ICH - Significant implications for the Telecom sector

Karachi Stock Exchange - Pakistan

Our channel checks suggest that the much touted International Clearing House (ICH) mechanism is very close to implementation. The only concerns at the moment are the objections raised by the Competition Commission of Pakistan (CCP), where we expect the Ministry of Information and Technology (MoIT) to amicably address the concerns of CCP. ICH will lead to the revival of the LDI sector in our view and should result in multiple rerating for the sector. While the market has today partially priced in the optimism from ICH as far as PTC is concerned (forward EPS could jump to PkR7.2 ex-VSS), we believe that the smaller telco players (TELE, WTL and WTCL) should also be in for a sustained bull run.

ICH key terms: In order to enhance the understanding of our readers, we have provided definitions/explanations of some of the telecom jargon (Source: Access Promotion Rules 2004):

i) Approved Settlement Rate (ASR): Half of the Approved Accounting Rate (AAR), which is the rate that a license negotiates with a foreign service provider for handling of one minute of international telephony.

ii) Access Promotion Charge (APC): Payments made by LDI licensees to LL (Local Loop) licensees or to the Universal Service Fund. It is the charge which an LDI operator pays to LL operator for termination of calls on the LL system. Recall that PTCL is the main LL operator in the country, so unlike other LDI’s, it will not have to pay APC, instead it will receive APC payments from other LDI operators.

The market dynamics: Total market size for incoming calls inclusive of the grey traffic is ~2bn minutes per month. Presently, the incoming traffic is mostly coming through legal channels owing to extremely low incoming rates. Post ICH we do see a significant fall in incoming traffic due to i) higher ASR will encourage grey traffic as well as shift towards VoIP platforms like SKYPE, ii) lower demand (demand elasticity), and iii) increase in outgoing traffic where currently outgoing traffic represents ~23% of total international traffic in Pakistan. Despite the said changes, we believe that incoming traffic through the legal channel should still average at around ~1bn min/month, where stricter monitoring, investment in infrastructure to prevent illegal traffic and need for greater voice quality should help curb grey minutes. VoIP is a concern for telcos globally and as per ‘TeleGeography’, VoIP accounted for ~30% of global international traffic.

Earnings impact: ICH will be a game changer for the listed telecom sector, particularly PTC, as the company will have 50% share in revenues from ICH, furthermore, unlike other LDI operators, PTC will actually receive APC and will not have to pay 15% of its LDI margin towards the settlement of USF dues. We estimate incremental per minute revenue of Usc7.5/min for PTC and Usc5.0/min for the other LDI operators. Post creation of ICH, the bargaining power of PTC would be enhanced as it will be the only LDI operator, making it easy for PTC to negotiate the higher ASR rates with foreign operators. Below we have provided earning sensitivity to incoming traffic, where assuming 1bn min/month, the incremental revenue of PTC will amount to PkR42.75bn, resulting in an annualized EPS impact of PkR5.45. The earnings sensitivity of the Telecom sector provided on the previous page assumes a market share of 50% for PTC, ~3.5% for WTL, ~6% for WTCL and ~3% for TELE. 

Recommendation: We highlight PTC as the major gainer from the ICH. Assuming recurring consolidated EPS of PTC of PkR1.75, forward EPS under ICH at monthly traffic of 1bn min could go up to PkR7.2 (ex-VSS), which in turn could conceivably bump up our target price to PkR50/share (assuming market P/E multiple of 7.0x). Similarly, TELE would also be a key beneficiary of the development (second highest EPS impact) followed by WTCL and WTL which should lead to multiple re-rating of these scrips in our view. We recommend a BUY stance on the sector with PTC being our conviction pick.

Risks to our call: CCP presents the biggest road block to our call, however we expect MoIT to amicably address the concerns of CCP, where the government itself would be a major beneficiary of the ICH in the form of higher foreign exchange earnings as well as improving the marketability of the telecom sector for 3G license auction. Another risk would be a huge jump in grey traffic, which could force PTA to reduce ASR in order for the sector to remain competitive. In this regard, a Usc1/min change in ASR will lead to a 13% reduction in our earnings estimates for PTC and 20% for other LDI operators.

Pakistan Market: Technical Outlook

 

Bearish divergence on the RSI; stay on sidelines

 

The KSE-100 index closed at the 15,254 level, a gain of 102 points. Volumes improved by 10% and were recorded at 224mn shares versus 204mn shares traded previously. The current pattern suggests that the index may consolidate at current levels, however, a short term correction is due. The RSI has created a bearish divergence and the Stochastic Oscillator has continued to decline, supporting the above view. At current levels, we believe investors should stay on the sidelines. The supports are at 15,187 and 15,157 level, while the index will face resistance at 15,321 and 15,351 level, respectively.

