Comments and forex-analytics from FBS Brokerage Company

[fallenDC]

UBS: pound may rise above $1.66

 

Technical analysts at UBS are bullish on GBP/USD despite the fact that pound didn’t managed today to overcome resistance at $1.6575. In their view, sterling will eventually rise to $1.6618 and $1.6661. The specialists think that the key support for British currency lies at $1.6421.

 

http://static.fbs.com/upload/image/technical_analis/August2011/23_08_11/.thumbs/9dea438d8f32ceb3122a65a3d015a92b_500_0_0.jpg

[fallenDC]

BBH and UBS regard QE3 as unlikely

 

Analysts at Brown Brothers Harriman believe that the although investors’ sentiment has worsened during the last several weeks, the markets will get disappointed as the Fed, in their view, won’t announce the third round of quantitative easing in the current circumstances. According to the specialists, the markets will remain in the risk-off mode and the demand for safe haven currencies will continue being high.

 

Strategists at UBS also don’t expect the QE3. The bank thinks that the Fed will try to reassure investors by outlining the central additional monetary policy tools against the nation’s economic weakness without committing to use them. As a result, that might disappoint dollar bears.

 

The Federal Reserve’s Chairman Ben Bernanke will speak tomorrow at 6:00 pm (GMT+4) in Jackson Hole, Wyoming.

[fallenDC]

Capital Economics: USD/JPY forecast

 

Currency strategists at Capital Economics still think that he greenback will be able to rise to 85.00 versus Japanese yen by the end of 2011. Such forecast is based on the assumption that the Bank of Japan will continue easing its monetary policy and that Japan will become less attractive as a refuge.

 

The specialists underline that if the Federal Reserve doesn’t start new round of QE, while the BOJ continues expanding its asset purchase program that will be sufficient to drive yen down. In addition, investors may start worrying about the economic and fiscal position of Japan itself.

 

Yesterday Moody’s Investors Service reduced Japan’s credit rating by one step to Aa3 – not very surprising event taking into account the fact that Japanese monetary authorities have made no efforts to reduce the nation’s dent.

 

It’s necessary to note, however, that if the Swiss Central Bank will do more easing measures to weaken franc, demand for yen may rise, says Capital Economics. In this case the pair USD/JPY may drop to 70 yen and even lower.

http://static2.fbs.com/upload/image/technical_analis/August2011/24_08_11/.thumbs/86c4b9608e8860ada09f16c021f1367b_500_0_0.jpg

[fallenDC]

Bernanke's won’t signal more QE

 

The majority of experts think that the Federal Reserve’s chairman Ben Bernanke won’t announce the resumption of the quantitative easing program. The main arguments against more QE are increasing inflation and the fact that the US is currently in no recession.

 

It’s widely thought that Bernanke will talk about the options for further stimulus and clarify how much the Fed’s reduction in its outlook this month stems from long-term obstacles to growth.

 

The economists point out that it’s necessary to realize that the current situation is different from what was seen a year ago when QE2 was launched. The core CPI index that doesn’t include volatile food and energy prices added 1.8% during a year through July, while during the 12 months up to July 2010 it gained only 0.9%. The S&P 500 Index is still above 12% of the on the eve of Bernanke’s speech last year.

 

Bernanke will speak tomorrow at 6:00 pm (GMT+4) in Jackson Hole, Wyoming. His speech is entitled “Near- and Long-Term Prospects for the US Economy”.

[fallenDC]

Standard Chartered cut euro area's GDP growth forecast

 

Analysts at Standard Chartered lowered euro zone’s economic growth forecast from 2% to 1.8% in 2011 and from 2.2% to 1.5% in 2012.

 

Among the reason of the downward revision of their projections the specialists named weak GDP growth in the region’s core economies and worsening European consumer and business sentiment. In their view, these factors have aggravated the situation that has already been quite complicated. The serious obstacles come from the fiscal and monetary tightening, weaker global growth and continued weak bank lending.

 

At the same time, the strategists note that the 2Q GDP numbers may be exaggerated to the downside, while the burden of higher commodity prices and Japan's supply-chain disruptions might no longer affect growth in the third quarter.

