ryuroden

AUD: RBA rate statement lowered the Aussie Australian currency declined against all of its 16 major counterparts. The Reserve Bank of Australia left its cash rate intact at 4.25%, coming up with expectations. However, according to the chairman Glenn Stevens, the RBA board decided to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy. The release of the first-quarter CPI is scheduled on April 24 (5:30 GMT). According to the Melbourne Institute, the nation’s consumer prices rose 1.8% last month from a year earlier, the slowest pace since October 2009. United Overseas Bank: The tone of the RBA’s statement was quite dovish. Interest-rate expectations are going to fall; this will continue to weigh on the Aussie. Moreover, retail sales rose 0.2% in February, below the forecasts and the January print, both at 0.3%. In addition, on May 10 (10:30 GMT) the annual budget release is expected. Prime Minister Julia Gillard said today the government will deliver a “tough budget”, when the Treasury presents a spending plan for the coming fiscal year. Societe Generale: If the signal from the budget is deep fiscal cuts, there is no option for the RBA but to ease monetary policy to accommodate tighter fiscal conditions. On the other hand, China, Australia’s biggest trading partner, posted upbeat figures today. China’s non-manufacturing PMI climbed to 58.0 in March from 57.3 in February. AUD/USD is currently trading around $1.0380, below the 50-, 100- and 200-day MA. Most analysts forecast the bearish pressure on the Aussie to continue. The support for the currency pair lies at $1.0370, $1.0355, $1.0335, $1.0305 (local minimum) and $1.0260, whereas the resistance – at $1.0415, $1.0450, $1.0485, $1.0510 and $1.0600.

BarCap: euro expected to decline Analysts at Barclays Capital advise investors to watch ECB policy rate press conference on Wednesday (14:30 GMT) for the hints on whether the central bank will move away from full allotment* – this question should be resolved by the end of June. If there are signs of normalization, euro may get some support. Never the less, the economists don’t regard such outcome as very likely. The specialists think that the single currency is likely to get under pressure. The bank draws the market’s attention to the fact that euro area’s Manufacturing PMI remained below 50 in March – not a good sign. According to BarCap, although German economic growth will improve the region’s economic outlook, for now its economic strength is being more than offset by weakness elsewhere. So, despite the fact that the bank expects German industrial production (released on Thursday, 12:00 GMT) to exceed forecasts posting the reading of 0.3% (m/m) vs. the consensus projection of -0.1%, the analysts don’t think that this would lead to the steady growth of the single currency.

CMC Markets: EUR/USD, USD/CHF and AUD outlook Analysts at CMC Markets believe that EUR/USD will fall to $1.20 over the next 12 months. IN their view, USD/CHF would rise from 0.90 to 0.92 in a year. “There was a concern that the Swiss National Bank would not tolerate a stronger Swiss franc and that turned out to be the case.” The specialists expect EUR/CHF floor to hold in the short to medium term. According to CMC Markets, Australian dollar is significantly overvalued and could weaken this year. “There will be further rate cuts out of Australia over the coming months because of deteriorating economic data and a possible slowdown in China.” The economists don’t mean the hard landing scenario in China, but think that demand out of China will diminish for Australian commodities and that will drive flows out of Aussie.

GBP/USD: analysts’ forecasts According to market strategists at J.P. Morgan Asset Management, nowadays the U.K. currency is on the rise due to high merger-and-acquisition activity in the country, demand for Britain's triple-A bonds, and rising stock prices. However, analysts at Shelter Harbor Capital say from the $1.6000 level problems for the U.K. economy will start; therefore the demand on the sterling is expected to contract. Strategists recommend going short on the pound against the greenback at $1.5991 level with a stop at $1.6100 and a target of $1.5600. Specialists at Westpac Institutional Bank also do not believe the sterling is a reliable currency today, considering the fact that two members of Britain's Monetary Policy Committee are in favor of further QE.

RBS: trading recommendations on AUD/USD Specialists at RBS recommend buying the Aussie against the dollar, potentially targeting at 1.0751 and stopping at 1.0290. The support lies at 1.0337/54 and at 1.0238 levels, whereas the resistance is placed at 1.0496 (previous support, now resistance), 1.0612 (76.4% retracement of the previous range), 1.0691 and 1.0856 (2012 maximum). According to RBS analysts, going long on AUD/USD may be one of the best trading strategies of April 2012, because the Aussie is strengthening every April at an average of circa 4%. Moreover, the slowing of a downside momentum in the MACD seems to be a positive sign.

