FBS.com_official

Take your chance! Dear forum members! Don’t miss the chance to participate in the best demo contest and win valuable prizes (555 USD, 333 USD, 111 USD). Registration is open until 30.04.12. Contest period: 1.05.12 – 1.06.12. Contest details: http://www.fbs.com/999-demo-contest Take part and win!

FBS always cares about its clients! FBS provides its clients with an opportunity to insure their deposits. If a trader loses his/her deposit, FBS will give the money back! Insurance details: http://www.fbs.com/breakeven

Register our super demo-contest 999!!! Don't miss an opportunity to implement their new strategies, test their ideas of investing, be entitled as the best trader and win 555USD, 333 USD and 111 USD! http://www.fbs.com/contest/999

Who will become Miss FBS Universe? Dear traders! Just as summer, “Miss FBS Universe” Contest step by step comes to an end. For 3 months you have been admiring our pretty contestants who decided to prove to everyone that they are the most beautiful ladies in the world of Forex. Undoubtedly each of the participants is very attractive. But only you are to decide who deserves the title of “Miss FBS Universe”. We would like to remind you that the winner of the contest is determined by a transparent Internet-voting on our Facebook official page (via function “Like” under a photo) http://www.facebook.com/media/set/?set=a.174884632565518.49148.100001319475487. The 31st of August is the last voting day. Hurry up, your vote may be critically important. The winner takes the title Miss FBS Universe and 500 USD! FBS wishes all the ladies good luck! Contest details: http://www.fbs.com/contest/miss_fbs

BNY Mellon: EUR/CHF will resume its decline The single currency managed to make yesterday the biggest advance versus Swiss franc since it was launched in 1999 – the pair EUR/CHF climbed from 1.0252 to the day’s maximum of 1.0929. It happened as franc slumped after the Swiss National Bank’s Vice President Thomas Jordan claimed that there’s a possibility of franc’s temporary peg to euro. Currency strategists at UBS think that such measures would require constant efforts on the SNB’s part to defend franc’s trading range as investors continue buying franc as a refuge. As a result, the central bank more obligations to intervene. Analysts at Bank of New York Mellon believe that the SNB won’t be able to defeat the high demand for franc as for the safe haven and Swiss currency will resume strengthening the next week. HSBC: investors bet on euro’s collapse Analysts at HSBC believe that the fact that investors are massively selling Italian and Spanish bonds means not only that they have negative view on the prospects of these nations, but that the market fears the single currency will collapse. According to the economists, if euro breaks apart, some former European currencies such as the Deutschemark will gain, while the others like Italian lira will weaken. To trade on this assumption means to sell Italian debt versus German one and that’s exactly what has been happening during the last few weeks, says HSBC. The strategists say that Italy's fiscal management has been better than that in several other countries, so the market players bet not against Italy specifically, but against the euro. BoA Merrill Lynch: dollar will keep being steady Analysts at Bank of America Merrill Lynch note that after the S&P cut US credit rating the greenback performed surprisingly well. In their view, dollar will keep being steady at rather strong positions. The specialists say that investors are going to the nations where growth prospects look stronger. Never the less, the bank doubts that US currency will weaken even if the Federal Reserve goes down the path of quantitative easing over the next 6 months. The economists claim that though in the past, when the U.S. economy has weakened, it's been negative for the greenback, if the slowdown spreads to the rest of the world and to the emerging markets in particular, the impact on US dollar will be quite positive. According to Bank of America, there’s a real possibility of the global economic slowdown. As for the short term, however, the specialists favor British pound and Japanese yen. In their view, sterling is a good alternative for those who are nervous about US dollar or the single currency, while yen will be supported by strong fundamentals despite the risk of Bank of Japan’s interventions. BBH: trading recommendations on EUR/USD Currency strategists at Brown Brothers Harriman advise traders to watch next week the economic data as well as the tensions in the euro zone peripheral nations and the signal from the equity market. Euro area’s flash GDP for the second quarter is released on Tuesday, August 16, at 1:00 pm (GMT+4). Weaker Euro zone growth in an environment of slowing global activity, government austerity and a banking crisis would add pressure on the euro and global economic confidence. French President Nicolas Sarkozy meets German Chancellor Angela Merkel meet the same day in Paris amid market turmoil that prompted France to speed up completion of its 2012 budget. The French government’s commitment to its deficit goals is “untouchable,” Sarkozy said. BBH expects that the meeting will provide an initiative in an attempt to stem the slide in French bank shares. According to BBH, EUR/USD will remain in the recent range between $1.40 and 1.45. The specialists recommend selling euro as it rises to the top of this area until the European authorities do something more concrete to stem the crisis.

S&P reduced US credit rating Standard & Poor’s reduced US credit rating by one notch on August 5 stirring up concerns about the nation’s fiscal health. The agency kept negative outlook for American rating as it’s not clear whether the Congress will end Bush-era tax cuts or tackle entitlements. According to S&P, if spending reductions are lower than agreed to, interest rates go up or the general government debt rises, the rating may be cut from AA+ to AA within 2 years. The other leading agencies – Moody’s Investors Service and Fitch Ratings – confirmed their top estimates of US debt on August 2 when President Barack Obama signed a bill that helped United States avoid default. Moody’s and Fitch also underline the possibility of downgrades if lawmakers fail to enact debt-reduction measures and the economy weakens. The pair USD/CHF hit the record minimum in the 0.7530 area. The pair USD/JPY dropped from the intervention maximum at 80.23 hit on August 4 to the levels in the 77.80 zone. Commerzbank: comments on USD/CHF and EUR/CHF Technical analysts at Commerzbank claim that below the 25-year support line in the 0.7554/0.7550 area the greenback has no support versus Swiss franc until 0.7410 and then 0.7160, the base of the 2010-2011 channel. In the near-term the divergence in 4-hour charts and the divergence of the daily RSI indicate the possibility of an upside correction. The specialists note that resistance for USD/CHF is situated at 0.7725. In order to strengthen to the 6-month downtrend line at 0.8285, US dollar has to overcome the accelerated downtrend at 0.7944. The bank recommends squaring trades, attempting tiny shorts on a rebound to 0.7725 adding at 0.7825, stopping at 0.7945 and covering position at 0.7410. UBS: the pair AUD/USD will fall to parity Technical analysts at UBS give bearish outlook for AUD/USD. In their view, Australian dollar will go down well below the parity with its US counterpart. The specialists note that S&P’s decision to downgrade the US will strongly increase the market’s risk aversion in the coming days. Aussie may get under significant downside pressure due to the weaker equities and falling commodity prices as well as due to the general increase in forex volatility, claims UBS. On the downside, support levels for the pair are found at 1.0330 and 1.0290. On the upside, resistance levels lie at 1.0440 and 1.0470. BBH: dollar won’t suffer much from US downgrade Currency strategists at Brown Brothers Harriman believe that US downgrade won’t strongly affect US dollar’s rate. According to BBH, American currency will be driven by the rating cut only in the shortest term. The specialists expect the greenback to consolidate versus its main counterparts. In their view, the pair EUR/USD will stay in the recent broad range between $1.4000 and $1.4600. The analysts think that the pair GBP/USD will keep trading between $1.6200 and $1.6600.

