fallenDC

Spanish bond auction results

Spanish government managed to raise 3.001 billion euro in auctions out of the 2.5-3.5 billion euro target amount. Cover ratios were lower. Average yield on 10-year bonds rose to 6.430% from 6.044% during the previous auction, while shorter-term maturities have posted lower yields.

France also sold 10-year bonds with yields up from 2.46% to 2.53% and cover ratio down from 2.0 to 1.9.

EUR/USD is trading down by about 20 pips from the opening level. More volatile moves are expected later today with the ECB meeting and press conference on the agenda.

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Photo Reuters

RBC: technical comments for USD/CAD

Technical analysts at RBC underline that the greenback failed to overcome resistance at 1.0353 after last week’s EU summit revived the market's risk sentiment making loonie strengthen.

The specialists claim that all attention is fixed on 1.0119 (uptrend pivot, 200-day MA). If USD/CAD closes the week below this level, bearish trend will return and the pair will get vulnerable for a slide to 1.0050 (100-day MA) and 0.9955 (May 11 minimum). For the uptrend to continue US currency has to overcome 1.0341/62 (late June maximums) and 1.0425 (June 5, December 14 maximums).

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Chart. Daily USD/CAD

Commerzbank: technical levels for GBP/USD

The fundamental picture for GBP/USD seems negative as the market’s awaiting the Bank of England’s decision to announce additional asset purchased today.

However, technical analysts at Commerzbank think that sterling still has chance to retest resistance in the $1.5752/1.5786 area (200-day MA and 50% Fibo retracement) as long as the pair holds above support at $1.5544. Other support levels lie at $1.5408 (June 5 maximum) and $1.5269/33 (2012 minimums).

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Chart. Daily GBP/USD

Nomura: bearish on EUR/GBP

Analysts at Nomura are bearish on EUR/GBP ahead of the ECB and BoE meetings. They recommend selling the pair at current levels, targeting at 0.7700 and with a stop at 0.8170.

According to specialists, both banks are likely to ease monetary policy on Thursday. In their view, the downside risk for GBP is rather limited as the British currency is no longer being sold off on QE announcements. The ECB meeting, on the contrary, is expected to be euro-negative: a larger-than-expected rate cut would be good for the currency at least in a short-term, but it is not likely. Moreover, Mario Draghi on a press-conference is not expected to hint on the new unconventional measures.

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Chart. Daily EUR/GBP

European agenda this month

On Monday, June 9, there’s a scheduled Eurogroup meeting within which Troika officials will conduct the first discussion on the mission’s ongoing inspection to Greece and try to develop an approach for the negotiation of the updated bailout agreement. According to the sources from Luxembourg, until the revised bailout agreement is signed, there will be no further disbursements from the ESM to Greece beyond the 1 billion euro that had been withheld from the May tranche.

In addition, the European Commission, the ECB and the IMF will discuss Greece’s bond maturity on August 20 which the nation won’t be able to pay unless it gets ESM funds. A month’s extension could be granted, although several European governments will likely object. Another item on the agenda will be Spanish and Cyprus requests for entry into the ESM.

Moreover, the Eurogroup may call an extraordinary meeting on July 20 to talk over the ongoing situations in Greece and Spain, reports say. That is when the Troika will receive its political instructions regarding its negotiating mandate and signal what kind of concessions European governments are ready to make. The new round of talks with the Greek side will begin on July 24.

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Photo from thefinancepages.co.uk

July 5: economy and currencies

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AUD/USD fell from a 2-month high as the demand for risky assets is down. Asian stocks dropped amid signs of a global economic slowdown: the MSCI Asia Pacific Index (MXAP) of shares lost 0.5%. Moreover, a report showed today that the Australia’s trade deficit increased to 0.29B in May from 0.03B in April, but came out below forecasts.

EUR/USD is crawling in the $1.2525 area, 23.6% Fibonacci retracement from May decline. Italian Prime Minister Mario Monti told yesterday after a joint press conference with German Chancellor Angela Merkel that Italy’s deficit would rise from 1.3% predicted to 2% of GDP. German finance ministry revised German deficit forecast down from 1% to 0.5% “thanks to the favorable overall economic development”. Francois Hollande, the French president, announced tax increases of 7.2 billion euro in order to ease upward pressure on the country’s large debt burden. French government is counting only on 0.3% growth in 2012 compared with previous estimates of 0.7%.