RBS: trading recommendations on EUR/GBP The RBS analysts recommend going short on EUR/GBP at current levels, targeting at 0.8000 and with a stop on a 2-day close above 0.8510. The reason why the specialists propose such trade is that the common currency is extremely vulnerable to any market pressure. Credit spreads narrowed due to LTRO, but the market sentiment toward financials remains unchanged.

The outlook for RBA’s actions The Reserve bank of Australia meets tomorrow for an interest rates decision. The majority of the economists expect the central bank to leave the rates changed. Here’s more detailed into on the issue and the expectations of future RBA’s moves. Outcome Looking Ahead ANZ Hold Cut in May NAB Hold Cut in May JP Morgan Hold Hold in 2012 HSBC Hold Cut likely in May TD Securities Hold Two cuts in May/June UBS Hold Hold in 2012 StanChart Hold Westpac Hold Two cuts in May/July Citigroup Hold Cut in May CommSec Hold Cut likely in May Deutsche Bank Hold Cut in May AMP Capital Hold Cut in May Moody's Hold Hold in coming months Barclays Hold Expect more easing St George Hold Cut likely in May Macquarie Hold Cut in May Nomura Hold Hold in 2012 RBC Capital Hold Two cuts in 2012 Goldman Sachs Hold Cut in May RBA Hold Two cuts in May/June

Standard Chartered: ECB may have to conduct another LTRO Analysts at Standard Chartered Bank expect further contraction of euro zone’s GDP. In their view, there are 3 main concerns: austerity measures, credit squeeze and high oil prices. The specialists underline that confidence isn’t back and credit isn’t flowing into the real economy (the money, which the ECB provided the region’s banks through LTRO, hasn’t reached households and companies). The unemployment rate will likely continue to rise (10.8% in February). The bank claims that “the ‘true’ firewall remains the European Central Bank”. The ECB’s 1 trillion for banks is “the magic number the market wanted to see.” With 2 rounds of loans committed already, “if the crisis escalates, we think the ECB will have no other option but to provide another”. According to Standard Chartered, EUR/USD will weaken due to the growth differential between the United States and Europe. Euro will be also under pressure due to the ECB’s liquidity increase.

USD/JPY: analysts’ forecasts Bullish views UBS: as new fiscal year started in Japan, yen will lose support of the seasonal repatriation conducted by Japanese companies. USD/JPY will rise to 85 yen in 3 months. Among the factors positive for the pair there are: possibility of higher US Treasury yields in the coming months, more optimism about US economy and more easing from the BOJ. As the central bank meets twice this month, if the policymakers “decide to keep policy on hold on April 10, they can always choose to ease further on April 27,” claim the analysts. J.P.Morgan: in the longer term USD/JPY fair value lies at 115 yen. Bearish views BNP Paribas: USD/JPY will fall to 80 yen in Q3 and to 78 yen by the end of 2012. Standard Chartered: USD/JPY will decline to 77 yen in Q3 and to 74 yen by the end of 2012 as investors seek Japan’s real yields and the US recovery stagnates. It’s also necessary to note that the BOJ has signaled that it doesn’t want the government to become dependent on it printing money. There is a limit to how much the central bank can do, so the bets on weaker yen may shrink. Nomura Securities: yen’s decline which started at the beginning of February was caused mainly by global factors (US yields, stabilization in the euro area). Now reversal is likely, so sell USD/JPY stopping at 84.00 yen and targeting 80.00.

CFTC trader positioning data The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that: •The value of the dollar's net long position rose to $19.58 billion in the week ended March 27, from $11.67 billion the previous week. • Euro shorts grew by 6.2k to 89.1k contracts. The euro's volatility (3-month implied volatility) is at its lowest level since August 2008. • The net short pound position declined by 4.7k contracts to 11.1k, the minimum since last September. Small longs were established (658 contracts) and short were pared by (4.1k). • Net short Japanese yen positions jumped 41.8k to 67.6k contraction, the smallest since mid-2005. This was a function of new shorts being established (17.8k contracts) and longs being cut (24k contracts). • Swiss franc net shorts dropped 3.9k contracts to 15.1k. Both longs and shorts decreased (5.5k and 1.5k). 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.