 

USD/CAD Intraday Technical Analysis and Trading Recommendations for August 30, 2012

The USD/CAD pair was trading in oversold position within a wide range bearish channel which is depicted on the chart in red, when the pair broke through the upper limit of the short term bearish channel presented on the chart in Blue indicating a possible bullish retracement towards price level of 0.9970 seen on Wednesday with two successful retestings of the backside of the broken channel at 0.9888 then at 0.9845 on Tuesday.

Breakout above the bearish Blue channel gives the opportunity for the USD/CAD pair to visit the upper limit of the longer term channel around the price level of 1.0025 as long as the pair is trading within the current consolidation range above 0.9845. However, the pair found resistance around price level of 0.9945 which pushed the USD/CAD pair to the backside of the broken channel 0.9845 again before further continuation of the bullish movement.

Price level of 1.0025 corresponds to Fibonacci levels of 50% and 78.6% of the most recent two bearish swings. That's why price action should be watched there for a valid long term SELL entry with SL located above 1.0080.

GBP/USD Intraday Technical Analysis and Trading Recommendations for August 30, 2012

The GBP/USD pair has resumed its bullish movement recording a higher high last Thursday at 1.5912 after breaking through 1.5750 and reaching the upper limit of the depicted channel which served as supply zone for the pair.

GBP/USD bullish movement was maintained within the depicted movement channel. However, on Friday the market witnessed some expected bearish retracement which was seen on Tuesday too.

The lower limit of the movement channel as well as the significant Support level, located between 1.5750-1.5770, were tested showing a strong bullish price action which indicated a valid low risk BUY entry as expected with SL located below 1.5700.

The most significant Resistance level is located around 1.5910; this price level was tested last week expressing obvious bearish reaction which pushed the GBP/USD pair towards the lower limit of the depicted movement channel yesterday. That's why bullish movement should break through this level in order to make other bullish swings.

Breakthrough above price level of 1.5850 is essential today in order to reach the next resistance level at 1.5910.

AUD/USD Weekly Wave Analysis

AUD/USD Elliott Wave

For the last 2 weeks the AUD/USD pair was trading in a strong downward move, developing corrective wave A (coloured green) of the bigger wave (E) (coloured orange). Yesterday during the early European session we could observe an ascending movement towards the 1.0397 level (new daily high). Therefore, at the beginning of the New York session this currency pair did not manage to hold this level and the price pushed lower reaching a 1.0347 level. At the moment the AUD/USD pair is trading around 1.0328 level and we are expecting to see the price around 0.9825 level in a few weeks. In accordance with our wave rules and taking into account that the wave E retraces 61.8% of the wave C, we can define the potential targets by measuring wave C, with Take Profit 1 at 0.9974 (50% of wave C) and Take Profit 2 at 0.9824 (61.8% of wave C) To reduce the risk, we can use resistance at 1.0410 as Stop Loss. Also it is necessary to monitor the U.S. Prelim GDP q/q, Pending Home Sales m/m, Crude Oil Inventories, Beige Book and EU German Prelim CPI m/m data that can change the rate of the pair.

Support and Resistance

(S3) 1.0283 (S2) 1.0315 (S1) 1.0332 (PP) 1.0364 (R1) 1.0381 (R2) 1.0413 (R3) 1.0430

Trading Forecast

Proceeding from Elliott Wave rules today, the trend is expected to begin the downward movement. That is why short positions at level 1.0315 with Stop Loss 1.0410, Take Profit 1 0.9974 and Take Profit 2 0.9824 are recommended.

USD/CHF Wave Analysis for August 30,2012

USD/CHF Elliott Wave

Since our last analysis the USD/CHF pair was trading in a downward move like we expected, developing impulsive (3) wave of the bigger (5) wave (coloured purple). Yesterday during the European and New York sessions we could observe a descending movement from 0.9635 towards the 0.9547 level and we can consider this move as confirmation of our count. At the moment this major pair is trading around 0.9565 level and we are expecting to see the price around 0.9455 level soon. In accordance with our wave rules and taking into account that the wave 3 retraces 161.8% of the wave 1, we can define the potential targets with Fibonacci extensions (0.9660-0.9538-0.9634), with Take Profit at 0.9457 (161.8% of wave 1). To reduce the risk, we can use resistance point at 0.9595 level as Stop Loss. Also it is necessary to monitor the U.S. Unemployment Claims, Core PCE Price Index m/m and Personal Spending m/m data that can change the rate of the pair.

Support and Resistance

(S3) 0.9533 (S2) 0.9549 (S1) 0.9559 (PP) 0.9576 (R1) 0.9592 (R2) 0.9602 (R3) 0.9619

Trading Forecast

Proceeding from Elliott Wave rules today, the trend is expected to begin the downward movement. That is why short positions at level 0.9550 with Stop Loss 0.9595 and Take Profit 0.9457 are recommended.

Obama or Romney? Markets do not care

Will the markets feel better under Romney or under Obama? Many analysts think that there is no difference.

