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New Zealand: mixed data released Statistics New Zealand reported on Monday that the trade surplus declined in March to NZ$134 million against NZ$202 million in February and NZ$445 million surplus expected. The decline is caused by an 8.7% fall in the value of exports; meanwhile, imports rose 1.2% Building consents improved 19.8% in March after a 6.2% fall in February. NBNZ Business Confidence index increased to 35.8 in April against 33.8 in March, indicating strengthening business optimism. The Reserve Bank of New Zealand (RBNZ) has consistently warned that the high national currency hurts the tradable sector and puts a downward pressure on economic activity. Bank officials remarked last week that if the NZD remains high the economy may to look towards a monetary policy easing. Nomura: The RBNZ has stepped up its rhetoric on the level of the NZD. We think this is just another attempt to talk the currency lower. We doubt any FX intervention will take place. We continue to look for opportunities to enter NZD long positions. The NZD/USD continues a sideways movement in a $0.8060-0.8280 channel since March 2012.

U.S. GDP came below expectations The greenback fell against the euro and the yen after the report showed the U.S. economy grew less than expected in the first quarter 2012. The estimated U.S. GDP growth in Q1 2012 is 2.2% vs. 2.6% forecasted and 3.0% in the previous quarter. However, the fairly strong personal consumption offsets things a bit (2.9% increase vs. 2.1% in Q4). BNP Paribas: Consumers are remarkably stable and steady. We’ll need to see final demand continue to improve. We’re still in muddling- along territory. In January 2012 the Fed lowered its forecasts for the U.S. economic growth to 2.2-2.7% in 2012 and to 2.8-3.2% in 2013. The FOMC “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” it said in an April 25 statement.

Analysts: comments on EUR/USD The common currency managed to recoup losses due to the Italian bond auction after S&P downgraded Spain’s credit rating. Standard & Poor's cut Spain's rating to BBB-plus from A on Thursday and gave it a negative outlook, warning it expects the government's budget deficit to deteriorate even more than previously thought due to economic contraction. S&P expects Spain's GDP to contract by 1.5% in 2012 and 0.5% in 2013. Italian 10-year borrowing costs climbed to 5.84% on Friday (60 b.p above a comparable bond sale in March) against the backdrop of Spain’s downgrade. However, in general, the bond auction was rather successful: the country sold 5.95 billion euros of bonds, near the top of a planned issue range of between 3.75-6.25 billion euros. HSBC: We are a bit surprised at the euro's resilience but part of the explanation is that the currency channel isn't the cleanest way to express discomfort with the periphery. If you don't like Spain you sell their bonds and buy German Bunds so the currency impact is muted. BBH: $1.3250 area is providing near-term resistance for EUR/USD. We feel the euro should be sold into rallies ahead of next week’s key economic data and political events, including PMIs, ECB meeting, and the ongoing political cycle. Analysts at Danske Bank recommend selling the EUR/USD cross at current levels targeting at $1.3145 and with a stop at $1.3245, while Commerzbank suggests going short at $1.3205 with a stop at 1.3315. UBS's analysts believe the pair will be at $1.30 for the next month and at $1.25 in the next 3 months.

Yen up after BoJ added stimulus The yen dropped against its major counterparts after the Bank of Japan increased the size of the asset buying program by 5 trillion yen additional in JGB whilst reducing the fixed-rate program by 5 trillion. As widely expected, the BOJ maintained the key interest rate at a 0-0.1% level. After the BoJ announcement the USD/JPY cross sky-rocketed to 81.35 yen, but soon declined to 80.81. While some analysts seem to be unimpressed by the QE measures, the BoJ may be starting to lose its fight to devalue the yen through more easing given the post-reaction of the currency.

US jobless claims: what’s behind the figures? US Labor Department announced today that initial jobless claims fell by 1K last week to a seasonally adjusted 388K in the week ended April 21. The reading was though higher than the forecast. It’s necessary to note one thing: the previous print (for the week ended April 14) was revised from 386K to 389K (the highest level since the first week of January). So the comments are positive, the newsmakers got what they wanted – the improvement. At the same time, this is the 10th week in a row of misses to the weaker side and the 16th of the last 18. The average of new claims over the past month rose by 6,250 to 381K. Some justified April increase in claims by the spring break when school workers can file for temporary benefits. However, fewer experts are so sure now. Recent data wasn’t encouraging enough and there are significant risks from Europe. There’s also talk that the government’s seasonally adjustments may have exaggerated the drop in claims at the beginning of the year. The picture will become clearer next Friday with the release of April employment report. An Army veteran chats with representatives from Southwest Airlines at the Hiring our Heroes job fair for U.S. military vets and their spouses last month. (E. Jason Wambsgans/Chicago Tribune) (E. Jason Wambsgans )

UBS: currency forecasts updated EUR/USD 1-month $1.30, 3-month $1.25; GBP/USD 1-month $1.62, 3-month $1.62; EUR/GBP 1-month 0.80, 3-month 0.77; NZD/USD 1-month $0.82, 3-month $0.78.