Yen: volatile week ahead Japanese yen opened the week on the down versus the greenback on the weak economic sentiment data: Tankan manufacturing index was unchanged in the first quarter from -4 at the last 3 months of 2011. The negative reading means that there are more pessimists than optimists. Such figures encouraged the talk about the prospects of more easing from the Bank of Japan. The BOJ policy board members are set to meet April 9-10 and April 27. However, the advance of USD/JPY stalled at 83.30 yen and the pair began once again drifting lower. Dollar’s move higher was probably constrained by the selling from exporters. Standard Chartered: “Exporters are clamoring for a weaker yen, but the Cabinet office survey and the Tankan survey suggest you have to take some of those complaints with a grain of salt because both measures suggest Japanese exporters had adjusted to the strong yen in the low 80s.” Trading will likely be quite volatile this week. US dollar will have support at 82 yen – the level from which it has recoiled up 4 times in March.

AUS/USD: mixed Chinese data, RBA’s coming The closely watched Chinese data came mixed on Sunday: the nation’s official PMI rose from 50.6 in February to 53.1 in March. However, HSBC PMI posted the reading below 50 that indicates industry contraction. AUD/USD opened about 100 pips above Friday’s closing level, but then slid lower returning to that area. The Reserve bank of Australia will announce its interest rate decision tomorrow. According to the consensus forecast, the central bank will leave rates unchanged at 4.25%, though today’s data may make the policymakers hesitate: TD-MI gauge showed that Australian inflation fell in March to 1.8%, below RBA’s 2% target, while the building approvals dropped by -7.8% in February (m/m). The most likely outcome is that the RBA will stay on hold, but we’ll see some more dovish notes in the statement. Nomura: “Support for the currency will be evident all week in the Australian dollar as shorts get taken off the table.”

EU finance ministers expand the firewall to 800 billion euros On a meeting held in Copenhagen the euro zone finance ministers agreed to expand the overall size of the firewall to 800 billion euros ($666 billion), including the 300 billion euros already committed to Greece, Ireland and Portugal. According to Austria’s finance minister Maria Fekter, permanent ESM and temporary EFSF will function together until mid-2013. The bail-out firewall expansion became possible after this week officials in Berlin agreed to combine funds to prevent the spread of debt contagion across the euro region and calm down tensions in financial markets. The common currency is heading towards posting weekly gains versus the U.S. dollar, which slipped after Bernanke's disappointing comments that concluded that the pace of recovery might not continue in U.S. without further easing and in result indicating at another round of quantitative easing. The EUR/USD pair is trading in the moment around $1.3350, compared with the opening level of $1.3301. The pair recorded so far the highest at $1.3376 and the lowest at $1.3293. Later today an important Spanish budget release is expected.

Mixed data coming from Japan According to the today's data release, business environment in Japan has improved in recent months, regardless of the negative industrual production figures. Manufacturing PMI increased to 51.1 against 50.5 in February. Unemployment rate eased slightly to 4.5% in February versus forecasted 4.6%. Household spending rose 2.3% year on year, beating expectations for a 0.2% fall. The core consumer price index rose 0.1% from a year earlier, or 0.2% from the previous month, Internal Affairs Ministry reported, marking the first such gain in prices in five months. However, the rise in the core CPI was due mainly to higher electricity and transportation-related costs, according to the data. Credit Agricole: Japan's fight against deflation is far from over. Although persistently elevated levels of crude oil prices would result in a positive core CPI inflation rate going forward, we maintain our view that there is a persistent underlying deflationary pressure in the economy. However, Japan's factory output fell unexpectedly in February, confirming the pace of recovery is still sluggish. The 1.2% decline in industrial production surprised specialists who had forecasted a 1.3% gain. Japan's factories posted a 1.9% output increase in January and 3.8% in December. Nomura: Japan’s recovery will continue to pick up in the first half of this year. Growth in production for March and April will absorb a decline in February. The Japanese yen keeps strengthening versus both the greenback and the euro (EUR/JPY is currently trading at 109.63 level; USD/JPY – at 82.08).

Canada's budget released Today Canada’s finance minister Jim Flaherty delivered the annual budget, which focuses on deficit elimination and requires a $5.2-billion cut to federal spending over three years. In order to achieve the objective the government plans to rise the retirement age to 67 years and to cut 19,200 public-sector jobs. According to Flaherty, the reform will allow people to work longer and cut the budget deficit, because the government spends around $6,000 on each retiree. The national unemployment rate is expected to rise to 7.5 percent this year from 7.4 percent in 2011. However, Flaherty promised to boost job growth and investment with $3 billion over two years for research and job subsidies. Moreover, today watch the monthly Canadian GDP release (0.1% growth is forecasted in Jan. versus 0.4% in Dec.) This Friday, USD/CAD is trading in the C$0.9981 area. Yesterday, the USD/CAD has tested again parity and the 200-day moving average.

