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RBS: still bearish on EUR/GBP Analysts at RBS claim that the outlook for the single currency versus British pound is still extremely bearish. The specialists point out that EUR/GBP broke lower after the period of sideways consolidation at the beginning of this year. In the medium term for the pair is still at 0.8069. There may be corrections within the downtrend at 0.8192 (the final retracement level from the credit crunch rally), 0.8140 (August 2010 minimum and the level from which the market rallied hard back to 0.8900) and 0.8069 (2010 low and level which has been underpinning price action since then).

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: $1.3025, $1.3100, $1.3115, $1.3120, $1.3150; GBP/USD: $1.5850; EUR/CHF: $1.2000; USD/CHF: 0.9200; USD/JPY: 80.00; AUD/USD: $1.0280, $1.0350; EUR/AUD: 1.2650; USD/CAD: 1.0000.

Barclay’s: short-term GBP outlook turned bearish Analysts at Barclay’s stopped being on British pound as it fell versus the greenback below $1.5900. The specialists claim that the pair GBP/USD will now fall to $1.5800 and $1.5770 and then probably to $1.5610.

BoC is unlikely to raise interest rate The Bank of Canada meets on April 17. The analysts expect the central bank to keep the rates unchanged at 1%. Then the BOC will release full domestic and international assessment April 18. On Thursday, April 18, Canada’s trade surplus declined to C$0.3 billion vs. C$2.2 billion expected and C$1.9 billion in February. However, many analysts believe the economy will continue demonstrating moderate growth. The median forecast in a Reuters poll of 40 economists shows the next interest rate hike will come in the second quarter of 2013. RBC Economics: With U.S. auto sales remaining robust during the first quarter of 2012, we expect the Canada’s automotive and energy export to return to positive growth in subsequent months. We forecast an annualized increase in GDP of 2.5%. The external risks remain sizeable, so the BOC is unlikely to raise the overnight interest rate level. CIBC Economics: The February trade report was downbeat for estimates of Q1 growth, but the quarterly GDP is still expected to grow by 2%. The BOC is becoming less worried about Europe blowing up and more encouraged by U.S. economic performance, but a change in the policy rate soon is unlikely. BMO Capital Markets: As long as the U.S. data remain unstable and the European debt problems unresolved, the BoC will be loathe adding negative drag to the domestic economy by tightening lending conditions. However, some specialists warn the Bank of Canada may change its monetary policy tone to a more hawkish. UBS: The BoC’s growing fears about household leverage and rapid house price gains have led to suggestions that it may even resort to rate hikes purely to mitigate bubble risks.

BT: bearish view on euro and Aussie Analysts at fund manager BT Investment Management expect Australian dollar and euro lose versus the greenback to 0.9500 and $1.25 respectively. The specialists note that “the next leg of the European crisis is building now” and all eyes are for Spain. In their view, the ECB will have to resume bond buying. As for Australia’s prospects, the firm says that the nation’s growth is “clearly slowing” due to the negatives from China and Treasurer Wayne Swan’s plans for record budget cuts. Economists surveyed by Bloomberg expect Australian’s GDP to add 3-3.5% in 2012, but BT Investment Management thinks this figure is lower and equals 2.5%.

Commerzbank: comments on GBP/USD Analysts at Commerzbank claim that GBP/USD’s uptrend versus the greenback seems vulnerable as the pair didn’t manage to overcome resistance at $1.6000. The specialists say that if sterling breaks below $1.5821 (uptrend line) it will fall to $1.5602 (March 13 minimum) and $1.5415 (January 19 minimum). There will be some support at $1.5805 (April low) and $1.5770 (March 22 minimum). As for resistance, it’s found at $1.5905 (Fibonacci retracement), $1.6037 (March maximum) and $1.6092 (November 2011 maximum).

