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Saxo Bank: comments on USD/JPY Analysts at Saxo Bank note that “short yen versus the dollar has been the main theme of the quarter and the market seems to have taken it too far heading into the Japanese fiscal year-end.” The specialists underline that US/Japan rate spreads are not supportive of where dollar/yen is at the moment. In their view, “there is more scope for yen strength in the near-term before it weakens against the dollar again and one-year forecast is at 88 yen.”

GBP: up or down? (Commerzbank, Danske) Commerzbank and Danske Bank analysts split over the prospects of the cable. According to Commerzbank specialists, GBP/USD is likely to slide from current highs, even though yesterday it tested the $1.6000 psychological resistance line. The 200-week MA lies at $1.6014 and the cable has not traded above here since 2008. The specialists think that the pair will decline to $1.5650, the minimums of the range within which the pair’s trading since the end of January. On the other hand, Danske Bank analysts express the opposite view on the cable’s prospects. The Danish bank advises clients to buy the pound against the greenback at $1.5830 aiming at $1.6036 with a stop at $1.5900.

RBS: comments on EUR, CAD, CHF - EUR/USD has strengthened in the recent days due to the short covering to $1.3330. The outlook for euro’s still negative. The fair value for the pair lies well below $1.3000, so it makes sense to go short on the pair. - USD/CAD: the pair is trading between 0.99 and parity. The pair failed to overcome resistance at the 200-day MA. Solid data in the US will keep improving prospects for Canadian economy, so loonie will likely appreciate. The upcoming budget release on Friday and comments from Bank of Canada Head Carney could also strengthen loonie driving USD/CAD lower. - USD/CHF: even despite the speculation about additional QE in the United States after Bernanke’s comments, short-term fair value (STFV) model continues to suggest about 3% upside for USD/CHF from current levels. Swiss policymakers may favor weaker franc. Solid US data expected in the coming weeks should support the pair.

Pound’s suffering from weak data On Wednesday the British pound dropped versus its major peers on the backdrop of negative data coming from U.K. According to the U.K. Office for National Statistics, seasonally-adjusted GDP shrank 0.3% during the fourth quarter versus the preliminary estimate of a 0.2% contraction. However, the current-account deficit decreased slightly to 8.5 billion pounds in the last quarter against 10.5 billion in the third. The household incomes in 2011 fell by 1.2%. On Tuesday the Chancellor of the Exchequer George Osborne said Britain is now “in the recovery phase.” Osborne used his March 21 budget to spur businesses to invest and hire by cutting taxes for companies and high earners. Bank of England Governor Mervyn King said that in 2012 the U.K. economy will be extremely volatile and the European crisis remains the biggest threat for U.K. economy rebound. Today GBP/USD slipped to the $1.5941 level. Cable is likely to find support at $1.5800, Monday’s low and resistance at $1.5963, the session high. The EUR/GBP reached the 0.8372 level.

SocGen: buy USD/CHF Analysts at Societe Generale claim that as the pair USD/CHF stays above the 200-day MA, it looks attractive. In addition, EUR/CHF, which is currently trading at 1.2060, is close to the Swiss National Bank's floor at 1.2000. The specialists recommend opening longs at the current levels stopping at 0.8850 and targeting 0.9500.

Watch US durable goods release The market is eyeing US durable goods release at 12:30 GMT as there isn’t much to watch in Europe today. Investors want more info about the condition of US economy. Societe Generale underlines that the focus remains on growth indicators. Commonwealth Bank of Australia: “The risk is that durable goods orders are going to be even stronger than economists predict and that will push the U.S. dollar higher.” American durable goods are expected to add 3.0% in February (m/m) after January decline by 3.7%. Core figure is seen up by 1.6%.

Citigroup: pound may fall to 1985 minimum British pound fell from maximum at $1.6000 reached yesterday (highest point since November 2011) to the levels around $1.5915. Analysts at Citigroup believe that the pair GBP/USD may fall to the minimal level since 1985 at $1.3255. The specialists underline that sterling approached strong resistance at $1.6014 (200-week MA). Pound hasn’t crossed this line since August 2008.

Barclays Capital, UBS: AUD and NZD prospects The Australian and New Zealand dollars tend to decrease against their major counterparts amid concerns Chinese manufacturing will slow, contracting the demand for resource exports. On March 30 RBA is expected to release the private sector credit figures (forecasted 0.3% growth in Feb. versus 0.2% in Jan.). RBA officials say the slow credit growth could hinder the large banks’ profit growth. The retail, manufacturing, construction and tourism sectors suffer from low retail spending and high exchange rates. Barclays Capital: If the U.S. is performing well, market is in a risk-on mode; in this environment AUD and NZD tend to perform well. AUD/USD will climb to $1.07 in a year, while NZD will reach $0.86. UBS: AUD/USD may rise to 1.05 in the next month, but drop to 1.00 in the next 3 months. The strong Aussie affects manufacturing and retail sectors, but the RBA intervention is unlikely. The underlying trend is bearish; support lies at $1.0427 and $1.0336, resistance is at $1.0596.