Of course, despite who wins in November, he will have to determine economic prospects of the country, cope with financial crisis, healthcare issues and many other crucial problems. Barack Obama and Mitt Romney are major contenders to the presidency but both of them do not have much influence on the markets.

It is hard to foresee how the market will behave in this or that case. There are too many of long term tendencies and factors which could not change the market direction just because there are some changes in the White House.

It is obvious that the elections will be predetermined by the problems in the country of that period. Investors from the both of sides admit one thing about the taxations: they must grow. However, who is going to pay more is not known yet.

Some experts note that political leaders of the country seem not to be able to compromise. Better not to think about the consequences of such behavior. Nevertheless, you can be sure that the economists of the Republican Party or democrats think that their ideas will be prosperous for the country while the actions of their opponents will lead to the crush.

Stock market correlates with profits and dividends and mainly depends on the business activity which is hard to predict. It is vital that the government will be able to create commercial benefits.

EUR/USD Wave Analysis for August 30, 2012

Wave Analysis:

During yesterday's trading session, EUR/USD failed to get over 1.2570 which resulted in price drop towards the lower line of the uptrend channel. Thus, the currency pair is of wait-and-see attitude which enables the growth within the boundaries of wave 5. In case of negative news, the pair may resume its downward move towards 24-level figure. Given that, indicators demonstrate unstable balance in which the market can operate till Bernanke’s speech on Friday.

Targets for Down Wave 1 or a:

1.2521 – 23.6% Fibonacci

1.2478 – 38.2% Fibonacci

Targets for Wave 5 into 5:

1.2568 – 161.8% Fibonacci

1.2613 – 200.0% Fibonacci

Summary and Trading Recommendations:

The most probable outcome is the continuation of the uptrend channel which was formed in 5 wave. Wave 5 into 5 may also continue its move enabling the rise towards 1.2568 and 1.2613 which is equal to 161.8% and 200.0% Fibonacci. The uptrend channel indicates the upward trend area, fixing below which will indicate a stronger downward move. After 5 into 5 wave formation, the pair may start going down under 1 or a wave which may push the currency pair lower towards 1.2521 and 1.2478 which is equal to 23.6% and 38.2% Fibonacci.

EUR/USD Intraday Technical Analysis - August 29, 2012

Yesterday the spot rate bounced off to the lower limit of its short term bearish channel at 1.2470 and is testing now the upper limit of this one at 1.2580 suggesting a decline. However, a break of these levels will release a good potential and initiate a bullish channel.

Technical indicators provide sell signals and until the resistance is not broken, the assumption of a decline is most likely. Bollinger bands are much discarded as a result of a strong increase of these days. Stabilization is expected in a short term.

As the spot rate tests the upper limit of its channel, we recommend 2 scenarios: the first one is the hypothesis of a decline where we suggest a sell at the level of 1.2580 with the 1st objective at 1.2520 and then at 1.2500. A breakthrough of 1.2600 will invalidate this scenario. The second scenario is a break of its resistance where we advise a “buy stop” which means buying the spot rate as soon as it is broken through its resistance of 1.2580 with the 1st objective at 1.2640 and then at 1.2660. A breakthrough of 1.2560 will invalidate this scenario.

USD/CHF Wave Analysis for August 29,2012

USD/CHF Elliott Wave

Yesterday the USD/CHF pair was trading in a downward move developing impulsive 5 wave (coloured purple) of the bigger wave 3 (coloured blue). During the European and New York sessions we could observe a descending movement from 0.9626 towards the 0.9547 level and we can consider this move as the end of the (1) wave (coloured black) of the bigger 5 wave (coloured purple). At the moment this major pair is developing corrective (2) wave (coloured blue) and we are expecting to see continuation of the bearish mood today. In accordance with our wave rules and taking into account that the wave 3 retraces 161.8% of the wave 1, we can define the potential targets with Fibonacci extensions (0.9798-0.9699-0.9767), with Take Profit at 0.9416 (161.8% of wave 1). To reduce the risk, we can use invalidation point at 0.9635 level as Stop Loss. Also it is necessary to monitor the CHF KOF Economic Barometer and U.S. Prelim GDP q/q, Pending Home Sales m/m, Crude Oil Inventories, Beige Book data that can change the rate of the pair.

Support and Resistance

(S3) 0.9439 (S2) 0.9493 (S1) 0.9526 (PP) 0.9580 (R1) 0.9613 (R2) 0.9667 (R3) 0.9700

Trading Forecast

Proceeding from Elliott Wave rules today, the trend is expected to begin the downward movement. That is why short positions at level 0.9560 with Stop Loss 0.9635 and Take Profit 0.9416 are recommended.