Scotia Capital: recommendations ahead of BoE and ECB meetings There are 2 central banks’ meetings today – the market will be watching Bank of England’s rate decision at 3:00 pm (GMT+4) and the European Central Bank’s one at 3:45 pm (GMT+4). Analysts at Scotia Capital believe that both central banks will keep the borrowing costs unchanged. In their view, there will be nothing worth attention about the BoE comments, while ECB President Jean-Claude Trichet may sound cautious that will put the single currency under negative pressure. The specialists recommend opening shorts on EUR/GBP in the 87.40 area stopping at 88.50 and targeting 84.00. Commerzbank: comments on USD/CHF and EUR/CHF The greenback rebounded from the record minimum versus Swiss franc in the 0.7600 area and is on its way up to 0.7800. Technical analysts at Commerzbank note that there are signs of reversal after the Swiss National Bank eased yesterday its monetary policy. The RSI on dollar shows that it’s oversold. The specialists expect the pair USD/CHF to stabilize above the 25-year support line at 0.7554/50 that connects the minimums from 1987. As for the pair EUR/CHF, it also is trying to stabilize after it once again tested 1.0795/1.0800, claims the bank. According to Commerzbank, resistance levels for the pair are situated at 1.1216 (38.2% Fibonacci retracement of the most recent decline) and 1.1365 (July 18 minimum). As long as the single currency is trading below these levels it risks falling to 1.0775 and 1.0550. Yoshihiko Noda: Japan conducted one-sided intervention Japanese Finance Minister Yoshihiko Noda confirmed that the Bank of Japan intervened today in the interbank market buying US dollars versus yen. Noda didn’t unveil the details such as the scale and the levels of the one-sided intervention. According to the market’s estimates, the BOJ sold more than 1 trillion yen. Some traders even think that the amount may be even higher than that of the biggest one-day intervention conducted on September 15. Japan’s central bank stepped in trying to stem the appreciation of the national currency after the Swiss National Bank moved yesterday in the same direction. Both Japanese yen and Swiss franc are safe haven currencies that tend to strengthen during the times of high risk aversion like it has been so far. That makes Japan’s and Switzerland’s economies hurt. The pair USD/JPY surged from 76.95 and approached the 80.00 level. Analysts’ comments on BOJ intervention Mizuho: it was the right timing to step in taking into account the weak manufacturing PMI data and due to the fact that after Switzerland’s action yesterday there was a risk that yen would have extended gains alone. UBS: it’s not clear whether the intervention is designed to slow the yen's gradual advance or to defend a line in the sand. Any attempt to encourage a reversal of the yen's multi-year uptrend will fail. Japanese Finance Minister Yoshihiko Noda has already noted that the nation’s monetary authorities may use the tactics deployed in 1995 that involved an eight-month campaign of sporadic and sometimes daily interventions. So, investors should be ready to more active steps of the BOJ. Westpac: historical experience allows assuming that the BOJ action will support USD/JPY for a few days maximum, but won’t be able to change the general downtrend. RBS: monetary authorities won’t be able to change USD/JPY downtrend. US dollar will remain weak due to the concerns about American economic slowdown and expectations of more quantitative easing by the Federal Reserve. Societe Generale: the BOJ aims for new range and not for trend reversal. Yen is driven primarily by falling US yields. It’s good for Japan that taking into account US debt issues American yields can't fall much further. Today’s intervention may help dollar to get firm support at 76.00. However, in order to return to the levels in the 80.00 area the outlook for Fed’s rates, not for BOJ ones, has to change. Citigroup: BOJ may have greater resolve than in March or September. The pair USD/JPY is facing resistance in the 79.50/80.00 zone. Credit Suisse: intervention can’t be called successful until yen gets below 80 against US dollar. BBH: comments on euro zone’s agenda Analysts at Brown Brothers Harriman note that today’s ECB meeting will be very important taking into account intensifying stresses in the euro area. The specialists underline that the markets will watch if Trichet gives hawkish comments using his coded language. It may happen that the European Central Bank will decide to pause its tightening cycle given the fact that the region’s economy is weak and the Swiss National Bank eased its monetary policy yesterday. In addition, there will be some political news from Europe. Italian Prime Minister Silvio Berlusconi will speak before parliament and Spain’s Prime Minister Jose Luis Zapatero canceled his holiday in order to address problems in Spain. BBH specialists, however, think that such measures won’t help to increase investors’ confidence in the ability of euro zone’s authorities to overcome the crisis. In their view, European policymakers will act only in case another serious slump of the market.