CFTC trader positioning data The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that: • The net short euro position swelled by 32k contracts to 101.4k, a largest in about a month. A small number of longs (almost 600 contracts) capitulated, while shorts rose by 21.3k contracts. • The net short yen position grew by 1k contracts to 66.1k. Both longs and shorts were increased (1.5k and 2.5k respectively). • The net short pound position rose by about 10k contracts to 18.8k. Longs added 500 contracts, while the short positions grew by 10.5k contracts. • The net short Swiss franc position was decreased to 9.9k from 14.7k. Short positions were trimmed by less than 100 contracts, while the longs fell by 4.8k contracts. It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

J.P. Morgan: trading USD/CAD Analysts at J.P. Morgan recommend selling the greenback versus Canadian dollar at 0.9980 stopping at 1.0050 and targeting 0.9800. The specialists try to trade on the US earning season. In their view, the market’s expectations are very low, so there may be some upside surprises. Up to this week 29 companies in the S&P 500 had reported first quarter earnings and 83% of them beat expectations. According to J.P. Morgan, Canada will benefit from stronger US economy. In addition, the analysts think that the Bank of Canada will upgrade tomorrow their assessment of the Canadian economic prospects.

Euro falls before Spanish bill auctions The common currency touched a one-month low against the greenback and decreased versus its other major peers before the Spanish bill auctions on Tuesday. Investors fear the European debt crisis may continue. Spain will sell 12-month and 18-month bills tomorrow, followed by April 19 auctions of debt due in 2014 and 2022. Yields on Spanish 10-year bonds soared to 6.07% on April 13 (highest since December 1). Westpac Banking: The euro does look like it’s vulnerable to breaking down a lot further in the short term. If Spain’s yields continue to rise, then they’re going to get to a point where they may well need some form of assistance, as Greece did. The euro fell 0.4% to $1.3023, after touching $1.3009 (minimum since March 15).

Danske Bank: trading recommendations Analysts at Danske Bank recommend: - selling EUR/USD targeting $1.2974 and stopping at $1.3094; - selling GBP/USD targeting $1.5737 and stopping at $1.5955; - selling USD/JPY targeting 80.25 and stopping at 81.38.

The week ahead: events to watch Monday, April 16: • Switzerland: Producer price index, a leading indicator of consumer inflation, is expected to increase 0.5% in March against a 0.8% growth in Feb. • U.S.: On Monday a bunch of negative data is expected. Core retail sales (retail sales excluding automobiles) in March are expected to increase by 0.6% compared with a 0.9% increase in Feb. Retail sales growth is also forecasted to slow to 0.4% after 1.1% in Feb. Analysts expect the Empire State Manufacturing Index to stay positive, but to decline from 20.2 to 18.2. Net Long-term Securities Transactions in Feb. may drop to $41B after outstanding $101B in Jan. Business inventories are forecasted to grow 0.7% in Feb. • Australia: Minutes of RBA’s recent board meeting release is scheduled. Sales of new motor vehicles were flat in February, there is no market forecast for March. In the year to February, new motor vehicle sales rose 1.7%. Tuesday, April 17: • Britain: CPI in March may grow 3.5% compared with 3.4% in Feb. • Europe: Spanish, Greek T-bill auctions will take place. In April German ZEW economic-sentiment indicator is forecasted to decline slightly to 20.2 from 22.3. • U.S.: Number of new residential building permits in March may slightly decrease to 0.71M from 0.72M in Feb. • Canada: According to a consensus-forecast, Bank of Canada may leave the overnight rate unchanged at 1%. The median forecast in a Reuters poll of 40 economists shows the next interest rate hike will come in the second quarter of 2013. However, analysts at RBS believe the bank statement may be more hawkish than expected. Manufacturing sales contraction in Feb. may be down to a 0.1% decline against 0.9% in Jan. Wednesday, April 18 • Europe: Spanish, French bond auctions. Meeting of Group of 20 deputy finance ministers (through April 22). • Britain: April meeting minutes of the Bank of England's Monetary Policy Committee will be released. At the April MPC meeting, the committee made no further changes to policy after deciding to extend QE by a further £50 billion at its February meeting. Interest rates were also kept low at 0.5% level. The unemployment rate in February is forecasted to remain at 8.4%. Meanwhile, on the claimant count, economists are forecasting unemployment to have risen by 6.6K in March versus 7.2K in Feb. • Canada: Bank of Canada will offer detailed forecasts in its quarterly Monetary Policy Report, followed by a press conference by Governor Mark Carney. • Japan: March trade deficit is forecasted to expand to 0.43T from 0.31T in February. • New Zealand: Quarterly CPI may show a 0.6% growth against a 0.3% decline in the last quarter 2011. Thursday, April 19 • U.S.: Weekly number of unemployment claims may decline to 370K from 380K on the previous week. Home resales in March are expected to go up slightly (4.62M versus 4.59M in Feb.). Philly Fed Manufacturing Index, however, may decline to 12.1 compared with the previous 12.5. Friday, April 20 • Europe: April German Ifo Business Climate index is forecasted to decrease to 109.6 from 109.8 in March. Also note the annual spring meeting of the International Monetary Fund/World Bank (through April 22) and the extended deadline for some Greek foreign-law bond holdouts (to tender their bonds and for second leg of debt-restructuring accord). • Britain: March retail sales data is expected to show an appreciable 0.4% growth after suffering a sharp decline in February. Retail sales volumes fell 0.8% in February after rising 0.3% in January and 0.7% in December. “If March retail sales do see significant growth, it will significantly boost the likelihood that overall consumer spending was positive in the first quarter and helped the overall economy return to growth after GDP contracted by 0.3% quarter-on-quarter in the fourth quarter of 2011”, analysts at IHS Global Insight say. • Canada: CPI may demonstrate a 0.3% growth in March compared with 0.4% in Feb. Sunday, April 22 • Europe: French presidential election, first round.