EUR/USD Ready for 1.2000 - Weekly Wave Analysis

EUR/USD Elliott Wave

Since our last analysis the EUR/USD pair was trading in a downward move like we expected, but if we take another look, we will come to a conclusion that corrective 4 wave is not over, so, there is no much change in our wave count. Yesterday during the early Asian session this major pair found support at 1.2465 level and we could observe a strong ascending move towards the 1.2575 level (3 days high). At the moment the EUR/USD pair is developing final 5 wave (coloured blue) of the bigger (C) wave (coloured green) and we are expecting to see price around 1.2000 level when the development of the final (5) wave (coloured orange) starts. In accordance with our wave rules and taking into account that the wave 5 retraces 161.8% of the wave 1, we can define the potential targets by measuring wave 1, with Take Profit 1 at 1.9964 (138.2% of wave 1) and Take Profit 2 at 1.1884 (161.8% of wave 1) To reduce the risk, we can use resistance at 1.2700 as Stop Loss. Also it is necessary to monitor the U.S. Prelim GDP q/q, Pending Home Sales m/m, Crude Oil Inventories, Beige Book and EU German Prelim CPI m/m data that can change the rate of the pair.

Support and Resistance

(S3) 1.2383 (S2) 1.2424 (S1) 1.2494 (PP) 1.2535 (R1) 1.2605 (R2) 1.2646 (R3) 1.2716

Trading Forecast

Proceeding from Elliott Wave rules today, the trend is expected to begin the downward movement. That is why short positions at level 1.2520 with Stop Loss 1.2700, Take Profit 1 1.9964, and Take Profit 2 1.1884 are recommended.

GBP/USD Supports and Resistances for Wednesday, 29 August, 2012

On 28th of August the British pound demonstrated a healthy deviation.

Having dropped against the dollar, the British currency then was trying to recover its positions during the Asian session. It managed to climb to week highs near 1.5837 and interrupted its 3-day fall.

At the end of the day the price was near VAL 1.5754 and VAH 1.5807. POC was in 1.5789 area.

Forecast for Today:

During the Asian session, the pound was trading in the narrow price range against the dollar.

In case of the following upward movement, the first resistance level will be at VAL of 24 August – 1.5823. From that level the growth will extend towards POC of 1.5861 and then to VAH of 24 August – 1.5897.

The most conservative longs will be up to VAL of 16 May – 1.5906.

In case of downward movement, the first support level will be placed at POC of 27 August – 1.5808. From this level the fall will extend towards yesterday’s POC of 1.5789 and then towards POC of 21 August – 1.5760, after that to POC of 16 August - 1.5737.

The most conservative shorts will be at POC of 20 August – 1.5707.

USD/JPY Forecast August 28, 2012, Technical Analysis

The USD/JPY pair had a very quiet session on Monday, in order to form a very neutral candle. We are sitting on top of support though, and as such it looks like a break to the upside would be an excellent opportunity to buy this pair that looks so consolidative. With this being said, we think that the 78 handle will continue to be protected by the Bank of Japan, and as a result will buying this pair as opposed to sell it.

We do see the 80 handle as massive resistance though, and as such are looking this only as a range trade. We don’t think this pair breaks out anytime soon, but if he gets above the 80.60 level, we see a move to 84 happening. If for some reason the market breaks down below the 78 handle, we think that the first signs of support should be bought as the Bank of Japan will certainly intervened sooner or later.

GBP/USD Forecast August 28, 2012, Technical Analysis

The GBP/USD pair attempted to rally during the Monday session, but fell off and managed to break down well below the 1.58 level. This is a very bearish sign as the day is closing out the session forming a shooting star, and now we have to pay serious attention to the 1.57 level if this level gives way, this would become a false breakout of a massive triangle – which is a massively bearish sign.

We still see no reason to panic at this point in time, as this is more than likely just going to be a pullback. On a supportive candle between here and the 1.57 level, we are very comfortable going long. Again though, if we get a daily close sub 1.57, this could be a market that would be worth selling.

AUD/USD Forecast August 28, 2012, Technical Analysis

The AUD/USD pair fell during the session on Monday as the 1.04 level has given way. The market appears like it is one seems to accelerate to the downside, but the 1.03 level should provide some type of supportive bounce at this point. We have broken down below the bottom of an up trending channel, and as such we are suddenly finding ourselves bearish of the Australian dollar.

During the early hours of the Monday session, China announced a large stimulus plan in order to pump the economy of from a confidence standpoint. It appears that the announcement has backfired, as it shows that the Chinese seem to be more concerned about the economic slowdown in that country than what was previously suggested. Because of this, there are concerns as to whether or not the Chinese can continue to buy so many of Australia’s natural resources.

On a break down below the 1.03 level, we would be very short of this pair aiming for parity. As for buying, we are not interested at the moment as we are already short with a small position.

USD/CAD Forecast August 28, 2012, Technical Analysis

The USD/CAD pair fell during the session on Monday, but managed to bounce in order to form a hammer by the end of the trading day. Interestingly enough, the oil markets looked relatively weak on a day that a massive tropical storm was heading towards many of the major refineries in the Gulf of Mexico. In fact, the storm is expected to be a level I hurricane by the time it hits land, and this should have in fact on refinery capacity.