Euro is widely chosen as a funding currency Before the European debt crisis the common currency has always been classified as risky: euro always declined when the economic situation anywhere in the world became worrisome. However, today China is gradually slipping into recession, but the euro stands steady above the $1.32 level. Analysts believe euro’s position on the market has changed due to the Greek debt crisis. European Central bank injected cheap liquidity into the financial system, while the ECB interest rates remain extremely low (1% since Dec. 2011). As a result, euro became a funding currency in carry trade operations. Baring Asset Management: US dollar and yen will continue to play their part in funding trades but euro is definitely joining the club. Sometimes the further movement of the liquidity cannot be easily traced, but specialists record large amounts heading into the Australian and New Zealand dollars, Mexican peso, Korean won. According to the International Monetary Fund, the emerging economies as a bloc are expected to expand by 5.4% this year (compared to 1.2% expected in advanced economies including the U.S., Japan, the U.K. and the euro zone). However, some market players prefer to get rid of the risky assets in favor of the euro on the back of the rising uncertainty about emerging economies. Pacific Investment Management Co: We still like euro as a funding currency but we are cautious on risk in general. So we haven't been very active lately investing in emerging market currencies against the euro. Credit Suisse: There's little near-term risk of the European Central Bank tightening policy or withdrawing liquidity from the market. This means the euro is likely to remain a good funding vehicle.

Market’s concerned about Spanish budget The majority of the experts believe that EUR/USD will keep trading in the $1.3000/$1.3500 area. However, with Spain's budget release on Friday, March 30, the pair may be vulnerable to the downside. Spanish 10-year yield jumped today by 11 percentage points to 5.43%. The nation’s major trade unions called a one-day strike in protest of additional austerity measures. If the budget delivers any negative surprises or is not considered sufficiently tough enough to reign in Spain's budget deficit, the demand for Spanish debt will decline even more. Commerzbank: “Given the fact that we are below $1.33 this is certainly a psychologically important mark which may be the beginning of a more sustained down move.” The specialists think that even if European authorities agree to enlarge the rescue package, it will calm down the market, but the risk premium on peripheral countries' yields will remain quite high. Credit Agricole: “We have a few political key events coming up, with the euro finance ministers meeting, Spain’s fiscal update and Italy’s labor market reforms. There’s still some uncertainty with regards to what happens over the next few days.”

Comments about declining Aussie During March Australian dollar has been trading within downtrend versus the greenback. The main thing that’s driving Aussie lower is concerns about Chinese economic slowdown which will surely affect Australian exports. Westpac: bearish view on Aussie in the next 1-3 months. ANZ: “AUD is likely to continue to underperform on most crosses.” Wells Fargo: “We would consider establishing long Canadian and NZ dollar positions against the Australian dollar.” Scotia bank: “AUD/USD will continue to trade on broader market sentiment ahead of the RBA meeting on April 3, where policymakers are expected to maintain policy at 4.25%.” Do not miss China’s March Manufacturing PMI release on April 1 (forecast 50.6).

Analysts’ comments ahead of Eurogroup summit European governments are preparing to increase the ceiling on rescue aid to 940 billion euro ($1.25 trillion) for 1 year at Eurogroup meeting in Copenhagen on March 30-31 in order to constrain the debt crisis. Under the proposal, the overall capacity would return to 500 billion in July 2013, when the EFSF expires. National Australia Bank: “We do believe the approval for the rescue package will go ahead tomorrow, and this may create more support for the euro in the interim.” Citi: The agreement to let the EFSF and ESM run in parallel would be “mildly positive because it could have been worse or not have happened at all. Everybody knows it is not going to be big enough. But less inadequate is a good thing." ING: “That looks like the most plausible option, although it’s still going to be hard to sell to the German parliament. It would clearly do the job as long as it was followed up by some action by the IMF and G20.” (The IMF will meet in Washington on April 20-22 and is expected to agree to increase its own crisis-fighting resources as long as Europe has taken significant action first). WSJ: “Officials tell us that a consensus will likely be reached in Copenhagen to pay in two extra tranches in 2013 and one in 2014. Despite this, officials say, unless paid-in capital is further accelerated, the funds’ actual combined size won’t top 700 billion euro at any stage. That’s because by the time the ESM lending capacity ramps up to roughly 400 billion euro by the middle of 2013, the EFSF will have been phased out.” Hermes: “We don't see the euro zone crisis fading in the next few years even when the ESM is operating.”