USD/JPY rose to the highest level in more than a week before sliding below the day’s opening level as Asian shares declined.

Events to watch today:

Euro zone: Markets stand still ahead of the important news to come out. German factory orders are expected to increase by 0.1% in May after a 1.9% contraction. Spain and France holds a 10-year bond auction on Thursday, while the ECB is to announce its rate decision. Many analysts forecast the regulator to cut rates to 0.75% today. Yet, risk rally has tempered as traders feared Mario Draghi, president of the ECB, would again resist the pressure to act. Later in the day the ECB press conference will take place.

Great Britain: The house price index is to decline by 0.3% in June after a 0.5% growth. The BoE meeting is an important event of the day: will the regulator add stimulus? Markets expect the expansion of the asset purchase program to 375B. The official bank rate is to remain unchanged at 0.50%.

US: ADP non-farm employment may improve by 103K in June compared with a 133K change in May. The number of unemployment claims is to increase to 385K, what means that the labor market remains weak. ISM non-manufacturing PMI is expected to contract to 53.1 in June from 53.7.

GBP/USD down ahead of the BoE

GBP/USD has been trading on a downside for the third day. On Wednesday a PMI report showed UK services growth fell below the expectations (a decline to 51.3 in June from 53.3 in May), what increases the chances that BoE will add stimulus tomorrow.

According to the median estimate of analysts, surveyed by Bloomberg, the regulator is to raise its target for bond purchases by 50 billion pounds to 375 billion pounds. The sterling, therefore, is likely to weaken further. Specialists at Bank of Tokyo-Mitsubishi UFJ expect GBP/USD to depreciate to $1.50 (a two-year low) over the next three months. Analysts at RBS also expect sterling to weaken in the weeks ahead, as the currency catches up with a continued easing in monetary conditions in the UK.

Support:

1.5616 (50- and 100-day MA’s crossing);

1.5600 (June 7 maximum);

1.5538 (Jun.25 maximum);

1.5510 (23.6% Fibonacci retracement of an April-June decline).

Resistance:

1.5660 (38.2% Fibonacci retracement);

1.5723 (July 2 maximum);

1.5783 (50.0% Fibonacci retracement).

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Chart. Daily GBP/USD

EUR/USD: technical and fundamental

On Wednesday EUR/USD has been moving down. The current dynamics of the pair resembles consolidation in the uneven range: euro’s attempt to recover from June 1 minimum of $1.2288 met resistance around 38.2%/50% Fibo retracement of the May decline in the $1.2670/1.2750 range. The pair remains supported at $1.2523 (23.6% Fibonacci retracement of May decline).

Analysts at Commerzbank expect EUR/USD to slip to the $1.2520/1.2460 area. The next support lies at $1.2407 (June 28 minimum) and at $1.2288 (June 1 minimum). However, if the pair trades above this area, it will have chance to test important resistance at $1.2698 (July 3 maximum), $1.2746 (38.2% Fibonacci retracement of this year’s decline and a 55-day MA) and $1.2825 (May 21 maximum).

It’s obvious that the situation in the euro area remains highly unstable these days making the technical analysis less reliable – there are many events ahead which will surely have strong impact on the market. It’s necessary to note that there are no releases from the US because of the bank holiday. Markets stand still ahead of the important news to come out on Thursday (Spain’s 10-year bond auction and the ECB statement – many analysts forecast the regulator to cut rates to 0.75%).

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Chart. Daily EUR/USD

Citi: threats to risk sentiment

Last week’s EU summit did bring relief to the financial markets: risk currencies strengthened, European credit default swap spreads narrowed, and stocks rallied.

Amid the risk sentiment recovery, analysts at Citi came up with 5 threats which may shoot at any moment making the market slump.

The threats are:

1. Finland and the Netherlands obstruct the bailout.

2. More euro zone’s nations need external financing due to increasing borrowing costs.

3. The IMF says it won’t negotiate or renegotiate with Greece.

4. The ECB will fail to make the region’s economic growth pick up and the situation at debt markets stabilize (“In practice these would amount to little more than showing the flag – were the euro zone’s sovereign debt issues solvable via policy rate cuts, those would have been put in place long ago,” says Citigroup).