 

http://static2.fbs.com/upload/image/technical_analis/August2011/24_08_11/.thumbs/58bb87051333ae507420cdd5938a4a5b_500_0_0.jpg

[fallenDC]

J.P.Morgan: avoid loonie

 

Currency strategists at J.P.Morgan claim that once one is bullish on oil, all he needs is to choose which currencies of oil-producing nations to trade.

 

The specialists warn that it’s necessary to be very cautious with Canadian dollar as its dynamics is strongly correlated with the moves of S&P 500 Index. So does Mexico's peso and Russian ruble.

 

As a result, the best choice for such traders is Norwegian krone.

[fallenDC]

UBS: forecast for USD/JPY

 

Analysts at UBS claim that Japanese monetary authorities have to wait until the Federal Reserve’s intentions about the QE become clear before conducting any forex interventions.

 

In their view, if the Fed doesn’t signal additional QE, there’s no need to step in the currency market. Otherwise, it may be necessary to wait until US dollar drops lower where it would be easier to make a big push.

 

The specialists left their 1-month forecast for USD/JPY at 77 yen.

 

http://static2.fbs.com/upload/image/technical_analis/August2011/24_08_11/.thumbs/d8ad58b63587e54ff6e48e99a5a20056_500_0_0.jpg

[fallenDC]

Feldstein on weak US dollar

 

Martin Feldstein, well-known economics professor in Harvard University, thinks that weak dollar is a really positive factor for US economy as it’s encouraging the nation’s exports and increase domestic demand for the goods produced in America as the import prices rise.

 

Moreover, another positive moment is that the declining dollar isn’t increasing the national debt. In addition, the greenback’s slump didn’t propel the pace of CPI growth.

 

It’s necessary to note, however, that although Feldstein forecasts further declines in dollar’s rate, he says that he isn’t calling for the currency’s depreciation. The thing is that declining dollar affects personal incomes as the households to pay more for imported items.

 

The economist warns that the Fed is running out of monetary tools to stimulate the US economy. Feldstein says that another round of asset purchases accelerate dollar’s fall.

 

According to the data from Bloomberg, the greenback has lost 6.3% this year being the worst performer among the 10 major currencies. USD contracted by 49% since the record maximum in 1985. American exports have climbed 16% this year through June compared with a year ago. The nation’s annual economic growth slowed down from 3.9% at the beginning of 2010 to 1.3% in the second quarter of 2011.

[fallenDC]

Commerzbank: GBP/USD technical levels

 

British pound didn’t manage to get yesterday above resistance in the $1.6539/47 area and pulled down below the 50% Fibonacci retracement level of the decline from April to July at $1.6370.

 

Technical analysts at Commerzbank believe that GBP/USD is poised down to July 21 maximum at $1.6330. If the pair breaks even lower than this level, it will drop to the channel support and the 50% Fibonacci retracement at $1.6264 and 55-day MA at $1.6224.

 

The specialists claim that if sterling closes today above the 3-month maximum at $1.6617 reached last week, it will once again get chance to climb to $1.6687/1.6745 (200-week MA and April maximum).

 

http://static.fbs.com/upload/image/technical_analis/August2011/24_08_11/.thumbs/6bd4ab0e268d67905b80508167d54a9a_500_0_0.jpg

[fallenDC]

Wells Fargo: Friday release of US GDP

 

US second quarter GDP is released for the second time on Friday at 4:30 pm (GMT+4). Consensus forecast is that the initial reading will be revised down from of 1.3% to 1.1%.

 

Analysts at Wells Fargo point out that since the last publication of the Q2 growth figures some new data has been released.

 

On the one hand, inventories and net exports were weaker than the government’s initial estimates, so their contribution to GDP will be revised down. On the other hand, the negative effect will likely be offset upward revision in the construction and consumer spending.

[fallenDC]

Roubini: comments on US labor market data

 

According to the data released today, initial jobless claims in US rose to 417,000 during the week ended on August 20 from 412,000 a week ago, while the economists were looking forward to the decline to 403,000.

