Comments and forex-analytics from FBS Brokerage Company

BBH: euro may be able to strengthen to the recent maximums

Analysts at Brown Brothers Harriman note that the single currency hit yesterday support at $1.4220 and managed to return above 1.4300 due to the hawkish comments of the European Central Bank.

The specialists claim that the pair EUR/USD may go up reaching the recent maximums in the $1.4550 zone. In their view, the ECB will likely continue tightening its monetary policy this year, while the EU financial support rules out the possibility of an un-orderly default in Greece.

Never the less, the bank isn’t so sure about further growth of euro. The economists underline that the European currency will still find itself under pressure of the euro zone’s debt crisis. For the pair could reach 2011 maximum in the $1.50 area, it has to break above $1.4550 on the sustainable basis. In any case trading is going to remain volatile affected by the risks associated with peripheral European nations.

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Commerzbank: comments on USD/CHF

The greenback went up versus Swiss franc from Wednesday’s minimum at 0.8365 to the 5-month downtrend resistance line at 0.8495.

Technical analysts at Commerzbank claim that the bearish pressure on the pair USD/CHF will ease if manages to close above 0.8554 (May 4 minimum and May 31 maximum). In this case US dollar will be poised up to 0.8593/8630 (Fibonacci level and the 55-day MA).

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Commerzbank: EUR/USD prospects after NFP

Analysts at Commerzbank think that the greenback won’t be able to gain versus the single currency on the Non-Farm Payrolls data.

The specialists think that even if the data goes in line with the forecasts, US dollar won’t be able to keep moving up.

The bank claims that the market talks about 130,000-140,000. If US economy gets less than 100,000 jobs, investors will get disappointed, especially in the unemployment rate increases.

As the specialists are looking forward to a discouraging result, the pair EUR/USD, in their view, has all chanced to find support.

The European currency returned today below $1.4300. Support levels are situated at $1.4220 (July 7 minimum), $1.4155 (uptrend support from May minimums) and $1.4100 (July 26 minimum). Resistance is situated at $1.4365/75 (50-day MA), $1.4395 (July 5 minimum) and $1.4465 (July 6 maximum).

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Reuters poll: experts’ forecasts on GBP/USD

According to monthly poll conducted by Reuters among 60 banks and analysts, British pound that has declined versus the greenback from $1.6800 to $1.5900 in the second quarter will remain at these levels for some time.

The respondents think that the pair GBP/USD will trade in the $1.6100 region during the next half of a year. The median forecast shows that sterling will start slowly strengthening only in 2012. The surveyed expects see pound reaching $1.6300 and then pulling back down to $1.6200 by the middle of the next year.

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MIG Bank, Commerzbank: bullish view on USD/JPY

Technical analysts at MIG Bank claim that as the greenback has overcome resistance at 81.30 trading versus Japanese yen, it’s moving up to 82.25. In their view, the pair USD/JPY will face some resistance at 81.80/85.

Specialists at Commerzbank also note that US dollar has managed to break above the daily Ichimoku Cloud at 81.31. According to them, above this level American currency will be poised up to the 55-day MA at 81.62 and then to the 200-day MA at 82.10. If dollar climbs above the latter, it will go higher to the downtrend line from 2007 to 2011 at 83.13. The bank sees support levels at 80.40 and 80.00.

Economists at Citigroup think that strong US Non-Farm Payrolls data will push USD/JPY to the levels in the 82.00 area.

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ECB decided to support Portugal

The European Central Bank, as it was widely expected, lifted up yesterday its benchmark interest rate by 25 basis points.

The ECB President Jean-Claude Trichet claimed that the region’s central bank would suspend its rating-requirement standard for Portugal so that nation could continue to use its bonds as collateral for central bank loans despite the fact that Moody’s Investors Service cut the country’s credit rating to Baa1.

According to Trichet, this decision was taken taking into account the fact that the Portuguese government has approved an economic and financial adjustment program which has been negotiated with the European Commission, the ECB and the IMF. Earlier the ECB waived minimum thresholds for Greek and Irish bonds.