Analysts: outlook for GBP/USD The preliminary GDP in Q1 unexpectedly shrank 0.2% vs. a 0.1% gain expected and a 0.3% contraction in Q4, meaning the Great-Britain has slid into a double-dip recession, according to yesterday’s release. Analysts split over the prospects of the sterling, despite the negative data. UBS's analysts see the pair at $1.6200 in the following three months. They expect the yesterday’s GDP report to be revised soon, while the Britain’s PMI data look rather optimistic. In their view, the MPC is ready to tighten its monetary policy, so the pound has reasons for growth. Technical analysts at Danske Bank recommend going long onthe sterling at the current levels, for a $1.6335 objective and with a stop at $1.6075. However, Commerzbank strategists advise to go short on the pound at $1.6130, with a stop over $1.6185 and targeting at $1.5900

TD Securities: bearish on AUD/CAD Analysts at TD Securities claim that the downtrend within which Australian dollar is currently trading versus its US counterpart remains strong. In their view, AUD/CAD will drift down to the parity and then to 0.9900. Support for the pair lies at 1.0155 (2012 minimum) and 1.0100 (long-term trend support). The specialists see the possibility of small corrections within the bearish trend, but the pair will be declining: “We rather think strongly trending oscillator signals will keep counter-trend rallies to a minimum and retain focus on the downside. Stay bearish while the 1.03 resistance remains intact.”

Analysts still believe in euro A bunch of negative signals came from the euro zone recently: lackluster economic reports, Dutch political crisis, and uncertainty, caused by French elections. However, the common currency keeps trading in a $1.30-$1.34 range, puzzling the investors. Commerzbank: We are observing a new wave of a debt crisis, coming from Spain. However, the EUR/USD cross remains stable, and the situation is not expected to change in the nearest future. Bank of New York Mellon: Spain now requires not the financial aid itself, but the investors’ confidence that the firewall is big enough just in case the situation worsens. Barclays Capital: The EUR/USD is not expected to plummet, because the greenback’s growth is limited by the Fed’s current policy. The U.S. interest rate remains at a zero-bound level at least until mid-2014. Citigroup: Later this year the ECB may extend the LTRO program and cut interest rates. The common currency weakens to $1.30 in 6 months and to $1.25 in a year.

Citigroup: euro's correlated with... According to analysts at Citigroup, there is a rough correlation between the euro and the foreign buying of euro zone’s debt. In the periods of euro’s strength, foreign investors are buying euro zone bonds, and when the euro weakens as it did late in 2011, foreign investors sell. Analysts believe the support of investors due to euro’s advance in early 2012 has probably softened the common currency’s drop these days, but the effect won’t last long.

NZD up on RNBZ’s comments The New Zealand dollar strengthened today against its major peers after a not as dovish as expected RBNZ's policy statement. The Reserve Bank of New Zealand today left the Official Cash Rate (OCR) unchanged at 2.5% calling this level of the borrowing costs appropriate for the moment. The RBNZ Governor Alan Bollard claimed that “domestic economy is showing signs of recovery” noting though that “the global outlook remains of concern.” Bollard said that if kiwi remains strong with all things equal, “the Bank would need to reassess the outlook for monetary policy settings”. RBC: Markets were clearly unimpressed by the threat. ANZ: We expect the RBNZ to take every opportunity to "talk down" the NZD. However, we think the main drivers of recent NZD price action are global rather than local. Analysts expect the kiwi to climb to $0.8200 after today’s growth to $0.8172. The cross has been trading sideways in a range $0.8060-$0.8280 since early March. The resistance for NZD/USD lies at $0.8188 (high Apr.25), $0.8198 (high Apr.23) and $0.8230 (55-day MA), while the support – at $0.8099 (100-day MA), $0.8078 (200-day MA), $0.8058 (low Mar.22) and $0.8040 (low Jan.23).