Yen strengthened versus main peers USD/JPY snapped 2 days of gains. Japanese yen rose versus all of its major peers as stocks dropped encouraging demand for yen as a refuge. The S&P 500 lost 0.3% yesterday, MSCI Asia Pacific Index declined today by 0.5%. Mizuho: “The yen move is driven by supply and demand before the final exchange-rate fixing of the fiscal year. While there haven’t been a whole lot of orders from Japanese exporters to sell dollar into the end of March, we’ll start to see some rise in demand to buy yen. The Aussie dollar is being sold against yen.” Standard Chartered: the greenback may see some pullbacks against the yen in the coming quarters if the market starts to doubt the feasibility of the BOJ's inflation goal – and it will, thinks the bank. “Most of this move higher in dollar/yen has already been seen,” says the bank. At the same time, many investors regard USD/JPY’s decline as merely a correction saying that yen’s downtrend is still in place as the loose monetary policies of major central banks will likely support risk appetite. The pair USD/JPY broke down below the key level of 83.00. Support: 82.63 (March 27 minimum) and 82.38 (week’s opening, March 22 minimum). Resistance: 83.20 (today’s maximums) and 83.38 (March 27 maximum).

J.P. Morgan: trading CAD/JPY Strategists at J.P. Morgan Asset Management recommend buying CAD/JPY at the current levels (pair trades at 83.22 today) with a stop at 82.00 and a target of 88.00. The Canadian dollar is going to benefit from the rebounding U.S. economy, while the Bank of Japan keeps on weakening the yen, seeking to reach a 1% inflation target. The loonie, therefore, is going to strengthen versus the yen. Analysts believe the Fed Chairman Ben Bernanke's comments about easy monetary policy not only hurt the dollar but lifted hopes for the U.S. economic growth. According to J.P. Morgan, the fair value of USD/JPY is around 115 yen in a longer term.

Credit Agricole: USD/CHF forecast Analysts at Credit Agricole draw investors’ attention to the bearish signals on the daily USD/CHF chart: - Ichimoku: the prices are below the Cloud as well as under the lines Tenkan-sen and Kijun-sen; - 50-day MA stays below the 200-day one; - the linear regression indicator also gives negative hints. As a result, the specialists expect US dollar to weaken in the medium term. According to the bank, the greenback will go down to February minimums in the 0.8930 area. Credit Agricole points out that in the short-term the pair may continue to trade within sideways trend as it did during the last 2 months.

Deutsche Bank: seasonal pattern of U.S. data surprises According to John Horner, strategist at Deutsche Bank, the greenback’s growth in recent months may be unstable and connected with a seasonality of the U.S. economic data. There seems to be a tendency for U.S. economic figures to overcome the expectations towards the end of a year and in the early part of the following year. However, since March, the situation is usually back to normal. The seasonal pattern is traced better if we exclude winter 2008-09 (peak of the financial crisis). John Horner believes the tendency existed long before the crisis; in the recent couple of years, however, it has become more evident. In recent months the U.S. economic data has followed the usual positive scenario, and in March, as would be expected, is turning lower. According to Horner, the lackluster data will definitely mark the U.S. Treasury yields down, so the greenback will also be on the ebb in the forthcoming months. The theory partly explains why USD/JPY tends to go down each year from early April.

SocGen: official China’s PMI may be better Analysts at Societe Generale believe that China’s official PMI data won’t be as weak as HSBC flash PMI. The specialists expect PMI to rise from 51 in February to 51.2 in March. According to the bank, March readings are typically more than 3 points above those of February even during the sharp deceleration of Chinese economy in 2009. “Stripping out this effect, our forecast for the March reading would actually signal contraction in China's manufacturing activity, and thus consistent with the HSBC PMI,” say the strategists. The HSBC preliminary PMI fell to 48.1 in March, a 4-month minimum, compared with a final reading of 49.6 in February. China’s March NBS PMI is due for release on April 1.

RBS: go long on GBP/USD Analysts at RBS recommend buying British pound versus the greenback on the dips again below $1.5929. The bank is bullish on sterling as GBP/USD broke yesterday above the downtrend resistance line connecting the maximums of 2007, 2011 and 2012. Target is at $1.6072 (the 38.2% Fibo retracement from the credit crunch sell-off), while stops are to set in the $1.5850 area. The specialists warn of resistance in the $1.5992 zone (2012 maximum). Support lies at $1.5929 (February 8 maximum), $1.5850 (100-day MA) and $1.5767 (last week’s minimum).

