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MARKET DRIVERS – CURRENCIES

FX Research 10.08.2010 • Jyske Markets

MARKET DRIVERS – CURRENCIES FX Research • 10.08.2010 • Jy ske Markets Today’s Comment Last night

Today’s Comment

Last night at 1 a.m., the RICS house price survey was published in the UK; expectations pointed to +5, yet the survey came out at -8. Therefore pound sterling fell against the US dollar, from 159 to 158, and due to this EUR/USD fell at the same time from 132.30 to 131.36.

Bank of Japan maintained its rate at 0.10 and stated that it will keep up the monthly purchases of government bonds at the level of about JPY 1,800bn.

Today primarily the interest rate meeting of the Fed will attract attention, but focus will not least be on the subsequent statements and any further quantitative easing in the form of buybacks of government bonds. Due to the weak economic indicators over the past two months it is doubtful whether the Fed will change its view of the growth prospects and possibly initiate measures to counteract the slowdown of economic growth. We expect that the Fed will maintain its interest rate and reiterate its promise to maintain its rate at an extraordinary low level over a prolonged

period of time. The expectations of the

short-term growth scenario may be lowered. Offhand a downgrade of the short-term scenario will be bad news to the dollar, but on the other hand, due to the most recent increase in EUR/USD and the very low 2- year yield on US government bonds, quite a lot of 'adversity' should be discounted in the dollar rate.

Today’s Key Events

10:00 Consumer prices (NOK)

10:00 Producer prices (NOK)

10:30 Trade balance (GBP)

14:30 Productivity (USD)

14:30 Unit wages (USD)

20:15 Fed’s interest-rate announcement (USD)

Today’s Chart – EUR/USD

1,55 1,50 1,45 1,40 1,35 1,30 1,25 1,20 1,15 01 dec 12 jan 23 feb 06
1,55
1,50
1,45
1,40
1,35
1,30
1,25
1,20
1,15
01 dec
12 jan
23 feb
06 apr
18 maj
29 jun
10 aug
Moving Average (20D )
Moving
Average (100D )

Source: Bloomberg/Jyske Bank

Publisher

Editor:

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Jyske Markets

JM Kunderådgivning, Valuta

Read more FX and interest rate analyses at www.jyskemarkets.com

FX & Interest Rate Research

+45 87 57 82 15

Disclaimer:

Vestergade 8-16 DK-8600 Silkeborg

fx-research@jyskebank.dk

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MARKET DRIVERS – CURRENCIES

FX Research 10.08.2010 • Jyske Markets

Currency

Spot

Short-term market drivers

 

Technical levels

   

1-month

     

target

Majors

 

EUR/USD

131.54

Future focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds

-

Resistance

  • 135.00 next

 

136.00

 
   

The US is somewhat ahead of Europe in the economic cycle

-

Support:

  • 131.20 next

 

130.12

126

   

The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should

+

         

USDDKK

566.38

Future focus on internal imbalances in the euro zone, political disagreement and pressure on Southern European govt. bonds

+

Resistance

567.84

next

572.56

 

The US is somewhat ahead of Europe in the economic cycle

+

Support:

551.86

next

547.80

592

The Fed’s quantitative easing keeps the USD value low; higher government debt does not result in increases in the US market rate as it should

-

 

EURGBP

83.27

Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling

+

Resistance

83.95

next

85.30

 
   

Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted

-

Support:

82.10

next

80.70

82.50

   

We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2

-

         

GBPDKK

894.54

Focus on very negative public finances: Uncertainty about future fiscal tightening (and UK’s rating) may weaken pound sterling

-

Resistance

907.44

next

923.18

 

Pound sterling was under massive pressure when the financial crisis peaked, and (too) much misery has already been discounted

+

Support:

887.44

next

873.40

903

We expect that the quantitative easing came to an end in February and that the BoE will start normalising its monetary policy in H2

+

 

EURJPY

113.02

Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY

-

Resistance

  • 114.40 next

 

115.50

 
   

Risk of renewed risk aversion supports JPY slightly

-

Support:

  • 111.55 next

 

110.00

110

   

Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a theme

+

         

JPYDKK

6.59

Focus on debts in Southern Europe has caused pressure on the single European currency and shifted the balance of power between EUR and JPY

+

Resistance

6.68

next

6.77

 

Risk of renewed risk aversion supports JPY slightly

+

Support:

6.51

next

6.45

6.77

Decent growth in recent months; the economy is, however, still fragile; low growth ahead and deflation may once again be a the me

-

 

