Technical Analysis: EUR/USD, GBP/USD, USD/JPY, and USD/CAD
ICM Brokers | Nov 22, 2011 07:51AM ET
EUR/USD
European stocks dropped the most in three weeks amid signs U.S. lawmakers may fail to reach an agreement on budget cuts, raising the prospect the world’s largest economy could face another credit downgrade.KBC Groep NV led banks lower as dollar funding costs and bond yields climbed. Mining and energy companies dropped with metal and crude oil prices on signs of slowing growth in Asia. Carrefour SA slipped 3.2 percent after the retailer’s largest shareholders were said to consider replacing its chairman and chief executive officer. The benchmark Stoxx Europe 600 Index sank 3.2 percent to 224.76 at the close, the gauge’s biggest retreat since Nov. 1. The Stoxx 600’s slump extended last week’s 3.7 percent selloff. Stocks tumbled around the world last week as the yields on Italian and Spanish bonds climbed, and the cost of insuring against losses on the nations’ debt rose.“The U.S. budget situation is a further drag on sentiment,” said Paul Coffin, a fund manager at Fieldings Investment Management Ltd. in London. “The market is still being dominated by the European situation. The U.S. budget is probably secondary to the euro zone’s problems.”The U.S. deficit-cutting congressional super committee will probably announce that it has failed to agree on $1.2 trillion of federal budget savings, a Democratic aide said in an e-mail.
GBP/USD
U.K. stocks dropped for a sixth day, the longest streak of declines since early August, amid signs U.S. lawmakers will fail to agree on budget cuts, raising the prospect America will face another credit-rating downgrade. Antofagasta Plc and Rio Tinto Group slid at least 5.9 percent as metal prices fell in London. Lloyds Banking Group Plc and Barclays Plc declined more than 5 percent as dollar funding costs and government bond yields climbed. The benchmark FTSE 100 Index retreated 140.34, or 2.6 percent, to 5,222.6 at the close in London, extending this year’s losses to 11 percent. The gauge slid every day last week, as surging borrowing costs for Italy and Spain spurred concern the debt crisis in Europe is spreading.“If bickering and incompetent politicians in Europe aren’t bad enough, we also have the specter this week of the so-called U.S. super committee, an oxymoron if ever there was one, failing to come to an agreement on spending cuts on the U.S. budget deficit, after the debt ceiling debacle a few months ago,” said Michael Hewson, a markets analyst at CMC Markets, in London. In the U.S., the deficit-cutting congressional super committee will probably announce that it has failed to reach an agreement on federal budget savings, according to a Democratic aide in an e-mail.
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USD/JPY
Japanese stocks fell for a second day, sending the Topix Index and Nikkei 225 to their lowest close since March 2009, on speculation a U.S. congressional committee will fail to reach an agreement on deficit-cutting measures and after a report showed Japanese exports fell. Honda Motor Co., a carmaker that gets 83 percent of its sales abroad, retreated 2.2 percent. Elpida Memory Inc., a producer of computer-memory chips, led a drop among chipmakers after Japan’s exports dropped more than expected, dragged down by declines in semiconductors and ships. Osaka Securities Exchange Co. rose 1.8 percent after a newspaper reported the bourse will announce a merger agreement with Tokyo Stock Exchange Group Inc. tomorrow. The Nikkei 225 Stock Average fell 0.3 percent to 8,348.27 as of the 3 p.m. close of trading in Tokyo, the lowest close since March 31, 2009. The Topix Index dropped 0.4 percent to 717.08, the lowest close since March 12, 2009. “There’s likely to be a continuing impasse and people will focus on the stability of the U.S. politically,” said Tim Schroeders, who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “People will probably sit on the sideline and wait for clarity.”The value of shares traded on the first section of the Tokyo Stock Exchange fell to the second lowest this year, after the bourse today shortened the trading lunch break by half an hour to boost transactions. The value dropped to 757 billion yen ($9.9 billion) today, compared to 729 billion on Nov. 15, the lowest since December. Futures on the Standard & Poor’s 500 Index fell 0.7 percent today. The index was little changed in New York on Nov. 18.
USD/CAD
Canada’s dollar dropped to the lowest level in six weeks as America’s deficit impasse and Europe’s sovereign-debt crisis spurred demand for the safety of the U.S. currency. The loonie, as the Canadian dollar is also known, was headed for a 3.6 percent drop this month against the greenback as stocks and crude oil fell today and a report showed the nation’s wholesale sales rose in September less than economists forecast. The loonie weakened as a U.S. debt-reduction committee with special powers to dissolve congressional gridlock was on the brink of failure. “We are once again in a risk-off environment,” Jim Phoenix, a managing director at Canadian Imperial Bank of Commerce in Calgary, said in a telephone interview. “Certainly the European story is still the overarching concern in the currency markets. As that situation unfolds, it puts upward pressure on the U.S. dollar and downward pressure on the euro and the Canadian dollar.”The loonie dropped 0.9 percent to C$1.0369 per U.S. dollar at 3:33 p.m. in Toronto. It touched C$1.0419, matching the Oct.7 low. One Canadian dollar buys 96.44 U.S. cents. The MSCI World Index of stocks in developed nations dropped 2.3 percent today after falling every day last week. The Standard & Poor’s 500 Index slid for a fourth day, shedding 1.9 percent. Futures on crude oil, Canada’s biggest export, were down 0.9 percent to $96.83 a barrel in New York.
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