Comments and forex-analytics from FBS Brokerage Company

[FBS.com Official]

UBS: currency forecast for majors

 

UBS analysts give the following forecasts for the major currency pairs:

 

EUR/USD: Neutral. Resistance is found at 1.4442, support lies at 1.4205 and 1.4158.

 

USD/JPY: Bearish. If the greenback breaks below 80.00, it will be poised down to 79.57 and 78.83. Resistance is at 81.28.

 

GBP/USD: Neutral. As long as resistance at 1.6464 holds, it’s necessary to pay attention to support at 1.6271.

 

USD/CHF: Bearish. US dollar stays under pressure below 0.8893. Support levels are at 0.8677 and 0.8554.

 

AUD/USD: Bullish. If Aussie overcomes 1.0878, it will be able to climb to 1.0953. Support is at 1.0697.

 

USD/CAD: Neutral. Resistance is at 0.9654, support lies at 0.9505.

[FBS.com Official]

Commerzbank: USD/JPY may rise to 82.93

 

US dollar recovered from last week’s minimums in the 79.55 area rising above the short-term downtrend channel resistance in the 80.70 zone.

 

Technical analysts at Commerzbank claim that the pair USD/JPY is trying to stabilize above support at 80.00/79.80 and get higher.

 

The specialists think that the greenback may rise to 82.34/93 levels that represent 55- and 200-day MA. If US currency manages to overcome 82.93, it will be able to climb to the 4-year downtrend at 84.68.

 

According to the bank, support levels are found at 80.15 and 79.57.

[FBS.com Official]

Societe Generale: comments on USD/CHF

 

Technical analysts at Societe Generale claim that US dollar’s advance versus Swiss franc is likely to be limited by Fibonacci resistance at 0.8840.

 

The specialists say that the pair USD/CHF may fall to the record minimum of 0.8552 hit last week, on May 4.

 

According to the bank, support levels for US currency are found at 0.8710 and 0.8675.

 

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[FBS.com Official]

Daiwa: China’s economy isn’t overheated

 

Analysts at Daiwa Capital Markets claim that although Chinese inflation is still high, the country’s economy isn’t overheated. As a result, the specialists think that more aggressive policy tightening is not necessary.

 

According to the data released today, China’s CPI added 5.3% in April on the annual basis after gaining 5.4% in March.

 

Never the less, the strategists note that as inflation is still elevated, the nation’s monetary policy loosening in the second or third quarter seems very unlikely.

 

Daiwa warns that if the tightening policies are not loosened in time in the third quarter, the odds of China’s economic growth slowdown in the final quarter of the year will significantly rise.

[FBS.com Official]

JPMorgan: yen will gradually rise versus the greenback

 

Analysts at JPMorgan claim that Japanese yen will once again rise to this year’s maximum versus the greenback as Japanese investors avoid investing in overseas assets willing to reduce risk following the nation’s biggest earthquake that took place on March 11.

 

The specialists estimate repatriation performed by Japan’s investors and companies by 10 trillion yen ($123.5 billion). In their view, such situation is opposite to what may be seen in elsewhere in the world where the demand for higher-yielding assets is increasing.

 

In addition, it’s necessary to take into account that Japan has one of the biggest current-account surpluses in the world that also creates upward pressure on yen’s rate. The data is released tomorrow. Economists surveyed by Bloomberg News expect that the nation’s current-account surplus increased from 1.64 trillion yen in February to 1.75 trillion yen in March. The bank’s strategists don’t think that the current account may fall into deficit even as the impacts of the disaster may shrink the nation’s trade surplus.

 

Weaker demand for the greenback is one more positive factor for yen. Specialists at JPMorgan claim that for the pair USD/JPY to stabilize, US interest rates have to be much higher than those in Japan, while now these 2 countries pursue the same policies of the extremely low borrowing costs. The analysts think that the Federal Reserve won’t raise the rates earlier than at the end of 2012.

 

According to JPMorgan, US dollar will fall to 78 yen by the end of March next year. The bank doesn’t expect more currency interventions of Japanese authorities to weaken the national currency as the market has become less volatile since the earthquake. The specialists think that any intervention decision will based on volatility and not on a certain level of exchange rate, so Japan won’t be preventing yen from gradual appreciation.

