19. September 2012, 10:54

Morning Call vom 19.09.2012 von Michael Hewson, FX-Analyst von CMC Markets

Bank of Japan joins the easing party

By Michael Hewson (Senior Market Analyst at CMC Markets UK)

With concerns about a rising yen continuing to trouble Japanese policymakers and economic activity starting to slow, the Bank of Japan decided once again to try and deal with the problem of their appreciating currency, which is continuing to hurt the country?s exporters. Last week?s Fed action won?t have done the Japanese any favours, strengthening the yen further and the central bank has decided to respond early by adding another 10 trillion yen to its stimulus program, in order to try and mitigate the Fed?s actions, on its own currency as well as attempt to stimulate growth.

And so the Bank of Japan continues the easing merry go round that has been symptomatic of this financial crisis with central banks taking it in turns to try and ease their economies back to health with little or no effect, as it slowly becomes a zero sum game, and a race to the bottom.

In Europe the focus is once again likely to be on Spain and its current reluctance to commit itself to a bailout, despite new data yesterday showing that distressed loans increased once again in July to 9.86%, the highest levels since 1962. This equates to around ?170bn in an economy where unemployment is rising and the economy is contracting.

In June the Spanish government commissioned two reports, from Wyman and Berger which estimated that the banking sector needed ?62bn, a figure that seemed unrealistic then, and seems totally unrealistic now.

The original banking bailout figure came in to the tune of ?100bn and the final independent report on Spanish banks has yet to be released, it is hard to see how the Spanish government won?t need more money.

The sums simply don?t add up and with money draining out of Spanish banks the longer the Spanish government leave a decision the more expensive it is likely to be.

The other economic event on the calendar today is the publication of the latest Bank of England minutes, if only to see whether or not in the departure of Adam Posen, whether David Miles has picked up the doves baton.

Markets will pay particular interest to which way Posen?s replacement Ian McCafferty will lean in the doves? vs. hawks? debate, and in particular the tone he adds to the debate. It is hard to imagine that he would be as dovish as Adam Posen, which suggests that the bank may well be less ready to turn on the monetary taps when the current program of asset purchases ends in November.

The tone of the minutes will also be noteworthy given the unexpected rise in the July inflation numbers, which may have given some members pause with respect to the committee?s inflation expectations. 

The minutes could also shed some light on early indications as to the success or otherwise, of the ?funding for lending? scheme which started at the beginning of August.

In the US in the wake of the Fed?s decision to by mortgage backed securities the latest housing starts figures are due for August with a rebound of 2.6% expected after July?s 1.1% decline. Building permits are expected to go the other way with a decline of 2%, after a surprise 6.8% rise in July.

EURUSD ? the euro continued its slow drift lower towards the 1.3000 level which suggests we could well have seen the highs in the short term at 1.3170.

The key resistance on the upside remains at 1.3235, trend line resistance from the 1.4940 highs of 2011. A move above 1.3240, targets 1.3495, the 50% retracement of the entire down move from 1.4940 to 1.2045.

A move below 1.3000 could well see a move back to the 200 day MA at 1.2830 with only a close back below the 200 day MA suggesting a move back towards 1.2650.

Key trend line support from the 1.2045 lows now lies at quite some way back at 1.2560.

GBPUSD ? the highs this year at 1.6305 as well as the highs this week at 1.6275 remain a key level and a major obstacle to 1.6590, last years August highs. We could well see a pullback towards 1.6050, while below that we have trend line support at 1.5970 from the August lows at 1.5490.

Only a break below 1.5860 has the potential to target 28th August lows at 1.5755. The long term trend line support lies at 1.5605 from the 1.5240 lows.

EURGBP ? the euro continues to drift back towards the 0.8000 level after this week?s failure to get close to the 200 day MA at 0.8140. This remains the major obstacle to further gains. We now have minor support at the 0.8000 level, while a move below the 0.7950 level suggests a move towards the 0.7880 level.

USDJPY ? the US dollar continues to be underpinned by the tensions between China and Japan which have sent the yen lower towards trend line resistance at 79.15 from the 20 April highs at 81.80. The 200 day MA at 79.31 remains the main obstacle to a return towards the highs last month at 79.70. Any pullbacks should find support around the 78.20 level as markets look to create a base.

Equity market calls

FTSE100 is expected to open 18 points higher at 5,886

DAX is expected to open 60 points higher at 7,408

CAC40 is expected to open 15 points higher at 3,528

FTSEMib is expected to open 155 points higher at 16,231

Quelle: http://www.cmcmarkets.com

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