5. A gap is growing between bad economic data and more or less optimistic markets.

Indeed, there’s much to be aware of. Citi’s economist Steven Englander cited Calvin Coolidge, the 30th President of the United States: “If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.” However, the President didn’t give any advice on what to do about the tenth trouble.

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Image from ilianaivanova.eu

How will EUR react to ECB's decision?

Analysts at Standard Chartered claim that as short positions on euro are extremely large, any ECB rate cut will be initially positive for the currency as the markets will be delighted that the region’s economy gets monetary support. At the same time, the specialists warn that such a surge is possible only in the very short term. The overall medium-term outlook for the single currency is bearish.

At the same time, the markets are hoping for the ECB to act and, if it doesn’t, the disappointment could pull EUR/USD down aiming for June 28 minimum around $1.2407. However, Standard Chartered expect the central bank to “do its bit” i.e., cut rates to support activity and boost confidence, especially as rate cut was discussed at the June meeting.

The ECB finds itself under pressure to ease monetary policy and help the euro area overcome its economic slowdown amid fiscal tightening and austerity. Near-term inflation pressures have declined making the central bank a scope for a rate cut.

Standard Chartered is looking for a 25bps cut of the refi rate (in line with the consensus forecast). In their view, another round of 3-year LTRO (Long-term liquidity operations) is unlikely, though the central bank may offer a shorter liquidity facility due to still-high bank funding stress in some countries.

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Chart. H1 EUR/USD

Citi: data releases disappoint analysts

The Citigroup economic surprise indexes (CESI) entered a negative territory early May and are already approaching to the one-year lows. That means that analysts get systematically disappointed by the data releases in largest economies in the world.

CESI measures the variations in the gap between the expectations and the real economic data. When the CESI is positive it means that the released data have been better than the expectations. When CESI is negative, it means that actual results have been worse than expectations.

On the chart below you may see the dynamics of indices for G10, US, Europe, and China.

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Chart. Citigroup economic surprise index (CESI)

BOTMUFJ: AUD/JPY may go up

Analysts at Bank of Tokyo Mitsubishi UFJ think that Australian dollar may rise above 83 yen level for the first time since May.

The specialists point out that AUD/JPY’s 5-day MA crossed 200-day MA bottom-up forming a “golden cross,” a bullish signal. In their view, if the pair closes above its 90-day MA at 82.38 yen (blue line on the chart), it will be able to rise to 83.23 yen (61.8% Fibo retracement of the decline from March 19 maximum to June 1 minimum).

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Chart. Daily AUD/JPY

Key options expiring today

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 (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2450, $1.2500, $1.2800;

USD/JPY: 79.50, 80.00;

EUR/GBP: 0.8060;

AUD/USD: $1.0000, $1.0100.

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Morgan Stanley: bearish on risky currencies

Morgan Stanley lowered their forecasts for the Australian, Canadian and New Zealand dollars, explaining that the current economic conditions are unfavorable for the commodity-exporting countries.

Specialists believe the global economic slowdown is to weigh on the risky currencies: weak manufacturing PMI indices in G10 countries warn that the demand for raw materials will remain low.

According to analysts, AUD/NZD will fall to $0.95 by the end of 2012, compared with a previous forecast of $0.99. NZD/USD is expected to close the year at $0.75, compared with the earlier forecast of $0.80. USD/CAD is to strengthen to C$1.06, compared with the previous forecast of C$1.03.

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July 4: economy and currencies

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US markets are closed for the Independence Day holiday, so trading volumes will be rather thin.

Asian session was rather quite with shares rising to 7-week maximum on the hopes for more monetary policy stimulus to support the faltering global economy beginning with the ECB on Thursday. The expectations of more easing predominate over the market warming investor’s sentiment.

Australian retail sales rose by 0.5% in May (vs. +0.3% expected). Aussie and kiwi gained against their American counterpart.

EUR/USD edged down ahead of tomorrow’s Spanish bond auction and the ECB meeting. According to the forecasts, ECB will lower its key interest rate by 25bps to 0.75%. Today’s release of final June services PMI is to confirm that the region’s service sector keeps contracting. Spain is scheduled to sell 3-, 4- and 10-year debt; a 10-year bond yield was at 6.25% yesterday compared with a record maximum of 7.29% reached on June 18.