USD/JPY: any trade ahead of the BOJ? The greenback’s trading on the downside versus Japanese yen today as lower USD/CNY made traders selling US dollar versus all of its Asian peers. In addition, USD/JPY also got under pressure due to the corporate flows ahead of the period of Japanese national holidays known as the Golden Week (Japanese Golden Week in 2012 is based on two separate holidays of 3 and 4 days. The first is from Saturday, April 28 through to Monday, April 30 and then Thursday, May 3 through to Sunday, May 6). At the same time, the moves of the pair seem to be limited as the market awaits tomorrow’s decision of the Bank of Japan. Investors expect more easing from the BOJ. If the central bank does more QE, that should be negative for the yen. If it doesn’t – well, it better be ready to the renewed strength of its national currency, it’s as simple as that. From the technical point of view, note yesterday’s doji candle on the daily chart. If US currency breaks above the short-term trend resistance line, one may go long. If it doesn’t, then USD/JPY may slide to the lower border of the channel in 80 yen area, though the potential decline will be limited by the hopes about the BOJ.

April 26: main economic events • New Zealand: As expected, the Reserve Bank today left the Official Cash Rate (OCR) unchanged at 2.5% calling this level of the borrowing costs appropriate for the moment. The RBNZ Governor Alan Bollard claimed that “domestic economy is showing signs of recovery” noting though that “the global outlook remains of concern.” Bollard said that if kiwi remains strong with all things equal, “the Bank would need to reassess the outlook for monetary policy settings”. Coming soon • Euro zone: Italian T-bill auction. Demand for euro was limited on the back of political concerns which may derail the efforts to stem the region’s debt woes. • U.S.: - The Fed’s Chairman Ben Bernanke said yesterday that the central bank is prepared to “do more” if necessary to spur the economy, boosting demand for higher-yielding assets. The FOMC upgraded its forecasts for growth and unemployment this year while repeating their view that borrowing costs are likely to remain “exceptionally low” at least through late 2014. - Unemployment Claims are forecasted to increase by 378K this week vs. 386K the previous week. U.S. Pending Home Sales in March may increase by 1.4% vs. a 0.5% decline in February. U.S. 7-year note auction is scheduled. S&P500 was 1.4% up yesterday, the MSCI Asia Pacific Index of shares +0.3% today.

What to expect from FOMC? Money market investors will look at the Federal Reserve's statement, forecasts and Fed Chairman Ben Bernanke's press conference on Wednesday to assess the prospects for the U.S. economy. Most analysts don’t forecast any significant changes in monetary policy; however, Ben Bernanke is a well-known wild card. The Fed's fund rate is expected to be kept at 0.00%-0.25% at least until late-2014 and asset purchases program to remain steady at $600 billion. The “Operation Twist”, aimed to lower borrowing costs and to stimulate economic growth, is expiring in June. While the most economists expect the Fed to quit the program in June, there are some who say the program will be extended in June. Goldman Sachs analysts believe the Fed will announce its decision on further QE today. According to Nomura and Barclays Capital analysts, despite Bernanke’s insistence that QE3 remains on the table, the Fed will become more hawkish on the back of U.S. economic improvement. However, the U.S. posted rather negative reports lately (manufacturing indices, housing market data), so the Fed Chairman Ben Bernanke may give a few more dovish comments on the U.S. and global economy. Most analysts expect the 2012 forecast for the unemployment rate to be revised down from the Fed's January estimate of 8.2% to 8.5%. According to Wells Fargo analysts, in 2012 GDP is expected to come in at 2.2% to 2.5%. Today Core Durable Goods Orders (the de-facto gauge of business investment) fell by 1.1% in March vs. 1.8% rise in February.

USD/CHF: technical comments The greenback keeps trading within short-term downtrend versus its Swiss counterpart. Ichimoku H4 chart hints at bearish outlook (Kijun-sen and Tenkan-sen are declining with the former lying above the latter). As a result, USD/CHF may decline to 0.9050, the lower line of the triangle formation. There may be some support for the pair in the 0.9080/70 zone (trend line supports, maximums of late March, early April).

