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Ichimoku. Weekly forecast. GBP/USD Weekly GBP/USD During the last couple of weeks GBP/USD was going up leaning against the Turning line (1). Tenkan-sen (1) and Kijun-sen (2) act as support – the lines have so far crossed forming the “golden cross”, though the signal isn’t very strong as the intersection took place below the Cloud. Kumo itself keeps narrowing (4) as Senkou Span A continues moving upwards. The chances of bulls aren’t bad: they are approaching the Cloud which is thin in that area and thus not a great obstacle. However, the prices met some resistance in the $1.5920 area (downtrend resistance line) and sterling opened this week on the downside. That’s why Tenkan-sen seems a critical level for now: if the pair fails to hold above it, it will likely slide to Kijun-sen. Daily GBP/USD On the daily chart GBP/USD keeps moving sideways: the pair consolidated above the horizontal Standard line (1). The bullish Ichimoku Cloud (3) stopped narrowing and began gradually widening. Tenkan-sen (2) is slowly moving up to meet Kijun-sen (1): if the 2 lines intersect, they’ll form “golden cross” – strong bullish signal as the lines are currently above Kumo. For now the prices enjoy strong support of both the Standard and the Turning lines. As for resistance, it’s provided by last week’s maximums and the late February/early March highs.

EUR/USD: trading week begins On Friday EUR/USD reached a 3-week high as far as fears of a global meltdown are a little bit down. Some market participants, however, believe bond auctions in Spain and Italy on Tuesday could put a downward pressure on the European currency. Italy is looking to raise 7.5 billion euro ($9.95 billion) in debt markets. Barclays Capital: Any sign of erosion in restored confidence for Italian and Spanish bonds is likely to weigh on the euro. In our view, the euro drops to $1.20 in 12 months because of the lackluster economic data continuing to come from Europe. Der Spiegel reported the German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble are expected to allow a temporary increase in the euro zone’s financial “firewall”. Before that Merkel opposed to any increase, but in Berlin they say she cannot resist the international pressure indefinitely. Euro zone finance ministers are supposed to reach a decision at a meeting in Copenhagen this Friday, March 30.The expansion of the euro-zone's rescue funds could open the way for the IMF to increase its own anti-crisis firewall during a spring meeting next month. In contrast to Europe, economic climate in U.S. is gradually improving. On Friday, however, lower than forecasted data on the country's new home sales were released (313K in Feb. versus 318K in Jan.). The German Ifo business climate index, started to grow in November 2011, in February increased to 109.8 versus 109.6 in January. The Fed's Chairman Ben Bernanke will speak later today. EUR/USD is now trading in the $1.3260 area. According to analysts, the support levels for the currency pair lie at $1.3190 (March 13 maximum) and $1.3178/68 (100- and 50-day MA). The resistance is seen at $1.3320 (February 9 maximum), $1.3365 (February 27 minimum).

BOTMUFJ, UBS: still long on USD/JPY The greenback recovered from 10-day minimum versus Japanese yen where it fell on Friday due to weak data from Europe and China, while Japan posted trade surplus in February. Never the less, strategists at Bank of Tokyo-Mitsubishi UFJ and UBS are still long on USD. Bank of Tokyo-Mitsubishi UFJ: “Even though the dollar rally on the yen has lost a bit of momentum, the dollar is still strong after it didn't break below the 81.97 support twice in the last two weeks”. The specialists think that USD/JPY won’t be seriously affected by the repatriation flows ahead of Japan’s fiscal year-end as there’s more talk about importers buying dollar on the dip than about offers by exporters. According to BOTMUFJ, many exporters have already finished their currency hedging, not only for the fiscal year to March 31, but also until the end of the first quarter of the next financial term. UBS: USD/JPY may still rise to 85 yen in the next few weeks, so buy US currency on dips. The analysts say that “Japan's recent run of monthly trade deficits isn't the main reason to be bearish on the yen”. In their view, the Bank of Japan's monetary loosening announced last month plus higher yields in the US are the factors that suggest the currency will weaken further against the dollar.

