Comments and forex-analytics from FBS Brokerage Company

[fallenDC]

Danske Bank: EUR/USD forecast revised upwards

 

Analysts at Danske Bank revised upwards their forecasts for the single currency versus the greenback.

 

The specialists think that the downside risks for EUR/USD have decreased due to the dovish Fed’s statement, the positive impact of ECB’s 3-tear LTRO and extensive short positions on euro.

 

According to the bank, the pair will trade at $1.30 in 3 months, $1.32 in 6 months and $1.36 in a year. At the same time, Danske urges investors to be cautious and hedge their long euro positions as downside risks to the global business cycle continue to translate into downside risks for euro.

 

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[fallenDC]

Dollar may strengthen versus Japanese yen

 

Many experts began speaking about the reversal of US dollar’s downtrend against Japanese yen claiming that American currency may be supported by rising global equities, investment outflows from Japan, the Asian nation’s first in many years annual trade deficit as well as technical factors. More and more options traders start betting on dollar’s advance.

 

Analysts at Royal Bank of Scotland think that the greenback will be slowly but surely rising versus Japanese yen. In their view, USD/JPY will reach 80 yen by March.

 

Strategists at Bank of Tokyo-Mitsubishi UFJ note that as the risk sentiment revives investors will seek for profit going away from low-yielding Japanese currency.

 

Some experts make bolder judgments and foresee more cardinal changes. For example, currency strategists at Wakabayashi claim that the 40-year cycle of yen’s appreciation from 357.41 yen per dollar in August 1971 to the record maximum of 75.31 yen per dollar on October 31, 2012 has finished. Note that 4 years ago these specialists predicted that dollar bottom around 74 yen in February 2012 and then recover. In their view, USD/JPY will rise to 180 yen by 2025. Analysts at Citigroup say that a move toward 100 yen by the end 2013, to the levels last seen in 2009, “may not be as incredible as it sounds today.”

 

All in all, 40-year trend is a too strong tendency to analyze now. One may speak about a reversal like that only if USD/JPY gets above 88.70 yen. In the foreseeable future among the things to watch there is US economic momentum, Japanese investment flow trends and the nation’s trade balance.

 

The greenback’s appreciation will likely be gradual as the Federal Reserve aims to keep interest rates at the record minimum until the end of 2014.

 

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[fallenDC]

RBC: good news are already priced in euro

 

The single currency has been strengthening so far even without the resolution of the Greece’s negotiations with its private creditors.

 

Analysts at RBC Capital Markets think that when Greek debt deal is reached, we won’t see much of euro’s advance as most of the good news for EUR is already priced in. In their view, austerity measures will cause severe slowdown of the region’s economy putting euro under negative pressure.

 

The specialists propose going short on EUR/GBP at 0.8450 stopping at 0.8625 and targeting 0.8100. According to RBC, British economic outlook seems better than the euro zone’s one as the economists expect UK GDP to gain 1% this year, while the European economy will likely stagnate.

 

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[fallenDC]

Nomura: forecasts for euro, yen and Aussie

 

Analysts at Nomura claim that as the US and European macroeconomic data has so far improves reviving global market’s sentiment, negative risks for the euro area subsided. As a result, the bank revised up its currency forecasts.

 

The specialists expect EUR/USD to trade at $1.20 by the end of the second quarter, at $1.23 by the end of the third quarter and finish 2012 at $1.25.

 

In their view, the pair USD/JPY will end Q2 at 80 yen, Q3 as well at 80 yen and Q4 at 81 yen level.

 

Nomura thinks that AUD/USD will reach $1.05 by the end of Q2, $1.07 by the end of Q3 and finish 2012 at $1.08.

 

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[fallenDC]

Westpac: sell AUD/NZD

 

As Greece is trying to reach agreement with its private creditors, the market became worried about the situation in Portugal.