Comments on EUR/USD The single currency is trading today on the downside versus the greenback as it was unable to overcome resistance of 50-day MA. The pair EUR/USD keeps trading in range between $1.30 and $1.35 within which it has been squeezed since January. Analysts at Commerzbank believe that euro will be able to break out of this range only in case something big happens such as QE3 or the escalation of the debt crisis in Europe. The situation in the euro area’s still uncertain: while Italy survived this week’s debt auctions well enough, Spanish 10-year yields remain dangerously close to 6%. The reaction to the news that Spain banks borrowed 316.3 billion euro from ECB in March up from 169.8 billion euro in February was, however, rather muted as EUR/USD’s still above $1.3100. The European currency was dragged lower mostly by the talk that the ECB may restart its government bond purchase program. On the one hand, such action would ease the stress at bond market; on the other, investors may take such news as a very bad sign. All in all, from the fundamental point of view, the market’s attention which has returned to Europe in the recent weeks will be staying here for now. EUR/USD is now trading between 50-day MA on the upside and 100-day MA on the downside.

RBS: trading updates for GBP/USD Analysts at RBS remain long on British pound versus the greenback placing the target at $1.6033/72 (tweezer top formed in November) and stops at $1.5790. The strategy is to buy GBP/USD on the dips to $1.5850. The specialists warn investors, however, that if sterling breaches support of $1.5790, they should switch to short positions citing a “head and shoulders” mode watching for $1.5666 and $1.5585.

Standard Chartered: forecasts for majors Analysts at Standard Chartered updated ctheir currency forecasts from Q2, 2012. The specialists are bullish on the greenback and negative on the single currency as teh euro zone's facing the treat of recession and will likely keep suffering from fiscal issues. Included in the note is their euro exchange rate forecast call.

Commerzbank: bearish view on euro Technical analysts at Commerzbank stick to their bearish view on the prospects of the single currency versus the greenback. The specialists underline that EUR/USD failed to break resistance at $1.3207 (the 55-day MA). In their view, euro’s decline will resume if it breaks below support line at $1.3035. In this case euro will slide to $1.2974/54 (February minimum and 61.8% Fibonacci retracement) and below that to $1.2624 (January minimum) and finally to $1.2000.