However, it looks like the market may be read pricing the idea of quantitative easing coming out on Friday from the United States. With the Jackson Hole, Wyoming meeting on Friday that features a statement by Federal Reserve Chairman Ben Bernanke still lurking in the background, the markets may actually start to put a bid in for the US dollar as many are starting to rethink whether or not quantitative easing will be announced this week.

This pair is highly sensitive to this kind of action, as the Canadian economy is so dependent on the United States for its exports. In fact, Canada exports over 85% of the goods it sends out of the country to the Americans, and of course what happens in America is massively important to Canada as a result. With this being said, if the Dollar starts to strengthen we could see a lot of momentum start back up.

Looking at the charts, we are actually at the bottom of a larger consolidation area that extends from 1.04 to the 0.98 level. If we bounce from here, we would simply be continuing the consolidation that the market has been in for several months. In fact, this has been the bottom of the range for the last year, and as not much has changed it is hard to think that the currency should be priced any differently.

On a break of the highs from last week, we are more than willing to go long as it would show a bit of a momentum shift in this market. Obviously we could have fairly tight stops as the 0.98 level must hold as support. As for selling, we will not do it until 0.98 gives way on a daily close.

EUR/USD Intraday Technical Analysis and Trading Recommendations for August 27, 2012

The EUR/USD pair is on its way to test the short term uptrend depicted on the chart after finding resistance around price level of 1.2535.

It's more probable now that the H&S reversal pattern mentioned in the previous article is going to be confirmed.

Confirmation requires 4H closure below 1.2490 which opens a direct target towards 1.2435 then 1.2360.

The lower limit of the movement channel and two important Fibonacci levels & SMA 100 are located between 1.2310-1.2360 (S2 & S3) where price action should be watched for a valid low risk BUY entry with SL located below 1.2230 which corresponds to 78.6% of Fibonacci level.

Chinese Data Weakens AUD and Crude Oil

After hitting a fresh seven-week high against the US dollar earlier in the week, the euro was unable to extend its gains during trading yesterday despite the release of positive French and German manufacturing data. In other news, weak Chinese economic data resulted in losses for both crude oil and the Australian dollar during the European session. Today, traders will want to note the results of the UK Revised GDP figure at 8:30 GMT, followed by the US Core Durable Goods Orders at 12:30. Any better than expected news could help both the GBP and USD before markets close for the weekend.

Forex Market Trends

	EUR/USD	GBP/USD	USD/JPY	USD/CHF	AUD/USD	EUR/GBP
Daily Trend
Weekly Trend
Resistance	1.2657	1.5968	79.65	0.9675	1.0543	0.8023
	1.2603	1.5915	79.17	0.9624	1.0497	0.7974
	1.2575	1.5883	78.89	0.9592	1.0465	0.7945
Support	1.2526	1.5831	78.36	0.9542	1.0412	0.7892
	1.2495	1.5799	78.05	0.9510	1.0384	0.7863
	1.2447	1.5747	77.56	0.9459	1.0332	0.7810

Economic News

USD - Core Durable Goods Orders Set to Impact USD

After taking significant losses earlier in the week as a result of the most recent FOMC Meeting Minutes, the US dollar was able to stabilize for the most part during European trading yesterday. The meeting minutes hinted at a possible new round of quantitative easing, which caused investors to sell the greenback. Yesterday, the USD/JPY gained close to 20 pips during mid-day trading, but quickly erased the gains following a worse than expected US Unemployment Claims figure. Against the Swiss franc, the dollar gained close to 25 pips to reach as high as 0.9578.

As markets get ready to close for the weekend, traders will want to pay careful attention to the US Core Durable Goods Orders figure, set to be released at 12:30 GMT. Analysts are forecasting the figure to come in at 0.5%, well above last month's -1.4%. If the forecasts turn out to be true, the dollar could recoup some of its recent losses against the Japanese yen during mid-day trading. At the same time, should the news disappoint, it may fuel speculations that the Fed will soon begin a new round of quantitative easing and could result in losses for the greenback.

EUR - EUR Takes Modest Losses vs. USD and JPY

After hitting a fresh seven-week high against the US dollar during early morning trading yesterday, the euro took moderate losses later in the day, despite positive French and German manufacturing data. After reaching the 1.2571 level, the EUR/USD fell as low as 1.2535 during European trading. Against the Japanese yen, the common-currency fell more than 40 pips during the second half of the day, eventually reaching as low as 98.26.

Turning to today, euro traders should monitor announcements out of the euro-zone. German and French officials have been meeting in recent days to discuss the current situation in the euro-zone, particularly with regards to Greek progress in the steps it needs to take to get its economy back on track. Any positive news concerning Greece's current debt situation may boost the euro before markets close for the weekend.

