser, Anthony Inglese, told the panel the Goldman deal had gone through without legal advice being sought from his department. Inglese was forced to testify under oath after the panel’s chairwoman, Margaret Hodge, said he was hiding behind legal-confidentiality pledges to not answer questions.
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USD/JPY
Foreign-exchange traders are gearing up to test Jun Azumi’s resolve to keep intervening in currency markets to weaken the yen from its postwar high. While Japan’s Finance Minister directed the central bank on Oct. 31 to sell what analysts estimate was about 8 trillion yen ($102 billion), sending it down as much as 4.7 percent against the dollar, the move failed to increase volatility. Traders avoid currencies with increasing price swings because they boost the odds of sudden losses. “The yen remains one of our favorite currencies as Japan still has a strong trade surplus and benefits from the global risk aversion that we’re seeing,” said Vimal Gor, the Sydney-based head of income and fixed interest at BT Investment Management Ltd., where he oversees the equivalent of $13 billion, on Nov. 3. “Unilateral interventions in the Japanese currency have no real lasting impact. If anything we’d view this as a buying opportunity.” Azumi, who took office in September when predecessor Yoshihiko Noda became prime minister, is under pressure to weaken the yen after traders seeking a haven from turbulence in global financial markets pushed it up as much as 21 percent between April and October against a basket of nine developed-nation peers tracked by Bloomberg’s Correlation-Weighted Currency Indexes.
USD/CAD
Canada’s dollar rose against all of its most-traded counterparts as crude oil, Canada’s largest export, touched the highest level in three months. The currency extended its gain versus the U.S. dollar on buoyed demand for higher-yielding assets as North American stocks advanced after the European Central Bank Executive Board member Juergen Stark said in Switzerland that the region’s debt crisis will be under control in two years. “The Canadian dollar is still something that people like in terms of the fundamental backdrop,” Brian Kim, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a phone interview. “Europe has been the larger focus. The commodity story has definitely been driving it as well.”Canada’s currency appreciated 0.6 percent to C$1.0128 per U.S. dollar at 4:02 p.m. in Toronto. One Canadian dollar buys 98.74 U.S. cents. The loonie fell 2.7 percent last week in its first five-decline since September. Among major counterparts, it had its biggest gain versus the Swiss franc, rising 2.4 percent to 88.90 centimes. Futures on crude oil gained 1.8 percent to $96.10 a barrel in New York trading. The Standard & Poor’s 500 Index increased 0.6 percent. The S&P/TSX Composite Index gained 0.4 percent. Greek Prime Minister George Papandreou said he will step down to make way for a coalition government and secure outside financing to avoid a collapse of the nation’s economy.
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