[FBS.com Official]

RBC: the single currency is likely to recover from the recent decline

 

The single currency lost more than 5% versus the greenback during the recent days falling from the levels in the $1.50 area to $1.4250. Euro was affected by the increased concerns about euro zone’s debt problems.

 

Currency strategists at RBC Capital Markets don’t think that the current weakness of the pair EUR/USD means that the market’s sentiment has significantly changed. According to the latest data on currency futures, the number of long positions on euro has been the maximal since 2007. As for US currency, there were over 100,000 net short futures contracts on dollar almost every week of this year.

 

The specialists underline that yield and rate differentials are still in favor the European currency. In their view, investors will continue thinking that the European Central Bank will raise rates ahead of the Federal Reserve.

 

However, as the analysts try to foresee how high euro will be able to rise they wonder if it’s good for the euro area to have the common currency so high.

[FBS.com Official]

MIG Bank: comments on USD/JPY

 

The pair USD/JPY found support in the 79.55 area bouncing up and coming closer to the resistance at 82.00 representing post G7 intervention maximum. Technical analysts at MIG Bank think that the greenback has to overcome this level to gain bullish momentum. The next resistance levels are found at 83.30 (post earthquake shock maximum) and 84.50 (December 16 maximum). If US currency manages to rise above the latter, the pair may resume potential long-term bull cycle.

 

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[FBS.com Official]

BMO Capital Markets looks for euro to weaken

 

Currency strategists at BMO Capital Markets claim that the European currency will decline versus the greenback. In their view, European authorities will soon make some announcements about Greece and these announcements won’t be positive for the country. The EU officials are likely to say that the nation has to make more efforts to get the bailout, expects BMO.

 

At the moment the analysts advise investors not to go short on euro directly, but to bet on the Norwegian krone rising versus US dollar. According to BMO Capital Markets, Norway’s economic position is firm: the country’s unemployment is a low 3.1% and its central bank is thought to lift up the rates today. The trade recommendation is to buy krone at 5.5050 stopping at 5.5550 and taking profit at 5.4050.

 

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[FBS.com Official]

RBC: factors influencing Canadian dollar

 

Analysts at Royal Bank of Canada note that Canadian dollar weakened versus US dollar as the data released yesterday showed that US crude oil inventories reached the 2-year maximum making oil price decline, stocks fall and demand for higher-yielding assets shrink. Crude supply in the United States, Canada’s major trading partner, surged during the week before May 6 by 3.78 million barrels to 370.3 million.

 

Trading against the single currency loonie gained on speculation Greece may restructure its debt while Canada’s economy grows stronger. Canada’s payrolls increased by 58,300 in April after 1,500 slide in March, while the unemployment rate unexpectedly dropped from 7.7% to 7.6%. In addition, in March the nation had the strongest trade surplus of C$627 million ($658 million) since November 2008, while the economists surveyed by Bloomberg were looking forward only to C$400 million.

 

The nation’s Finance Minister Jim Flaherty said this week that the strengthening national currency reflects confidence in the Canadian economy and that the government’s goal is not to let extreme currency fluctuations.

 

The pair USD/CAD rose from 0.9445 on May 2 getting above 0.9600. The pair EUR/CAD fell by 1% to the levels in the 1.3652 zone.

 

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[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency went down below 1.4900 on May 5 renewing the week minimums below 1.4255/70 (55-day MA). Technical analysts at Commerzbank expect the pair EUR/USD to consolidate in the 1.4200 zone.

 

The specialists think that euro is poised for a decline to 1.4145/55 (38.2% retracement of 2011 advance and April 18 minimum). In their view, these levels will manage to constrain the initial attack of the bears.

 

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[FBS.com Official]

HSBC: yuan will become reserve currency in 5-7 years

 

Analysts at HSBC think that in 5-7 years Chinese yuan will become a global reserve currency. In their view, it would happen more due to the growing demand for it than because of the actions of the nation’s authorities and yuan will attain nearly full convertibility.