EURCHF

               
   

Please refer to the publication, CHF: stil moving upwards

         

-

                 

CHFDKK

 

Please refer to the publication, CHF: stil moving upwards

 

-

MARKET DRIVERS – CURRENCIES FX Research • 10.08.2010 • Jyske Markets Currency Spot Short- term marketCHF: stil moving upwards - CHFDKK Please refer to the publication, CHF: stil moving upwards - " id="pdf-obj-1-421" src="pdf-obj-1-421.jpg">

MARKET DRIVERS – CURRENCIES

FX Research 10.08.2010 • Jyske Markets

Currency

Spot

Short-term market drivers

 

Technical levels

   

1-month

     

target

Scandinavia

 

EURNOK

791.11

Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record -high levels

-

Resistance

812

next

820

 
   

Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term

-

Support:

781

next

769

800

   

Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK

+

         

NOKDKK

94.14

Continuing improvement of key indicators in Norway: labour market is strong and housing market is close to its record -high levels

+

Resistance

95.39

next

96.94

 

Norges Bank was one of the first ones to raise its interest rate. Even though we may be in for a slow start, we foresee 3% in the 1-year term

+

Support:

91.75

next

90.85

93.10

Correction in the equity market/rising risk aversion will still be able to put pressure on the NOK

-

 

EURSEK

940.98

Still risk that SEK will suffer a blow in the event of risk aversion

-

Resistance

965

next

980

 
   

Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis

+

Support:

935

next

925

940

   

After GDP for Q2, Q3 and Q4 2009 has been revised up, we anticipate interest-rate hikes at the remaining monetary meetings in July

+

         

SEKDKK

79.16

Still risk that SEK will suffer a blow in the event of risk aversion

+

Resistance

79.68

next

80.54

 

Riksbanken expresses optimism about the economy and thinks Sweden has been through the worst part of the crisis

-

Support:

77.20

next

76.02

79.00

After GDP for Q2, Q3 and Q4 2009 has been revised up, we anticipate interest-rate hikes at the remaining monetary meetings in July

-

 
MARKET DRIVERS – CURRENCIES FX Research • 10.08.2010 • Jyske Markets Currency Spot Short- term market

MARKET DRIVERS – CURRENCIES

FX Research 10.08.2010 • Jyske Markets

Current Strategies

Currency Strategy Description of Strategy Date of Entry Target Stop READ Entry Level Loss MORE USD/JPY
Currency
Strategy
Description of Strategy
Date of
Entry
Target
Stop
READ
Entry
Level
Loss
MORE
USD/JPY
Option
Due to deflation in Japan, BoJ will keep rates unchanged for quite som time into 2011
Widening of the interest-rate spread to the US and the euro zone, among others, will put the yen under pressure
In the long term, the dollar will strengthen due to a faster economic recovery and stronger rate hikes in the US
16-12-2009
89.68
106 N/A
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Note: We point out that FX investment is currently associated with extraordinarily high uncertainty. But for long-term risk tolerant investors, there may be good investment opportunities in these turbulent times. This recommendation is only relevant for very risk-tolerant clients with the right risk profile and the overall financial strength to cope with any loss that may be incurred.

 

MARKET DRIVERS – CURRENCIES

FX Research 10.08.2010 • Jyske Markets

Disclaimer & Disclosure

Jyske Bank is supervised by the Danish Financial Supervisory Authority.

The research report is based on information which Jyske Bank finds reliable, but Jyske Bank does not assume any responsibility for the correctness of the ma terial nor any liability for transactions made on the basis of the information or the estimates of the report. The estimates and recommendations of the research report may be changed without notice. The report is for the personal use of Jyske Bank's custom ers and may not be copied.

This is a recommendation and not an investment report.

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Risk

FX, money market and/or commodity investment involves risk. Movements in the credit market, the sector and/or the news flow, etc. regarding the issuer may affect the exchange rate/the interest rate /the price of the commodity. See the front page of the research report for our view of the risk associated with the currency/interest rate/commodity investment. The risk factors and/or the sensitivity calculations stated in the report should not be regarded as exhaustive.

Update of the research report

Analyses, recommendations, and ad hoc publications are not updated. A new publication will instead be published if

and when it is found necessary. Market comments are updated daily.

See the front page for the initial date of publication of the report. All prices stated are the latest trading prices at the time of the release of the research report, unless otherwise stated.

MARKET DRIVERS – CURRENCIES FX Research • 10.08.2010 • Jyske Markets Disclaimer & Disclosure Jyske Bank