Gold - FOMC Meeting Minutes Continues to Boost Gold

Gold extended its bullish trend throughout European trading yesterday, following the most recent FOMC Meeting Minutes from earlier in the week. The meeting minutes, which hinted at a new round of monetary stimulus in the near future, led to risk taking in the marketplace. As a result, gold gained close to $16 an ounce to reach as high as $1673.

Today, gold traders will want to pay attention to US data, specifically the Core Durable Goods Orders figure at 12:30 GMT. If the news comes in above analyst expectations, it may lead to reduced speculations that the Fed is getting ready to initiate a new round of quantitative easing and could result in losses for gold.

Crude Oil - Chinese Data Leads to Losses for Crude Oil

A poor Chinese manufacturing indicator turned crude oil bearish yesterday. The news signaled to investors that demand for oil in China may decrease, and contributed to risk aversion in the marketplace. The price of oil fell close to $1 a barrel during European trading, reaching as low as $97.26 before bouncing back to the $97.65 level.

Turning to today, oil could see volatility if there are any announcements out of the euro-zone with regards to the current debt situation in Greece. Positive developments could lead to risk taking in the marketplace, which may boost the price of oil before markets close for the weekend. Conversely, negative developments in the euro-zone could result in oil extending its downward movement.

Technical News

EUR/USD

The Bollinger Bands on the weekly chart are beginning to narrow, signaling that this pair could see a price shift in the coming days. A bullish cross on the same chart's MACD/OsMA indicates that the price shift could be upward. Going long may be the wise strategy for this pair.

GBP/USD

The Williams Percent Range on the weekly chart is approaching the overbought zone, indicating that this pair could see downward movement in the near future. This theory is supported by the Slow Stochastic on the daily chart, which has formed a bearish cross. Opening short positions may be the wise choice.

USD/JPY

The weekly chart's Bollinger Bands have begun to narrow, indicating that this pair could see a price shift this week. Furthermore, the Slow Stochastic on the daily chart has formed a bearish cross while the Williams Percent Range on the same chart is in overbought territory. Going short may be a wise choice for this pair.

USD/CHF

While the weekly chart's MACD/OsMA has formed a bearish cross, most other long-term technical indicators show this pair range trading. Traders may want to take a wait and see approach, as a clearer picture is likely to present itself in the coming days.

The Wild Card

NZD/USD

The Williams Percent Range on the daily chart has crossed into the overbought zone, signaling a downward correction in the near future. Furthermore, the MACD/OsMA on the same chart has formed a bearish cross. This may be a good time for forex traders to open short positions ahead of a possible downward breach.

USD/JPY Forecast August 24, 2012, Technical Analysis

USD/JPY fell during the session on Thursday as the “risk off trade” continued. The pair looks like it is trying to find some type of support in that general vicinity and this of course makes sense as the 78 handle has been so important. By the end of the Thursday session, we have printed a very neutral candle.

The candle is in the epicenter of a massive support area between 78 and 78.75 roughly. This area has been protected by the Bank of Japan from various reports, and as such we are willing to take a long position on the first supportive candle that we see. This means that a break of the Thursday highs would be good enough for us to go long, as would any type of hammer or bullish engulfing candle a little below where we are now.

As for selling this pair is concerned, the Bank of Japan would certainly get involved in this market if the price was the fall below 78. Because of this, we will not sell this market even if it breaks below this area. In fact, we are willing to buy supportive candles below with even more vigor than the ones in this general area.

Going forward, 80 should be significant milestone in this currency pair, followed by the 80.60 level. If we can get above both of those there’s a good chance that we end up in the 84 area before it is all said and done. Above that level and we are talking a long-term buy-and-hold type of situation.

It should also be said that this pair is ideal for the short term trader, as there is so much volatility in a tight range that we can perhaps pickoff 20 to 30 pips at a time. It isn’t exactly glamorous work, but in the end it all pays the same. Because of all of this, we are not selling this pair, but would rather buy the closer we get to the 78, as we think the consolidation should continue. In fact, there is a little bit of an argument to be made that we could be heading into consolidation between 78 and 80.

USD/CAD Forecast August 24, 2012, Technical Analysis

The USD/CAD pair rose during the session on Thursday, to test the top of the shooting star that was printed on Wednesday. The “risk off” trade seems to be back into play now, and the commodity currencies all got whacked during the session. However, we did not break the top of that shooting star, so there really wasn’t a signal at that moment in time. This would be a countertrend trade, so we will have to be very picky when it comes to buying this pair.

It looks to us that the parity level above will be very resistive anyway, so more than likely it’s going to be prudent to ignore any buy signals. Looking forward, we think that rallies are set up to be faded, and that may be what’s about to happen. We are currently flat of this market, and don’t necessarily feel the need to change that status right now.

GBP/USD Forecast August 24, 2012, Technical Analysis

The GBP/USD pair attempted to continue higher on Thursday, but got old back instead in order to form a hammer. This hammer is essentially anchored at the 1.59 level, and as such it looks like we may be pulling back to confirm the breakout. Because of this, we are looking for some type of supportive candle in the vicinity of the 1.58 handle.