 

The specialists expect that yuan will be strengthening at the lower pace during the coming years than it has been doing so far. As a result, now it’s necessary to focus attention not on the pace of yuan’s appreciation, but on its internationalization.

 

According to HSBC, within the next 3-5 years China’s rapid economic growth will make yuan one of top three currencies used in global trade. The strategists note that the central banks have to diversify their foreign exchange reserves with multiple currencies, including the CNY, reducing the share of the greenback.

[FBS.com Official]

John Taylor: higher-yielding assets have reached maximums

 

John Taylor, chairman and founder of FX Concepts, the world's largest currency hedge fund, claims that the advance of the higher-yielding assets that began in the first half of 2009 will soon be over. In his view, the euro zone debt problems will once again come to the centre of market’s attention.

 

According to Bloomberg survey, investors are becoming less optimistic about the prospects of American and world’s economy and the demand for commodities is likely to decline during the next half of the year.

 

So, equities, euro and emerging market currencies have either reached their maximums or will do so by end of July, says Taylor.

 

The S&P 500 that has increased more than in 2 times since March 2009 lost 1.1% since May 2 on the signs that US economic growth is slowing down and the speculation that hedge funds were exiting bets on growth.

 

The pair EUR/USD hit yesterday 6-week minimum at $1.4123 having lost 4% since reaching $1.4940 on May 4. Taylor is currently bearish on the single currency. According to the specialist, euro will eventually fall to parity with the greenback.

 

Analysts at FX Concepts seem very pessimistic about Greece advising investors to get ready to the potential default of the country. The yield on 2-year Greek bonds climbed yesterday to 26.77%. As the yield spread between Greek and German securities is rapidly widening, there is going to be the crisis soon, think the specialists.

[FBS.com Official]

Commerzbank: outlook for euro is still negative

 

Technical analysts at Commerzbank think that the outlook for the single currency versus the greenback remains negative.

 

The specialists note that if the pair EUR/USD breached support in the 1.4145/55 zone, it will be poised down to 1.3996.

 

According to the bank, resistance for the pair is found at 1.4440/65.

 

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[FBS.com Official]

BNY Mellon: EU authorizes should come up with a plan on Greece

 

Currency strategists at BNY Mellon claim the things in Greece and the euro area can’t continue in their current state of extreme uncertainty.

 

Although the EU authorities met last Friday to discuss the country’s issues, nothing was announced. While France represented by finance minister Christine Lagarde spoke in favor of granting Greece financial help, Finnish opposition voted against of any future bailouts. BNY Mellon analysts underline that it would be very difficult to find the way out acceptable for all parties.

 

Although the simplest solution in the short term is to provide Greece with money, northern members of the currency bloc aren’t likely to agree to that. Another variant – the restructuring of the country’s debt in terms of maturities – won’t help Greece much leaving it in a very pitiful state. If addition, if Greece gets looser terms of the bailout other indebted nations such as Portugal and Ireland may also ask for concessions.

 

Despite all these difficulties European officials have to come up with something as the constant uncertainty propels Greek funding costs and the unrest in the country is escalating.

 

BNY Mellon is bearish on the single currency which the bank regards as is overvalued. According to the economists, the pair EUR/USD may return to the levels of low $1.30s it was trading at the beginning of 2011.

[FBS.com Official]

Mizuho: USD/JPY will test 80.00 yen

 

Technical analysts at Mizuho Corporate Bank note that the pair USD/JPY went down below the Ichimoku Cloud and the Fibonacci resistance. The specialists advise investors to sell the greenback. In their view, US currency will dip to a very important support at 80.00 yen.

 

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[FBS.com Official]

IMF: comments on the situation in euro area

 

The International Monetary Fund said yesterday that despite bailouts for Greece, Ireland and Portugal, core euro zone economies and emerging Eastern Europe may still be contaminated with the debt crisis.

 

The organization expressed readiness to provide Greece with more financial support if requested, though underlined that the country still had plenty of potential to raise funds on its own selling the state assets.

 

According to IMF, in order to prevent the debt crisis from spreading peripheral European states have to make “unrelenting” reforms.