USD/CAD: technical updates US dollar keeps losing versus its Canadian counterpart. USD/CAD approached the lower border of the range between 0.9840 and 1.0050 within which it has been trading since the end of January. The pair has tested today the levels below 0.9864 (April 17 minimum). If this support fails to contain the bearish pressure, US dollar will be heading down to 0.9800. Analysts at RBS think that USD/CAD’s fair value is situated at 0.93. However, for now American currency returned closely to the opening level, so we see something close to doji on the daily chart. Analysts at Commerzbank say that if USD/CAD closes today below 0.9842, it will become vulnerable for a slide to 0.9786 (minimum of the middle of September) and then to 0.9726 (end of August low). For the outlook to improve US currency should go above 1.0052. It’s better to wait for the pair’s advance above this week's high of 0.9980 to start thinking about longs. The Bank of Canada’s Governor Mark Carney said yesterday that “some modest removal of monetary stimulus may become appropriate; interest rates are exceptionally low, won't always be the case”. Such comments make investors expect the central bank to take a more hawkish approach and start removing stimulus which is positive for CAD.

GBP/USD down on UK recession The Great-Britain has slid into a double-dip recession according to today’s GDP data release. The preliminary GDP in Q1 unexpectedly shrank 0.2% vs. a 0.1% gain expected and a 0.3% contraction in Q4. In the same tone, index of services also missed the expectations, rising 0.2% in Feb. vs. a 0.6% growth estimated. “Abandoning deficit reduction measures would only make UK situation worse. Conditions are very tough and recovery is taking longer than had been envisaged”, George Osbourne said. The Public Sector Net Borrowing, released yesterday, grew to 15.9 billion pounds in March vs. a 15.0 billion forecast and 9.9 billion in February. However, the U.K. inflation surprisingly accelerated in March for the first time in six months. The GBP/USD cross fell on GDP data to $1.6086. The sterling had been rising for 8 consecutive days and reached $1.6163, the highest since Nov. 2011. The sterling also weakens against its other counterparts. Analysts at Goldman Sachs recommend selling EUR/GBP at current levels with a stop at 0.8250 and targeting at 0.8150.

Westpac: bearish on euro in the medium term Analysts at Westpac Bank believe that the elections turmoil in the Netherlands, France and Greece will make the single currency breach its trading range to the downside and make it start to “unravel quietly, certainly through the first week of May.” According to the bank, the current band EUR/USD is trapped in is “almost frustrating”. The specialists say that it seems that “here is a barrier, some sort of physical option structure in the market that's limiting downside through the $1.30 level.” However, euro shorts will mount and once the bears push the pair down through $1.31 and $1.30, downside momentum for EUR/USD will significantly increase. Westpac says that the possibility of euro’s slide to the levels around $1.25 in the second quarter is rather strong.

Analysts: outlook for GBP/USD The British pound strengthened to a six-month high vs. the greenback before a release of GDP data on Wednesday. According to Bloomberg survey, the preliminary GDP in Q1 gained 0.1% after shrinking 0.3% in Q4. The British economy is expected to avoid recession, reducing concerns that the additional monetary easing will be needed. Moreover, the “dovish” MPC member Adam Posen stopped standing up for a new round of QE. The U.K. inflation unexpectedly accelerated in March for the first time in six months. Some specialists believe the BoE may stop its 325 billion pound QE program on May, 10. GBP/USD keeps strengthening for 8 consecutive days. Today the pair trades in the $1.6159 area, facing a strong resistance at this level (a 61.8% retracement of Apr. 2011 – Jan. 2012 decline). The EUR/GBP pair bounced away from the 19-month low at 0.8142 pounds that the cross reached yesterday. Mario Draghi’s speech pushes the common currency up. According to analysts at Barclays Capital, EUR/GBP will decline to 0.7600 pounds in a year. They recommend selling the cross at 0.8190 pounds, targeting at 0.7800 and with a stop at 0.8270.

Commerzbank: EUR/USD will decline Technical analysts at Commerzbank note that the single currency’s facing key resistance versus the greenback in the $1.3300/12 area. The bank expects EUR/USD to slide to $1.2974/54 (February minimum and 61.8% Fibonacci retracement). There will be some support at $1.3174/73 and $1.3045. If the pair manages to overcome resistance, it will get chance to rise to $1.3487/1.3510 (February maximums).

Bank of America: outlook for USD/JPY According to analysts at Bank of America, the greenback will soon resume a bullish trend against the yen after a recent correction. USD/JPY declined 4% since Mid-March before gaining 1% since April 16. In their view, the cross may go up to ¥ 84.82 or ¥ 85.45 after demonstrating ability to leap from a ¥80.28 low.