UBS lowered forecasts for USD/CAD Analysts at UBS think that though the Federal Reserve will start normalizing its policy the next year, the Bank of Canada will start moving in this direction earlier (the reasons – recent strength in Canada’s employment data and the fears about the housing price bubble). The specialists think that such expectations aren’t prices in the exchange rates and expect the greenback to get under pressure versus its Canadian counterpart, so they lowered forecasts for USD/CAD from 1.0100 to 0.9900 in a month and from 1.0300 to 0.9800 in 3 months.

Friday, April 13: economic news and outlook China’s growth slowed down The market has been expecting Chinese economy to slow down, but the actual data came even worse than the projections: the nation’s GDP added only 8.1% in Q1 vs. the forecast of 8.4% and down from 8.9% increase in the last 3 months of 2011. This is the slowest expansion in almost 3 years. The data has naturally hit Australian dollar (remember Australia exports commodities to China?). Aussie weakened versus all of its major peers, the pair AUD/USD went down from this week’s maximum at $1.0451 reached today to the levels in the $1.0400 area. Fed speakers Fed Bank of New York President William C. Dudley claimed yesterday that it’s “too soon to conclude that we are out of the woods” and that the rates should be held at the minimal level until the end of 2014. Ben Bernanke speaks later today amid the speculation that the Federal Reserve will conduct additional easing as the economic recovery isn’t going as smooth as the central bank thought it would. American currency weakened versus the majority of its peers ahead of the CPI release later today: the pace of consumer prices growth is seen declining from 0.4% in February to 0.2% in March. Slowing inflation would give the Fed more room for another QE. Preparing for additional stimulus from Japan The greenback and the single currency are strengthening against Japanese yen for the third day as the market’s looking forward to more easing from the bank of Japan (though USD/JPY was affected by the weak Chinese data). Today the nation’s ministers will discuss the problem of deflation. Asian stocks: Nikkei +1.2%; HK +1.6%; Shanghai +0.25%.

RBS: trading AUD/USD Analysts at RBS recommend buying the Aussie vs. the U.S. dollar at the current levels, with a stop at $1.0210 at targeting at $1.0612. Strategists see support at $1.0320 (recent lows), $1.0240 (61.8% retracement from a Dec. 15 low) and $1.0201 levels, and resistance – at $1.0496 (recent support, now resistance) and $1.0612 (23.6% retracement from a Dec. 15 low). According to RBS analysts, the Australian dollar will be the best performing currency in April due to seasonal patterns. Specialists also point that a lot of negative news were priced into the AUD/USD, that’s why they advise to play on the dips now.

World Bank trimmed China’s growth forecast The World Bank reduced forecast for China’s 2012 GBP growth from 8.4% to 8.2% (13-year minimum). According to the economists, there’s “potential for growth to be bumping along the bottom for longer”. “We see cyclical weakness continuing, but that the prospects for a soft landing remain high,” said the specialists noting that Chinese authorities have enough resources to help bolster the economy if risks to the downside accelerate. The main problems of Chinese economy are the decreased external demand for its goods and risks connected with the real estate market. Note that the World Bank increased 2013 forecast for China from 8.3% to 8.6% expecting activity to rebound next year. Official data on the nations Q1 economic growth is released on Friday, April 13. Consensus forecast is a gain of 8.4% down from 8.9% in the final 3 months of 2011.

Euro zone: Italian auction, Greece, weak data EUR/USD reiterated from today's highs at $1.3145 affected by the latest news’ releases. Italian government sold BOT of 4.884 billion euro meeting the targeted amount, though the yields were higher – not an entirely positive picture. Here are the details: - 2.884 billion euro of 2015 BTP yield 3.89 % (from 2.76%) out of a targeted 2-3 billion euro; - 2 billion euro of three-off-the run issues due in 2015, 2020, 2023. The off-the-run sale had been announced for an overall amount of between 1.0 billion and 2 billion euro. The overall bid-to-cover was 2.20. In addition, Greek unemployment rate rose from 21.0% in December to 21.8% in January. Moreover, euro zone’s industrial production declined by 1.8% (y/y) in February.

