Comments and forex-analytics from FBS Brokerage Company

[FBS.com Official]

Commerzbank: comments on EUR/GBP

 

The single currency rose from Friday’s minimum at 0.8360 to new month maximum at 0.8575 just below the resistance of the middle-term trend line connecting October 2010 to January 2011 maximums.

 

Technical analysts at Commerzbank believe that the pair EUR/GBP has already reached its peak. In their view, it will ease down to support at the levels between 0.8530 and 0.8490. Above these levels the near-term outlook for euro will be bullish.

[FBS.com Official]

Zuercher Kantonalbank: comments on EUR/CHF

 

The European currency went down this week from Monday’s maximum versus Swiss franc at 1.2975 to yesterday’s minimum at 1.2705.

 

Analysts at Zuercher Kantonalbank claim that in order to obtain a chance of recovery the pair EUR/CHF has to close this week above 1.2800. In such case euro will be able to rise to 1.2890.

 

On the contrary, if the pair ends today’s trade below 1.2730, next week it’ll be poised for declines.

[FBS.com Official]

Mizuho: euro will rise in case of weekly close above $1.38

 

The single currency rose versus US dollar from the 1.3430 zone in the middle of February to new 3-week maximums in the 1.3840 region today.

 

Technical analysts at Mizuho Corporate Bank note that the pair EUR/USD has closed on Wednesday and Thursday above 61% Fibonacci retracement resistance at 1.3740 and above the upper edge of the “flag” pattern that indicates continuation of the trend.

 

The specialists claim that momentum is bullish and euro may keep appreciating if it manages to close the week above 1.3800. In such case there will be the second round of short-covering.

[FBS.com Official]

HSBC: RBA rate forecast

 

Economists at HSBC believe that the Reserve Bank of Australia won’t raise the interest rates in March. However, the specialists note that the risks of inflation surge remain. In their view, in 2011 the RBA will increase its benchmark rate by 50 basis points from the current levels of 4.75%.

 

Although the markets are currently pricing in the rate hike in November, HSBC thinks that it will happen earlier. According to the analysts, Australian inflation has constrained by the strong national currency and low consumer demand. Now the situation’s changing and these factors won’t be holding down inflation anymore.

 

While the global inflation is going up, the country has an undersupply of housing and power stations that’s boosting rents and electricity prices. In addition, wages in Australia are also increasing.

 

Taking into account the current strength of the country’s economy, the central bank’s policy may be not tight enough. RBA is aware of these risks, HSBC. As a result, there a bunch of factors that that can justify the next rate hikes.

[FBS.com Official]

UBS: use yen and franc to fund carry trades

 

Analysts at UBS AG claim that it became profitable to use Japanese yen and Swiss franc as funding currencies for carry trades to invest in higher-yielding assets.

 

The specialists advise investors to borrow in yen and franc to buy Swedish krona, Norwegian krone, euro and Canadian dollar. Norwegian krone and euro are included in this list as because the potential move in yields is going to be bigger because they’re coming from a lower base.

 

As exchange rates volatility may derail benefits from carry trade, it’s necessary to wait until turmoil in the Middle East and North Africa fades before elaborating such strategy.

 

Borrowing in yen and selling it to buy SEK, NOK, CAD and EUR has returned 33% this year. The same trade, funded by the franc, has returned 17%. Last year carry traders lost 11% on yen and 7.6% on franc.

 

Economists surveyed by Bloomberg News expect the EBC to increase the rate by 25 basis points in the fourth quarter and Canada’s and Norway’s central banks to raise rates by the same amount in the second quarter. Sweden’s Riksbank that has already lifted up borrowing costs for 5 times since the beginning of July may hike by 25 bps 4 more times this year.

[FBS.com Official]

S&P: New Zealand’s rating won’t be lowered for now

 

New Zealand’s dollar gained versus its US counterpart for the second day in a row as the Standard & Poor’s claimed that in the near term at least the country’s credit rating isn’t affected by the earthquake that broke out on February 22.

 

The rating agency said that it’s too early to make judgments about the extent of damage to New Zealand’s economy. According to S&P specialists, New Zealand’s financial system remains operational and will support an inevitable period of increased activity associated with the extensive reconstruction and repair work.

 

The pair NZD/USD went up from Wednesday’s minimum in the 0.7430 area rising above 0.7500. Strategists at ANZ National Bank expect that kiwi’s rate will get support from the coming short-covering.