Bernanke: comments on the economic situation The Federal Reserve Chairman Ben Bernanke has spoken several times this week on the most important questions concerning US and global economic prospects. According to Bernanke, the U.S. economy is standing on pre-crisis levels in the context of the sovereign debt volume and low consumer confidence. A rise in consumer spending is needed to support U.S. economic growth. Moreover, high unemployment (8.3%) still raises serious concerns. Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead. During the testimony before Congress on Wednesday Bernanke noted the commodity price growth poses a significant risk to the U.S. and global economy, adding that the current increase in oil and gas prices probably would reverse before sparking long-term inflation. On Thursday Ben Bernanke opined that the financial crisis hasn’t been caused by low Federal funds rates in the early 2000s. “Monetary policy did not play an important role in raising house prices,” Bernanke said. He noted housing prices began to pick up in the late 1990s before the Fed began cutting interest rates and rose dramatically after the central bank began tightening. One of the alternative reasons for home prices rise, according to Bernanke, could be the psychological optimism generating a growth in stock prices. As for the euro area, the Fed’s Chairman claimed that the financial and economic situation in there remains complicated regardless of the slight easing of stress. In order to overcome the recession European authorities have to keep strengthening the region’s banking system, reducing debt levels and encouraging economic growth. Bernanke pointed that the influence of the debt crisis in southern Europe on American banks is limited. However, analysts say, Greek, Spanish, Italian and Portuguese bonds account for 7% of the U.S. banks assets.

MIG Bank: USD/JPY technical levels According to MIG Bank analysts, the USD/JPY is confidently continuing a downward movement from 84.00 area after the 800-pip rally since early February. To bring the bullish trend back to the market a consolidation above 84.18 is required. The currency pair is expected to stay above the 80.59 (March 7 swing low) and 80.00 (psychological level) support lines. Support lies at 82.25.

BNP Paribas: still bearish on EUR/USD Strategists at Societe Generale point at the growing concerns over Europe and China. Despite these worries EUR/USD rebounded today from a low of $1.3133 to $1.3293. However, BNP Paribas analysts expect the euro to keep weakening. In their opinion, Treasury yields may overcome the levels expected given the current Fed policy. Moreover, specialists believe the strain in Europe may rise on the backdrop of the French and Greek elections. Note that we may see a “head and shoulders” pattern on the daily chart (neckline at $1.3000), so the levels in the $1.3000/2969 area have to be watched for confirmation of a larger bearish move. There are the talks of sell orders in the $1.3290/3300 zone. Support for EUR/USD is found at $1.3180 (100-day MA), $1.3150/57 (76.4% Fibonacci correction from the move $1.3286/1.3133/March 22 maximum, 50-day MA).

GBP/JPY: growth potential There may be a chance to benefit from buying British pound versus Japanese yen. Note that GBP/JPY has broken above the weekly Ichimoku Cloud for the first time in 4 years. As a result, sterling may rise to 140 yen in the coming weeks and opening longs on the pair may be a sensible way to play on potential yen’s weakness. Concerns about the state of UK economy aren’t very likely to affect GBP/JPY unless the nation is stripped of its top credit rating or the double dip recession occurs.

Aussie may weaken versus yen Strategists at Aspen Trading Group, one of the leading providers of actionable analysis and trading strategies in the currency markets, recommend selling the AUD/JPY at 85.90 with a stop at 87.00 targeting 82.50. According to analysts, the currency pair follows the S&P 500 stock index. Recent negative manufacturing reports from China (Manufacturing PMI declined to 48.1 in Feb. against 49.6 in Jan.) and Europe (PMI indices stand below 50) put a downward pressure on the S&P 500 index, so the Aussie is going to decrease against the yen.

SocGen: comments on USD/JPY Analysts at Societe Generale say that risk sentiment has stabilized in March mainly due to the temporary solution of Greece’s debt problems. If global risk appetite consolidates in the second quarter of the year, Japanese yen will remain a funding currency versus high yield currencies. The main risk factor to this scenario is the worsening of the euro zone’s debt crisis. The specialists claim that though it’s too early to know whether there will be a durable uptrend in US yields and as the Bank of Japan’s intervention was the first trigger, a floor in US yields would help determine a floor for the USD/JPY. Comments on USD/JPY’s correlation with WTI: “1-month correlation stands at 0.78. Our commodity analysts expect WTI at around $124 per barrel by the end of 2012, again USD/JPY supportive.”

Reuters: survey on USD/JPY According to a survey, conducted by Reuters among Japanese companies on March 1-16, 60% of the respondents expect USD/JPY to trade in the 76.00-80.00 area in the first half of the fiscal year (beginning in April), while 31% of the pollees forecast yen to stay weaker at 81.00-85.00 level. The average rate for USD/JPY for the first half-year was 80.6 yen per dollar. The resulting data shows Japanese market participants do not expect the yen to depreciate further.