Societe Generale: comments on Eurogroup meeting Analysts at Societe Generale claim that the Eurogroup meeting on March 30 will be an important event for markets and the broader economy. In their view, last week's movements on peripheral bond markets should have served as a reminder to euro area policymakers that the debt crisis is not over yet. Failure to increase the rescue mechanisms this Friday would be a significant negative. The specialists say that despite the talk that German and Finnish politicians no longer oppose the temporary increase in the region’s bailout funds, much will depend on the will of the fiscally weaker member states to deliver on austerity and structural reform. While financial stress in the periphery may thus ease anew, austerity headwinds will continue to blow.

Barclays Capital: major currencies outlook JPY: Japanese currency is expected to weaken versus the USD, AUD and CNY on the back of the risk of a structural current account deficit. We recommend going long USD/JPY, because prospects for the greenback have significantly increased. The Bank of Japan aims for higher inflation, but it doesn’t seem to be a significant negative factor for yen, while the current account deficit is a real long-lasting threat, supported by fiscal problems and political instability. EUR: the easy monetary policy and the efforts to resolve the debt crisis have decoupled the global risk appetite and the common currency prospects. A weak euro and buoyant equity market is a rare combination. According to the past experience, this environment is positive for the euro’s major counterparts (usually the liquid safe havens and oil-related currencies outperform). AUD, NZD: in the medium term the outlook on commodity prices is bright, so the Aussie and the kiwi remain high-yielding currencies. If crude oil prices grow for reasons different from strong Asian growth, AUD and NZD may continue the recent depreciation since early March. CAD: Canadian dollar still has the biggest growth potential among the major currencies (influenced by less stretched valuation, bright oil price prospects and U.S. economy growth).

UBS: comments on USD/JPY Analysts at UBS claim that there are many reasons to be bearish on yen in the near term: - late deficits in the Japanese trade balance despite February’s modest surplus; - additional 10 trillion yen in the asset purchase program decided by the Bank of Japan in its last monetary policy meeting; - the BOJ’s commitment to eradicate deflation by chasing a 1% inflation goal; - rising US Treasury yields; - the likelihood of private Japanese investors to seek higher returns in foreign assets. The specialists keep advising to buy USD/JPY on the dips claiming that the pair may still reach 85.00 in the next few weeks.

Will the stock market remain bullish? More and more specialists start to think that the current rally in stocks, commodities and emerging markets could be a long-lasting one. Last week the S&P 500 index closed above 1,400 points for the first time since the 2008 financial crisis rising by 30% from the bottom at the beginning of October (the index gained 11% in 2012). It seems that investors don’t hurry to take profits, but prefer to stay at American markets. Goldman Sachs: “The prospects for future returns in equities relative to bonds are as good as they have been in a generation”. Wells Fargo: individual investors have started wading back into higher-risk, higher-yield assets, including high-yield and emerging market funds. There’s an increase in demand for high-dividend-yield stocks, high-yield corporate debt, and emerging market fixed income. Barclays Capital underlines that the prices for US Treasuries regarded as the safe haven dropped by 7.3% this year. EUR/USD is up by about 2% by the end of the first quarter. Goldman Sachs expects euro to rise to $1.38 over the next 6 months and $1.45 by the end of 2012. So, we see that the market was quite optimistic about US economic recovery. The main question now is whether Bernanke’s concerns will prove to be correct (read more). Another thing to worry is seasonal patterns: according to some researches, American data tends to deteriorate in spring. The market’s sentiment may change quickly enough. Still, the current situation is much less tense than in 2008 or in 2011. As the specialists at Credit Agricole say, “markets love a grizzly story, but there is no grizzly story – the bears have left the room.”

Bernanke revived concerns about QE3 On Monday the US dollar declined against the other major currencies on the back of the Federal Reserve Chairman Ben Bernanke comments. According to him, the U.S. labor market is still weak, and the recent signs of improvement may be due to statistical errors. Bernanke said that he doesn't expect the unemployment rate (8.3% in Feb.) to keep falling. The Fed Chairman comments raised concerns about the U.S. economy prospects and increased the likelihood of a third round of quantitative easing (QE3). Analysts believe the Fed will keep interest rates near zero in 2012 to sustain recovery, so the greenback continues to decline. Analysts’ comments Societe Generale: QE3 is on its way or at least a very dovish stance until such a point as unemployment falls enough. Barclays Capital: The improvement in US economic prospects has continued, but the USD remains weak. In our view, the USD will be viewed as an increasingly unattractive funding currency, compared with the JPY, EUR and CHF. UBS: EUR/USD may rise to $1.3489, the highest since Dec. 2, after it broke the $1.3294 to $1.3303 resistance range yesterday. Today Bernanke is scheduled to give a new lecture at George Washington University.