Analysts at Bank of New York Mellon note that the fundamental issues and tensions within euro area are still in place. The specialists draw investors’ attention to the fact that Trichet hinted that the rate hike would not be immediate.

Ichimoku. Weekly forecast. GBP/USD

Weekly GBP/USD

Last week the trade was volatile – the bulls and the bears were fighting for domination at the market, so there was a small candle with long upper and lower shadows formed on the weekly chart. The bears turned out to be a bit stronger, so pound didn’t manage to overcome resistance provided by the Standard line.

Tenkan-sen and Kijun-sen have approached each other preparing to make a “dead cross” (1). Never the less, this signal won’t de strong as the figure will be formed above the bullish Ichimoku Cloud.

The prices will get support from the lower border of the uptrend channel and still ascending Kumo (3). In addition, the already mentioned Standard line is moving up that means that the longer term uptrend tends to continue.

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Daily GBP/USD

On the daily chart the situation is still more pessimistic. On the upside the prices face resistance from the Turning line (1), the Standard line (2) and the descending Ichimoku Cloud that has widened during the recent weeks that means the bears are leading at the market.

Tenkan-sen (1) and Kijun-sen (2) still hold in place the “dead cross” formed below the Ichimoku Cloud – the bearish signal.

At the same time, the longer term trend (Kijun) remains neutral, while Tenkan and Senkou Span A which characterize short-term price moves are deviating upward. Taking into account the outlook on the weekly chart we don’t disregard the possibility of the pair’s attempt to rise to the resistance line connecting May and June maximums.

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Ichimoku. Weekly forecast. USD/JPY

Weekly USD/JPY

On the weekly chat Tenkan-sen has managed to recoil a bit from the longer term Kijun-sen that remains horizontal since the beginning of April (1) – the bulls have managed to prevent the “dead cross”.

In addition, there was an “inverted hammer” candle formed last week – the bullish signal. Moreover, the descending Ichimoku Cloud is narrowing – Senkou Span B goes down (2), while Senkou Span A is flat.

The bulls will likely manage to move higher this week.

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Daily USD/JPY

On the daily chart tankan0sen (1) and Kijun-sen (2), as it was expected, formed the “golden cross”. Despite the rate’s decline on Friday, the Standard line (2) acted as support helping the pair go up at the beginning of this week.

The Ichimoku Cloud has narrowed almost to the limit – the lines Senkou Span A and B have come close to each other.

As a result, the bulls have now the chance to win the leadership. To achieve this they have to overcome 2 obstacles – the Turning line (1) and Senkou Span A.

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Ichimoku. Weekly forecast. USD/CHF

Weekly USD/CHF

On the weekly chart the pair USD/CHF kept consolidating between 0.8275 and 0.8550.

The Turning line (1) and the Standard line (2) are still providing resistance for the prices. All lines of the Indicator are horizontal (1, 2, 3 and 4).

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Daily USD/CHF

On the daily chart the lines Tenkan-sen and Kijun-sen are preparing to form the “golden cross” (1). The Standard line and the lines limiting the Ichimoku Cloud (2) are directed sideways, while the short-term Turning line is deviating up.

This week the bulls are likely to move up to the levels in the 0.8440/0.8500.

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Commerzbank: bearish view on EUR/USD

The single currency went down from last week’s maximums versus the greenback in the $1.4575 getting below the uptrend support line at $1.4156.

Technical analysts at Commerzbank believe that the pair EUR/USD is now poised down to 200-week MA $1.4024, the recent minimum at $1.3968 and the 200-day MA at $1.3907.

According to the bank, on the upside the pair will be limited by resistance at $1.4400 and $1.4538/80.

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Nomura, Citi: the situation in Italy shows market is still concerned

The slump of Italian bonds shows that the concerns about the euro zone’s debt problems don’t subside and that European leaders didn’t manage to prevent the spreading of the crisis within the region.

The yield on Italy’s 10-year bond rose to 5.47%. The spread between it and the yield on German bunds reached the record maximum as did the spread between the yields of Spanish and German 10-year securities.

Analysts at Westpac note that rising fears about Italy was somewhat unexpected as the economists and the markets were worried primarily about Spain and Portugal.