SocGen: comments on AUD/USD Analysts at Societe Generale point out that the pair AUD/USD has seemed exhausted since the beginning of March lagging all the other G10 currencies against US dollar. The bank thinks that Aussie has weakened as both domestic and external factors ran out of steam. The specialists claim that Australian dollar is testing 100-day MA versus the greenback at $1.0370. In their view, this may be a pivotal level. If Aussie breaches this support, it will likely decline to $1.0145 (this year’s minimum) and then to the parity. At the same time the economists comment on rising US Treasury yields: “The recent sell-off in US Treasuries and swap rates has also played a key role in AUD/USD's trajectory. Although US 10-year yields may have found a bottom, it is still premature to call a lasting uptrend. The narrowing in the 10-year AU/US spread may thus soon run out of steam, helping to set a floor for AUD/USD.” According to SocGen, though the Reserve bank of Australia may have been reassured by the recent stabilization (even though it may be temporary) of the euro zone debt crisis, it will remain concerned by the Chinese data. With key rates currently at 4.25%, the central bank clearly has plenty of room to act if necessary. The next RBA meeting is on April 3. It will be also necessary to watch Chinese data in April: the official PMI and Q1 GDP are released on April 1and 13 respectively, the CPI (which hit its June 2010 minimum of 3.2% y/y in February) is expected on 9 April. If Chinese economic growth keeps slowing, the People’s Bank of China may be tempted to ease monetary policy further.

Goldman Sachs: trading USD/JPY Analysts at Goldman Sachs advise to sell USD/JPY. The currency pair may weaken to 79 yen because the Japanese currency may rebound after declining since the beginning of February to the middle of March. The idea is supported by the seasonal patterns as the financial year in the country is coming to an end and the unexpected improvement in Japan’s trade balance (a surplus of 32.9 billion yen against the forecasted deficit of 120 billion yen). If USD/JPY strengthens, strategists recommend closing the trade above 84.50 yen. Today the greenback is trading in the 82.86 area.

US dollar: up or down? US dollar has been the one of best performing G10 currencies so far. The greenback’s advance was driven by strong US economic figures (retail sales, labor market, Empire State index and the Philly manufacturing index) and rising Treasury yields. 15 out of 19 American banking giants successfully passed stress tests. Another QE in the near future seems unlikely. Many experts think that dollar is switching from being a safe haven (counter-cyclical) currency to a growth-related (pro-cyclical) one. However, in the periods of concerns about the global economy which will certainly occur more or less often, investors will still tend to abandon higher-yielding currencies for dollar perceiving the latter as a refuge. US economy looks much healthier than European and Japanese ones, so it stands out promising more profits than the euro area or Japan and more safety than Australia or Canada. Rising oil prices may contribute to dollar’s appreciation: firstly, expensive oil will increase inflation pressures – an argument against more QE, secondly, further oil price hike can hinder the global economic rebound encouraging safe-haven demand for dollar. Analysts at RBC Capital Markets warn that as investors start to expect better and better US economic performance, constant increase in the nation’s economic figures will be needed to satisfy the market’s appetite. As a result, traders may get quite disappointed if the further data from the United States doesn’t meet their expectations or if there is some bad news. Despite all the talk about the potential advance of US dollar, there are the risks associated with being bullish on the greenback. For example, strategists at Merk Investments remind that as Treasury yields rise, their prices decline. In less than a month the US 30-year bond has fallen by about 8.5% in value. This is a negative factor for those who already hold Treasuries. The specialists think that the emergence of Treasury bear market could cause foreign investors to liquidate their US debt holdings repatriating funds or investing them in non-dollar assets. In this case the greenback would weaken. Analysts at Goldman Sachs think that US dollar’s advance was due to only a few reasons. In their view, when a currency move is narrowly based, not much has to happen for it to change course. As a result, the specialists think that broad dollar’s weakness will resume.

Westpac: Australia’s exports will survive This week negative news Chinese manufacturing prospects put a downward pressure on the Australian currency because of the drop of demand on iron ore. China is the most important Australia’s trading partner. Westpac analysts, however, are convinced the outlook on the Aussie is not so dismal. They explain the investors missed the fact that Australian energy exports will increase significantly over a 5-year period. The return on enormous investments being made into liquefied natural gas plants (LNG) will start to be seen soon, taking into consideration the perpetual demand from Japan. LNG is expected to become Australia’s second largest commodity export by 2016-17.