 

Never the less, the bank says that the county’s GDP will lose minimum 0.5 percentage points because of the earthquake. The analysts at CMC Markets note that from growth and interest-rate point of view, New Zealand’s will likely remain under pressure. 4 out of 8 economists surveyed by Bloomberg News predict that the Reserve Bank of New Zealand will cut its 3% benchmark rate by at least 25 points. A central bank spokesman yesterday refused to comment on speculation about the unscheduled meeting that may be held to consider potential rate change.

[FBS.com Official]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly USD/CHF

British currency didn’t manage to renew maximums during the past week. On the other hand, the GBP/USD retreated to 1.6100.

 

The general uptrend, however, remained: the Ichimoku Cloud is rising, while Tenkan-sen and Kijun-sen still hold the “golden cross” in place (3) though the pattern isn’t as powerful as it used to be. Never the less, all lines remain horizontal that points at the continuous sideways trade.

 

http://www.fbs.com/upload/image/technical_analis/Ichimoky/February2011/28_02_11/.thumbs/340b5aaf640aaaf292459f00da9f47d6_500_0_0.jpg

 

Daily USD/CHF

On the daily chart the Ichimoku indicator began pointing at the total reversal of the trend and the end of the middle term sideways trade.

 

That means that Tenkan-sen and Kijun-sen formed the “dead cross” (2) and headed down. In addition, the Preceding lines (1) are also directed downwards and have almost equal values.

 

All mentioned means that the market’s sentiment is very negative and that the downtrend may resume after a small consolidation at the current levels.

 

http://www.fbs.com/upload/image/technical_analis/Ichimoky/February2011/28_02_11/.thumbs/73950a52f202da15455c0252e28559cc_500_0_0.jpg

Edited February 28, 2011 by FBS

[FBS.com Official]

Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

The pair USD/JPY doesn’t want to rebound. After the bulls didn’t manage to keep the lead the week before last and, consequently, the prices failed above the Standard line (4), the past week turned out to be much more negative. As a result, the rate fell below Tenkan-sen (3).

 

Senkou Span A (1) continued widening down the Cloud’s range increasing the bearish sentiment at the market.

 

It’s clear that the local and, possibly, even historic minimums will be breached in the next few weeks.

 

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Daily USD/JPY

The daily outlook brings nothing optimistic for the bulls as well. The Ichimoku Cloud here switched downwards as the prices were falling during the entire week. The rate didn’t get support from the horizontal Kijun (4) and Senkou Span B. Taking into account this fact, it’s possible to conclude that the bears are very strong and plan to continue the downtrend.

 

In addition, Сhinkоu Span broke down the price chart that confirms the market’s bearish sentiment.

 

Tenkan-sen and Kijun-sen (3, 4), however, didn’t manage to form the “dead cross”. So, in the near time the market may return to the lower border of the Ichimoku Cloud and go further down.

 

http://www.fbs.com/upload/image/technical_analis/Ichimoky/February2011/28_02_11/.thumbs/16f0397d0ab7868392ead910f0ad8f3c_500_0_0.jpg

Edited February 28, 2011 by FBS

[FBS.com Official]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

The bearish sentiment that spread over the market last week let the rate renew historic minimums. By the end of the week USD/CHF fell to 0.9230, but then the bulls regained 50 points.

 

As a result of this slump, all lines of the Indicator kept declining (1, 2, 3 and 4). Even the Senkou Span В (2) that was trading sideways since the beginning of the year went down.

 

So, the downtrend for the greenback is very likely to continue.

 

http://www.fbs.com/upload/image/technical_analis/Ichimoky/February2011/28_02_11/.thumbs/0b8a757bca379c97b5602ce35222d82a_500_0_0.jpg

 

Daily USD/CHF

On the daily chart the Ichimoku indicator began pointing at the total reversal of the trend and the end of the middle term sideways trade.

 

That means that Tenkan-sen and Kijun-sen formed the “dead cross” (2) and headed down. In addition, the Preceding lines (1) are also directed downwards and have almost equal values.

 

All mentioned means that the market’s sentiment is very negative and that the downtrend may resume after a small consolidation at the current levels.