SNB cut rates to weaken franc The Swiss National Bank loosened its monetary policy today in order to stem excessive appreciation of the national currency. Comments from SNB: - Franc is currently massively overvalued - Switzerland’s economy at threat, outlook worsened - Deflation risk grows The central bank: - is aiming to keep 3-month Libor rate as close to 0 as possible – the target range narrowed from 0.00-0.75% to 0.00-0.25%; - will increase the supply of liquidity to franc’s money market during the next few days; - is planning to expand banks’ sight deposits at the SNB from 30 to 80 billion francs; - no longer renew repos and SNB Bills that fall due and will repurchase outstanding SNB Bills, until the desired level of sight deposits has been reached. - is watching the foreign exchange market; - will act to stem franc’s appreciation if it’s necessary. The SNB’s move helped to ease Swiss franc down from its record maximums versus the single currency and the greenback. The pair EUR/CHF rose from 1.0794 to the levels above 1.1000, the pair USD/CHF went up from 0.7607 to the levels in the 0.7760 zone. Paul Krugman: US has to increase but not reduce spending Nobel Prize winner Paul Krugman believes that US President Barrack Obama was wrong to compromise with Republicans on the debt ceiling agreement that includes government spending cuts. The famous economist thinks that the cuts will decrease the nation’s GDP while American economy is already weak. Krugman underlines that the bill doesn’t imply such measures as the extension of unemployment benefits as it was widely expected, so the country is likely to face the severe fiscal tightening. In his view, the austerity measures mean that US authorities are making the same mistakes as during the Great Depression. If the specialist was one in charge and there weren’t any political constraints he would increase spending as that could be financed at a relatively low interest rate.“The federal government can borrow. It can borrow with inflation-adjusted bonds at an interest rate at 0.3%. So this is a really good time to borrow for infrastructure spending, which we badly need and which would create jobs at a time when we badly need jobs,” says Krugman. According to him, the unemployment benefits are necessary to sustain spending power, though Krugman understands that now America can’t afford health care or entitlement spending as it needs more revenue in the longer term. Scotia Capital: low demand for both euro and dollar With much struggle the euro area and the United States are both through the major decisions aimed to improve the situation and reduce risks. Never the less, investors don’t hurry to rush in euro and dollar. Strategists at Scotia Capital believe that EUR/USD will trade in range between $1.3950 and $1.4700 and finish the third quarter at $1.45. The specialists note that, on the one hand, the European economic outlook remains uncertain due to the risk of slowdown combined with austerity measures that will certainly keep euro under pressure. On the other hand, dollar will suffer from high US fiscal deficit and debt and deteriorating economic prospects. The evidence for the latter is weak GDP readings, ISM PMI falling to 50.9 and declining consumer confidence. Analysts at Goldman Sachs claim that the pair may climb to $1.55 in a year, though, according to their forecast, the single currency will be able to strengthen more due to the general weakness of the greenback than to some euro-related factors. As a result, the odds are that EUR/USD will trade sideways for the rest of the year, so it’ probably better to trade another crosses. BarCap, RBS: Japan will follow SNB's example Analysts at Barclays Capital believe that franc may be no longer regarded as the safe haven after the Swiss National Bank eased monetary policy to keep franc from further appreciation, so investors will likely turn to Japanese yen. As a result, the pressure on Japan’s monetary authorities will strengthen. According to BarCap, Japan must act quickly to stem yen’s advance if it means to do so. Strategists at RBS note that the Bank of Japan will seriously consider the option of easing monetary policy. The economists underline that Japan and Switzerland are facing similar challenges with regard to the strength of their currencies used as refuges from the European and US debt problems. In their view, it would be easier for Japanese officials to decide on intervention than it was for SNB which lost billions in 2010 trying to stem franc. RBS expects Japan's MOF to intervene after US non-farm payrolls data is released on Friday. UBS, UniCredit: comments on the SNB Analysts at UniCredit believe that today’s move of the Switzerland’s central bank will help to stabilize franc’s rate even if from the fundamental point of view the situation hasn’t changed. The specialists think that the SNB was absolutely right to step in. As the Swiss National Bank mentioned that the nation’s growth outlook has substantially deteriorated, the risk of a recession strongly increased. Strategists at UBS expect more interventions from the Swiss National Bank as the euro zone’s issues may keep the franc attractive for investors and more easing will be needed to stem its gains. In their view, the previous SNB interventions came at wrong times and acting at current levels could be more effective. NBER Committee about US economic prospects US economic recovery that has been lasting for 2 years is now obviously losing its pace. Economists at Business Cycle Dating Committee of the National Bureau of Economic Research, which determined the dates of recessions, don’t seem very optimistic about the nation’s growth prospects. Committee members believe that weakness in housing, employment, and business confidence and efforts to reduce debt by consumers and government are the main obstacles to growth. While the committee doesn’t forecast the odds of a recession, individual members can make their own predictions. Here are their comments reported by Bloomberg. Martin Feldstein (Harvard University): now there’s the 50% chance of the US falling into new recession. Robert Hall (Stanford University): the slower the growth rate, the more likely it is that an adverse shock would cause a recession. Consumption declines as debt repayments are reducing spending even this long after the crisis. Christina Romer (University of California): the risks of another recession have gone up for compared to what was 6 months ago. The economist expects anemic, but positive, growth. James Stock (Harvard University): new shock could spark a downturn, similar to the contraction after oil prices jumped with Iraq’s invasion of Kuwait in 1990. Business confidence has been shaken by the months-long debate over raising the debt ceiling. Jeffrey Frankel (Harvard University): spending cuts will reduce US economic growth next year. Robert Gordon (Northwestern University): the aftereffects of the housing bubble keep affecting the economy. Moody’s and Fitch about US credit rating Moody’s Investors Service and Fitch Ratings confirmed US top credit ratings but warned that the nation may be downgraded if it doesn’t manage to reduce the debt and its economy continues weakening. Moody’s claimed that the decision on the rating may be made within 2 years or “considerably sooner”. According to Fitch, the ratio of general government debt, including state and local governments’ debt, will reach 100% of GDP in 2012. That’s the most of any AAA-ranked country. The agency points out that while the rating may be cut in the medium term, the near-term risks aren’t very high as the agreement on lifting up the debt ceiling and cutting deficit is only a first step. Fitch plans to finish the rating’s review in August. For now the threat of US downgrade was overweighed by concerns about the nation’s economic slowdown that has been supporting demand for Treasuries. The yield on the 10-year bonds fell to 2.59% approaching the minimal levels since November and staying below the decade’s average of 4.05%. Analysts at JPMorgan Chase believe that in case of the downgrade US borrowing costs will be increasing by $100 billion a year, while 50-basis-point increase in Treasury yields would reduce American economic growth by about 0.4 percentage points.

Western Union: RBNZ may raise the interest rate New Zealand’s dollar renewed today the record maximum versus its American counterpart rising to 0.8763. Resistance for NZD/USD is situated at 0.8800. Analysts at Western Union claim that kiwi managed to strengthen because of US dollar’s weakness, positive domestic business confidence survey and Australian CPI data. The Reserve bank of New Zealand will announce its interest rate decision on Thursday at 1:00 am (GMT+4). Although the consensus forecast is that the central bank will leave the borrowing costs unchanged at 2.5%, Western Union economists regard the chance of the rate hike as rather high. The specialists underline that when the RBNZ cut the interest rates by 50 basis points in March it clearly signaled that this was a temporary measure taken in order to help the national economy overcome the consequences of devastating earthquake that occurred in February. In their view, it’s obvious now that the disaster wasn’t as great as everyone feared. In addition, there’s significant enough inflationary pressure – one more argument to look forward to the monetary tightening. Commerzbank: bullish outlook for EUR/USD The single currency is consolidating in the 1.4500 area versus the greenback. Technical analysts at Commerzbank note that as long as EUR/USD is trading above the short-term uptrend line at 1.4324, the outlook for it will remain bullish. According to the specialists, the pair will be trying to retest 1.4580 (July 4 maximum) and 1.4694/1.4704 (June maximum and 78.6% retracement of the decline from May highs). RBS: sell dollar versus yen and franc Currency strategists at the Royal Bank of Canada note that US authorities seem to make no progress in the debt deal. In their view, if the market’s sentiment keeps deteriorating, it’s necessary to sell the greenback versus Japanese yen and Swiss franc. The specialists underline that these currencies were steadily appreciating since US debt issues escalated and the policymakers have reached a deadlock in trying to raise the debt ceiling and avoid default. RBS advises to stay away from commodity currencies such as Canadian and Australian dollars as they are vulnerable to the rising risk aversion even despite the fiscal strength of these nations. It’s very difficult to say how low US dollar will fall. However, some analysts think the greenback’s slide in case of the United States downgrade won’t be that strong. Analysts at Well Fargo, for example, have studied other instances when a country has lost its AAA credit rating. The economists came to the conclusion that the impact of the rating cut will be moderate of 3-5%. Fund managers look forward to US downgrade The largest fund managers such as BlackRock, Loomis Sayles and Franklin Templeton Investments expect United States to be downgraded. Analysts at BlackRock note that when the policymakers face the deadline, the debt ceiling will be raised. Never the less, the nation will be still likely to lose its top credit rating. Specialists at Loomis Sayles Bond Fund doubt that the White house and the Congress will manage to reach an agreement and expect that at least one agency will reduce US debt rating. At the same time, the AAA or AA rating doesn’t exactly matter for US debt as the Treasuries will continue to be a large and liquid market, says the fund. Strategists at BNP Paribas, however, do think that the credibility of US bonds is declining. Yields indicate investors are favoring bank or company debt over Treasuries. 10-year Treasury yield hit 2.97% level today, though it’s still below the decade’s average of 4.05%. Economists at Franklin Templeton Investments say that the lack of long-term solution of American debt issues will cast doubt on the risk-free status of US Treasuries. Mitsubishi UFJ, BarCap: comments on USD/JPY Analysts at Mitsubishi UFJ Morgan Stanley Securities believe that Japanese monetary authorities have given up on verbal interventions as all comments fail to curb demand for yen as a safe haven. In addition, the specialists note that the atmosphere seems to be calmer than in the past as the stock markets didn’t seriously suffer. Japan realizes that even though strong yen makes exports less competitive, it makes imports cheaper and the nation currently needs plenty of foreign materials for reconstruction from the March 11 earthquake and tsunami. It’s also necessary to note that the breakdown at the nuclear power plant increases Japan’s dependence on foreign fuel imports. Strategists at Barclays Capital claim that support for USD.JPY is situated at 77.40. Below that level it will slump to the record minimum at 76.25 hit in March. According to the bank, the negative pressure on the pair will ease only if it overcomes 78.40. GS, JPMorgan Chase, Merrill Lynch about US GDP forecast Analysts at the major banks such as Goldman Sachs, JPMorgan Chase and Bank of America-Merrill Lynch have reduced US economic growth forecast in the second quarter from 3.25% to 2.5%. In their view, slower recovery will make the Federal Reserve hold the borrowing costs at the record minimum of 0-0.25%. JPMorgan and Goldman Sachs don’t rule out the possibility of the recession in the United States. The economists are worried as the growth in the second quarter was more due to the expansion of inventories rather than to demand. Domestic final sales which exclude inventories, exports and imports gained only 0.5% from April to June, while business inventories added 1% in both April and May. The rise in inventories may be explained by the fact that Americans have become more worried about the future. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell in July to 63.8, the weakest reading since March 2009, three months before the recession ended. The deterioration in consumer confidence, in its turn, may be caused by the discouraging situation at the labor market. The unemployment rate rose in June to 9.2%. Economists surveyed by Bloomberg News believe that US GDP added 1.8% in Q2 after rising by 1.9% during the first 3 months of the year. Data is released on Friday at 4:30 pm GMT. Credit Agricole: US problems and EUR/USD dynamics Analysts at Credit Agricole believe that the risks that the US will lose its top credit rating are high given the current impasse in the negotiations about the debt ceiling increase. If the United States is downgraded, equity markets will fall and the bearish pressure on US dollar will strengthen, while the gold prices will rise. The bank thinks that shock to the American economy in case of the rating cut could lower the next quarter's real GDP growth close to zero, though 4Q growth is likely to show some rebound after a possible resolution to the budget standoff. According to Credit Agricole, EUR/USD should remain supported for some time by the widening of yield spread between US and German government bonds. The specialists warn, however, that as investors’ demand for safe havens increases, Treasury yields may actually get lower. In addition, the strategists underline that the August 2 deadline isn’t ultimate as the White house will have 1-2 weeks more before it runs out of cash. As a result, the panic seen so far seems to be exaggerated. The analysts say thus that euro’s advance is going to be limited. Strategists at Societe Generale agree. In their view, the pair can't hold above $1.45.