Euro slipped due to declining industry activity The single currency sank versus the greenback due to weaker than expected PMI data released in Europe today. According to forecasts, flash Manufacturing PMIs in France and Germany, the leading euro zone’s economies, for March were to post readings above 50 (the actual index above 50.0 indicates industry expansion, below indicates contraction). However, neither of these predictions came true: we see 47.6 for France (down from 50.0 in February) and 48.1 for Germany (down from 50.2 in February). Euro area’s industry activity is also declining – flash Manufacturing PMI was at 47.7 versus the estimate of 49.6 (down from 49.0 in February). As we see, the economic conditions in the region are far from favorable. Weak European data will fuel concerns about European and global growth outlook. EUR/USD dropped from $1.3250 to test $1.3130 (support: 50-day MA at $1.3144). Consolidation during the next trading hours seems likely with sales at $1.3175. The next important release today is the publication of US unemployment claims at 12:30 p.m. GMT.

BarCap: forecasts for AUD/USD revised down Analysts at Barclays Capital believe that in April AUD/USD will be trading around the current levels supported by high oil prices on the one side and capped by Chinese economic slowdown on the other side. As a result, the specialists think that Australian dollar will be trading sideways versus its US counterpart in range between $1.04 and $1.07. The bank revised down its forecasts for Aussie from $1.07 to $1.06 in a month, from $1.08 to $1.05 in 3 months and from $1.10 to $1.07 in a year.

Analysts’ comments on EUR/USD Euro-positive Rabobank: “The calming of markets in the last few months has come from policy measures, and the ability of policy makers to continue delivering supportive packages in large part stems from the strength of Germany. In the near-term the euro may be supported.” Euro-negative UBS: “We’re seeing a tussle between investors who think this is a risk-on environment and therefore euro-dollar should go higher, and those that recognize balance sheet expansion by the European Central Bank will likely weaken the euro. A growing number of investors are looking at “the relative policy stance” of the ECB and the Fed.” Pimco: the specialists are bullish on the greenback and expect EUR/USD to fall below $1.15 this year. On the odds of additional QE in the US RBS: if US economy evolves as outlined in the median FOMC forecast released in January, the odds of QE3 this year are about 0.25%. However, given the risks around that forecast, the (unconditional) probability of QE3 is much higher, around 40%.

Yen strengthened: analysts’ comments On Thursday yen went up against other major currencies on the backdrop of the unexpected positive data on Japan’s export. The trade balance in February came to a surplus of 32.9 billion yen ($393 million) regardless the expected deficit of 120 billion yen. Exports dropped only by 2.7% from the previous year instead of the 6.5% forecasted decline. Forecast Pte: The data suggest that Japan’s economy is doing better. From a fundamental perspective, this is likely to be positive for the yen. J.P. Morgan analysts refer the yen’s strengthening to yesterday’s “bearish reversal” at USD/JPY chart where the dollar failed to break through the 84.10 resistance area. A breach below 82.85/65 support zone will prove the retracement. Brown Brothers Harriman: Momentum and other technical indicators warn the market is stretched, after the dollar has rallied more than 10% against the yen since the end of January. A break of the 83.00 area is needed to confirm a top is in place. Danske Bank analysts advised earlier to open long positions at 83.65 yen, targeting at 84.78 and with a stop-order at 83.01. USD/JPY is now trading at 83.14.

Aussie’s down after China’s PMI; technical levels Australian dollar is once again affected by Chinese data. HSBC flash PMI signaled that manufacturing may shrink in China for a fifth month in a row. The economists will now expect Chinese authorities to ease monetary policy, though the risk of building inflation will surely complicate such decision. Aussie is very dependent on economic situation in China, its key export partner. AUD/USD slid this week from Monday’s maximum of $1.0636 to the levels below $1.0400. Australian currency depreciated by 4% in March due to the general strengthening of US dollar. Today the pair tested the levels under 200-day MA at $1.0400 and touched 100-day MA at $1.0372. These together with the base of the daily Ichimoku Cloud at $1.0353 are the key support levels to hold Aussie from further slump in the near term. As for the longer term, analysts at Pimco expect AUD/USD to slide to 0.0900 by the year-end.

Nova Scotia: loonie may rise versus Aussie Technical analysts at Bank of Nova Scotia (BNS) expect the Canadian currency to advance against the Australian. Specialists are bearish on the currency pair because of the Momentum indicator and as MACD dropped further below the center line. The decline in AUD/CAD is provoked by the global economic trends. Data from China, the Australian biggest trade partner, show the cutback in manufacturing. Canada, quite the opposite, is benefiting from the rebounding U.S. economy. According to analysts, if AUD/CAD consolidates below C$1.0337, the chances for further drop to C$1.0260 will increase. Today the currency pair is trading in the C$1.0323 area.

