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Dec. 24: Asian session

Asian stocks rose boosted by the gains in the American session as the upbeat US spending data showed that US economic recovery gaining momentum. In addition, China’s central bank moved to ease a cash crunch by making its first market-wide money injection in three weeks.

Japan’s Nikkei went up by about 0.8% to 6-year high above 16,000 after Tokyo markets opened after a holiday. USD/JPY rose to 104.41.

AUD/USD declined to $0.8907 after peaking to $0.8960 yesterday. NZD/USD edged down to $0.8176. Gold dipped below the $1,200 level yesterday and is heading for its biggest annual loss in three decades.

EUR/USD slid to $1.3675 after it tested $1.3716 on Monday. GBP/USD is consolidating around $1.6345.

EUR/USD: how do the banks trade?

There’s a choice among various shorts.

BoA/Merrill: Short at $1.3764 with stop at $1.3834 and take profit at $1.3479

Credit Agricole: Short at $1.3780 with stop at $1.4160 and take profit at $1.3300

Credit Suisse: Short at $1.3800 with stop at $1.3860 and take profit at $1.3415

Commerzbank: Short at $1.3750 with stop at $1.3815 and take profit at $1.3405

Commerzbank: Short at $1.3665 with stop at $1.3815

Morgan Stanley: Short at $1.3600 with stop at $1.3750 and take profit at $1.2700

Nomura: trajectory for USD/JPY

Analysts at Nomura have outlines a scenario for USD/JPY using Elliott waves. The specialists expect the pair to trade sideways in the 102.50/104.50 during the next month in the wave (4) and then rally to 106.00 in the wave (5).

http://fxbazooka.com/upload/tiny/Analytics/2013/December/24.12/1.png

Credit Agricole: Q1 GBP forecasts

GBP/USD

GBP/USD to weaken to $1.6200 in the stronger USD environment. Britain's officials will try to talk the pound down in Q1 2014.

http://fxbazooka.com/upload/tiny/Analytics/2013/December/24.12/eurgbpweekly.png

Chart. Weekly GBP/USD

EUR/GBP

As for EUR/GBP, the pair is expected to fall towards 0.8200 by end-March. Pound will gain some ground vs. the euro on a wave of EUR sales.

http://fxbazooka.com/upload/tiny/Analytics/2013/December/24.12/gbpusdweekly.png

Chart. Weekly EUR/GBP

Dec. 27: Asian session

Most Asian stocks went up after big gains at Wall Street where Dow Jones made a record high close. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.25%. Chinese shares rose as money rates eased and China set its yuan at an historic high.

USD/JPY tested briefly levels 105.00 today and EUR/JPY – 144.00. Yen hit 5-year lows versus the greenback and euro. Japanese data showed that the nation’s manufacturing activity is expanding at the fastest clip in more than 7 years, while Japanese firms added workers at the quickest pace in over 6 years. Japan’s core consumer price inflation in November rose to a 5-year high. This means that the country’s making progress in its fight against deflation.

Australian and New Zealand dollars have both strengthened in the late Asian session. AUD/USD has recovered above the $0.8900 mark. However, the Monday bearish gap still remains open. NZD/USD rose to $0.8170. The pair is supported by the 200-day moving average.

EUR/USD rose to $1.3745. GBP/USD went up to $1.6447.

EUR/USD: Ichimoku analysis (Dec. 27)

Daily. In the week ahead the New Year the US dollar is losing ground versus almost all major world currencies. EUR/USD recovered to 1.3740 by the end of the week. Bullish sentiment strengthened: prices have gone through resistance of the Tenkan-sen, and will soon be fixing above it. The Ichimoku Cloud also points to the strengthening of the bulls, but in the longer term.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/eurusdd1.png

Chart. Daily EUR/USD

H4. Here EUR/USD is leaving the Cloud. The pair’s supported by the short-term Golden Cross ©. The Cloud itself looks positive. It started widening up due to the growth of Tenkan-sen. The position of the bulls is strengthening. Note though that there’s a serious resistance at $1.3755. In addition Chinkou Span shows that the market is overbought. So, when the market reaches the level mentioned above, the market can either begin consolidation or make a corrective decline to the lower edge of the Cloud.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/eurusdh4.png

Chart. H4 EUR/USD

GBP/USD: Ichimoku analysis (Dec. 27)

Daily. During the past week the pair has settled above Tenkan-sen (TS). This allowed the bulls to resume rebound. However, growth is only in the short term. All lines of the Indicator are horizontal, so there’s no dominating trend. At the same time, the pair’s once again approaching the yearly highs as it’s trading in the $1.64460 area. In the coming days the bulls may attempt to break the December range to the upside. This will open the way towards $1.6600.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/gbpusdd1.png