If we do get that supportive candle, we are more than ready to go along of the cable pair, and as such right now we see absolutely no chance of selling this pair.

EUR/USD Forecast August 24, 2012, Technical Analysis

The EUR/USD pair continued to March higher on Thursday, but gave back about half of the gains in order to close near the 1.2550 level. The market looks a little overextended at this point in time, and we are right in the middle of the massive resistance area going to the 1.27 level. With this being said, we think that it is only a matter of time before this pair searched the pullback, but the real question will be whether or not it actually breaks down.

We have yet to determine what exactly has changed in the Euro’s favor, and as such we think there will be a selling opportunity soon. Once we get above the 1.27 level however, we have to change her thesis and start buying. Truth be known, we find is very difficult to believe, but you never know what can happen in the Forex markets. A break below 1.25 would also have a selling.

AUD/USD Forecast August 24, 2012, Technical Analysis

The AUD/USD pair initially rose during the Thursday session, but it must be said that it sold off rather drastically by the end of the day. Looking at this chart, it’s easy to see that there is an uptrend line that the market is banging against currently. The 1.05 level seems to be massive resistance, and as such it seems like we have a real fight on our hands. The candle looks really weak for the Thursday session, and as such there is a possibility of a trend line break. If we get that trend line break, we think that the market will run to the 1.03 level. At that point time, support could be expected.

We think that the gold markets rising should eventually give a lift to the Australian dollar as well, and we find it on that the gold markets did so well during the Thursday session, while the Australian dollar got absolutely pummeled. Sooner or later the correlation will return, and the markets will realign themselves. We think that even if the trend line breaks down, that the 1.03 level should offer enough support that we can serve buying the Australian dollar then. In the meantime, this is going to be a messy pair to trade.

Forex: EUR/USD trapped inside a 15 pip range above 1.2550

FXstreet.com (Barcelona) - As it's been usual for some recent Asia-Pacific sessions, EUR/USD is currently inside a very narrow range 1.2568/53 since session started, last at 1.2561, off yesterday's and fresh 6-week highs at 1.2588. Local share markets trade all in the red losing on average more than -1%, while gold retreats at $1665 from recent 4-month high yesterday at $1673, and US SP500 futures stay flat barely above the 1400 points mark.

Again London session ahead will show no EUR macro data related risk events on the agenda, with focus on Greek-EZ leaders meetings going on, today with Greek PM Samaras visiting German PM Merkel, and also on Spain possibly asking for the bailout as soon as mid Sept according to sources, with its risk premium back above the 500bps for German 10y yields. As usually for Fridays, no EZ sovereign debt auctions will take place today.

Immediate resistance to the upside for EUR/USD shows at recent fresh 6-week highs yesterday and 0.38 retrace of 1.3489/1.2037 down leg at 1.2588/93, followed by former Jan 2012 lows at 1.2622,and June 11 highs at 1.2668. To the downside, closest support comes at Tuesday's highs/0.38 retrace of 1.2293/1.2588 up leg at 1.2487/77, followed by Aug 06-07 highs/Wednesday's lows/0.5 retrace of same up leg at 1.2440/32, and Aug 14/17 highs at 1.2385.

FOREX-Euro eases, support seen from trimming of bearish bets

* Euro remains not far from 7-week high vs dollar

* Trimming of euro bearish bets may persist -analysts

By Masayuki Kitano

SINGAPORE, Aug 24 (Reuters) - The euro eased versus the dollar on Friday but still hovered near a 7-week high hit the previous day, its downside seen limited in the near term by the potential for the further unwinding of euro short positions.

The euro, which rose after Fed minutes on Wednesday suggested the U.S. central bank may opt for more monetary stimulus "fairly soon", got a further lift on Thursday after sources said Spain is negotiating with the euro zone over conditions for aid..

The Spain news helped offset a scaling back in expectations of an imminent U.S. easing after St. Louis Federal Reserve President James Bullard said the minutes are a bit stale given stronger data since the Fed's last policy meeting.

The euro dipped 0.1 percent to $1.2554, having hit a high of $1.2590 the previous day on trading platform EBS, its highest level in about seven weeks.

Against the Australian dollar, the euro touched a six-week high of A$1.2047 earlier on Friday.

"The moves that have taken place are nothing more than position unwinding," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, referring to the trimming back of euro-bearish bets.

Such unwinding may persist in the near term given a recent accumulation of short euro positions.

"Various potential pitfalls for the euro are coming up, so people want to sell when it rises. They sell and then buy back, sell and then buy back. There has been a continuation of that," Okagawa said.

The euro has bounced since hitting a two-year low of $1.2042 in late July, buoyed by expectations that the European Central Bank will announce plans to help lower Spanish and Italian bond yields at its policy meeting on Sept. 6. The euro could come back under pressure if the ECB disappoints the market. Another event that the market awaits is a German constitutional court ruling on the European Stability Mechanism, the permanent European rescue fund, due on Sept. 12.