Elsewhere, don’t miss UK services PMI release: the index is still seen above the critical 50 mark, though economists expect a decline from 53.3 in May to 59.2 in June.

Financial markets keep watching the development of the scandal about Libor manipulation (British bank Barclays has been accused of manipulating worldwide interest rates and other European and US banks will likely follow the suit). Bob Diamond, Barclays’ former CEO faces grilling in Parliament after resigning yesterday. The whole situation raises the risks of confidence to the whole banking system and its ethics.

EUR/NZD: will the trend persist?

EUR/NZD is declining for the eighth week in a row: the pair is close to setting a new historical low (the current minimum was reached on February 15). Since its peak on May 18 the pair has already declined more than by 7%.

However, some analysts believe the recent events such as a temporary Greek relief and a positive outcome of the EU summit could reverse the sustainable trend. Is it possible? Not really. New Zealand dollar is actually the best-performing currency in recent months, while the euro zone’s euphoria comes to an end – root of the problem grows ineludibly despite all the summits and negotiations.

Specialists at RBS also don’t forecast the trend reversal: in their view, it doesn’t matter whether the overall risk sentiment is positive or negative; the EUR/NZD is expected to go down. If the pair breaks support 1.5590/50, a decline to the 1.5250 area becomes possible.

Support:

1.5632 (July 2 minimum);

1.5618 (today’s minimum);

1.5590 (Feb. 15 minimum).

Resistance:

1.5820 (April13 minimum);

1.5888 (June 29 maximum);

1.5999 (June 20 maximum);

1.6181 (23.6% Fibonacci retracement from Nov. 2011 – Feb. 2012 fall).

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Chart. Daily EUR/NZD

Outlook for USD/JPY

USD/JPY is consolidating between 79.20 and 80 yen staying within larger downtrend. The pair is trading on the upside helped by yen’s broad weakness during the Asian session.

Analysts at Bank of Tokyo-Mitsubishi UFJ note that although everyone is used to yen’s strengthening on weak US economic data, this pattern doesn’t work anymore. In their view, yen depreciated since the beginning of the year due to trade and merger and acquisitions by Japanese firms. The specialists think that yen’s purchases haven’t revived and the greenback may recover to 80 yen in the near term.

Experts warn that thin trading volumes may exaggerate price movements ahead of the US Independence Day holiday on Wednesday, the ECB meeting on Thursday and Friday’s US NFP report.

The technical picture

On the daily USD/JPY chart US dollar enjoys support of Kijun-sen, but remains under pressure of large looming bearish Ichimoku Cloud. However, the Kumo has so far significantly narrowed that means that the bulls are really fighting to regain the market.

If USD/JPY overcomes psychological resistance at 80 yen, enters the daily Cloud and gets above 38.2% Fibonacci retracement of the decline from March maximums to May minimums around 80.13, it will be able to rise to 80.92 (50% Fibonacci retracement) and probably to 81.59/78 (current Ichimoku cloud top, 61.8% Fibonacci retracement), though unlikely higher.

If USD/JPY falls below 79.13 (Kijun-sen), support will be at 78.90 and 78.61 (June 15 minimum).

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Chart. Daily USD/JPY

Where will the AUD move?

On Tuesday Australian dollar has been strengthening against its major counterparts on the back of the positive data. There is no surprise that the RBA left the interest rate unchanged on today’s meeting: Australia is evidently stronger these days than many euro zone’s economies.

The news provided a temporary bounce for the AUD/USD, raising the pair to $1.0283, before it stabilized near $1.0260 (near to the strong resistance level – 78.6% Fibonacci retracement from a May drop and an intersection of the100- and 200-day MAs).

Where will the pair move next? Most analysts expect the Aussie to keep gaining, especially if the other regulators take new easing measures. In our view, it makes sense to buy AUD/USD at current levels targeting $1.0300 and stopping at $1.0085. If the AUD/USD manages to overcome the current level, an intraday rise to $1.0285 and $1.0310 will become possible. Support for the pair lies at $1.0225 (June 20 maximum), $1.0211 (July 2 minimum), $1.0128 (61.8% Fibonacci retracement), $1.0085(June 15 maximum), and $0.9965 (June 25 minimum).