 

Analysts at Westpac don’t think that Portugal is an immediate concern, though they admit that one has to be cautious about that. In their view, by the middle of the year the discussion about whether this nation will need the second bailout like Greece will be heating up.

 

For now, the specialists say that it Greek deal is made and EUR/USD rises to $1.3400, one has to sell the single currency. At the same time, the bank underlines that the uncertainty surrounding the Greek negotiations and the prospect of the Fed’s Chairman Ben Bernanke’s testimony on Thursday makes it hard to trade EUR/USD, so one may better sell Australian dollar versus New Zealand’s dollar at 1.2930 stopping at 1.3115 and a targeting 1.2650.

 

Westpac expects the Reserve bank of Australia to cut interest rates new week. In addition, “there has been renewed interest over the weekend of sovereign wealth funds buying kiwi assets”, say the analysts.

 

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[fallenDC]

AUD surges, Gillard’s comments

 

Australia's Prime Minister Julia Gillard claimed today that the rate of the national currency versus the greenback will likely remain relatively high during the next several years. In her view, European debt turmoil made investors regard Australian dollar as a global safe haven for the first time in its history. As the euro zone’s issues are far from over, one should expect Aussie to remain strong. The nation still has the best triple-A credit rating. Last year offshore holdings of Australian government bonds increased to 80%. The pair AUD/USD rose by around 80% since 2008.

 

The Prime Minister claimed that Australia’s economic outlook is positive and that the government is able to fulfill its pledge and deliver budget surplus in 2012-2013. Returning a budget surplus will ensure that the central bank has room to ease monetary policy if needed.

 

AUD/USD bounced today to $1.0700. Analysts at Westpac think that Aussie is overvalued above $1.6000. The specialists underline that AUD/USD traded above $1.05 only for 1.4% of days since the 1983. In their view, Aussie may retrace to $1.0300 in near term, though the possibility of the Fed’s QE3 and additional stimulus from the ECB has potential to push the pair above $1.0800. The majority of economists believe that the Reserve Bank of Australia will reduce interest rates on Tuesday, February 7, though Aussie may show little reaction.

 

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[fallenDC]

Yen advances, talks about potential intervention

 

Japanese yen keeps strengthening versus the greenback for the 6th day in a row.

 

The market's speculating about potential Japan’s currency intervention and further monetary easing by Bank of Japan – this talk may provide USD/JPY some support keeping it from falling much below 76 yen.

 

BOJ Deputy Governor Hirohide Yamaguchi repeated today that Japanese central bank is ready to act as the European debt crisis still poses a high threat to the global markets and economy.

 

The nation’s Finance Minister Jun Azumi and Economy Minister Motohisa Furukawa spoke about the necessity to overcome deflation. Azumi underlined that “speculative moves are increasing in the market and we can’t overlook them” signaling that the Federal Reserve is partly to blame for yen’s recent advance.

 

Strategists at Bank of America Merrill Lynch think that Japanese monetary authorities may intervene if USD/JPY falls below 75 yen in order to save the national exporters. Last year Japan sold 14.3 trillion yen ($187 billion).

 

Never the less, analysts at JP Morgan believe that yen-selling intervention is highly unlikely even if the pair renews the record minimums as the United States strongly criticizes Japan's unilateral interventions.

 

At the same time, Nomura Research Institute argues that Japan has to abandon the intervention approach as stronger yen makes lower the cost of fuel imports – a very important expense item for Japan given its current nuclear capacity issues.

 

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[fallenDC]

Get ready to sell euro

 

The negotiations between Greece and its private creditors are still going. On January 31 Greek Prime Minister Lucas Papademos claimed that the nation will try to make the agreement reached by the end of the week.

 

Bloomberg reports that there’s speculation that Athens managed to persuade bondholders agree to lower coupon on the new 30-year securities from 4.25% to 3.6%.

 

The hopes of soon Greek deal allowed the single currency to gain despite all the worries about the euro zone’s future. At the same time, many experts say that when the deal is actually reached, one should sell euro.