 

The IMF economists warned the European Central Bank that it has to be careful with further rises in the interest rates. In their view, euro zone may afford relatively accommodative monetary policy. Jurgen Stark, ECB policymaker, said, however, that the central’s bank priority is stemming inflation in the region strengthening investors’ hope for another rate hike.

[FBS.com Official]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

British pound kept declining during the last week: the prices broke down the Turning line (1) that acted as an important support. The next support level is the Standard line.

 

The trend for GBP/USD remains neutral. All lines of the Indicator keep moving horizontally (1, 2, 3, 4).

 

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Daily GBP/USD

 

On the daily chart the outlook is much more bearish.

 

The prices have already broken down below the longer-term Standard line, while Kijun-sen has crossed Tenkan-sen bottom-up forming the “dead cross” (1). The signal isn’t very strong as the figure is found above the Ichimoku Cloud (2). At the same time, the bullish Cloud remains rather thin. The impulse of the uptrend has weakened: the upper border of Kumo is pointed downwards at rather sharp angle narrowing the range of the Cloud, while Senkou Span B moves horizontally.

 

The selling signal is confirmed by Chinkou Span that broke down the price chart. British pound has approached Senkou Span A. The thin Cloud isn’t able to provide sterling with strong support, so this week’s forecast is negative.

 

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[FBS.com Official]

Ichimoku. Weekly forecast. USD/JPY

 

 

Weekly USD/JPY

 

Although the priced have recovered a bit they didn’t manage to return above Tenkan-sen and Kijun-sen that merged together keeping moving horizontally (1) that means that the market has rather strong sideways trend. So, the pair USD/JPY has chance to edge upwards.

 

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Daily USD/JPY

 

As it was expected, last week the prices were moving inside the Ichimoku Cloud. On Friday the greenback closed below the lower border of Kumo. The narrowing bullish Kimo (3) shows that the powers of bulls are limited.

 

The “dead cross” (4) formed by Tenkan-sen (2) and Kijun-sen (1) remains in place, though as it was formed above the Cloud the signal isn’t very strong.

 

The Turning line (2) will play the role of support. If the prices manage to return inside the Cloud, the bulls will probably manage to rebound the rate.

 

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[FBS.com Official]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

 

On the weekly chart the bulls managed to move even higher: dollar’s rate was growing during the second week in a row.

 

At the same time the prices have reached the resistance of the 9-day MA – Tenkan-sen (1). If the bulls fail to overcome this level and lift up the market, the pair’s advance was just a correction.

 

The bearish Cloud is still wide. The majority of lines are declining (Tenkan, Senkou Span A and B). However, Kijun-sen went sideways that gives some hope for an improvement in future.

 

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Daily USD/CHF

 

The outlook for the pair USD/CHF on the daily chart has significantly improved. On Friday the prices managed to close above the long-term Standard line (1).

 

Tenkan and Kijun went to meet each other preparing the form the “golden cross”. At the same time the Ichimoku Cloud still puts the pair under pressure.

 

We are waiting for signal from the rising Chinkou Span: if it breaks above the price chart, this will mean buying, if it recoils down this will be the bearish signal that the correction is over.

 

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[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency declined on Friday versus the greenback breaching support in the 1.4145/55 area.

 

Technical analysts at Commerzbank think that the pair EUR/USD will drop this week to the 200-week MA at 1.3998 and then fall to 1.3770 and 1.3431/1.3375 (55-week MA and 11-month support).

 

According to the bank, resistance levels for euro will be found at 1.4260/70 and 1.4341. If the European currency closes below the 55-day MA at 1.4270, the outlook will be regarded as quite bearish.

 

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[FBS.com Official]

Euro area: important decisions on the agenda

 

The situation around Greece is getting tenser. Today the country will ask the EU and the IMF to increase 110 billion-euro ($155 billion) bailout it got last year or give it more time to repay official loans. The problem is that Europe’s donor countries, primarily Germany, demand that in return Greece should deepen austerity measures.

 

Things got more complicated from the political point of view due to the scandal with IMF Managing Director Dominique Strauss-Kahn who was arrested in the United States for the sexual assault. Strauss-Kahn used to be French finance minister and it was widely thought that he will call for helping the euro area.