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Chart. Daily AUD/USD

AUD/JPY also demonstrates growth and has already overcome the yesterday’s maximum. The cross trades in an upward channel since early June. According to analysts, AUD/JPY has good prospects for growth: AUD is second strongest currency of last 5 days behind the NZD and ahead of the JPY.

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Chart. Daily AUD/JPY

EUR/AUD keeps moving on a downside for a fifth consecutive week. The pair managed to touch a 5-month low today. However, the RBA announcement didn’t influence the pair significantly. The support for EUR/AUD lies at $1.2225 (January 17 minimum) and $1.2145/30 (twice acted as a support in February), while resistance – at $1.2359 (July 2 maximum), $1.2436 (June 29 maximum), $1.2525 (June 22).

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Chart. Daily EUR/AUD

GBP/USD: fundamental and technical comments

GBP/USD keeps consolidating on the hourly chart between $1.5650 and $1.5720.

On the positive side we have positive risk sentiment after Asian session. In addition, the Bank of England is expected to increase its asset purchase program on Thursday to restart the engines of the lackluster UK economy.

On the downside there’s weak British construction PMI data (the index fell to 48.2 in June from 54.4 in May and below consensus of 53.0 indicating contraction of the industry). Net lending to individuals came at 1.3B in May (above 1.1B expected, but below 1.4B in April).

Analysts at Commerzbank think that the pair will retest resistance in the $1.5752/1.5786 area (200-day MA and 50% Fibonacci retracement). In this region one may also find $1.5806 (55-day MA) and $1.5771 (200-week MA). The resistance seems strong and it will likely stop the first bullish attack. If the bulls manage to overcome resistance, GBP/USD will be able to rise above $1.6000 where the specialists also see high odds of failure.

Support is at $1.5600 and $1.5485. Below these levels there’s a risk of a slide to $1.5407 and $1.5269/35 (recent minimum and 2012 minimum).

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Chart. Daily GBP/USD

Key options expiring today

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 (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2400, $1.2415, $1.2575, $1.2585, $1.2600, $1.2645, 1.2650;

USD/JPY: 79.75, 80.00, 81.20;

GBP/USD: $1.5600, $1.5700;

EUR/GBP: 0.8025, 0.8040;

AUD/USD: $1.0000, $1.0120, $1.0150, $1.0200 (large), $1.0250.

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Westpac: buying NZD/USD on NFP

The most interesting and unpredictable regular data release is getting closer and closer. Yes, we’re speaking about US Non-Farm Payrolls.

Consensus forecast: +92K in June after +69K in May.

Analysts at Bank of America Merrill Lynch expect US economy to have added about 100K jobs. In their view, it’s “a slow trend, but not a collapse.”

Strategists at Westpac also sound optimistic. The specialists say that if the employment report comes in around consensus forecasts or slightly higher, one should buy NZD/USD. Otherwise, it will be necessary to do quite the opposite. The bank favors the first outcome expecting the increase in investors’ risk appetite, so the recommendation is to buy NZD/USD at 0.7950 targeting 0.8200 and stopping at 0.7840 (last week's minimums).

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Chart. Daily NZD/USD

European crisis echoes in the US

According to yesterday’s release, the US manufacturing unexpectedly contracted in June for the first time since the end of the recession (July 2009). The ISM manufacturing index dropped to 49.7 from 53.5 in May, while economists forecasted a slight decline to 52.1. A reading below 50 indicates the industry contracts.

The release drew a big response from the investors and analysts: there’s a growing concern that the crisis in the euro zone and Asia influences the US economy. According to specialists at Capital Economics, the fall in ISM index is the surest sign that the economy is slowing down. Analysts at Bank of Tokyo-Mitsubishi disappointedly state that the largest economy in the world “is going nowhere”. Specialists at ITG Investment believe that all the policy easing measures taken by the Fed are senseless: these days the issue is an insufficient demand for credit rather than an insufficient supply.

Analysts at IHS Global Insight, however, remain more optimistic: they point that the recessions are usually accompanied by ISM readings in the low-40s. The construction industry is recovering (construction spending rose in May by 0.9%, reaching the highest level in two years). Moreover, the US manufacturing is still stronger in comparison to the other countries. Specialists at Barclays Capital agree: even though the Europe’s problems influence the US economy, the increasing domestic demand is likely to keep the overall economy growing.