 

Analysts at BMO Capital claim that the Greek negotiations could continue into March, when Greece has a big bond payment due. The specialists are also deeply concerned about Portugal’s fate. The yield on the nation’s 10-year bonds is above 15% after Monday’s peak of 17.4%.

 

According to BMO, investors should sell EUR/USD at $1.3185 with stopping at $1.3285 and targeting $1.2885. Those investors who would rather wait for a potential rise on news of a Greek deal can just adjust the trade levels to reflect the same 3:1 ratio of target to stop, says the bank.

 

Analysts at TD Securities point out at the risk of euro’s decline. Bank of New York Mellon thinks the success of the Greek deal is already prices in euro’s rate and there won’t be much of an advance. Westpac keeps expecting move up to $1.3400 to sell there.

 

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[⭐ Unclepips]

Those Japaneses talked about intervention many thousand years go, and they haven't done squat.

[fallenDC]

Lloyds: EUR/CHF will breach SNB’s floor

 

Analysts at Lloyds Bank believe that the single currency may break the floor versus Swiss franc set by the Swiss National Bank in September at 1.2000.

 

The specialists claim that the long-term chart still shows that EUR/CHF may drop to 1.1311 before the 4-year downtrend is over. In their view, the pair has so far tested trend resistance on the monthly chart, but didn’t manage to break above.

 

According to the bank, resistance for the pair for the month end is at 1.2490, while support lies at 1.1274 (monthly Ichimoku conversion line).

 

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[fallenDC]

Morgan Stanley cut EUR/USD forecast

 

Analysts at Morgan Stanley lowered their forecast for EUR/USD’s minimum this year from $1.20 to $1.15.

 

The specialists note that ECB’s expanded its balance sheet and expect more easing from the central bank.

 

“We believe that the relative performance of money multipliers will be a significant driving force for currency markets in the coming year. We see the ECB liquidity as a negative for the EUR,” said the economists.

 

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[fallenDC]

Euro’s affected by the Greek uncertainty

 

The lack of agreement between Greece and its creditors is weighting on the rate of the single currency. The weekend approaches, but the uncertainty remains strong.

 

Analysts at Mizuho claim that Greek creditors have no incentive to voluntarily agree on a debt write-down, so it would be very difficult for the nation to reach the deal with the bondholders. The specialists say that EUR/USD should fall below $1.20.

 

The single currency may show the weekly decline as it’s trading in the $1.3150 area, below Monday’s opening at $1.3222.

 

Analysts at RBC Capital Markets think that the downtrend will become evident if euro closes the day below $1.3028 (February 1 minimum). That would mean that the pair has topped and will be targeting $1.2875. On the upside, the upward move will be confirmed by the pair’s close above $1.3220. In this case, EUR/USD will head to $1.3291 and then to $1.3469.

 

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[fallenDC]

Analysts’ comments on SNB’s floor

 

The European currency has so far approached the critical level versus Swiss franc at 1.20. Swiss National Bank interim President Thomas Jordan expressed resolve to defend EUR/CHF floor set in September with all efforts. Here are the analysts’ comments on this issue.

 

Swissquote Bank: “We’re seeing a test of the floor. If European policymakers make a deal, get Greece the money, and if markets cheer on Monday, the SNB is going to wipe the sweat off its brow. That’s the primary determinant.” Never the less, “already there’s a feeling that the longevity of the floor is highly questionable given what we’re hearing out of Europe. There’s also a question about Jordan’s commitment to the floor. Hildebrand had become a figurehead, the guy up front and there’s a feeling of less control.”

 

Citigroup: “SNB will defend the floor at any cost”.

 

RBS: “The closer we get, the more excited markets become, and if we touch 1.20, the SNB should be ready to act. It’s obviously watching very closely.”

Standard Bank: “If the euro-franc is sitting just above 1.20 and there’s a shock within the euro zone such as a Greek pullout, the euro could easily plunge through this barrier almost before the SNB has had time to react.”