Citigroup: US dollar may gain as a safe haven Analysts at Citigroup believe that the demand for the greenback as a safe haven may rise in the situation of uncertainty caused by the lack of agreement between Barack Obama and US Congress on raising the $14.3-trillion debt ceiling and reducing the budget deficit. The specialists remind that during the times of elevated risk aversion investors tend to seek most liquid and deepest markets and American Treasuries and dollars have traditionally been such. As US authorities have reached the deadlock, stock markets are down so that investors’ risk sentiment worsens. That will make traders desert riskier assets. House Speaker John Boehner who represents the main opposition force against the White House’s called for a 2-step debt-limit extension that would provide a roughly $1 trillion – less than Obama has requested – demonstrating his unwillingness to compromise and withstanding the threat of President’s veto. Standard & Poor’s estimates the possibility of US rating cut from AAA to AA+ within 3 months by 50%. BOTMUFJ: USD/CHF has potential for rebound Technical analysts at Bank of Tokyo-Mitsubishi UFJ believe that the greenback may rise from the record minimum versus the Swiss franc in the 0.8000 area hit today. The specialists underline that 14-day RSI (relative strength index) for USD/CHF dropped to 30 that may mean that its rate has fallen too rapidly and risks reversing. As a result, the economists see the chance of the pair’s short-term recovery. In their view, US currency that is now at roughly 6% below the Ichimoku Cloud has to reach it in order to confirm the rebound and the change of trend. Wells Fargo: EUR/USD won’t rise above $1.47 The single currency rose today to the 3-week maximum versus the greenback at $1.4500. Analysts at Wells Fargo Bank claim, however, that though they have become more positive on euro, they think that its advance is going to be limited as there’s evidence of the euro zone’s economic slowdown and remained uncertainty about the possibility of further contagion. According to the specialists, the pair EUR/USD has potential to gain during the next few weeks, but it will be capped by the June maximum in the $1.47 area. The bank adds that commodity and emerging currencies may be the best performers in the longer term as the risks in Europe and United States ease down. Commodity currencies have become less dependent on commodities The currencies of the large exporters of raw materials are becoming less correlated with the dynamics of commodity prices as investors choose them as a refuge from the debt issues in Europe, the United States and Japan. The following figures speak for themselves: S&P’s GSCI Total Return index of 24 commodities lost 8.45% since April, while Canadian, Australian and New Zealand’s dollars and Norwegian krone added 1% on average during the same period. Strategists at BMO Capital Markets claim that Canadian dollar seems to have outpaced its commodity-price fundamentals. Analysts at Citigroup underline that the desire of the central banks, especially the Asian ones, to diversify their reserves is a significant driver of commodity currencies. Strategists at Mizuho Corporate Bank note that the greenback is slowly but surely losing its status as the world’s reserve currency, while Australian and Canadian dollar are now the majors with large markets. According to the IMF data, the share of the world’s currency reserves denominated in “other currencies” such as Aussie, kiwi and loonie rose from 3.6% a year ago to 4.7% in the first quarter. The greenback that accounted for 72.7% of the reserved 10 years ago represented 61.8% in the first 3 months of 2010 and 60.7% at the beginning of 2011. Another reason of commodity currencies’ strength is relatively higher interest rates. Investors will get about 4.35% more from 2-year government bonds in Australia, Canada, New Zealand and Norway than from Treasuries of similar maturity. US dollar may suffer this week from the economic data US Q2 GDP is released on Friday at 4:30 pm (GMT+4). If the reading is low, US dollar will get under a very negative pressure the debt burden will be accompanied by the nation’s economic weakness. Economists surveyed by MarketWatch expect to see annual growth 1.6% after 1.9% in the first quarter. During the past 7 quarters the growth accounted for 2.8% on average. Never the less, for US to enjoy the sustainable decline in unemployment, economic growth pace has to exceed 3%, so the results between 2.5% and 3% just won’t be enough. It’s also necessary to note that many experts are already thinking about the third quarter hoping that the economic situation in the US will improve due to the increased auto output as the Japan supply-chain problems are resolved as well as lower commodity prices. However, if the Q3 data disappoints the market the sentiment will turn very negative as traders are tired of the constant bad news they have been getting so far. Analysts at JPMorgan also advise investors to pay attention to US bond auctions. US Treasury will offer 2-year securities on Tuesday, 5-year papers on Wednesday and 7-year bond on Thursday. In their view, low demand for Treasuries will make dollar weaken versus Japanese yen, Swiss franc and the single currency. MIG bank: strategists of selling USD/CHF Technical analysts at MIG bank advise investors to sell US dollar versus Swiss franc. The specialists give 2 possible strategies. Firstly, one may sell USD/CHF on its rebound to 0.81 with stops above 0.82 targeting 0.80, 0.7825 and 0.7650. Secondly, if the greenback doesn’t recover, the bank recommends opening shorts on the pair’s break below 0.7997 stopping above 0.8097 and targeting 0.77 and 0.76. It’s necessary to remember about the fundamental factors though. Strategists at HSBC believe that American currency will gain support once US debt issue is resolved. In their view, if US lawmakers approve a package of at least $3.5 trillion of cuts, the danger of a credit downgrade should decrease. BMO Capital: how to hedge from US default Analysts at BMO Capital claim that there are 3 scenarios of the debt-ceiling debate: 1)The plan close to the one developed by the “Gang of Six” will be adopted. 2)President Obama will agree to a small extension of the debt limit to prolong the discussion of a major shift of the debt ceiling. 3)The worst case scenario: US will default or/and loses its top credit rating. The specialists note that Standard & Poor's seems to be extremely worried by the dynamics of US debt and deficit, so the agency is likely to downgrade the nation even if the debt ceiling is raised. Fearing the worst, one should sell Australian dollar, the classic riskier currency, versus Swiss franc, the classic safe haven. BMO recommends going short on AUD/CHF at 0.9073 stopping above 0.9203 and targeting 0.8503. Strategists at J.P. Morgan say that selling EUR/CHF may also suit as a strategy. UBS: about the potential reduction of US debt Analysts at UBS think that the United States may lose its top AAA credit rating in August if the White house and Congress agree to limited reductions of the budget deficit, while Standard & Poor’s and Moody’s Investors Service insist that $3-$4 trillion cuts are necessary. According to the bank, the downgrade will certainly affect the prestige of America, but the impact on the greenback probably won’t be very significant as the central banks won’t sell Treasuries as they have to hold foreign-exchange reserves in liquid assets. John Taylor, the head of the world’s largest currency hedge fund, believes that dollar won’t lose its dominance even in case of the nation’s downgrade.