Economists at Citi recommend selling the single currency versus US dollar, Swiss franc and Japanese yen in case risk sentiment keeps getting worse. Analysts at Rabobank don’t think that euro will manage to find support in the near term given the results of European banks’ stress tests due at the end of the week.

Strategists at Nomura believe that the situation in Italy may deteriorate. The specialists warned about the potential political tensions in Italy. In their view, it’s necessary to get short on EUR/USD targeting $1.3750.

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The leading experts about the outlook for US dollar this year

The most accurate currency forecasters have different opinions on the future of US dollar which has lost 13% during the past year.

There are dollar-optimists who project the greenback to stop declining as the demand for it is likely to increase due to the euro zone’s debt concerns. In addition, the greenback may be supported by the fact that QE3 in the US seems to be unlikely.

Strategists at Schneider Foreign Exchange expect US currency recover to $1.40 by the end of 2011. In their view, the risk of a disorderly default in Europe is currently much higher than in the United States. Wells Fargo economists say that dollar may appreciate to $1.39 by December 31, while Credit Agricole sees dollar to end the year at $1.30.

Analysts at HSBC remind that dollar is still the reserve currency of the world and will be for some time to come, so it won’t continue depreciating. According their forecast, the pair EUR/USD will finish the year at $1.44.

The main dollar-negative factors are concerns about the weakness of US economy and US debt. Analysts at Bank of Nova Scotia underline that there’s no credible fiscal plan in the United States.

Strategists at Societe Generale believe that dollar will fall to $1.50 by the end of the third quarter and to $1.52 per euro by year-end. The specialists point out that US favors a weaker currency for the sake of economic growth encouragement. In their view, as long as unemployment remains high the Federal Reserve will keep its monetary policy extremely loose. JPMorgan thinks American currency will weaken to $1.48 by the year-end.

All in all, despite some negative opinions the overall sentiment about the greenback has significantly improves.

Analysts at Wells Fargo note that the safest strategy is to stay long on USD/JPY. In their view, by the end of the fourth quarter there will be a shift in interest-rate futures positive for US dollar.

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BNY Mellon gives outlook for USD/CAD

Currency strategists at Bank of New York Mellon claim that Canadian dollar may get under pressure in the near term versus its US counterpart, while its longer-term prospects are quite bullish.

Last week loonie got support from stronger than expected Canadian employment data, but then dropped after poor US employment figures as investors’ risk aversion strengthened. The specialists claim that Canada’s currency will be affected by US economic weakness. In their view, the pair USD/CAD may reach parity during the next 3-4 months.

In the longer term, however, the bank expects loonie to gain against the greenback. In their view, Canada’s dollar will benefit from rising oil prices as the nation has got some of the largest reserves in the world. As a result, BNY Mellon expects loonie to run in 2012 to 0.90 per dollar.

Analysts at RBC Capital Markets also see upward potential in loonie. According to them, Canadian currency will reach 0.94. The bank, however, has doubts about the near-term outlook. The specialists think that the Bank of Canada will raise the interest rates, though they aren’t as sure as earlier. In their view, it’s necessary to watch the central bank’s monetary policy report that is published on July 20.

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Barclays: dollar will rise to parity with Swiss frank

Analysts at Barclays believe that the greenback will manage to rise to the parity versus Swiss franc in 3 months as the attractiveness of US currency is increasing with the deterioration of the situation in the euro area.

The bank points out that if Europe’s prospects improve, demand for franc as a safe haven decreases. If the state of things in the monetary union, on the contrary, worsens, financial markets will get extremely concerned. In such case dollar will likely be able to strengthen, despite even the weak payrolls data.

As a result, the specialists think that it’s a good chance now to buy USD/CHF at 0.8350 stopping at 0.7900. The last time the pair was trading above the parity was on December 2, 2010. US dollar declined by 10.5% against its Swiss counterpart since the beginning of this year.

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Commerzbank: EUR/USD will fall to $1.3685

The single currency breached the uptrend support line at $1.4161, May minimum at $1.3968, the 200-day MA at $1.3908 and 50% Fibonacci retracement support at $1.3900.