 

http://www.fbs.com/upload/image/technical_analis/Ichimoky/February2011/28_02_11/.thumbs/73950a52f202da15455c0252e28559cc_500_0_0.jpg

Edited February 28, 2011 by FBS

[FBS.com Official]

Emerging markets' currencies will keep outperforming

 

Analysts at Morgan Stanley believe that the emerging markets’ currencies will keep outperforming the currencies of the developed nations. It will happen as food prices have soared to the record maximums, while oil is trading high, at $100 a barrel. According to Barclays Capital, in emerging economies inflation is accelerating at a 6% rate, while in the developed nations this figure is equal only to 2%.

 

As a result, inflationary pressure in the developing countries increases and their authorities have to raise interest rates – in February rates were lifted up in Peru, China, Colombia, Indonesia and Russia. So, Morgan Stanley favors Russian ruble, Mexican peso and Malaysian ringgit.

 

Specialists at Nomura Holdings say that the quickest way to stem inflation is to strengthen national currency. If the country’s officials have to make a choice facing such issues as weak economic growth and high inflation, they will have to deal firstly with the latter and here comes monetary tightening.

 

Strategists at Citigroup believe that the first to hike will be developing countries most reliant on imported oil – fuel and mining products account for about 36% of South Korea’s imports, 25% in China, 27% for Turkey and 24% for Indonesia. These nations can’t afford to keep pursuing loose monetary policy and exchange-rate depreciation.

[FBS.com Official]

Mizuho: USD/JPY will drop to 80.21

 

The greenback went down versus Japanese yen from maximum of the middle of February at 83.95 to the 3-week minimums in the 81.60 area. Technical analysts at Mizuho Corporate Bank claim that all technical indicators signal that the pair USD/JPY will keep declining. Such situation continues since July. In their view, US currency will inevitably go down to retest multi-year minimum at 80.21.

 

The specialists note that US dollar is trading at the lower part of a triangle and is likely to breach the pattern. According to Mizuho, the next question is how the market will react at the all time low of 79.75 hit in 1995.

 

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[FBS.com Official]

China: annual GDP growth target for the next 5 years is at 7%

 

Chinese premier Wen Jiabao announced that the economic-growth targets for the next 5 years are lower than the previous ones. China’s annual economic expansion target is set at 7% for the period from 2011 to 2015. From 2006 through 2010 the target was at 7.5%, with actual growth surpassing that each year and equal on average to 11.1%.

 

According to Wen, the main reason why China will target slower economic growth is its efforts to improve the quality of the growth and reduce inflationary pressures.

 

Analysts at Royal Bank of Canada note that it’s necessary to regard the new target as a signal of Beijing’s intentions over the medium term. In their view, during the past several years Chinese officials have underlined the need to move China away from a reliance on low-value-added and heavy-polluting export industries and to promote greater domestic consumption.

 

Wen also said that stronger yuan is in the interest of the country’s economy and people. However, yuan’s appreciation must be gradual because sharp gains of the currency would provoke bankruptcy of a number of Chinese enterprises. RBC economists note that although the comments on the currency revaluation were just a reiteration of what has been said before about gradual strengthening, Wen also made it clear that he sees the currency moving in only one direction.

[FBS.com Official]

UBS: EUR/CHF will rise to 1.3500 in 3 months

 

Analysts at UBS recommend buying the single currency versus Swiss franc at 1.2800 with 3-month target at 1.3500.

 

The specialists believe that the interest-rate gap between Switzerland and the EU may widen as the Swiss National Bank’s official keep giving dovish comments while the European Central Bank’s authorities seem to be rather hawkish so far.

 

Franc was boosted by risk aversion over the past few days. According to UBS, however, unless the political tensions spread to some of the larger countries in the Middle East, market may calm down and demand for Swiss currency will decrease.

 

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[FBS.com Official]

US dollar under pressure because of rising oil prices

 

US dollar was under pressure because of the rising oil prices as investors worried that US economy will be affected more than others taking into account the fact that it strongly depends on consumer spending. According to Deutsche Bank, a $10 increase in oil reduces US growth over two years by 0.5 percentage point. Last week crude oil reached $112.14 a barrel in London, the highest level since August 2008.

 

Analysts at Bank of Tokyo Mitsubishi UFJ say that rising oil prices help to widen the perceived policy divergence between the Fed and other major central banks. While the ECB regards rising crude as an upside risk to inflation, the Fed's view is that it will be negative for the economic growth. As a result, the European currency is likely to outperform the greenback in the near term. Strategists at UBS believe that the American currency will stay weak for now and advise investors buying euro, pound and Swedish krona.

 

The pair EUR/USD rose to 3-week maximum in the 1.3840 area. In order to get more bullish momentum euro has to overcome 2011 maximum at 1.3862.