 

Commerzbank: “Consumer prices are 0.7% below last year's levels. Excluding energy prices the figure even reaches 1.1%. If the SNB is breaking out in a cold sweat this is more likely to be caused by concerns about deflation. The SNB would be pleased about any franc it can create by intervention.”

 

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[fallenDC]

Forecasts for January NFP figure

 

US Non-Farm payrolls data for January is released today at 1:30 p.m. GMT.

 

Bloomberg median forecast: +140K

 

Reuters’ median estimate: +150K

 

Prior three months:

 

December: 200K

 

November: 100K

 

October: 110K

 

ADP Non-Farm Employment Change: +170K vs. +292K in December.

 

Initial jobless claims 4-week MA: 375.8K vs. 374K at the end of December.

 

Challenger January job cuts: -53.5K vs. 18-year average of -101K.

 

Citigroup expects NFP to add only 100K. The bank underlines that the good outcome would only reinforce the recent trend of good US data, while a weak payrolls number could signal that expectations have begun to adjust.

 

Analysts at Ueda Harlow think that if US labor market figures turn out to be good and stocks rise, investors will get out of the dollar because of the low rates.

[fallenDC]

Bullish euro forecast? Really?

 

Analysts at Bank of New York Mellon think that the dynamics of the pair EUR/USD will depend more on dollar’s prospects than on those of euro.

 

The specialists think that as US economic data tends to improve that will encourage global risk appetite. As a result, the greenback will be widely used as a funding currency for the carry trade: investors will borrow in US dollars in order to invest in higher-yielding overseas assets. BNY Mellon thinks that American currency will get under pressure, especially in the second half of the year.

 

According to the bank, EUR/USD may rise to $1.40 by the end of 2012 and maybe even to $1.45.

 

It seems quite unusual to read such bullish euro forecast, don’t you think?

 

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[fallenDC]

February 6: market situation, coming events

 

The Asian session was marked by the weak Australian data: retail sales declined by 0.1% in December (m/m). This increases the possibility of the Reserve bank of Australia’s rate cut tomorrow (consensus opinion). The RBA reduced borrowing costs by 25 bps both in November and December. In January the central bank didn’t meet. It’s necessary to note, though, that some economists think that the RBA may stay on hold expecting the retail banks to follow up their warnings on funding costs and not pass on the easing. Another point in favor of keeping the rates unchanged – good US labor market data released on Friday (unemployment fell to 8.3%).

 

The weekend came and went, but Greek negotiations aren’t over yet. Greece’s Prime Minister Lucas Papademos will once again meet private creditors today as yesterday the talks finished with several points still under discussion. Papademos said the leaders of Greek political parties had agreed on a series of primary issues, such as additional new spending cuts equal to 1.5% of GDP in 2012. Never the less, the Prime Minister’s statement does not mention anything on the proposals causing the most friction, which include a further reduction of minimum wage, elimination of the 13th and 14th months of salary, and massive lay-offs in the public sector.

 

The Troika – the European Commission, the IMF and the ECB – is currently in Athens to examine the country’s finance, it progress on promised reforms, and to estimate its funding needs. Jean-Claude Juncker, the Eurogroup president and Prime Minister of Luxembourg, claimed that Greek default remains a possibility. There will be labor union strikes in Greece on Tuesday.

 

The market’s risk sentiment is affected by the tensions in the Middle East, particularly in Syria and Iran.

 

EUR/USD went down below $1.3100. USD/JPY kept its advance rising above 76.50 yen.

 

To watch today:

• France's debt auction (plans to sell 8.5 billion euro ($11 billion) of bills.

• St. Louis Federal Reserve President James Bullard and President of the FRB of Dallas Richard Fisher speak amid the speculation that the Fed may avoid further monetary easing.

 

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[fallenDC]

The odds of QE3 in the US declined?