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Photo: Getty Images

July 3: economy and currencies

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The risk sentiment revived today. US dollar and Japanese yen are weakening versus its peers, while commodity currencies go up. Asian stocks rose for a fifth day in a row. The MSCI Asia Pacific Index (MXAP) had added 0.8% today after gaining 2.7% last week.

As expected, the Reserve Bank of Australia decided to stay on hold leaving its benchmark rate at 3.5%. Australian building approvals increased by 27.3% in May (vs. the forecast of only +5.1%). China also cheered investors up: non-manufacturing PMI rose from 55.2 in May to 56.7 in June (3-month maximum). AUD/USD renewed 2-month maximum.

Events to watch today:

Britain: Construction PMI in June is expected to fall to 53.1 after a 54.4 in May. Analysts expect the net lending to individuals to slide from 1.4B in April to 1.1B pounds in May showing that the banks are less willing to lend money to consumers.

US: Factory orders, a leading indicator of production, may turn out to be weak. This, together with poor June ISM manufacturing PMI released yesterday and the coming labor market data on Friday may fuel the speculation of more easing from the Fed. Don’t forget that the market is pricing in a rate cut by the ECB on Thursday – the market seems hopeful for monetary stimulus here and there that curbs demand for safe havens.

AUD/USD: prospects for growth

On Monday the Australian dollar edged a bit higher versus the greenback getting above Friday’s maximum setting new 2-month high. Aussie was helped by the residual optimism created by the EU Summit results and the bets that the RBA will leave interest rates on hold at 3.5% tomorrow. According to analysts at Bank of America Merrill Lynch, the central bank will stay on hold until November.

At the same time, the bulls were really unsure: though AUD/USD remains strong enough, it has been trading mainly in red all day long. Investors are in a wait-and-see mode ahead of the RBA announcement and the US data releases later today.

Most analysts expect the Aussie to gain further, especially if the ECB takes new measures on Thursday to support the weakened euro zone’s economy. AUD will be also influenced by the Bank of England’s monetary policy decision the same day.

It makes sense to buy AUD/USD at current levels targeting $1.0300 and stopping at $1.0085. Aussie is currently trading near the strong resistance at $1.0250 (78.6% Fibonacci retracement from a May drop and an intersection of a 100- and 200-day MAs). If the AUD/USD manages to overcome this level, a break to $1.0316 and $1.0409 will become likely. Support for the cross lies at $1.0225 (June 20 maximum), $1.0208 (today’s minimum), $1.0128 (61.8% Fibonacci retracement), $1.0085(June 15 maximum), 0.9965 (June 25 minimum).

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Chart. Daily AUD/USD

BOTMUFJ on ECB rates, EUR outlook

Analysts at Bank of Tokyo-Mitsubishi UFJ also think that the ECB will cut borrowing costs by 25bps on Thursday.

The specialists say that they understand the argument for a potential 50bps cut – the central bank may decide to solve the problem once and for all and be done without having to take into account the market’s speculation of another 25bps reduction – but regard the chances of such outcome as small.

The BOTMUFJ specialists don’t think that the ECB will do more than lowering rates. The extraordinary measures used in the past to support financial markets “will be kept for another day”.

As for euro’s surge at the end of last week, the analysts say that it was due to the low expectations ahead of the EU summit. Timing played its rose as well affecting the monetary flows: it was the end of month, quarter and half of a year.

The markets are already concerned with the size of the European bailout funds and there will be actually more pressure from this side from now on. The EMS has been initially created with the option for future buying bond at the secondary market – that was its difference from the EFSF, so that’s not a new development.

All in all, the specialists are bearish on euro. In their view, EUR/JPY which has bounced above 100 yen may slide to low 90ies in the next 1-2 months. In terms of EUR/USD, it’s not that clear as there will be a lot of data from the United States in the near future – people are talking about the slowdown and that may temper the enthusiasm for US dollar. However, BOTMUFJ is almost sure: whenever the markets are severe, investors will always come back to the greenback. The baseline scenario is that US currency will keep appreciating the second half of this year and then we’ll see some weakness in 2013 (remember US fiscal cliff). If not enough is done politically, the Fed may have to step up.

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