The medium-term outlook for the euro remains murky, but the single currency might rise to around $1.27 to $1.28 in the near term, said Sim Moh Siong, FX strategist for Bank of Singapore.

"There's probably a bit more room for the further unwinding of short euro positions in the crosses, so I think we might see a bit of a higher euro in the interim," he said.

The dollar, which had slid against the yen following the release of the Fed minutes on Wednesday, gained a bit of respite versus the Japanese currency, rising 0.1 percent to 78.59 yen .

Since U.S. economic indicators released after the Fed's most recent policy meeting were fairly upbeat, traders are divided on exactly what the Fed will decide at its next meeting in September, said a trader for a major Japanese bank in Bangkok.

The market is now hunting for clues on the latest thinking of Fed Chairman Ben Bernanke, who will give a speech at the annual informal conference of central bankers and economists at Jackson Hole, Wyoming at the end of this month.

"Views are split and I think we will get some sort of conclusion at Jackson Hole," the trader said.

FOREX-Euro hits 7-week high vs dollar

* Spain in negotiations with euro zone for aid-sources

* Merkel and Hollande unite in tough message for Greece

* Expectations of ECB action, Fed easing seen boosting euro/dollar

* Fed minutes prompt expectation of easing next month

By Julie Haviv

NEW YORK, Aug 23 (Reuters) - The euro rose for a fourth straight day against the dollar on Thursday to hit a seven-week high on a report that Spain is negotiating with the euro zone over conditions for aid, though a final decision to request a bailout has not been made.

In the talks aimed at bringing down Spain's borrowing costs, the favored option is that the existing European rescue fund, the EFSF, would purchase Spanish government bonds at primary auctions while the European Central Bank would intervene in the secondary market to lower yields, sources with knowledge of the matter told Reuters on Thursday.

The news added to risk sentiment that was already in play after the release of Federal Reserve minutes the previous day that hinted at more quantitative easing in the United States. Sur v eys on French and German business activity tha t wer e not as dour as feared als o benefited the euro.

"We got the pop (in the euro) because we are getting some clarity on this whole bailout package for Spain," said David Song, currency analyst at DailyFX in New York. "Suggestions of a more accelerated approach or common ground is what's helping the euro right now."

The euro last traded at $1.2564, up 0.3 percent on the day, after earlier hitting a peak of $1.2589, its highest since July 4.

Fed minutes on Wednesday showed the U.S. central bank may "fairly soon" opt for more stimulus, which investors expect to be a third round of quantitative easing, known as "QE3."

"While this does suggest that the Fed is one step closer to further policy easing, in our view such a move is not yet a 'done deal' for September given the somewhat firmer economic data released after the August meeting," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

The Fed has pledged to keep U.S. interest rates low through late 2014.

The foreign exchange markets should be bumpy in the coming weeks as expectations fluctuate ahead of European Central Bank and Fed September meetings, Serebriakov said.

"While there is still uncertainty about the exact policy mix for both central banks, our sense is that the net outcome is likely to be positive for risk sentiment and thus consistent with a weaker U.S. dollar trend," he said.

The dollar pared some of its losses against the euro after St. Louis Federal Reserve President James Bullard told CNBC television that data since the last policymakers' meeting on July 31-Aug. 1 had been somewhat better and that the minutes were "a bit stale."

GREECE EYED

Angela Merkel and Francois Hollande presented a united front towards Greece, telling Athens it should not expect leeway on its bailout agreement unless it sticks to tough reform targets.

The German and French leaders met in Berlin to fine-tune their message to Prime Minister Antonis Samaras, who begins a charm offensive in Berlin and Paris this week in the hope of persuading Europe's big powers that Greece deserves patience.

Analysts, however, saw scope for further gains for the euro in the near term due to expectations the European Central Bank will act to lower Spanish and Italian bond yields next month.

"There is a lot of momentum, people are still short of the euro and you have both sides of the equation, the Europe side and the U.S. side, coming together," said Audrey Childe-Freeman, head of foreign exchange strategy at BMO Capital Markets in London.

"Another round of Fed QE was something many people were talking about but not many were believing. If you look at previous times the Fed has done QE it is undeniably bearish for the dollar."

Childe-Freeman said if Federal Reserve Chairman Ben Bernanke confirms more QE is possible when he speaks at a conference in Jackson Hole, Wyoming, next week and if there are no "nasty negative shocks" from Europe, the euro could rise to $1.2760 -- the 50 percent retracement of the March to July selloff -- next month.

The dollar suffered its biggest one-day loss in nearly two months against the yen on Wednesday after the Fed minutes.

The U.S. dollar last traded down 0.1 percent against the Japanese yen at 78.48 yen with the session peak of 78.69 yen and a session low at 78.34, according to Reuters data.