UK trade deficit wider than expected Britain’s trade deficit grew to £8.7 billion in February from revised £7.8 billion in January, despite the forecasted gap of £7.7 billion. The export slippage is caused mostly by decreasing trade volumes with non-EU countries (U.S., China and Russia). According to recent surveys, Britain has just returned to a moderate economic growth after the threat of a recession blew over. However, a slowdown in Britain's main trading partner, the euro zone, could weigh on exporters' prospects. The market, however, is reacting on the negative trade balance data oddly: cable climbed to a one-week high $1.5955. Commerzbank: GBP/USD is rebounding near term from $1.5827 level (55-day MA). We expect the pair to find intraday resistance at $1.5935/65 and continue to view the market as having topped at $1.6062. Resistance for the pair lies at $1.5937 (Apr. 11 maximum), $1.6062 (April maximim), and $1.6200 (psychological resistance), support – at $1.5850 (Apr. 11 minimum), $1.5724, and $5600 (lowest since March 12).

BNY Mellon: USD/JPY is to get higher Analysts at Bank of New York Mellon think that Japanese authorities will refrain from active monetary interventions for now using only verbal comments ahead of the next Bank of Japan’s meeting at the end of April. BNY Mellon reminds that the quantitative easing conducted by the BOJ in February was much more effective than the previous intervention. According to the economists, Japanese Ministry of Finance “has (sensibly) tried to keep a degree of unpredictability about its operations in order to preserve their effectiveness.” So, the bank’s main scenario is more asset purchases on April 27 and positive near-term outlook for the greenback. USD/JPY may rise to 83 and 84 yen.

Beige book: no surprises According to the Beige book report, released on Wednesday, each of the 12 U.S. bank districts keeps expanding at a modest-to-moderate pace from mid-February through the end of March. The Fed pointed at stronger manufacturing sector, consumer spending, better demand for professional business services, increased tourism and some improvement in the real-estate market. The survey also noted that hiring was steady or increased in most of the country. In general, the estimates remain unchanged from previous Beige book release, but with slightly increased optimism on the back of positive March U.S. data.

AUD/USD grows after employment data The Australian dollar jumped to a one-week high on the backdrop of the surprisingly positive employment data. Strong labor market figures lower concerns that the RBA will cut interest rates from current 4.25% level. Australia’s 3- and 10-year bond yields increased 8 and 3 basis points respectively. In March 44K new jobs were created in Australia versus 6.4K forecasted and 15.4K decline in February. The unemployment rate remains unchanged at 5.2%, compared with forecasts to grow to 5.3%. BNP Paribas specialists expect the Aussie to trade at $1.0500 level in Q2. Moreover, China’s GDP data on Friday may surprise the market and create additional support for AUD/USD. However, analysts at Commerzbank remain bearish on the Aussie vs. the greenback. In their view, there is a strong resistance on the $1.0405 level. They expect the pair to weaken to $0.9863 (Dec. 15 minimum). Early Thursday AUD/USD strengthened to $1.0391, the highest level since April 3.

Short-term outlook for loonie Canadian dollar hit yesterday the minimal level against its US counterpart since the end of January: USD/CAD posted high at 1.0051 before returning today to the parity level. On the fundamental part, CAD has its main drivers rising equities and oil prices in action. The current fluctuations are by the approaching release of the Bank of Canada’s monetary policy report (the central bank will meet on April 17 and publish quarterly report on April 18). From the technical point of view, there may be a “double top pattern” confirmed in case of steady trading back below the neckline of the pattern at 1.0010, so we may expect more bearish moves today. Scotia Capital: buying loonie seems OK for now, though one should close USD/CAD shorts if the pair closes above 1.0050/1.0070 breaking out of the range within which it has been stuck for months. RBS: bullish on CAD versus euro and US dollar. As conditions in Canada, the United States and the world as a while have improved, the BOC should revise up the domestic and international outlook. Data to watch: Canada’s February trade balance (forecast: 2.2 billion surplus), New housing price index (forecast +0.2% m/m in February).