MIG analysts: EUR/USD prospects According to MIG analysts, the EUR/USD growth is targeted at $1.3290 (March 8 maximum). If the currency pair surpasses this level, it will get the chances to break through the $1.3436/60 area and to target at $1.3628 (200-day MA). If the pair closes below $1.3140 and then $1.3000, a risk of further decline to $1.2630 will arise.

Standard Chartered: the greenback and risk appetite Analysts at Standard Chartered underline that many experts that the greenback has lately been switched from being a safe-haven or, in other words, counter-cyclical currency to a more pro-cyclical, risk-positive one. The specialists don’t share this point of view. To their mind, that while US dollar has periodically traded in line with higher-beta assets, as opposed to against them, this has not been the case on a trend basis. According to Standard Chartered, what we see now is not a permanent shift in the relationship between the greenback and risk appetite. The recent dynamics of American currency reflects the cyclical divergence between the US economy on the one hand and those of Europe and Asia on the other, along with diverging portfolio flows.

Citi: USD/JPY ahead of Japan’s fiscal year Usually Japanese companies tend to buy the national currency in March ahead of Japan's fiscal year-end. This year, however, the traditional pattern seems derailed, says Citi. “One traditional yen specific factor is the year-end yen buying by Japanese corporates and there has been some of that of late. This time around, however, we have also seen some USD/JPY buying from Japanese energy importers. The latter could offset any USD/JPY selling in coming days."

Commerzbank: euro’s advance may prove short-lived The single currency was trading on the upside versus the greenback today as Greece's lawmakers approved the country's second 130 billion-euro bailout deal. However, the majority of analysts regard euro’s advance as short-lives claiming that EUR/USD will likely be curbed due to rising U.S. Treasury yields which encourage dollar’s growth. In addition, analysts at Commerzbank think that the approval “was not a big step but has been perceived as positive by the market”. In their view, “the broader trend is still a stronger dollar and on that point we see the economy picking up in the U.S.” Brown Brothers Harriman: “If U.S. data remains solid U.S. yields may continue to track higher, while Europe faces some risks from the Italian labor reform talks and continued poor economic news from Spain”. Many experts say that the Parliament vote was nothing but a formality. EUR/USD is down from an almost 2-week high of $1.3283 to the levels around $1.3240. Resistance for the pair is situated in the $1.3300 area (61.8% retracement of the decline from the end of February to the middle of March). Keep an eye on the Fed’s Chairman Ben Bernanke’s testimony to Congress later today and a bunch of European (especially German) PMIs tomorrow. In the longer term analysts at UBS believe that the ECB would need to keep pumping liquidity into the euro zone’s money markets, so investors will be tempted to seek other foreign assets rather than the euro. According to the bank, EUR/USD will fall to $1.25 in 3 months and to $1.15 by the year-end.

UK: public borrowing surges, Posen and Miles want more QE British pound dropped by 70 pips on the news that UK public sector net borrowing rose in February to the maximal level since 1994 of 12.9 billion pounds versus the forecast level of 5.0 billion pounds. In addition, the minutes of the Bank of England’s MPC March 8 meeting showed that 2 members of the Committee (David Miles and Adam Posen) voted to increase Asset Purchase Program by 25 billion pounds in order to avoid damage for the supply capacity of the economy. Posen and Miles said that the central bank’s monetary policy should be loosened further to stimulate demand quickly, “but the stimulus could then be withdrawn were it to become clear that there was a significant risk of inflation rising above target in the medium term.” The agreement to keep the benchmark interest rate unchanged at 0.5% was unanimous. According to the statement, “overall, the Committee judged that the recent data had evolved in line with its expectations and that there had been little change to the balance of risks to UK activity and inflation.” At the same time, MPC acknowledged the sharp increase in crude oil prices: “If oil prices were to rise to a level significantly higher than the Committee currently assumed, then that would tend to slow the global and domestic recovery, reduce supply growth, and put upward pressure on domestic costs and prices.” After the market digested the data GBP/USD found support in the1.5856 area and managed to rise to $1.5870. If the pair manages to rise above March 19 maximum in the $1.1915 zone, it will get chance to strengthen to $1.5966 (Mar. 2 maximum) and $1.5975 (Mar.1 maximum). Support levels for sterling are situated at $1.5831 (Mar. 20 minimum), $1.5823 (Mar. 19 minimum), $1.5798 (21-day MA) and $1.5771 (10-day MA).