 

The major events this week are the congressional testimony by Fed's Chairman Ben Bernanke on Tuesday and the ECB meeting on Thursday.

 

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[FBS.com Official]

Loonie reached the maximum since 2007

Canadian dollar tested the 0.9710 level versus its US counterpart, the strongest since November 19, 2007.

 

Loonie’s rate was pushed up after the country’s GDP gained in the fourth quarter 3.3% from the previous year’s level, while the economists were looking forward to an annual increase only by 3%.

 

Canada’s exports, which accounted in 2009 for 32% of its economy, added 4% in the last quarter of 2010 showing the biggest quarter advance since the second quarter of 2004. Crude oil shipments rose by 30% to a record level. In February Canadian currency managed to climb by 3% due to the surge of the crude oil price.

 

The Bank of Canada will announce today its interest rate decision. Analysts at Bank of Nova Scotia’s Scotia Capital believe that the pressure on the policymakers is rising and they will have to hike sooner or later. Last year the Bank of Canada has already raised the rates for 3 times being the first central bank among those of the Group of Seven nations to tighten monetary policy. Strategists at Citigroup expect that Canada’s monetary authorities will use today’s meeting in order to prepare for the rate hike in April.

 

As for the Bank of Canada itself, on January 18 it claimed that it will be careful increasing the borrowing costs as there are still the risks to the country’s economic recovery from the euro zone’s debt crisis.

 

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[FBS.com Official]

Analysts on Switzerland’s GDP

According to the data released today, Switzerland’s GDP increased by 0.9% in the fourth quarter, while the economists were looking only for 0.5% advance.

 

Analysts at Credit Suisse say that the report shows that there’s no imminent downturn in economic momentum in the months ahead. The specialists note that consumer demand, investment and trade of goods all expanded at a solid pace. Never the less, according to Credit Suisse, strong franc will seriously affect exports, so they see 2011 economic growth at rather moderate level of 1.9%.

 

Strategists at UniCredit called Swiss GDP advance in the fourth quarter “very strong” and raised 2011 forecast for the country’s economic growth from 1.8% to 2.5%. In their view, despite the strong rate of the national currency that’s negative for exports it's possible to suggest that Switzerland’s economic expansion will continue at the beginning of 2011.

 

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[FBS.com Official]

Mizuho: EUR/USD may rise to 1.4000

 

Technical analysts at Mizuho Corporate Bank claim that the single currency has jumped from yesterday’s minimum at 1.3710 and reached resistance at 1.3860. In their view, the possibility of the day’s close above 1.3900 has so far increased. This, in its turn, will trigger short covering. The same effect will be from the weekly close above 1.3900. The next target of the pair EUR/USD is at 1.4000.

 

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[FBS.com Official]

UBS: AUD/USD forecast’s increased

 

Australian dollar dipped to 1.0148 versus its US counterpart after the Reserve Bank of Australia decided to leave the benchmark interest rate at 4.75%, so the players who were looking forward to more hawkish RBA statement got disappointed. However, the pair AUD/USD has already gone up to 1.0180 to compensate today’s losses.

 

Analysts at UBS note that the demand for Aussie remains high. The specialists lifted up their month forecast for Australia’s currency from 0.9700 to 1.0000. The 3-month forecast was raised from 0.9300 to 0.9800. According to the strategists, the market will be now waiting for the rate’s hike next month.

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[FBS.com Official]

Barclays Capital: USD/CAD will fall to 0.9500

 

Analysts at Barclays Capital expect the pair USD/CAD to fall down to 0.9500 in the next few months as it broke below the trend line support from the Augusts maximum in the 1.0670 zone.

 

According to the specialists, the greenback may bounce from the 0.9660/0.9710 area, but the recovery will be short-lived and the bulls will give up.

 

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[FBS.com Official]

Commerzbank: comments on GBP/USD

 

British pound recovered from Friday’s minimum versus the greenback at 1.6070 getting above 1.6300 and reaching 1-year maximum at 1.6330.

 

Technical analysts at Commerzbank claim that is the pair the pair GBP/USD manages to hold above 1.6300, it will head to the 1.6400/45 area limited by the double Fibonacci retracement and the downtrend from 2007 to 2011. The topside of this area will provide enough resistance to make sterling fail, says the bank.