 

Nouriel Roubini, professor of economics at New York University famous for predicting 2008 global crisis, says that Non-Farm Payrolls may be in August zero or even negative, while in July the number of jobs in the United States rose by 117,000. The NFP data is releases on Friday, September 2, at 4:30 pm (GMT+4).

[fallenDC]

Citigroup: world’s economic growth forecast reduced

 

Analysts at Citigroup reduced its global economic growth forecast from 3.4% to 3.1% in 2011 and from 3.7% to 3.2% in 2012.

 

The specialists think that the growth of the developed nations will likely remain sluggish at least until the end of 2012, while the unemployment will keep rising. The situation is aggravated by the abrupt tightening in financial conditions and doubts over scope for monetary and fiscal stimulus needed to help the economies rebound. At the same time, the major economies aren’t, in their view, in the treat of recession.

 

The United States, the euro area, Japan, and the United Kingdom are expected to go through a long period of extremely low interest rates.

[fallenDC]

The background of Bernanke’s speech

 

All eyes today are on Ben Bernanke’s speech that will take place at 6:00 pm (GMT+4). The market is speculating whether the Federal Reserve’s Chairman signals the third round of quantitative easing or not.

 

Professor Lew Spellman, from the McCombs School of Business at the University of Texas at Austin takes a glance back examining how the Fed’s monetary policy has been changing since 2008. Spellman points out that the Federal Reserve’s approaches towards QE1 and QE2 were quite different: QE1 was a defensive step aimed to contain GDP collapse, while QE2, on the contrary, was an offensive measure.

 

It’s difficult to assess the results of QE2 and definitely say whether this program helped the recovery or not. The clear thing is, however, that the inflation expectations have increased – the main argument of those who don’t expect QE3.

 

At the same time, it’s also important to realize what the general approach of Bernanke is – as his colleagues say, the central banker is a man of action: he would rather err doing too much, rather than too little, when dealing with the consequences of financial crisis. Bernanke is also known for criticizing Japanese monetary authorities in 1999: in his view, the Bank of Japan didn’t do enough to fight deflation and encourage economic growth, while it should have kept interest rates low until inflation picked up and buy government bonds.

[fallenDC]

Commerzbank: EUR/USD prospects after Bernanke

 

Analysts at Commerzbank note that investors are very nervous.

 

If the comments of the Fed’s Chairman sound uncertain, the pair EUR/USD will get under pressure.

 

However, the specialists believe that as Bernanke used weak economy to justify the previous QE steps, there’s little chance that he admit that the strategy of monetary stimulus was wrong.

 

So, it may happen that Bernanke’s views on economy aren’t as pessimistic as many are thinking. In such case the markets will likely calm down and EUR/USD will get some support.

http://static2.fbs.com/upload/image/technical_analis/August2011/26_08_11/.thumbs/dcdf96a1b8e52da85ba75ec3304a27fc_500_0_0.jpg

[fallenDC]

Jyske Bank: EUR/USD will break the «wedge»

 

Currency strategists at Jyske Bank note that from the beginning of the week EUR/USD remained in range between $1.4350 and $1.5000 ahead of Ben Bernanke’s Jackson Hole speech. However, the latest trend on yield spreads, equities and commodities shows that the pair has strong downward potential.

 

That’s why the specialists recommend selling the single currency stopping above $1.4580 and targeting $1.3855. In their view, euro is trading within the “symmetrical wedge” and will break this formation this week. The bank forecasts that if the Fed’s Chairman announces QE3, EUR/USD will break the model to the upside; otherwise there will be a downside breach.

http://static2.fbs.com/upload/image/technical_analis/August2011/26_08_11/.thumbs/3a65868a42c86aa1dcb1bad95f6201bc_500_0_0.jpg

[fallenDC]

Martin Weale on the prospects of further QE in Britain

 

Martin Weale, the Bank of England’s Monetary Policy Committee member, doesn’t think that it’s necessary to expand the central bank’s emergency 200 billion pound ($326 billion) bond-purchase program now.