Danske Bank: sell USD/JPY Analysts at Danske Bank recommend selling the greenback versus Japanese yen stopping at 83.25 yen. Resistance for USD/JPY is found at 82.95, 83.25 and 83.47 yen. Support for the pair lies at 82.29, 81.97 and 81.89 yen.

Comments on EUR/USD Many analysts think that EUR/USD will trade sideways in range between $1.30 and $1.35. Resistance for the pair lies at $1.3373 (76.4% Fibo retracement of the decline from the end of February to the middle of March). Support is found at $1.3189 (March 23 minimum) and $1.3133 (March 22 minimum). On the upside the single currency will be limited by concerns about Spain’s fiscal state as the nation presents its budget plan on Friday. Analysts at RBC also advise investors to watch out Italy’s bond auction on Thursday. The country’s authorities will offer 7.5-10 billion euro ($10-$13.3 billion) of debt. In addition, don’t forget about the summit of euro area’s finance ministers and central bankers on Friday. There’s a lot of talk this week German Chancellor Angela Merkel no longer opposes the idea of temporarily increasing the region’s bailout funds. However, until the actual decision is made the uncertainty will remain. Traders have been disappointed with European decisions too often so far. On the one hand, decline in Treasury yields after yesterday’s Bernanke’s comments may put negative pressure on dollar versus euro. On the other hand, concerns about peripheral euro zone’s nations could make investors get rid of euro looking for a safer currency. Isn’t it always like that with EUR/USD?

HSBC: comments on Swiss franc Analysts at HSBC believe that the role of Swiss franc as a safe-haven has deceived markets into thinking that the demand from foreigners is the main determinant of franc’s exchange rate. The specialists note that Switzerland's balance of payments data shows that while foreign events may drive franc, it is the response of the Swiss rather than foreigners to these developments that predominantly influences the CHF. The bank says that it is the Swiss that who will ultimately determine the sustainability of the current EUR/CHF floor. In addition, the dynamics of the balance of payments suggest that efforts to limit CHF strength are ultimately doomed to failure. The best the EUR/CHF floor can hope to do is limit the damage. If the world looks to be healing further and were EUR/CHF to creep up to 1.30 on its own accord the Swiss authorities should consider declaring this emergency floor as having done its job. This will then allow the CHF to eventually resume its appreciating trend albeit at a slower rate, says HSBC.

J.P. Morgan: trading AUD/USD on China Analysts at J.P. Morgan Asset Management believe that in the near term Australian dollar will weaken due to concerns about China’s economic outlook. In the longer term, however, Chinese authorities will be able to improve the situation and promote growth (China's Ministry of Commerce has recently announced the launch of the 2012 Consumption Promotion Month between April 2 and May 4). As a result, the specialists recommend buying AUD/USD at 1.0100, stopping at 0.9875 and targeting 1.0600. “If you hold this position over time, you make money on the interest rate differentials as well,” says the bank.

Ichimoku. USD / JPY. Week of 26-30 March Weekly USD/JPY As it can be seen from the chart, prices consolidate in the 82.00/84.20 area. The Tenkan-sen and Kijun-sen lines are moving horizontally, as well as the lines Senkou Span A and B. The descending Cloud narrowed, signaling that bears are losing power. Bulls have to make a decisive spurt to reverse the current flat trend. In February the greenback managed to break through Kumo (bullish signal). However, given the fact that the prices are rather far from the support levels (Tenkan-sen and Kijun-sen lines and the upper bound of the Ichimoku Cloud), there seems to be a risk of a pullback before further growth. Analysts advise to wait for positive signals before going long (the Ichimoku Cloud to change the color, the Turning line and the Standard line to reverse upwards). Daily USD/JPY According to the daily chart, dollar fell below the Turning line (1), which from now on became a resistance level. The pair’s move down turned the Tenkan-sen line horizontally. The up-directed Standard line (2) supports the prices. As a whole, USD/JPY outlook stays positive. The bullish Ichimoku Cloud is growing quickly (3), signaling the steep upward trend started in February will continue. The currency pair may dip to Kijun-sen (2) due to retracement. However, the bulls are still expected to continue the upward movement.

CFTC trader positioning data The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that during the week to March 20: - US dollar net longs shrank by 37% (their value dropped from $19.0 to $11.67 billion); - Euro net shorts decreased by 16%; - Pound net shorts contracted by 62%; - Yen net short fell by 40%; - Franc net shorts declined by 23%; - Aussie net longs declined by 33%; - Kiwi’s net longs reduced by 68%. Among forex majors only loonie showed increased net interest from investors (net longs rose by 58%). 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.