 

If 1.6300 keeps constraining GBP/USD advance, the rate may drop to 1.6100. According to Commerzbank, pound will remain under bullish pressure as long as it trades above support at 1.5963.

 

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[FBS.com Official]

CIBC: USD/JPY will rise to 89.00 by the year-end

 

Analysts at Canadian Imperial Bank of Commerce expect that US dollar will begin strengthening versus Japanese yen from the middle of the year. In their view, by then US economic outlook improves and the Federal Reserve will start regarding the possibility of tightening its monetary policy.

 

According to CIBC, the pair USD/JPY will climb to 87.00 area in the second quarter, then rise to 88.00 in the third quarter and end 2011 at 89.00.

 

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[FBS.com Official]

Societe Generale: EBC may not hike until 2012

 

Economists at Societe Generale think that the more hawkish remarks we’ve been hearing from the central banks may actually be wrong-footed. The high inflation is being driven by the supply concerns in the oil market that means that it’s very negative for the global economy in terms of growth. The specialists believe that this is not something the central banks should be responding to by hiking interest rates.

 

The concern is on the second round effects that would come but that will require a very long period of higher oil prices. And this is where the ECB expresses its second concern – the demand side that is driving commodities from the stronger growth in emerging markets. However, the core inflation in Europe shows that there’s really no indication of second-round effects coming through, so it’s too early to call for the ECB rate hikes from the current inflation picture.

 

According to Societe Generale, the ECB could wait until 2012. There’s the second dimension about which the central banks don’t like to talk much but which is very important – this is the financial stability and the sovereign debt crisis. It could be much harder for the ECB to hike rates than the market’s currently pricing, as the central bank has to take into account not only the rising oil prices, but also the threats to the region’s financial stability.

[FBS.com Official]

Bernanke: inflation risk in US remains low

 

Yesterday’s speech of Federal Reserve Chairman Ben Bernanke allows suggesting that the Fed won’t hurry to raise interest rates after the $600 billion quantitative easing program is completed by the end of June. In his view, inflation risk isn’t high, while the situation on the labor market is still difficult.

 

Bernanke believes that the surge in commodity prices won’t generate a lasting rise in inflation. For the economic recovery to be sustained, the Fed’s benchmark rate will has to stay low for an “extended period”.

 

Bernanke pledged to act if higher commodity prices persist, spurring inflation and increasing inflation expectations, though currently the head of US central bank sees no necessity for such actions.

 

The Fed’s Chairman will continue his monetary policy testimony today. Bernanke will begin speaking in front of the House Financial Services Committee in Washington at 3 p.m. GMT.

[FBS.com Official]

Bof T-Mitsubishi: US dollar will strengthen versus euro by the year-end

 

Analysts at Bank of Tokyo-Mitsubishi UFJ claim that the greenback may rise to the levels at which it traded versus the European currency in September. Such forecast is based on the reviving of US economy and possibly waning expectations of the rate hikes by the developed nations’ central banks.

 

The specialists expect US dollar to climb to $1.27 per euro and 92 yen in a year. The dollar estimates were reduced from the previous prediction of $1.20 per euro made before a surge in oil prices in February led US currency lose 0.8% versus its European counterpart.

 

US economic growth is going to be strong surpassing economists’ expectations. The data so far seems to be quite encouraging – the country’s manufacturing grew in February at the fastest pace in almost 7 years. ISM factory index rose from 60.8 in January to the maximal level since May 2004 at 61.4. So, according to Bank of Tokyo-Mitsubishi, such solid performance of American economy is going to drive US dollar up.

 

The bank also underlines that the markets are pricing in too much in terms of the ECB rate hikes in the next 12 months and most likely will get disappointed that will be a negative factor for the single currency.

 

Bank of Tokyo-Mitsubishi projects that the pair EUR/USD will rise to $1.40 in 3 months due to the increase in oil prices. Japanese yen will decline to 85 per dollar during this period.

 

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[FBS.com Official]

Mizuho: EUR/USD will rise in March at least to 1.4000

 

The single currency advanced from minimums in the 1.3425 area hit in the middle of February and met resistance at 2011 maximum at 1.3860.

 

Technical analysts at Mizuho Corporate Bank believe that the pair EUR/USD will finally manage to break above this level. In their view, in March euro will climb at least to 1.4000 and possibly to November’s maximum at 1.4281. The specialists underline that momentum for the pair has become bullish.

 

Bullish pressure will decline if EUR/USD falls below 1.3300. In such case this forecast will have to be revised.

 

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