April 25: main events to watch Australian and New Zealand markets closed for Anzac holiday. Risk sentiment is on due to the news that Apple profit almost doubled in Q1. Nikkei +0.75%, other regional markets are almost flat. EUR/USD is almost unchanged, USD/JPY edged higher. Events to watch today: • Euro zone: Allotment of ECB three-month long-term refinancing operation. Following the April ECB rate decision in which the rate wasn’t changed at 1% Mario Draghi will speak and may refer to ECB’s plan to calm the markets including implementing LTRO 3 or resuming the SMP. According to UBS analysts, in order to lower the fears circling the euro zone debt situation, ECB's officials are speaking about the likeliness of new SMP. However, Germany is strongly against such a measure or another LTRO, so the ECB may use the strategy of cutting the interest rates. In general, the UBS analysts expect the ECB to remain more dovish than the Fed in 2012. • Great Britain: The Preliminary Q1 GDP is expected to grow by 0.1%. In the Q4 2011, the GDP contracted by 0.3%. • U.S.: A bunch of important data is expected. The Federal Open Market Committee will hand down its monetary policy decision. Members have been slightly more positive on the economic outlook; however, it is still very much in the realm of “cautious optimism”. Any discussion about the prospect of more QE will be important. Core Durable Goods Orders (the de-facto gauge of business investment) are expected to increase by 0.6% in March vs. 1.8% rise in February. 5-year notes auction is scheduled.

USD/JPY: trading recommendations This week the meetings of the Fed (April 26) and the Bank of Japan (April 27) may influence the currency markets. Some analysts believe both central banks will adapt a relatively loose monetary policy to stimulate the economic growth. However, strategists at Shelter Harbor Capita are convinced that the Fed is leading a much more hawkish policy than it pretends, pointing to recent statements by normally dovish officials.They recommend going long on the USD/JPY, entering the trade at 81.60, setting a stop at 81.20, and targeting a move to 83.00. Analysts at UBS also advice to buy the USD/JPY on the dips, entering the trade at a current 80.00-85.00 range. They expect the pair to break the top of the range in the next three months. According to UBS analysts, the Japan's inflation in 2012 is likely to remain below the 1.0% target. Therefore, the BOJ has enough reasons to add a ¥5-10 trillion monetary stimulus on a meeting on Friday, April 27.

USD/CAD: economic news, technical comments Canadian retail sales came worse than expected declining by 0.2% (m/m) in February, while the forecast was for the indicator to remain unchanged. Core retail sales rose 0.5% vs. +0.4% forecasted and up from January’s -0.8%. The pair USD/CAD initially rose on the news, but then began retracing down the gains as Case-Shiller HPI which in is measuring change in the selling price of single-family homes in 20 metropolitan areas also turned out to be quite disappointing: the index contracted by 3.5%in February (y/y). The greenback will gain positive momentum if it manages to rise above 0.9921/23 (100-hour MA and 38.2% Fibo retracement of the decline from yesterday’s high. Support lies at 0.9886 (today’s minimum), 0.9879 (April 19 minimum) and 0.9864 (April 17 minimum). All in all, USD/CAD is still in range between 0.9840 and 1.0050 within which it has been trading since the end of January. There’s a chance that the pair will retest the bottom of the range, but it will likely soon start drifting to the upper border of the band. Of course, US currency should close the week above 0.9850.

EUR/USD: little reaction to debt auctions Although the market had been eyeing results of the European bond auctions, we didn’t see much of a reaction to their results. Spain sold 1.93 billion euro of 3- and 6-month bills. The yield on 3-month bills rose from 0.381% to 0.634%. At the same time, demand exceeded supply 7.6 times versus a bid-to-cover ratio of 3.5 in March. The 6-month yield rose from 0.84% to 1.58%, while the bid-to-cover fell from 5.6 to 3.3. The Netherlands – one of the few European economies still rated AAA – sold 1.995 billion euro of 2- and 25-year government bonds, roughly in the middle of its target range, a day after Prime Minister Mark Rutte resigned in a crisis over budget cuts. EUR/USD is little changed on the day. Resistance lies in the $1.3200/23 area. The pair remains trapped between 50-day MA on the upside and 100-day MA on the downside. Bank of Tokyo-Mitsubishi: “There has been more chat about the resilience of the euro that's spooking some people out of playing it lower over the short-term, but there are some very significant risks ahead. As we move into May and June we could see further volatility and turmoil which we think will see the euro break below $1.30.” Nomura Securities: “We expect euro/dollar to resume a weakening trend in coming weeks, with a break of $1.30 opening up a trading target of $1.25 within a 2-3 month horizon.”