UBS, Credit Agricole: risk factors for the single currency Currency strategists at UBS think that the United States may avoid default, but get downgraded by the ratings agencies. At the same time, the situation in Europe is far from optimistic as there are the prospects of a selective default in Greece, the bailout implementation risks as the EFSF has not been expanded. It’s also necessary to mention the renewed concerns about the peripheral euro zone’s nations and deteriorating data in the core economies of the region such as lower German and euro-zone PMI data and weaker German IFO. As a result, the specialists advise to sell EUR/USD at its advances to $1.44/1.45. Analysts at Credit Agricole also note that euro will remain very vulnerable to the negative news from the PIIGS this week. In addition, the bank points out that if the European economic data keeps worsening, investors may start wondering if the ECB had made the right decision to raise rates in April and June. Commerzbank: GBP/USD will rise above $1.65 British pound gained last week about 130 pips versus its US counterpart consolidating in the $1.6300 area. Technical analysts at Commerzbank believe that GBP/USD has broken up the key short-term resistance levels – its 3-month downtrend line at $1.6211, 55-day MA at 1.6204 and the 50% Fibonacci retracement at $1.6265. The bank now expects sterling to rise to the previous 2010-2011 uptrend line at $1.6395 and 78.6% retracement of the decline from April and May maximums at $1.6540/47. Standard Chartered cut UK GDP forecast Analysts at Standard Chartered claim that the Bank of England will keep the borrowing costs at the current 0.5% level until the beginning of 2013. The specialists lowered UK economic growth forecast in 2011 from 1.4% to 1.1%. In their view, inflation may surge in the coming months, but this increase is likely to be short-lived. The economists expect consumer prices’ growth pace to return to the target levels by the end of 2012. As a result, British central bank will start tightening monetary policy in 2013. Analysts at BNP Paribas advise investors to pay attention to the Britain’s preliminary GDP release on Tuesday, July 26, at 12:30 pm (GMT+4). According to them, UK economy won’t grow at all, while the market is looking forward to 0.2% advance. BofNY Mellon, BOTMUFJ: US dollar prospects Economists at Bank of New York Mellon note that once US government and Congress reach agreement on lifting up the debt ceiling, dollar’s rate will rebound. In their view, the greenback will show the most significant growth versus British pound as at the beginning of the year the market was too excited about the potential rate hikes in the UK where the inflation level is high, but the central bank is unable to tighten policy because of the low economic growth. At the same time, analysts at Bank of Tokyo-Mitsubishi UFJ warn that if the debt problem remains unsolved by the deadline on August 2 the United States may face another recession. In their view, if the nation loses its top AAA credit rating, the near-term impact won’t be that strong, but in the longer time perspective it will seriously affect US currency. Analysts at Barclays Capital believe that in the short-term the pair GBP/USD may rise to $1.6385 and $1.6425. Support is situated at $1.62. As for USD/JPY, the strategists advise investors to sell the greenback versus Japanese yen on its advance to 78.75. In their view, the pair is on its way down to 77.50. Pimco: US risks to lose its credit rating US President Barack Obama has asked for a $2.4 trillion borrowing boost in the $14.3 trillion debt ceiling. House Speaker John Boehner encouraged the Republicans to unite their efforts in order not to let Obama obtain the money at once without any guarantees of spending cuts. Mohamed A. El-Erian, the head of Pacific Investment Management Co, the world’s largest manager of bond funds, believes that the United States may lose its top AAA credit rating even if US Congress agrees to lift up the debt ceiling. The specialist notes that the nation already suffers from weak economic growth and high unemployment and the debates over the debt limit make the problems intensify. Standard & Poor’s estimates the possibility of US rating cut within 3 months by 50%. Yields on benchmark 10-year rose to 2.96% on July 22 but remain below the 5-year average of 3.71%. Deloitte: forecast for the RBA rates Analysts at Deloitte Access Economics expect the Reserve bank of Australia to raise the interest rates 3 times the next year, but not earlier. The specialists base such forecast on the expectations that the mining boom encourages the growth of wages stimulating the economic recovery from the costliest floods. According to Deloitte, Australian incomes will rise because of high commodity prices and strong demand. The number of people employed won’t be sufficient enough for the growing economy. As a result, the demand for labor will get higher than the supply and the wages will go up. The last time the RBA changed rates was in November 2010. Since that time, the central bank’s benchmark rate accounts for 4.75%. During the period from April and June the number of jobs dropped by 5,400. Australian dollar appreciated by 22% during the past year. It’s necessary to note that Australia’s recovery is two-speed as the mining industry flourishes, but other areas such as tourism, manufacturing, farming and retailers suffer from the strong national currency. That’s why the economists expect hikes in the longer term. Mizuho, SocGen advise to sell USD/JPY Currency strategists at Mizuho note that last week the greenback has posted another minimum versus Japanese yen. In their view, the downside momentum for USD/JPY has increased. The specialists say that all elements of the weekly Ichimoku chart indicate short position. In their view, the greenback is on its way down to 76.25. Analysts at Societe Generale believe that as there’s some temporary improvement in Europe, all attention will switch to the United States. The economists claim that the situation in the US is very different from what’s happening in Japan. The bank reminded about the high current account surplus. As a result, Societe Generale recommends selling dollar versus yen with stops at 79.75 and target at 75.00.