OECD: UK is facing “double-dip” recession The Organization for Economic Cooperation and Development said today that United Kingdom is poised for a so-called “double-dip” recession. Recession is defined as 2 quarters of negative growth in a row. British GBP shrank by 0.3% (q/q) in the final quarter of 2011 after sliding by 0.2% in the previous 3 months. The OECD economists think that in Q1 2012 UK economy contracted by 0.4%.

Standard Chartered: economic outlook for Asia Analysts at Standard Chartered claim that the economic outlook for Asia for the rest of 2012 is mixed. Among the positive factors the specialists cite data from the US, reduced tail risks from a European sovereign or banking crisis, and the turnaround in the electronics cycle. As for the negative ones, they are the ongoing correction in China's property market, moderating export growth across Asia, and growth and inflation threats from higher energy costs. The bank expects loosening in Asia to slow going into the summer as policy makers try to balance growth and inflation concerns. As the same time, Standard Chartered makes it clear that the risks to Asian growth are to the downside this year, so the region’s authorities will likely come up with more easing.

Canada: watch the budget release On March 30, Thursday, finance minister Jim Flaherty is expected to deliver the annual budget. RBC Capital Markets: The finance minister will report a deficit of between C$20 billion ($20.1 billion) and C$25 billion for the fiscal year, compared with an earlier forecast of C$31 billion, and will forecast bringing the country back to budget balance by the end of the 2015-16 fiscal year, a year ahead of schedule. Although Flaherty promised earlier this month the 2012 budget will focus on “bolstering growth in a bid to sustain the country’s recovery, rather than spending cut”, he is expected to reduce governmental spending significantly by cutting public-sector jobs across the country. At the same time, Canada’s labor market has already been going through hard times in the past five months (7,400 job cuts a month since October), regardless of the U.S. economy rebound. Today also watch for the Raw Material Price Index release (leading Canada’s indicator of consumer inflation is expected to grow 0.4% in Feb. versus 0.1% in Jan.). Tomorrow the monthly Canadian GDP will be published (0.1% growth is forecasted in Jan. versus 0.4% in Dec.) The pair USD/CAD has been trading sideways since the end of January in range between 0.9840 and 1.0050. Analysts at Bank of Nova Scotia note that the greenback has broken above the 50-day MA at 99.70 cents, but the pair is still not that far from the center of the 2-month range. There is strong resistance at the parity level and higher, at 1.0006 (200-day MA) and $1.0033 (March 23 maximum).

Yen keeps strengthening USD/JPY continues its decline as Japanese exporters are seen selling US dollar in large amounts as the nation’s financial year ends today and MSCI Asia Pacific Index fell by 0.8% after losing 0.5% yesterday. Strategists at Royal Bank of Scotland say that yen is now more correlated with the stock market’s moves, so they are in favor of selling USD/JPY. If the pair closes today below 82.60 (March 27 and 28 minimums), it will likely fall to 81.87/97 (March 2 maximum, March 23 minimum). Resistance for US currency lies in the 83 area (Tenkan-sen at the daily Ichimoku chart). However, analysts at Bank of Tokyo-Mitsubishi underline that despite the recent sell-off of the greenback and dovish Bernanke’s comments, the greenback seems resilient against yen. In their view, dollar will get more support when new toushins (currency-selective type investment trust funds) are launched and life insurers' foreign bond buying gains momentum from April.

BMO, BBH: trading recommendations for EUR/USD Specialists at BMO Capital suggest a strategy to benefit from the dollars’ temporary slippage. They recommend going short when EUR/USD reaches $1.35 level or now at $1.33 with a stop at $1.34 and targeting at $1.30. On Tuesday the Fed’s Chairman Ben Bernanke hinted that the third round of QE is on the cards. "The euro rose after Bernanke's comments, but it wasn't a widespread shift," BMO analysts say. According to Brown Brothers Harriman, the common currency is unlikely to stand above $1.33 on the back of the concerns about the European banking sector and the sovereign debt problems.

RBC: forecast for USD/JPY Analysts at RBC Capital Markets claim that US dollar made last week a reversal pattern “bearish divergence” as it fell below 82 yen. The specialists expect USD/JPY to keep declining to 82.02 and 80.60. At the latter level the bank recommends going long on the greenback within the upward trend which began in February. According to RBC, if US currency manages to rise above 83.63, it will be able to get higher to 84.16 and 85.53 yen.