 

US positive labor data released on Friday triggered speculation that the Federal Reserve may avoid further monetary stimulus.

 

Analysts at Brown Brothers Harriman are sure that the possibility of additional QE declined. Strategists at UBS note that if US employment data remain this strong going forward, the likelihood of further Fed easing will be lower than what the market priced in after the FOMC January 25 meeting.

 

As a result, the greenback now may be under less pressure than it was expected earlier. Consequently, UBS thinks that the risky currencies, such as Australian and New Zealand’s dollar will be capped and won’t be able to reach 2011 maximums. Euro, Swiss franc and Japanese yen which are the candidates for the role of the funding currency will fall against US dollar. The specialists underline that the single currency will become less and less correlated with the risk-on mode of the market.

 

In the short term analysts at J.P. Morgan recommend selling euro versus US and Canadian dollars. The economists say that euro may gain this week if the ECB doesn’t cut rates, so they advise to watch and see if EUR/USD manages to get to $1.3200 and then go short there stopping at $1.3600 and target $1.2800.

 

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[fallenDC]

CFTC trader positioning data

 

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that:

 

• Euro shorts declined, but remained excessive. Net shorts account for around 158K contracts, down from the previous week’s total of 171K.

• British pound shorts fell from 31K contracts on January 24 to 26K on January 31. Sterling positions are improving for the second week in a row.

• Japanese yen net longs increased from 44K contracts reported on January 24 to 57K on January 31. Yen speculative positions are just below their maximum in over a year which was reached on January 10 when contracts surpassed the August 2 level of 59K.

• Swiss franc net shorts declined from 13K contracts on January 24 to 11K net short contracts on January 31. The shorts decrease for the second consecutive week.

• US dollar longs were reduced by 1/3rd but overall positioning is not yet very significant, at around 100K contracts. Non-commercial futures traders, usually hedge funds and large speculators, decreased their total US dollar long positions from a total long position of $20.09 billion on January 24 to $14.22 billion on January 31.

 

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound.

[fallenDC]

GBP/USD: technical levels

 

British pound may decline versus the greenback to $1.5620/43 as the bears are currently trying to push the pair below Friday’s minimum of $1.5749. Support for GBP/USD lies at $1.5705 (February 1 minimum) and $1.5600.

 

The short-term outlook, however, still remains bullish. If sterling manages to get above $1.5883 (last week’s maximum), it will be able to climb to $1.6000 and $1.6165 (October 2011 high).

 

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[fallenDC]

USD/JPY: technical levels, intervention risk

 

Analysts at UBS think that Japan’s monetary authorities will intervene if USD/JPY dives below 75 yen. At the same time, it seems that until the critical level is tested, Japan will use only verbal interventions, claims Credit Agricole.

 

Support for the pair is situated at 76.42/03 (January 31 maximum/February 1 minimum), while resistance lies at 76.87 (38.2% Fibonacci retracement of the decline from January 25 to February 1) and 77.15 (Ichimoku base line and 100-day MA).

 

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[fallenDC]

Short-term outlook for euro: analysts’ comments

 

Analysts at Morgan Stanley are bearish on the single currency. In their view, the pace of euro’s decline will be determined by whether Greece can meet the restructuring and austerity claims laid out by the Troika. So far, many of the major political forces in Greece have rejected demands to reduce minimum wages down to Portugal's levels, fearing that the economy would move further into recession, notes the bank.

 

Strategists at Commerzbank also think that EUR/USD will likely weaken as Greek situation remains unresolved. In their view, the area below $1.3050 could become critical as it could increase worries that the 10-day trading range between $1.3030 and $1.3230 will break on the downside.

 

Specialists at ING claim that the pair may test support at $1.3000. According to the bank, Greece will be eventually reach solution, but only after the stressful period of uncertainty. Euro will likely test the downside levels, says ING. However, the analysts warn that there’s the risk of a short-squeeze to the $1.3300 area.

 

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[fallenDC]

Bank of England may announce additional QE

 

On Thursday at 12:00 p.m. GMT the Bank of England’s Monetary Policy Committee announces its decision.

 

According to the consensus forecast, the BoE will increase its asset purchase program by 50 billion pounds to 325 billion in order to avoid recession. The central bank is expected to hold the key interest rate at the record minimum of 0.5%.

 

UK GDP contracted by 0.2% in the fourth quarter of 2011. Recession is defined as 2 successive quarters of falls.

 

Although we’ve seen some inspiring data in January (positive PMI from the manufacturing and services sector released last week), it’s too early to speak about recovery. British economy is strongly connected with the euro area and the problems of the latter are still unresolved.

 

As Britain’s economic outlook looks rather grim, the possibility that inflation will undershoot the 2% target in the medium term seems rather high. As a result, this will allow the nation’s central bank to conduct additional monetary stimulus.

 

Analysts at UBS “expect the MPC will agree to buy another 50 billion pounds of government bonds. The PMI releases are only one month's data and fiscal austerity is likely to keep holding back UK growth. Thus we continue to see GBP/USD being over-extended at current levels of $1.58.”

 

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[fallenDC]

John Taylor is bearish on US dollar

 

John Taylor, the founder of FX Concepts, the world’s largest currency hedge fund, is bearish on US dollar after the Fed extended their pledge to keep interest rates close to 0 until late 2014 and signaled that it’s prepared for additional quantitative easing on January 25.

 

The specialist is more bearish on US currency than on the European one. “Everybody in the market is sure that whenever the dollar looks strong, Bernanke will come up with another idea to make it weak”, says Taylor. In his view, EUR/USD will end the year at the parity level.

 

The economist also expects the greenback to depreciate versus Japanese yen even if it is temporarily boosted by the bank of Japan’s dollar purchases. Taylor agrees that Japanese central bank is likely to intervene in 75 yen area, but thinks that traders will wait until USD/JPY is pushed up by the interventions and then start selling the pair again.

[fallenDC]

RBA left the rates unchanged

 

Australian dollar surged to the 6-month maximum versus the greenback at $1.0809 as the Reserve bank of Australia surprisingly decided to keep the rates unchanged at 4.25%, while the market was looking forward to a cut. For now the pair AUD/USD has returned back to the levels in the $1.0780 area.

 

The RBA Governor Glenn Stevens noted that “with growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy was appropriate for the moment.”

 

Analysts at RBC claim that the central bank “has left the door open for a rate cut going forward, but the onus is going to be on the data.” Economists at ANZ think that the RBA is showing no signs of any immediate policy easing. According to the specialists, the policy statement was neutral, while the RBA made little mention of bank funding costs and won't incline to easing unless the global outlook seriously changes.

 

The RBA lowered costs both in November and December by 25 basis points. The majority of the economists expected the central bank to lower the borrowing costs.

 

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[fallenDC]

Greece: negotiations seem endless

 

The single currency is under pressure versus the greenback, unable to resume recovery from January minimum at $1.2625. The pair EUR/USD has so far been consolidating in the $1.3035/1.3225 area. The bias is still bullish. On the upside, if euro rises above $1.3233, it may get to $1.3375 (December 12, 2011, maximum). On the downside, below support at $1.3075, the pair may drift to $1.2856/75 (December 29, 2011, minimum/January 2011 minimum).

 

Investors are worried that the Greece’s policymakers may fail to reach an agreement on terms for a second aid package, which is a condition for the second bailout. Today Greek Prime Minister Lucas Papademos will resume talks with the heads of 3 political parties in his interim coalition government. In addition, Papademos begins today a second round of negotiations with the Troika – the European Commission, the ECB and the IMF.

 

Analysts at Westpac think that there will be a lot of problems and shocks before the Greek situation is resolved, so they are bearish in euro. The single currency lost 4.5% during the last 3 months.

 

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