Chart. Daily GBP/USD

H4. At H4 the pair was consolidating just below the lines Tenkan and Kijun which have formed the Dead Cross. However, in the second half of the weeks the buyers re-appeared and resumed rebound. The pair formed a Golden Cross (С), and both lines are rising now. Senkou Span A and B are going up as well. Bullish sentiment is strengthening, so the odds that the uptrend will continue are high.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/gbpusdh4.png

Chart. H4 GBP/USD

USD/CHF: Ichimoku analysis (Dec. 27)

Daily. During the past week the currency pair has been trading inside the Tenkan-Kijun channel. The prices were mostly drifting to the lower border of this range. All lines of the Indicator remain horizontal, so the sideways move may continue. Note that the odds that the downtrend will resume are high as the Cloud remains bearish and the Dead Cross (С) is still in place.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/usdchfd1.png

Chart. Daily USD/CHF

H4. Here the trend is sideways as well. Here the pair has also been trading inside Tenkan-Kijun channel which itself is inside the Ichimoku Cloud. However, on Friday the sellers livened up and the pair fell to the lower border of the Cloud. As Chinkou Span went below the price chart, we expect downtrend to develop in the near term.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/usdchfh4.png

Chart. H4 USD/CHF

USD/JPY: Ichimoku analysis (Dec. 27)

Daily. USD/JPY is setting new highs. The pair has reached 105.00. So, the bullish rally continues supported by all lines of the Indicator at the daily timeframe. The Golden Cross (С) and the bullish Cloud confirm the positive sentiment. But after the prices test resistance at 105.20, the pair may start corrective decline to Tenkan-sen.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/usdjpyd1.png

Chart. Daily USD/JPY

H4. At H4 there are yet no problems for further rebounding. All lines of the Indicator are rising as well. The Cloud is bullish. Tenkan and Kijun have once again formed the Golden Cross (С). If the pair managed to hold above support at 104.65 in the coming days, the pair will start the year by testing 105.20 and maybe even 106.00.

http://www.fbs.com/sites/default/files/image/analysis/2013/December/27_12/usdjpyh4.png

Chart. H4 USD/JPY

ANZ: EUR/USD will continue uptrend

Analysts at ANZ point out that EUR gained 6% versus its main counterparts this year. This happened despite the fact that the ECB lowered interest rates to the record low, the euro zone’s economic recovery isn’t very convincing and the region’s unemployment remains extremely high.

ANZ concludes that the EUR depends not on comparative growth dynamics, but on a large current account surplus, improving fiscal position and the union’s progress in resolving the crisis and deepening economic integration. According to the specialists, this situation is unlikely to change in 2014. In their view, the uptrend will remain in place, especially against AUD and NZD. ANZ expects EUR/USD to trade in the $1.40/45 range.

Dec. 30: Asian session

USD/JPY edged up to 105.40. Asian stocks strengthened, curbing demand for haven assets. MSCI Asia Pacific Index of shares advanced 0.2%.Yen declined on a mix of improving sentiment on the global economy, rising investor risk appetite and expectations of more Bank of Japan stimulus.

EUR/USD declined to $1.3730 after spiking to $1.3890 on Friday. Euro rose by the end of the year as the European banks tended to repatriate funds ahead of an asset review by the ECB. Mario Draghi said that he saw no urgent need to cut the euro zone’s main interest rate further and no signs of deflation. GBP/USD declined to $1.6474 after spiking to $1.6578 yesterday.

Commodity currencies are all trading under pressure, but have reversed the early-session drop. AUD/USD found support at $0.8835, holding a bit above the key $0.8820 support (Dec. 10 low). NZD/USD bounced from the $0.8115 low.

BoA: EUR/USD will make a top

Analysts at Bank of America Merrill Lynch have noticed that since 2008 EUR/USD was reversing down near the long-term resistance after completing a 3-legged advance from the previous cyclical low. This time such low is at $1.2041 (July 2012 low).

So, the specialists are looking for a top and turn down. Targets lie at $1.2745 (March 2013 low) and $1.2173.

http://fxbazooka.com/upload/tiny/Analytics/2013/December/27.12/eurusdweekly.png

Chart. Weekly EUR/USD

Analysts on USD/JPY 2014 prospects

We’ve seen an impressive rally in USD/JPY in the year 2013 – the pair rose by more than 3000 pips, recovering 61.8% Fibonacci from the 2007/2011 decline. The gradual widening of the yield spread between the US and Japan should support the pair further, as the Fed’s monetary policy will become less dovish with time, while the BOJ is expected to ease further. Our next bullish targets lie at 107.35 (200-month MA) and 108.80.