Technical analysts at Commerzbank believe that the pair EUR/USD will slump to the 2010-2011 uptrend support line at $1.3685.

According to the bank, on the upside resistance is found at $1.3900, $1.4076 and $1.4161.

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Westpac: buy kiwi versus euro

New Zealand’s Q1 GBP figures are released on Wednesday, July 13, at 22:45 GMT.

The economy that suffered in February from the devastating earthquake is rapidly recovering.

Analysts at Westpac expect the nation to show accelerating economic growth gaining 0.3-0.5% in the first 2 months of the year after adding 0.2% in the final quarter of 2010.

The specialists believe that New Zealand’s dollar will get support from the data publication. In their view, it’s necessary to open longs on kiwi against the single currency at 1.7250 stopping at 1.7450 and targeting 1.6900.

Economists at Nomura Securities claim that the People’s Bank of China may be buying NZD. According to the bank, big central banks may get more interested in kiwi.

The Fed is likely to keep the rates low until June 2012

According to the study conducted by the Federal Bank of Cleveland, the 3-percentage-point gap between yields for 3-month and 10-year Treasuries means that American economy may add 1.1% in a year through June 2012 – that is less than half of the Fed’s current forecast.

Taking into account pore June labor market figures, it’s becoming more and more likely that US central bank will keep interest rates extremely low in the current 0-0.25% range. The nation’s borrowing costs remain at these levels since December 2008 and may do so for the longest period since World War II.

In February federal fund futures showed 51% chance of increase. This percentage lowered in April to 39% and is now only at 10%.

The yield on the benchmark 10-year notes declined from 3.77% in February to 3.03% on July 8. Strategists at Barclays note that the 10-year yields staying in the 3% area reflect expectations that US lawmakers will reach an agreement on raising the debt ceiling, though obliging the government to conduct spending cuts that will certainly affect US economic growth in the short term.

BNY Mellon: situation in Europe has gone too far

Analysts at BNY Mellon believe that the European currency will keep weakening against a range of currencies during the summer even though Germany's finance minister Wolfgang Schauble claimed that there is still time for the euro zone to reach a deal on Greece ahead of the next tranche of money due at the end of September.

In their view, the crisis has gone too far for the markets’ concerns to ease down. In addition, there are other indebted euro zone nations at stake now.

According to the bank, the pair EUR/USD is poised down to cross at $1.3710 the uptrend support line from June 2010 of $1.1876.

Economists at Rabobank warn that the longer it takes for European politicians to find a solution to the region's sovereign-debt crisis, the greater will be the risk of the region’s contagion with the debt crisis. In their view, euro will stay under pressure in the near term.

Strategists at RBC Capital Markets believe that the single currency will keep going down as long as the yield spread between Italian and German bond keeps widening and renewing the record maximums. The yield on 10-year Italian bonds reached today 6.02%.

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HSBC: euro’s decline could be much stronger

Analysts at HSBC note that as the negotiations of US government and the lawmakers on the debt ceiling increase gave reached a deadlock the greenback doesn’t surge versus euro undermined by the debt crisis as much as it could have.

The specialists claim that euro’s fair rate is found at $1.25.

The pair EUR/USD fell today breaching the 200-day MA at $1.3908 and hitting the 4-month minimum at $1.3837.

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Daiwa, RBS: pound under pressure of negative factors

The prospects of the Bank of England’s rate hike faded today as the annual inflation rate declined from 4.5% in May to 4.2% in June. According to the Office for National Statistics, it may have happened as the producers reduced prices of electronic goods trying to attract customers. CPI inflation has been above the 2% target for the past 18 months. Core inflation that excludes the impact of volatile food and energy prices went down last month from 3.3% to 2.8%.

Analysts at Daiwa note that such CPI dynamics was quite surprising. In their view, the drop, particularly reflected in the core measure, indicates the underlying economic weakness. The specialists now doubt that the BoE will raise the borrowing costs this year and even in 2012.

Pound was also pressures by the fact that Britain's trade deficit increased from 7.6 billion pounds to the maximal level since December of 8.5 billion.

Moreover, British currency suffered from external factors, particularly from the escalation of concerns about Italian debt that worsened investors’ risk aversion.