 

However, the official says that his opinion may change if UK economy significantly weakened and inflation falls below the 2% target level. According to Weale, more QE will be necessary if the nation’s banks become more reluctant to lend, though he doesn’t believe such outcome is very likely.

[fallenDC]

Daiwa Securities: Japan can’t conduct interventions frequently

 

According to the government survey of 61 large manufacturers, 63% of respondents are calling for sustained currency market intervention to weaken yen. The participants of the survey see the average rate of USD/JPY in a fiscal year through March 2012 at 81.10 yen and EUR/JPY – at 112.80 yen.

 

Never the less, analysts at Daiwa Securities claim that it’s difficult for Japanese monetary authorities to conduct currency interventions frequently. There are political obstacles as such moves would be criticized by other leading nations. In addition, it’s very hard to reverse the market that keeps regarding yen as a safe haven against the global growth concerns and euro zone’s debt crisis.

 

http://static2.fbs.com/upload/image/technical_analis/September2011/01_09_11/.thumbs/dfc750e4f0d14d0b7f31c628fa1f3918_500_0_0.jpg

[fallenDC]

Wells Fargo: bullish middle-term forecast for NZD/USD

 

In August New Zealand’s dollar weakened versus its US counterpart falling from the August 1 maximum at 0.8841 to end the month in the 0.8500 area. However, analysts at Wells Fargo are still bullish on NZD/USD in the medium term.

 

Among the positive factors for kiwi the specialists cite recovery in the country's economic activity and higher inflation that increases the possibility of the RBNZ rate hike.

 

The specialists expect New Zealand dollar to recover paring last month’s decline. In their view, in the first half of 2012 the pair will trade at record highs in the 0.9100 region.

 

http://static.fbs.com/upload/image/technical_analis/September2011/01_09_11/.thumbs/11ea34e74d82a530770b1022c696ab04_500_0_0.jpg

[fallenDC]

BMO Capital expects good NFP data

 

US August Non-Farm Payrolls data are released tomorrow at 4:30 pm (GMT+4).

 

Economists surveyed by Bloomberg project that the number of jobs in the United States increased in August by 75K after gaining 117K in July. The unemployment rate is seen unchanged at 9.1%.

 

ADP report showed that the number of employed in American private sector rose by 91K versus 109K in July.

 

The Federal Reserve’s Chairman Ben Bernanke claimed in Jackson Hole that the nation’s economic growth was insufficient to achieve sustained reductions in unemployment.

 

Analysts at BMO Capital believe that the data may surpass the expectations. The specialists advise investors to take risk selling US dollar versus its Canadian counterpart in the short term targeting 0.9520 and stopping at 0.9920.

 

http://static.fbs.com/upload/image/technical_analis/September2011/01_09_11/.thumbs/b0e701c4c9433545b846cbc8363934cd_500_0_0.jpg

[fallenDC]

UBS: we face the crisis of capitalism

 

George Magnus, economist at UBS regards the current crisis in the developed nations as the crisis in capitalism: companies seeking for greater profits and productivity are cutting jobs. As a result, income inequality in the US approached the highest level since the 1920s.

 

The specialist advises the policymakers to turn to Karl Marx for the possible solutions. In his view, it’s necessary to lower employer payroll taxes and to create fiscal incentives to encourage companies to hire people, to allow eligible households restructure mortgage debt and to ease capital adequacy requirements for well-capitalized and well-structured banks so that they could credit smaller companies.

 

Magnus proposes European creditors to extend the lower interest rates and longer payment terms proposed for Greece. According to the analyst, instead of QE programs central banks should target nominal GDP growth rate.

[fallenDC]

ING: SNB rate outlook

 

Economists at ING think that the Swiss National Bank won’t lift up interest rates until the middle of 2012.

 

The specialists note that strong Swiss franc has seriously affected the national economy: according to the data released today Switzerland’s economic growth slowed down from 0.6% in the first 3 months of the year to 0.4% in the second quarter. In their view, the same pressure will be seen on the figures for the third quarter.

 

The effect of SNB's recent rate and liquidity injections will be seen in the final quarter of the year. Never the less, ING believes that the central bank won’t be able to ensure 2% growth rate in 2011.

 

http://static2.fbs.com/upload/image/technical_analis/September2011/01_09_11/.thumbs/87500c74283bd3d7715bb4b4aa94302c_500_0_0.jpg

[fallenDC]

Barclays Capital sees potential for pound’s advance

 

Analysts at Barclays Capital believe that if Switzerland and Japan manage to stop appreciation of their national currencies, British pound may strengthen.

 

The specialists say that there are several reasons for that. Firstly, exports don’t account for a big part of UK GDP, secondly, sterling’s advance doesn’t tend to affect stock markets and, finally, pound may be undervalued. In addition, the investors won’t expect UK government to stem pound’s growth.

 

Barclays underlines that the pair GBP/CHF showed better results than EUR/CHF when the SNB Vice President Tomas Jordan said on August 11about the possibility of pegging franc to euro. Pound also performed well when Japan intervened on August 4.

 

The strategists say that the only potential negative effect on pound may come from Britain’s economic weakness.

 

http://static.fbs.com/upload/image/technical_analis/September2011/01_09_11/.thumbs/9e97223e2bccca173ceac2572390ebf8_500_0_0.jpg

[fallenDC]

RBC: comments on USD/CAD

 

Analysts at Royal Bank of Canada say that if Canadian dollar rises too steeply and gets too high versus its US counterpart, it will start affecting the nation’s economy. The negative economic impact, in its turn, will pull loonie lower, so the self-correction will happen.

 

The specialists don’t rule of the possibility of USD/CAD slipping to 2007 minimum, but they think that the pair won’t stay low for long.

 

This year Canadian currency had a series of ups and downs. Although in the second quarter Canadian economy contracted by 0.4% on the annual basis, the majority of economists expect this decline to be a short-lived correction.

 

Comparing 2 nations, Canada has healthier fiscal system and greater weighting to commodities. If commodity sector is strong, loonie will perform quite well. According to RBC, from the point of Canada's economic fundamentals 1.0000/0.9520 range is normal for USD/CAD.

 

It’s also necessary to note that RBC is concerned about the impact of the euro-zone debt crisis on the global economy. The specialists note that investors have to be prepared for an extended period of slow growth both in the United States and Europe.

 

http://static.fbs.com/upload/image/technical_analis/September2011/02_09_11/.thumbs/cd8d0211700f3ba6fd090f363ad5ed2f_500_0_0.jpg

[fallenDC]

Mizuho: forecasts for EUR/USD

 

Currency strategists at Mizuho updated forecasts for EUR/USD. According to the specialists, the single currency will be steadily rising versus the greenback to reach $1.5000 in a year from now. The analysts see euro strengthening to $1.4300 in September and to $1.4650 in 3 months.

 

http://static.fbs.com/upload/image/technical_analis/September2011/02_09_11/.thumbs/a360f8e877349cb687bf16d7b35ad2d4_500_0_0.jpg

[fallenDC]

UBS, Commerzbank: comments on EUR/CHF

 

Currency strategists at UBS note that Swiss franc keeps appreciating versus the single currency and US dollar due to the encouraging economic data from Switzerland and the lack of comments from the Swiss national bank. Commerzbank notes that the data indicate that Swiss economy is fundamentally sound increasing demand for franc as a safe haven.

 

Switzerland's economy expanded 2.3% in the second quarter on the annual basis after gaining 2.5% in the first 3 months of the year. Swiss retail sales grew only 1.9% in July after adding 7.9% in June as Swiss prefer to go shopping abroad.

 

According to UBS, the pair EUR/CHF may hit the 1.1000 level or get even lower. Analysts at Commerzbank say that if euro drops below 1.1023 it will eased down to stabilize in the 1.0800 area.

 

http://static.fbs.com/upload/image/technical_analis/September2011/02_09_11/.thumbs/74bcaa1555bd5cee4b620145f2d292d8_500_0_0.jpg