JP Morgan strategists warn about a strong bearish correction in the year 2014. “JPY has high risk of mean reversion over the next year because positioning is so stretched (shorts more than 3-sigmas from average). This extreme positioning is why we have flagged USD/JPY as vulnerable to a correction in Q2 (target 100) if the economy fails to reaccelerate quickly from a contraction induced by the consumption tax hike”. However, by the year-end analysts expect the pair to recover to 106.00.

Analysts at Deutsche Bank are much more optimistic on the USD prospects: “We are only about half way through a move that will eventually push up to and probably through 120.00 yen”. DB puts its 2014 USD/JPY forecasts at 106 in Q1, 109 in Q2, 112 in Q3 and 115 in Q4.

http://fxbazooka.com/upload/tiny/Analytics/2013/December/27.12/usdjpymonthly.png

Chart. Monthly USD/JPY

Jan. 9: Asian session

US dollar remains strong versus its main counterparts as the signs of improvement in the labor market (ADP said US private employers added a bigger-than-expected 238K jobs in December, the strongest increase in 13 months) support expectations the American economy will be strong enough for the Fed to end bond purchases this year. USD/JPY is trading in the 104.80 area after reaching 105.12 yesterday.

Asian shares wavered on Thursday after a lackluster performance on Wall Street overnight. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2% after snapping a five-day losing streak on Wednesday. Despite the yen's weakness, Japan’s Nikkei benchmark shed 1.4%, giving up some of its 1.9% bounce in the previous session.

Australian and New Zealand dollars are trading under pressure for a third consecutive day. AUD/USD dipped to $0.8865 before bouncing to $0.8880. AUD weakened in the Asian trade despite the strong retail sales figures (+0.7% m/m vs. forecasted +0.5%). Australia has also released pretty neutral building approvals data (-1.5% m/m). NZD/USD hit a daily low of $0.8240. New Zealand building consents rose above the forecast by 1.1%. China inflation figures came a little bit below the forecast with CPI rising by 2.5% y/y and PPI falling by 1.4%.

EUR/USD edged up to $1.3586, while GBP/USD is trading in the $1.6450 area.

Soros: China is the biggest risk

George Soros remains pessimistic about the prospects of the Chinese economy. In his view, the growth model that caused its rapid rise has run out of steam. Soros believes China is the main destabilizing factor threatening the global economic recovery, and not other bleak assessments on the euro, the US political stalemate or a Japanese bubble.

Soros sees a worrisome disconnect between China's pledges to move away from excessive investment and overborrowing and toward a services-based economy without sacrificing rapid growth. “There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years," Soros wrote.

Jan. 10: Asian session

Asian shares were little changed on mixed Chinese trade data. Trade surplus contracted, but the jump at imports points to stronger domestic demand and may mean that the nation’s rebalancing away from a reliance on exports to fuel growth. MSCI’s broadest index of Asia-Pacific shares outside Japan inched up by 0.1%. Shanghai stocks trimmed early losses to be almost flat. Japan’s Nikkei also pared losses to be down 0.4%, while the Hong Kong market added 0.5%.

USD/JPY is trading just under 105.00. AUD/USD is trying to recover after having dipped to $0.8880 on China trade balance figures. NZD/USD remains under a slight bearish pressure for a fourth day in a row. Kiwi remains supported by the 55-day MA at $0.8246 as of writing. Australian and New Zealand dollars may be influenced by the US nonfarm payrolls data today.

EUR/USD found support at $1.3550 yesterday and rose to $1.3616 today. GBP/USD is trading in the $1.6480 area.

EUR/USD: Ichimoku analysis (Jan. 10)

Daily. The pair started the year with a decline. The strengthening of the US dollar contributed to the fall of the currency pair to the upper limit of the Ichimoku Cloud. Senkou Span B supported euro at $1.3560 – the pair was consolidating above this point last week. Short-term outlook turned bearish as Tenkan and Kijun formed a “dead cross” ©. However, pay attention to the fact that the Kijun-Sen (KS) went up immediately after the intersection. This may mean a recovery in the near term. Also note that the Ichimoku Cloud is still positive.

http://www.fbs.com/sites/default/files/image/analysis/2014/January/10/eurusdd1.png

Chart. Daily EUR/USD

H4. The trend turned bearish at H4. The prices fell and Tenkan-sen and Kijun formed a “dead cross” ©, which is still relevant after almost two weeks. Ichimoku Cloud turned bearish. This indicates that the bears are gaining power. Nevertheless, the support at $1.3560 doesn’t give them the opportunity to continue the decline. During the last day the pair returned to the Tenkan and Kijun lines. If the prices fix above Kijun, they may rise to the lower boundary of the Cloud.

http://www.fbs.com/sites/default/files/image/analysis/2014/January/10/eurusdh4.png

Chart. H4 EUR/USD

GBP/USD: Ichimoku analysis (Jan. 10)