Analysts at RBS claim that pound will be affected by the euro-negative comments (bearish for GBP/USD), though noting that, on the other hand, as investors will be selling euro, they may regard UK as an alternative (bearish for EUR/GBP).

The bank economists expect GBP/USD to fall to $1.55. Sterling hit 5-month minimum versus the greenback and 3-month minimum versus Japanese yen.

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MIG Bank: GBP/USD может упасть до $1.5345

Currency strategists at MIG Bank note that British pound has breached the pattern within which it was consolidating during the past half of the year.

The pair GBP/USD pulled back after forming a lower maximum at $1.6442 and went down below the 200-day MA at $1.6045. The specialists think that sterling will fall to $1.5345.

Today pound hit 5 ½ -month minimum at $1.5780 after the release of lower-than-expected UK CPI figures. Resistance levels for the pair are situated at $1.5935 and $1.6015, while support is found at $1.5775, $1.5750 and $1.5660.

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Westpac: Aussie declined due to the risk aversion

Australian dollars hit today 2-week minimums versus US dollar and Japanese yen on the concerns about the global economic recovery and on the expectations that the European debt crisis will spread more, while the region’s authorities are unable to act decisively to prevent it.

Analysts at Westpac and RBC note that risk aversion has significantly strengthened. In their view, the pair AUD/USD is poised for more declines.

According to the survey of more than 400 companies that took place from June 24 to June 30 conducted by National Australia Bank, confidence index dropped from 6 in May to 0 in June. Specialists at NAB that weaker confidence and slower consumer spending will increase the pressure on the Reserve bank of Australia to keep the rates unchanged at 4.75%.

The pair AUD/USD dropped from $1.0600 to the lowest level since June 29 at $1.0524. The pair AUD/JPY fell from 85.53 to the minimum since June 28 at 84.78.

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HSBC, BoA-Merrill Lynch: Chinese data was rather strong

China's second-quarter GDP was in line with forecasts rising by 9.5% after gaining 9.7% in the first quarter. June industrial production increased by 15.1% after 13.3% rise in May versus 13.2% expected.

Analysts at HSBC claim that Chinese GDP and industrial output figures released today are relatively strong. The specialists note that as inflation rate remains high, monetary tightening conducted by China’s monetary authorities seems justified. In their view, the country will be very cautious about raising rates, so this year 1-2 bank reserve requirement hikes are more likely.

Economists at Bank of America-Merrill Lynch believe that Chinese economic growth pace will slow down to 9.0% in the fourth quarter. According to the bank, the nation’s economy’s heading for a soft landing. The strategists think that China’s GDP will add 9.3% in 2011.

HSBC, Western Union: kiwi’s rate depends on Europe

New Zealand’s dollar rose versus its US counterpart from the recent minimum at 0.8110 hit yesterday to the levels in the $0.8220 area.

Currency strategists at HSBC claim that taking into account kiwi’s 2011 maximums, the short-term prospects for the pair NZD/USD seem to be negative. The specialists note that the demand for New Zealand’s currency will be stemmed by the market’s concerns about the situation in Europe.

Analysts at Western Union believe that the pair has found support after its decline earlier this week. Never the less, the specialists also think that further dynamics of the cross will depend on how the things go in the euro area. The specialists say that kiwi managed to get higher today on the good Chinese data and is now losing its upward momentum. In their view, support for NZD/USD is at $0.8190, while resistance is situated at $ 0.8240.

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Commerzbank: EUR/USD decline will soon resume

Yesterday the single currency hit the minimum at $1.3837 versus the greenback and then managed to return back to the levels in the $1.4000 zone.

Technical analysts at Commerzbank, however, expect euro’s recovery to be limited. In their view, EUR/USD is going to resume decline to the uptrend support line from 2010 to 2011 at $1.3685.

According to the bank, the pair tested the levels below the 200-day MA at $1.3909 and the 50% retracement support at $1.3900, though hasn’t yet closed down there.

Resistance levels are situated at the 200-week MA at $1.4024, June 16 minimum at $1.4073 and previous support line at $1.4166.

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