Commerzbank: outlook for pound has improved British pound advanced yesterday versus the greenback gaining more than 170 pips. Sterling was encouraged by the improved market’s risk sentiment due to the EU summit that managed to show that the European authorities have made progress bringing the second bailout for Greece. Technical analysts at Commerzbank claim that GBP/USD has overcome the 3-month downtrend at $1.6211, the 55-day MA at $1.6206 and the 50% Fibonacci retracement at $1.6265. As a result, the pair has got above the key short-term resistance levels and the bias switched from negative to neutral. According to the bank, British currency may rise to the 78.6% Fibonacci retracement of the decline from April and May maximums in the $1.6540/47 area. The main results of EU summit The European leaders agreed yesterday on the 159 billion euro ($229 billion) second bailout package for Greece inducing the private bondholders to take part in financing the indebted nation. 109 billion euro will come from the euro region and the International Monetary Fund, while the rest 50 billion euro will be brought by the financial institutions after a series of bond exchanges and buybacks that will also reduce Greece’s debt burden. Investors will have the option to exchange existing Greek debt into four instruments: 3 will be fully collateralized by AAA-rated zero-coupon securities and have a 30-year maturity, and the fourth will be for 15 years and partially collateralized by funds held in an escrow account. The 440-billion euro European Financial Stability Facility was authorized to buy debt of the peripheral euro zone’s nations in stress. In addition, the fund was enabled to help the problem banks (the stress tests showed that 24 out of 90 banks have financial difficulties) and offer credit-lines for the European nations that are losing investors’ confidence (the practice used by the IMF). All in all, it\s necessary to note that the European policymakers tried to compromise and develop a strategy to support Greece and make sure that Greek crisis doesn’t spread. Analysts at UniCredit believe that the measures taken by the EU officials create the best possible conditions for Greece and other peripheral countries. The specialists point out, however, that the market will keep pricing in some probability that these steps won’t be enough to stop the contagion. SocGen, BarCap: euro may rise to $1.50 Analysts at Societe Generale believe that though the negative factors for euro are, of course, not all gone, the single currency may climb in the short term to $1.50 versus the greenback after the EU summit was successful enough. Strategists at Barclays Capital advise investors to buy EUR/USD on its slide down to $1.4300/1.4280 or on the break above $1.4460. In their view, the pair may rise to the trend line resistance at $1.4580. If euro manages to overcome this level and close the week above it, it will be able to strengthen to $1.4700 and possibly $1.4950. The specialists note that the outlook for the pair will turn negative if the rate falls below $1.4180. Commerzbank: watch today’s Canadian economic data Yesterday the greenback went down versus its Canadian counterpart breaching support at 0.9450. Analysts at Commerzbank believe that the market’s attention will be focused on Canada’s inflation report released today at 15:00 (GMT+4) and retail sales data published at 16:30 (GMT+4). For the timely information see our economic calendar (http://www.fbs.com/analytics/economic_calendar/). The specialists note that Canadian June CPI data has to be surprisingly high, while May retail sales have to show solid growth. In such case the pair USD/CAD may fall below 0.9425 to July 2007 minimums in the 0.9060 area, especially if investors remain optimistic after the Greek bailout. BarCap, Commonwealth: bullish forecast for Aussie Australian dollar is on its way up versus the greenback and Japanese yen. According to the data released today, Australia’s import prices added 0.8% in the second quarter while the economists were looking forward to 1.1% decline. The CPI data due next week may show that inflation pace rose to the maximal level in more than 2 years – economists surveyed by Bloomberg expect consumer prices to 3.4% in Q2 from the 2010 level. As a result, the chances of the Reserve bank of Australia’s rate hike increase. Analysts at Commonwealth Bank of Australia are very bullish on Aussie. In their view, after the inflation report there will be no more speculation about the reduction of Australian borrowing costs. Strategists at Citigroup also think that the next move of the RBS will be to raise the rates. Specialists at Barclays Capital note that AUD/USD has manage to break above the upper border of its trading range at $1.0810 rising to 2-month maximums in the $1.0867 zone. The analysts think that the pair may go higher and climb to $1.0890 and then to May maximums in the $1.1010 area. The bank says that the outlook for Australian currency will remain bullish as long as it’s trading above $1.0765. BBH, Saxo bank on the prospects of EUR/USD Currency strategists at Brown Brothers Harriman believe that the single currency has strong chances rise to $1.47 versus the greenback if it manages to overcome $1.46. The specialists base their assumptions on the data from the CFTC and Tokyo Financial Exchange. Analysts at Saxo bank add, however, that euro won’t be able to get higher than that and will fall to the $1.35 zone by the end of the summer. In their view, the market’s optimism encouraged by the second bailout for Greece will fade away during the next few weeks. The bank underlines that the summit didn’t change enough as the insolvency issues are still solved by increased liquidity. UBS: EUR/USD will drop to $1.40 in a month Currency strategists at UBS are bearish on the single currency versus the greenback. The specialists expect EUR/USD to slide to $1.40 in a month. The 3-month target of the bank is at the same level. The specialists expect euro to decline despite yesterday's decisions of the European leaders to provide Greece with the second bailout. Here are UBS targets for some other major currency pairs: - EURCHF: 1-month 1.20; 3-month 1.25; - USDCAD: 1-month 1.00; 3-month 1.00; - EURGBP: 1-month 0.90; 3-month 0.86. Westpac: the pair NZD/USD has renewed the record maximum New Zealand’s dollar reached today the record maximum versus its American counterpart at $0.8674. The sentiment all over the world improved after yesterday’s EU summit and investors seem to be optimistic on Greece. Analysts at Westpac claim that market’s attention will now switch to the US debt problems. In their view, the greenback will be declining until American debt ceiling is lifted up. In the near term resistance for the pair NZD/USD is found at $0.8700, while support for the pair is situated at $0.8575. Credit Suisse Group AG index based on swaps shows that the market expects the Reserve Bank of New Zealand to raise the interest rates during the next year by 94 basis points – that’s the maximal estimate since November. New Zealand’s CPI rose gained 5.3% in the second quarter on the annual basis making the biggest advance since 1990. The RBNZ will hold a policy meeting on July 28. Never the less, it’s necessary to be cautions with the long positions as kiwi is currently overvalued and technical indicators show that it’s rate has risen too quickly and risks to reverse. On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets

Taylor expects severe global economic recession John Taylor, the founder of the world’s biggest currency hedge fund FX Concepts, expects the euro area debt crisis to ease during the next 3 months. The specialist thinks that the improvement of the market’s risk sentiment will help gold price surge to $1,900 by October. Taylor is also quite bullish on commodity currencies, in particular, on Australian and Canadian dollars. Never the less, the economist thinks that the rally won’t last long. After reaching the record high gold may fall to $1,100 as the global economy gets into recession worse than the one in 2008. According to Taylor, the United States will run out of means to prevent the economic slump. European economy is also likely to get into the declining path, says the analyst. In his view, the pair EUR/USD will drop to $1.15 hitting the parity level next year. Commerzbank, Citi: comments on EUR/USD The single currency keeps going up this week from Monday’s minimum at $1.4014. Technical analysts at Commerzbank, however, keep giving bearish forecasts for EUR/USD. In their view, the pair’s advance will be limited by the 55-day MA at $1.4307. The specialists say that the outlook for euro will remain negative as long as it’s trading below the downtrend line at $1.4471. Strategists at Citi note that plenty of positive news is already priced in, so investors should buy carefully. Resistance is situated in the $1.43 area where the 100- and the 55-day MA are meeting each other, while support is found at $1.4240, $1.4210 and $1.4180. BMO Capital: loonie may be used as a refuge Currency strategists at BMO Capital believe that though Canadian dollar tends to follow the dynamics of oil process and strengthen when the market’s risk appetite is up it may be used now as s safe haven against the euro zone’s and US debt issued. According to the specialists, loonie has all needed to attract investors: Canada enjoys economic growth and has strong financial system. In addition, the Bank of Canada is likely to raise rates sooner than the other major central banks. Analysts at BMO think that Canadian currency has much more upward potential than the classic refuge – Swiss franc – as it may gain on the oil price’s advance. As a result, the bank proposes to sell USD/CAD at the current levels. EU summit: political background During the whole week investors were looking forward to the EU emergency summit taking place today in Brussels hoping that the deals on the second bailout for Greece will be made. German Chancellor Angela Merkel warned that it’s not possible to solve the crisis in “one spectacular step”, while the Greek Prime Minister George Papandreou, on the other hand, said that the summit will be very important either leading to a breakthrough or being a total failure. Merkel and French President Nicolas Sarkozy have reached some agreement on the matter during their private negotiations. European Central Bank President Jean- Claude Trichet and European Union President Herman van Rompuy have also participated in the discussion. Analysts at Barclays Bank note that Germany and France made some coordinated efforts preparing for the summit that may be very helpful for some decision to be made today. Strategists at Mizuho Corporate Bank point out, however, that even if the European authorities manage to persuade the private sector to do a voluntary rollover, the reaction of the rating agencies is going to hit euro. The specialists say that the pair EUR/USD is likely to drop below $1.40. Societe Generale, Lloyds, BarCap about the prospects of EU summit Analysts at Societe Generale believe that the European leaders will manage to make a deal. The question is if it will be credible enough to improve the market’s sentiment at least for some time. All in all, the specialists think that despite the potential skepticism euro will find some support. Strategists at Commerzbank think that the situation has gone too far and become too dangerous for the EU could skip an agreement. If Greece gets the second bailout, euro will resume its recovery, at least in the short term. Economists at Lloyds expect a lot of announcements and commitments from today’s summit. According to them, there may be some additional plan for Greece along with a broadening of scope of the EFSF, for example the purchase of bonds on the secondary market. It’s necessary to understand that all issues of the euro area won’t be cured today. Never the less, commitment to establish a viable systemic framework of support may be enough to encourage investors’ risk appetite. Specialists at Barclays Capital say that any discussions around a consolidated EU fiscal framework or common euro-bonds issuance may provide a signal for a more sustained advance of the single currency. Without that, any improvement in sentiment and tightening in spreads will likely provoke profit taking maintaining a highly volatile environment. Capital Economics: debt crisis affects European economy There was a bunch of economic activity indicators released today in China and Europe. PMI figures for France, Germany and the euro area as a whole turned out to be rather negative. HSBC'S Chinese PMI showed that China's factory sector contracted in July for the first time in a year and at its fastest pace since March 2009. It happened due to the nation’s monetary policy tightening and low demand in the world. The flash services PMI dropped from 53.7 in June to 51.4 in July, the minimal levels since September 2009. The reading turned out to be below the expectations of 53.0. The flash manufacturing PMI fell from 52.0 in June to 50.4 in July, also the minimal level since September 2009, below the forecast level of 51.5. Analysts at Capital Economics note that the decline of the European indicators may mean that the debt crisis begins weighting on the region’s economic recovery. Commezbank: comments on EUR/GBP Technical analysts at Commezbank believe that as the single currency didn’t manage to overcome the 55-day MA at 0.8827 trading versus the British pound, it will decline to 0.8712 and 0.8700. If the pair EUR/GBP gets even lower, it will be poised down to the 200-day MA at 0.8666. RBS: British pound is undervalued Currency strategists at Royal Bank of Scotland believe that British currency is, so it’s possible to invest in sterling undervalued in the long term looking forward to its steady appreciation. In their view, pound is 14% below its 10-year average in real terms. The specialists think that the greenback is also cheap, while the single currency has become closer to its fair value. The commodity currencies such as Australian, Canadian and New Zealand’s dollars, on the contrary, seem to be expensive though they keep getting support from the improving terms of trade. The most important question here is whether high commodity prices and strong export demand from Asia are structural or only cyclical factors. RBS analysts think that in the longer term, if the world’s economic recovery gains pace pound will rise to the fair value versus commodity currencies. In the near future, however, state of the global economy is too uncertain and unsustainable for buying sterling. EU summit: the draft plan of resolving the crisis It seems that the European authorities have managed to make some progress in dealing with the Greek issue. According to the report containing the draft plan of resolving the crisis, the European Financial Stability Facility will be allowed to buy bonds in the secondary market. The plan also calls for a reduction in interest rates on EFSF loans to 3.5% while extending maturities from 7 ½ to 15 years. The problem European banks will get help from the EFSF to recapitalize. Analysts at Brown Brothers Harriman point out that the ECB won’t need to be the purchaser of “last resort” in the euro zone. The specialists note that the markets have become more optimistic as it looks as if the EU is going to increase the flexibility and the scope of the way the EFSF works. The ECB also seems to give in and agree on accepting “selective defaulted” debt as a collateral, thus saving the Greek banking system. On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets

Commerzbank: GBP/USD will face resistance The greenback went up from Monday´s minimum in the $1.6000 area to yesterday’s maximum of $1.6177. Technical analysts at Commerzbank claim, however, that though the near-term outlook has become neutral, the 3-month downtrend is still in place. As a result, the pair GBP/USD will face resistance at $1.6220 strengthened by the 55-day MA at $1.6213 that is pointing lower. The specialists expect sterling to fall to $1.5778. Westpac, Citi about the prospects of AUD/USD this year Australian dollar has made significant advance versus its US counterpart gaining 21% this year due to the strong commodity prices and relatively high interest rates. Apart from other Australian banks analysts at Westpac expect that the Reserve bank of Australia will reduce interest rates that will put Aussie under pressure for the rest of this year. In addition, the specialists express concerns about the euro area’s crisis having a negative impact on Australian consumer confidence. Currency strategists at Citi, on the other hand, tend to be bullish on AUD/USD. In their view, the massive investments in the metals and the LNG space will provide solid support for Australian dollar during the next 5 years. The bank believes that the RBA rates will stay unchanged this year. The economists underline that the mining industry keeps performing quite well, while housing prices are still very high, so there’s no need for the central bank to cut rates. As a result, building the trading strategy on AUD/USD one has to decide whether to focus on the miners or the consumers and be ready to adjust quickly. Commerzbank, Citi: comments on USD/JPY Technical analysts at Commerzbank are bearish on USD/JPY. Never the less, the specialists think that Fibonacci support at 78.23 will manage to hold the initial attack of the bears. The bank places resistance for the greenback at 79.57, 79.88 and the psychologically important level of 80.00. Strategists at Citi believe that the Bank of Japan will conduct currency intervention if US dollar drops to 76 yen. In their view, the pair will move higher in a month as the market’s sentiment will probably improve and the uncertainty connected with the European and American debt issues eases. The analysts warn, however, that now it’s too early to start the trade as USD/JPY is likely to slide lower before bouncing on the BOJ intervention. AllianceBernstein: all major currencies have weaknesses Strategists at the fund AllianceBernstein revoked their bets versus the greenback changing the outlook to neutral as the euro area debt crisis escalates. It’s necessary to note that though the fund managers’ sentiment towards US dollar has improved they didn’t become positive on dollar taking into account high indebtedness of the United States and its budget problems. In addition, the economists don’t think that the economic growth will slow down making dollar popular safe haven. AllianceBernstein expects slow and uncertain economic recovery and is cautiously bullish on the market. The specialists are now bearish on the single currency and British pound and bullish on Scandinavian currencies and Swiss franc. According to them, the downside pressure on euro is stronger due to the ECB policy that is keener on targeting inflation while some economies of the currency bloc are too weak to bear tighter monetary policy. Analysis conducted by the OECD on the basis of the purchasing power parity shows that US dollar is 8.3% undervalued versus euro. American currency lost 5.8% this year versus the European one. The situation has a bit improved as it managed to gain 2.3% in July. All in all, the specialists say that it’s not the time for long-term trade and investments as all major currencies – dollar, yen and the European currencies – have their drawbacks, so it’s necessary to adjust to the changing conditions. ZKB, Commerzbank: comments on EUR/CHF Technical analysts at Commerzbank believe that as the single currency managed to break above resistance at 1.1556 trading versus Swiss franc, it may strengthen to 1.1770. Never the less, as long as EUR/CHF is staying below June minimum at 1.1808, the general outlook for euro will remain bearish. Strategists at ZKB doubt that the pair will manage to rise above 1.1700. In their view, even if it does that euro’s advance will be likely contained by 1.1750. The specialists note that the EU summit that will take place tomorrow may disappoint the market. JPMorgan: EUR/GBP is trapped in the narrow range Analysts at JPMorgan believe that EUR/GBP is trapped at the current levels as in the short term both the euro zone and the UK faces serious risks that are affecting their currencies. While in Europe the main threat comes from the debt crisis, Britain is in danger of economic recession. The specialists expect euro to remain in a very tight trading range versus its British counterpart during the coming months between 0.8550 and 0.9100. In their view, the trade’s volatility has heightened due to the unexpected crisis of confidence to Italy seen so far and the pat situation in America where the policymakers are trying to reach compromise on the debt ceiling. According to the bank, when the pair EUR/GBP finally comes out of this range it will break it on the upside. UBS: the odds of QE in the UK declined British pound rose today versus the single currency and US dollar after the minutes from the Bank of England’s MPC meeting showed that the number of QE advocates has reduced. The policymakers voted 7-2 to keep the benchmark interest rate unchanged this month as the majority of them said that the recent data shows that the near-term tightening isn’t necessary. In contrast to the June meeting, there was no mention of other the MPC members calling for more bond purchases this month. Right after the release of the minutes GBP/USD fell to the daily minimum of $1.6067, but soon recovered getting up to the $1.6130 area. Currency strategists at UBS claim that the outlook for the pair will become bullish if it manages to overcome resistance at $1.6194. Support for sterling is situated at $1.6006. On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets

Commerzbank: comments on EUR/USD Technical analysts at Commerzbank note that yesterday the single currency found support in the $1.4000 area versus the greenback and managed to close in the $1.4100 zone posting some gains. The specialists, however, retain their negative view on EUR/USD as long as the pair is trading below the downtrend line at $1.4487. According to the bank, resistance for euro is situated at last Thursday’s maximum of $1.4282 and the 55-day MA at $1.4330. Merrill Lynch: USD/JPY will test the record minimum Currency strategists at Bank of America-Merrill Lynch think that the greenback won’t drop below the record minimum versus yen at 76.25 hit on March 17 after Japan was shaken by the severe earthquake. Never the less, the concerns about the debt problems both in the euro area and the United States are likely to keep strengthening risk aversion. As a result, the specialists warn that the slide of the pair USD/JPY may turn out to be surprisingly big. The net short position on Japanese yen that is currently aggregated by the FX margin trade is very large, so the sharp risk aversion may trigger stops provoking unwanted liquidations of investors’ short yen positions making Japanese currency surge. According to BoA-Merrill Lynch, if the pair tests all-time minimum, the Bank of Japan would have to ease policy further, while the nation’s Ministry of finance would probably intervene to stop disorderly appreciation of the national currency. Westpac recommends selling USD/CAD The Bank of Canada will release its rate statement today at 5:00 pm (GMT+4). The majority of economists agree that the central bank will hold the borrowing costs at the current 1.00% level. Currency strategists at Westpac note that Canadian economy is currently in a very good shape. The specialists reminded about the encouraging June employment report. In addition, Westpac is looking forward to see strong CPI data due on Friday at 3:00 pm (GMT+4). According to the bank, it’s possible to expect that the BOC will sound more hawkish than at the May meeting, so the analysts advise investors to go long on loonie versus its American counterpart. The recommended strategy is selling USD/CAD at 0.9580 stopping above 0.9700 and targeting 0.9350. Credit Agricole, Westpac: pessimistic view on Aussie The minutes of the Reserve Bank of Australia’s last meeting released today made the odds of its interest rate hike lower. Analysts at Credit Agricole note that the RBA didn’t mention the necessity to tighten monetary policy at some stage and believe that Aussie will remain under negative pressure. Strategists at Barclays Capital expect that the central bank will stay on hold in the near future, though they think that the nation’s monetary authorities are inclining more towards lifting up the borrowing costs than to reducing them. The RBA is keeping its benchmark interest rate at 4.75% since November. Strategists at Westpac note that the pair AUD/USD, which has been staying between 1.0400 and 1.0800 since May, may breach the lower border of this range in the next few weeks. In their view, Australian dollar can slide to 1.0200 and then maybe even to the parity level with its American counterpart. As the reason for Aussie’s weakening the specialists cite the debt problems in the euro area and the United States. It’s also necessary to note that Goldman Sachs that recommended buying AUD/JPY at the end of June revokes this advice. TD Securities: RBNZ is ready to lift up the interest rates Analysts at TD Securities believe that the Reserve Bank of New Zealand may increase the interest rates from the record minimum of 2.5% at its next meeting that is taking place on Thursday, July 28. In their view, it may happen as the inflation rate in the second quarter and the first quarter GDP turned out to be higher than expected. New Zealand’s economy gained 0.8% in the first 3 months of the year while the central bank was projecting only 0.3% growth. The nation’s CPI added 1% in the second quarter versus 0.8% forecast. According to TD Securities, RBNZ may increase the borrowing costs next week by 50 basis points compensation the cut made on March 10 or at least prepare the markets for such move on September 15. In the near term New Zealand’s dollar, however, will likely remain under pressure ahead of EU summit in Brussels scheduled on July 21, warns Ueda Harlow. Barclays Capital: outlook for EUR/CHF and USD/CHF Technical analysts at Barclays Capital believe that in order to reverse July's downtrend versus Swiss franc the single currency has to overcome 1.1650. In such case, EUR/CHF will be able to rise to 1.1810 and possibly to 1.20. Until that happens, the pair’s prospects will remain bearish and euro will be poised down to 1.1250. Credit Agricole: the prospects of China’s interest rates Currency strategists at Credit Agricole believe that the People’s bank of China will pause its monetary tightening cycle in the second half of the year as the nation’s economic growth and inflation pace is slowing down. The specialists note that Chinese monetary authorities are content with the current state on the country’s economy – so called “soft landing” as this was exactly the goal they pursued by raising borrowing costs and reserve requirements rate. Credit Agricole notes that China now needs to finish policy tightening before the economic growth declines more sharply. The specialists believe that the PBOC will conduct no more deposit and credit rate hikes until the next year when the economy will once again starts gaining pace. Credit Agricole thinks, however, that the bank will keep sterilizing its currency interventions by increasing required reserve ratio. The bank is looking forward to 2 such hikes until the end of 2011. China’s second quarter GDP growth was in line with the forecasts gaining 9.5% after 9.7% advance during the first 3 months of the year. On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets