Comments and forex-analytics from FBS Brokerage Company

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AUD/USD fell below the parity level

 

Australian dollar has slumped today below the parity versus the greenback for the first time in more than 6 weeks.

 

Aussie was affected by HSBC Manufacturing PMI preliminary data that declined from 49.9 in August to 49.4 in September – a reading below 50 signals a contraction in the nation’s manufacturing.

 

Australia & New Zealand Banking note that concerns about the global economic growth make serious negative pressure on AUD. The currency is especially vulnerable to lower Chinese figures as China is Australia’s largest trading partner, the main buyers of Australian commodities. The International Monetary Fund revised downwards its economic growth forecasts this week. In addition, analysts at Westpac claim that the Federal Reserve’s yesterday statement sounded pessimistic and the central bank didn’t surprise the market.

 

The pair AUD/USD went down from Friday minimum at $1.0398 to the levels in the $0.9825 area.

 

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Greece keeps tightening belts

 

Greece announced that it plans to accelerate budget cuts in order to obtain the next tranche of bailout.

 

Additional austerity measures announced yesterday include a 20% cut in pensions of more than 1,200 euro ($1,627) a month and lower wages for 30,000 state employees.

 

Greek government pledged yesterday to complete the 28-billion-euro cuts in June by 2014 instead of 2015.

 

Talks on the Greek aid payments resumed after IMF and EU monitors suspended the negotiations earlier in September after the data showed that Greece’s budget deficit this year through August widened to 18.9 billion euro exceeding the 18.1-billion-euro target. Greece aims to cut its budget shortfall from 10.5% in 2010 to 7.5% in 2011.

 

According to IMF forecast, Greek economy will contract by 5.5% this year and by 2.5% in 2012.

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Mizuho: pound renewed minimum versus yen

 

British pound dropped versus Japanese yen and renewed the record minimum hitting 117.00. The previous all-time low of 118.78 was set in January 2009.

 

Technical analyst at Mizuho Corporate Bank note that GBP/JPY is currently trading at two standard deviations below the average level of the past 10 years at 182.00, but above the 40-year mean regression at 107.00.

 

According to the bank, sterling may lose more sliding to 115.00 and 110.00.

 

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G20 spurred risk-on sentiment for some time

 

The Group of 20 has managed to encourage the markets: the nations pledged “strong and coordinated” response to the problems of the global economy, among which G20 named such factors as “heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment”, says the statement released in Washington.

 

The comments of the world’s largest economies have improved investors’ confidence and risk sentiment. The single currency advanced from the 10-year minimum versus Japanese yen. Euro has also risen from the 8-month minimum versus the greenback on the rumors that Asian central banks bought EUR/USD. Australian and New Zealand dollars found support and rebounded encourages by rising Asian stocks.

 

At the same time, analysts at Standard Chartered point out that no concrete steps were actually announced, so the market’s optimism might soon fade. In their view, there has to be some kind of mechanism that will allow European Financial Stability Facility (ESFS) to expand, which seems unlikely at the moment.

 

Now it’s necessary to watch the IMF-World Bank Annual Meetings take place on September 23-23.

 

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BNY Mellon, RBS: ECB will soon cut rates

 

The Federal Reserve has announced this week the Operation Twist – the measure aimed to lower long-term rates and spur US economy.

 

Some analysts say that now it’s the turn of the European Central Bank to do something referring to the quantitative easing.

 

Currency strategists at Bank of New York Mellon think that there are strong odds that the ECB cuts its benchmark interest rate again returning the borrowing costs to the 1% level where they were six months ago reversing April and June increases by 25 basis points each.

 

Economists at the Royal Bank of Scotland are looking forward to 50-basis-point cut already at the next ECB meeting on October 6 and, if not, then by the central bank's November 3 meeting at the latest.

 

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BarCap: Canadian dollar is down versus the greenback

 

Canadian dollar slumped yesterday to 11-month minimum versus its US counterpart – the pair USD/CAD got above the parity and surged to 1.0361.

 

Loonie was affected by the discouraging US economic prospects and the sings of China’s and Germany’s slowdown. As a result, investors were actively using American debt and currency as a refuge. Canada’s economy has performed rather well in comparison with other developed nations, but it won’t be able to keep showing bright dynamics while the US economy, it biggest trading partner, is weakening.

 

Technical analysts at Barclays Capital claim that the trend for the pair is ready to switch upwards. In their view, the greenback will be able to rise to 1.0675. Support for US dollar lies at 1.0140. If the pair falls below this level, the outlook will turn bearish.

 

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MIG Bank: EUR/USD will keep declining

 

Technical analysts at MIG Bank claim that as the single currency went down below $1.3800 and then slid even lower getting under $1.3495, it will keep falling. In their view, EUR/USD is poised down to $1.2860. The specialists note that there’s large bearish flag on the daily chart.

 

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Credit Suisse about the possibility of euro collapse

 

Analysts at Credit Suisse estimate the possibility of the euro area break up by only 10%. In their view, it would be much cheaper for the member nations to stay in the monetary union bailing out the indebted peripheral economies.

 

If euro collapses and the euro area disintegrates, the peripheral currencies would fall by around 50% pushing net foreign liabilities to 200%-250% of GDP for the periphery ex Italy, resulting in a 40% default on both sovereign and private loans. The economies will contract by about 9%.

 

The bank proposes to boost the EFSF for a TARP-like facility. According to them, the ECB has to keep purchasing peripheral bonds. In addition, Credit Suisse thinks that soft quantitative easing and weaker euro are also needed.

 

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UBS: bearish forecast for EUR/USD

 

Currency strategists at UBS believe that the single currency will likely resume declining versus the greenback as investors tend to favor US dollar as a safe haven.

 

According to the bank, EUR/USD is poised down to $1.20 during the next 3 months. The specialists believe that the pair is going to repeat its 2008 trend when it dropped from $1.60 to $1.23.

 

Euro was seen going down during the past weeks on the concerns about the world’s economic slowdown and the euro area debt crisis.

 

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Commerzbank: bullish outlook for USD/CHF

 

Last week the greenback’s advance versus Swiss franc was limited by the levels in the 0.9185 area, just below the 55-week MA.

 

Technical analysts at Commerzbank believe that USD/CHF is now going through consolidation getting ready to head up for further growth towards 0.9340/0.9400 (March 2011 maximums and double Fibonacci retracement). In their view, the outlook for American currency remains positive as long as it’s trading above 0.8927.

 

The specialists note that support for the pair is currently found at 0.8927 (September maximum) and 0.8646 (last week’s minimum).

 

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Greece: parliament votes on the property tax

 

The single currency remains above the new 8-month minimum versus the greenback at $1.3662 hit yesterday.

 

Analysts Daiwa Capital Markets speak about the temporary revival of the risk sentiment. Economists at Barclays Capital say that euro has chance to return to $1.39.

 

Italy, Spain and the Netherlands are holding the debt auctions today, while Greek parliament is getting ready to vote on the property tax at 4:00p.m. GMT – that would be an important step towards the nation’s receiving the next tranche of financial aid.

 

However, strategists at Morgan Stanley recommend selling EUR/USD in case Greek lawmakers don’t approve the unpopular law.

 

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BMO, Westpac: EFSF vote ahead

 

On Thursday, September 29, German Bundestag will vote on the bill to reform the European Financial Stability Facility (EFSF). The day earlier, on September 28, similar vote is held in Finland.

 

Analysts at BMO Capital and Westpac Institutional Bank expect the euro zone’s leading economy to pass the bailout package but warn that otherwise the market’s reaction is going to be extremely negative.

 

If the worst comers true, the trading recommendations are to sell EUR/USD looking forward a decline to at least $1.32.

 

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Gaitame.com: technical comments on EUR/USD

 

Technical analysts at Gaitame.com Research Institute note that EUR/USD has entered the weekly Ichimoku Cloud and will likely ease to its bottom at $1.3183.

 

The specialists say that if the single currency goes below the 50% Fibonacci retracement of its advance from $1.1875 on June 7, 2010, to $1.4940 on May 4, 2011, it will drop to the 61.8% Fibonacci retracement at $1.3047.

 

In their view, euro’s decline may lead the currency to this year’s minimum in the $1.2873 zone.

 

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Mizuho: comments on USD/JPY

 

Technical analysts at Mizuho Corporate Bank claim that the greenback is consolidating within an irregular triangle versus Japanese yen.

 

In their view, the outlook for USD/JPY remains negative as long as it’s trading below 78.00.

 

The specialists think that the pair may decline to the psychological level of 75.00 and then to 74.30 and 72.00.

 

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Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

Last week British pound, as it was expected, dipped to the lower border of the Ichimoku Cloud (3) where the bulls managed to find support and return sterling higher, closer to the centre of Kumo.

 

The prices advance since the beginning of this week manages to contain the decline of Tenkan-sen (1) and Kijun-sen (2) and bring them into the horizontal state. The Turning line together with the Standard line and the upper border of the Ichimoku Cloud is currently acting as resistance for GBP/USD.

 

At the same time, it’s necessary to note that the weekly Cloud has switched to the negative mode: though it’s still quite narrow and the bears haven’t gained much power yet, this may be a signal that the growth seen now is nothing but a correction.

 

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Daily GBP/USD

As it may be seen on the daily chart, that pound was gaining versus the greenback during the past 3 days as it strengthened and from the 1-year minimum hit last Thursday.

 

The bulls are currently confronting the Turning line (1) which acts as resistance. If the prices manage to overcome this level, they will face another obstacle – the Standard line (2).

 

All lines of the Indicator leveled up in the horizontal state (1, 2, 3 and 4). The descending Ichimoku Cloud (3, 4) shows that the bears still dominate the market.

 

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Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

 

Once again we have to say that the situation on the weekly USD/JPY chart remains unchanged. The prices keep consolidating between 76 and 78 yen. High demand for yen keeps contrasting with the risk of the Bank of Japan’s interventions.

 

All lines of the Indicator are directed horizontally (1, 2, 3 and 4) signaling the sideways trend.

 

At the same time, the risks for the pair seem to be to the downside: Tenkan-sen (1) and Kijun-sen (2) still hold the strong «bearish cross» in place (5) providing resistance for the prices, while the Ichimoku Cloud remains rising (3, 4).

 

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Daily USD/JPY

 

On the daily USD/JPY chart the Turning line (1) and the Standard line (2) have formed the “dead cross” (5) – strong bearish signal as the lines have intersected below Kumo.

 

Tenkan-sen and Kijun-sen still act as resistance – they didn’t let the bulls breathe freely and hold the pair close to the record minimums.

 

All lines of the Indicator became horizontal (1, 2, 3 and 4) that means that the US currency will likely keep consolidating.

 

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Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

 

The greenback is gradually strengthening versus its Swiss counterpart.

 

The lines Kijun-sen (1) and Tenkan-sen (2) are getting ready to form the “golden cross”.

 

The sole obstacle on the upwards is the descending Ichimoku Cloud.

 

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Daily USD/CHF

 

On the daily chart the greenback’s rate is consolidating within the uptrend.

 

The Turning line (1) and the Standard line (2) act as support.

 

The rising Ichimoku Cloud has become wide enough to show that the bulls managed to regain predominance.

 

The general technical outlook remains positive.

 

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SocGen, Commerzbank: comments on GBP/USD

 

Analysts at Societe Generale and Commerzbank are positive on British pound in the short term. In their view, GBP/USD is on its way up to resistance in the $1.5780/1.5820 area (July 12 minimum/38.2% Fibonacci retracement of the decline from $1.6617).

 

The longer-term outlook for sterling, however, is negative. Commerzbank expects UK currency to decline to the 2009-2011 uptrend line at $1.4973. Support for the pair is found at $1.5347 (December 2010 minimum).

 

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Mizuho: demand for yen remains high

 

Japanese yen is strengthening versus the greenback on investors’ demand for safe haven.

 

Later in the day the market expects some discouraging data – orders for US durable goods are seen declined by 0.4% in August from July level. The figures are released at 12:30 p.m. GMT.

 

In addition, there are talks that Japanese exporters are repatriating their overseas earnings before the end of the third quarter and the fiscal half-year end that comes on Friday.

 

Analysts at Mizuho note that the markets are still dominated by uncertainty caused by the euro zone’s debt problems and concerns about the world’s economic slowdown. In their view, yen will continue being quite attractive for investors.

 

Strategists at Citibank note that the US dollar still has downside potential. The specialists claim that today USD/JPY will remain trading between 76.30 and 77.30.

 

The pair has been staying between 76 and 78 yen since the Bank of Japan’s intervention at the beginning of August.

 

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UBS, RBS: forecasts and comments on EUR/USD

 

The single currency keeps crawling up versus the greenback from the 8-month minimum at $1.3362 hit on Monday.

 

Technical analysts at UBS believe that the current upward correction can bring euro higher, but then it will resume its slump. The specialists kept 1-month target for EUR/USD at $1.30 and the 3-month estimate – at $1.20. As for the coming political decisions, the bank is rather optimistic saying that Greece will likely get the sixth tranche of the bailout and that the odds are that Germany will ratify the changes to the EFSF tomorrow.

 

At the same time, the Royal Bank of Scotland cut EUR forecasts yesterday to $1.33 by the end of 2011 and $1.41 by the end of 2012. RBS underlined that there are strong chances that the ECB will lower the borrowing costs amid the rising risk of the region’s falling into recession the next year.

 

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Commerzbank: comments on EUR/USD

 

The single currency went up versus the greenback from the 8-month minimum at $1.3362.

 

Technical analysts at Commerzbank note that euro has reached the level of 23.6% Fibonacci retracement of the decline from August at $1.3640. In their view, EUR/USD upward correction is over at this point.

 

It’s necessary to say, however, that the specialists don’t rule out the possibility of the pair’s advance to $1.3723 (23.6% retracement of the move down from May) and to $1.3815. According to the bank, resistance for the European currency is found at $1.3936 (September 15 maximum).

 

If euro resumes moving down, it will drop to $1.3428/1.3360 and then to $1.2870 (2011 minimum). The bank’s long-term target for EUR/USD remains at $1.20.

 

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Goldman Sachs: euro and the situation in Italy

 

Economists at Goldman Sachs claim that unstable political situation in Italy threatens the positive outlook for the single currency.

 

In their view, in the worst case continued reluctance of the Italian authorities to fight the national economy’s structural weaknesses and the worsening public relations may keep affecting the market’s attitude to Italian bonds.

 

Never the less, the analysts are hopeful. The bank believes that Italy will take a more pro-active approach to the structural reforms. According to Goldman, this will help bring the debt levels down into sustainable territory even if Italian economic growth continues to slow. .

 

The bank sees euro at $1.40 in 3 months, $1.45 in 6 months and $1.50 in a year. The strategists warn, however, that any signs that the worst-case scenario begins to come true will affect the forecasts.

 

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Commerzbank: bullish outlook for USD/CAD

 

Last week the greenback surged versus its Canadian counterpart from the levels in the 0.9800 zone to 1-year maximum at 1.0385 reached on September 26. Then USD/CAD faced resistance of October 2010 high and eased down to $1.0220.

 

Technical analysts at Commerzbank claim that support for the pair is found at 1.0140/09 (August, May and June 2010 minimums) and 1.0058/00. In their view, US dollar will recoil up from these levels and resume growth.

 

According to the bank, US currency will manage to strengthen to the 200-week MA at 1.0581.

 

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Commerzbank: comments on AUD/USD

 

Technical analysts at Commerzbank think that Aussie’s correction from the 10-month minimum at $0.9621 hit on September 26 reached its target at $0.9967.

 

The specialists don’t rule out the possibility of some more retracement to $1.0180/1.0200, but expect AUD/USD to resume its downtrend. In their view, if the pair breaks below $0.9835, it will be poised down to the recent minimum at $0.9621 and $0.9407/0.9390 (late 2009 and early 2010 maximums).

 

According to the bank, resistance for Australian dollar is provided by the downtrend line from $1.0503.

 

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Bernanke: unemployment may lead to the “national crisis”

 

Federal Reserve Chairman Ben Bernanke warned yesterday that the United States finds itself under threat of a “national crisis”.

 

Bernanke underlines that the situation at the labor market remains intense: the unemployment rate stays at or above 9% since April 2009 and almost 45% of the unemployed are jobless for already 6 months or more.

 

The Fed’s head reiterated that monetary policy along can’t solve the country’s problems and spur its sluggish economic growth. In his view, it’s very important to breathe life in the housing markets. Bernanke also pointed out that the US should use the experience of many emerging market economies supporting strong economic growth through “disciplined fiscal policies”, “encouraging private capital formation and undertaking necessary public investments”, reports Bloomberg.

 

Last week American central bank decided to lengthen long-term interest rates by replacing $400 billion of short-term debt in its portfolio with longer-term Treasuries. At the same time, 3 members of the FOMC opposed this decision and spoke against further monetary stimulus. Despite 2 rounds of quantitative easing, which cost the Fed $2.3 trillion, US growth has stalled.