Daily. During the past week GBP/USD managed to regain a bit the lost ground. Kijun-sen (KS) acted as support, which stopped the corrective decline at $1.6400. Note that a local minimum was formed a lower, in the $1.6340 area. Thus, the upward trend remains in both the short- and long-term prospects. A “golden cross” © is still in place. The Ichimoku cloud is bullish. If the prices fix above Tenkan, the bulls will continue purchases.

http://www.fbs.com/sites/default/files/image/analysis/2014/January/10/gbpusdd1.png

Chart. Daily GBP/USD

H4. At H4 the picture is not that smooth. After the pair recovered to the upper boundary of the Cloud, it found resistance at $1.6500. It may be difficult for the prices to break higher as Chinkou Span is in the overbought area. So, in the short term we can expect the depreciation to Tenkan after another attempt to get above $1.6500.

http://www.fbs.com/sites/default/files/image/analysis/2014/January/10/gbpusdh4.png

Chart. H4 GBP/USD

Jan. 13: Asian session

Asian shares rose. The MSCI Asia Pacific excluding Japan Index gained 0.5%, Shanghai Composite moved up 0.4%. Japanese markets are closed for a holiday.

USD/JPY fell almost to 1-month minimum in the 103.30 area as dollar bulls were disappointed by weak US NFP data released on Friday. Traders started reassessing how quickly the Federal Reserve can scale back stimulus.

AUD/USD strengthened to $0.9045, extending the upside after the Friday’s post-NFP jump. Aussie’s strength extends the chances for a base formation with a low at $0.8820. Australia ANZ job advertisements contracted a little bit below the forecast (-0.7% vs. -0.9% expected), while home loans came in line with forecast (+1.1% m/m). NZD/USD has also strengthened, testing the $0.8330 resistance.

EUR/USD is at $1.3677. GBP/USD is just below $1.6500.

Key currency options (Jan. 13)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3540, $1.3550, $1.3600, $1.3625;

GBP/USD: $1.6400;

USD/JPY: 102.50, 103.50, 104.00, 105.00, 106.00 (large);

EUR/GBP: 0.8270;

EUR/CHF: 1.2370.

CFTC: USD longs increased

Here are the essentials of the latest Commitments of Traders (COT) report, released on Jan. 10 by the Commodity Futures Trading Commission (CFTC) for a week ended on Jan. 7.

According to the report, large speculators increased their net long USD positions from $17.5 billion on Dec. 31 to $21.1 billion on Jan. 7. This is the best level since Sep. 10 when the US dollar bullish bets equaled to $22.0 billion.

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/usd.png

EUR/USD

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/eur.png

GBP/USD

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/gbp.png

USD/JPY

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/jpy.png

AUD/USD

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/aud.png

NZD/USD

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/nzd.png

USD/CAD

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/cad.png

USD/CHF

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/chf.png

Gold

http://fxbazooka.com/upload/tiny/Analytics/2014/January/13/gold.png

Jan. 15: Asian session

Asian shares were mostly higher on Wednesday as the World Bank upgraded its outlook for the global economy. US dollar extended gains versus its counterparts due to surprising strength in US consumer spending. Japanese Nikkei bounced by 1.8% after suffering its sharpest daily drop in 5 months on Tuesday. MSCI's broadest index of Asia-Pacific shares outside Japan was little changed.

USD/JPY recovered to 104.40. AUD/USD slid to $0.8915. NZD/USD slipped to $0.8333.

EUR/USD fell to $1.3630. GBP/USD is trading at $1.6422.

Jan. 17: Asian session

Asian stocks swung between gains and losses before China reports economic data next week. Nikkei fell by 0.8% following Wall Street lower on the disappointing US corporate earnings, while exporters sagged as the weak-yen trend took a pause. MSCI Asia Pacific Index erased a 0.4% drop.

USD/JPY is trading at 104.33 after testing 104.92 yesterday. Japanese consumer confidence declined. AUD/USD is consolidating in a tight $0.8830/00 range after having hit a low of $0.8878 yesterday (lowest since August 2010). NZD/USD is the main loser of this Asian session, falling by more than 60 pips to $0.8285. Despite the recent NZD decline, the market remains generally long on the kiwi in expectations of RBNZ rate hike in the near future.

EUR/USD is in the $1.3625 area, down from yesterday’s high at $1.3649. GBP/USD is down to $1.6333, but above yesterday’s low at $1.6314.

FBS Forex Outlook 2014

FBS analytical team prepared a report on 2014 Forex market prospects. What currency pairs deserve traders’ attention in the coming year? Which economic and political events will influence the market? What to expect from the major central banks? Find the answers to these questions and many more in the FBS Forex Outlook 2014.

Contents

* 2013: A year to remember

* 2014: Highlights

* Analysis by currency

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