 

According to the European Commission forecasts, in Greece’s 2011 budget deficit will be equal to 9.5% of GDP that exceeds 7.4% target established last year.

 

The pair EUR/USD fell to the minimal level since March at 1.4047. Analysts at BMO Capital advise to sell euro versus the greenback at $1.41 stopping at $1.4210 and taking profit at $1.3450.

 

In addition, there are other two important questions for the European finance ministers to decide today – the approval of 78 billion-euro aid package to Portugal and the nomination of Bank of Italy Governor Mario Draghi as the candidate for the post of the ECB president.

 

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[FBS.com Official]

Analysts about the prospects of British economy and pound’s rate

 

British pound was the worst-performer after the greenback during the past 3 month. Sterling is at 35-year minimum versus the currency basket (Bloomberg Correlation-Weighted Indexes) as slowing growth forces the Bank of England to keep the borrowing costs low while inflation keeps rising.

 

Currency strategists at Lloyds Bank Corporate Markets claim that the main effect of the UK austerity measures will be seen during the next 2 quarters. The specialists think that the Bank of England would prefer the pound to stay weak. On the other hand, despite the fact that spending cuts will likely affect the nation’s economic growth, they reduce the risk associated with investing in the UK as the ratings agencies and investors see that British authorities do their best to cut the budget deficit.

 

Analysts at Barclays currently regard sterling as one of the weakest currencies. Low GBP may be explained by very low real interest rates in the UK, so if the rates go up, so will the pound. According to the bank, pound will advance to 80 pence per euro in a year and to $1.72 in 3 months and $1.80 in 12 month. The economists are looking forward to 2 BoE rate hikes this year.

 

Analysts at Mizuho Corporate Bank, on the contrary, claim that monetary tightening at the time of severe fiscal tightening will cause the disaster. In their view, higher rates in such case won’t encourage pound’s appreciation.

 

British authorities are planning to decrease the budget deficit from 9.6% of GDP in the year through March 2011 to 2.5% of GDP by 2015.

 

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[FBS.com Official]

BMO Capital Markets: USD/CAD is likely to rise

 

Canadian dollar declined versus its US counterpart from maximum of 0.9445 hit on May 2 to 0.9769 today. The pair USD/CAD managed to break above the 9-month bearish trend line at 0.9758.

 

Currency strategists at BMO Capital Markets claim that if the greenback closes the day above this level, the short-term trend will reverse upwards within the longer-term downtrend from October.

 

The specialists expect that the greenback will firstly consolidate at the current levels or even pull lower before the next upward move. In their view, the pair may climb to 0.9915/1.0060.

 

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[FBS.com Official]

UBS: EUR/USD may go down to $1.39

 

Technical analysts at UBS claim that the outlook for the single currency against US dollar will remain negative as long as it’s trading below resistance at 1.4340. In their view, the pair EUR/USD is poised down to 1.4021 and 1.3903.

 

As for the longer term, the specialists expect the greenback to rebound ahead of the end of the Fed's QE2 program in June. According to UBS, investors have already begun unwinding significant short positions on US dollar.

 

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[FBS.com Official]

Danske Bank: the outlook for EUR/USD

 

Currency strategists at Danske Bank claim that although the single currency was under strong pressure during the past month, future dynamic of the currency markets will be determined primarily by the interest rate differential that are in favor of euro versus the greenback.

 

The specialists think that the European authorities won’t support the idea of early Greek debt restructuring and this will help to constrain investors’ concerns. In addition, according to Danske, Greece’s debt problems won’t keep the ECB from lifting up the interest rates. Danske expects the next hike to come in July. As for the greenback, the economists think that it’s going to stay weak as the Federal Reserve has no intention to raise the borrowing costs.

 

However, the elevated risk premium made the specialists revise downwards the forecast for the pair EUR/USD: 3-month forecast – from 1.50 to 1.48, 6- and 12-month forecasts from 1.50 and 1.40 to 1.46 and 1.38. In the second half of the year US currency will get more support as the Fed’s QE2 program expires in June.