Comments and forex-analytics from FBS Brokerage Company

[fallenDC]

EUR/USD up on US data

 

On Thursday (16:30 GMT) a bunch of negative data was released in US.

 

US initial jobless claims unexpectedly increased to 380K compared with the forecast 355K. Producer Price Index (PPI) also didn’t come up with the economists’ expectations: 0.0% vs. a forecasted rise 0.3%. The trade deficit contracted to -46.0B vs. forecasted -51.9B, but mostly due to the decline of imports.

 

The currency pair EUR/USD trades in the 1.3175 area (a one-week high). Resistance lies at $1.3200 and $1.3235. On the downside, support might act at $1.3095, $1.3040 and $1.2995.

 

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Friday, April 13: economic news and outlook

 

China’s growth slowed down

 

The market has been expecting Chinese economy to slow down, but the actual data came even worse than the projections: the nation’s GDP added only 8.1% in Q1 vs. the forecast of 8.4% and down from 8.9% increase in the last 3 months of 2011. This is the slowest expansion in almost 3 years.

 

The data has naturally hit Australian dollar (remember Australia exports commodities to China?). Aussie weakened versus all of its major peers, the pair AUD/USD went down from this week’s maximum at $1.0451 reached today to the levels in the $1.0400 area.

 

Fed speakers

 

Fed Bank of New York President William C. Dudley claimed yesterday that it’s “too soon to conclude that we are out of the woods” and that the rates should be held at the minimal level until the end of 2014.

 

Ben Bernanke speaks later today amid the speculation that the Federal Reserve will conduct additional easing as the economic recovery isn’t going as smooth as the central bank thought it would.

 

American currency weakened versus the majority of its peers ahead of the CPI release later today: the pace of consumer prices growth is seen declining from 0.4% in February to 0.2% in March. Slowing inflation would give the Fed more room for another QE.

 

Preparing for additional stimulus from Japan

 

The greenback and the single currency are strengthening against Japanese yen for the third day as the market’s looking forward to more easing from the bank of Japan (though USD/JPY was affected by the weak Chinese data). Today the nation’s ministers will discuss the problem of deflation.

 

Asian stocks: Nikkei +1.2%; HK +1.6%; Shanghai +0.25%.

 

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[fallenDC]

UBS lowered forecasts for USD/CAD

 

Analysts at UBS think that though the Federal Reserve will start normalizing its policy the next year, the Bank of Canada will start moving in this direction earlier (the reasons – recent strength in Canada’s employment data and the fears about the housing price bubble).

 

The specialists think that such expectations aren’t prices in the exchange rates and expect the greenback to get under pressure versus its Canadian counterpart, so they lowered forecasts for USD/CAD from 1.0100 to 0.9900 in a month and from 1.0300 to 0.9800 in 3 months.

 

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Commerzbank: bearish view on euro

 

Technical analysts at Commerzbank stick to their bearish view on the prospects of the single currency versus the greenback.

 

The specialists underline that EUR/USD failed to break resistance at $1.3207 (the 55-day MA).

 

In their view, euro’s decline will resume if it breaks below support line at $1.3035. In this case euro will slide to $1.2974/54 (February minimum and 61.8%

 

Fibonacci retracement) and below that to $1.2624 (January minimum) and finally to $1.2000.

 

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Standard Chartered: forecasts for majors

 

Analysts at Standard Chartered updated ctheir currency forecasts from Q2, 2012.

 

The specialists are bullish on the greenback and negative on the single currency as teh euro zone's facing the treat of recession and will likely keep suffering from fiscal issues.

 

Included in the note is their euro exchange rate forecast call.

 

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RBS: trading updates for GBP/USD

 

Analysts at RBS remain long on British pound versus the greenback placing the target at $1.6033/72 (tweezer top formed in November) and stops at $1.5790. The strategy is to buy GBP/USD on the dips to $1.5850.

 

The specialists warn investors, however, that if sterling breaches support of $1.5790, they should switch to short positions citing a “head and shoulders” mode watching for $1.5666 and $1.5585.

 

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[fallenDC]

Comments on EUR/USD

 

The single currency is trading today on the downside versus the greenback as it was unable to overcome resistance of 50-day MA.

 

The pair EUR/USD keeps trading in range between $1.30 and $1.35 within which it has been squeezed since January. Analysts at Commerzbank believe that euro will be able to break out of this range only in case something big happens such as QE3 or the escalation of the debt crisis in Europe.

 

The situation in the euro area’s still uncertain: while Italy survived this week’s debt auctions well enough, Spanish 10-year yields remain dangerously close to 6%. The reaction to the news that Spain banks borrowed 316.3 billion euro from ECB in March up from 169.8 billion euro in February was, however, rather muted as EUR/USD’s still above $1.3100.

 

The European currency was dragged lower mostly by the talk that the ECB may restart its government bond purchase program. On the one hand, such action would ease the stress at bond market; on the other, investors may take such news as a very bad sign.

 

All in all, from the fundamental point of view, the market’s attention which has returned to Europe in the recent weeks will be staying here for now.

 

EUR/USD is now trading between 50-day MA on the upside and 100-day MA on the downside.

 

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The week ahead: events to watch

 

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Monday, April 16:

 

• Switzerland: Producer price index, a leading indicator of consumer inflation, is expected to increase 0.5% in March against a 0.8% growth in Feb.

• U.S.: On Monday a bunch of negative data is expected. Core retail sales (retail sales excluding automobiles) in March are expected to increase by 0.6% compared with a 0.9% increase in Feb. Retail sales growth is also forecasted to slow to 0.4% after 1.1% in Feb. Analysts expect the Empire State Manufacturing Index to stay positive, but to decline from 20.2 to 18.2. Net Long-term Securities Transactions in Feb. may drop to $41B after outstanding $101B in Jan. Business inventories are forecasted to grow 0.7% in Feb.

• Australia: Minutes of RBA’s recent board meeting release is scheduled. Sales of new motor vehicles were flat in February, there is no market forecast for March. In the year to February, new motor vehicle sales rose 1.7%.

 

 

Tuesday, April 17:

 

• Britain: CPI in March may grow 3.5% compared with 3.4% in Feb.

• Europe: Spanish, Greek T-bill auctions will take place. In April German ZEW economic-sentiment indicator is forecasted to decline slightly to 20.2 from 22.3.

• U.S.: Number of new residential building permits in March may slightly decrease to 0.71M from 0.72M in Feb.

• Canada: According to a consensus-forecast, Bank of Canada may leave the overnight rate unchanged at 1%. The median forecast in a Reuters poll of 40 economists shows the next interest rate hike will come in the second quarter of 2013. However, analysts at RBS believe the bank statement may be more hawkish than expected. Manufacturing sales contraction in Feb. may be down to a 0.1% decline against 0.9% in Jan.

 

 

Wednesday, April 18 :

 

• Europe: Spanish, French bond auctions. Meeting of Group of 20 deputy finance ministers (through April 22).

• Britain: April meeting minutes of the Bank of England's Monetary Policy Committee will be released. At the April MPC meeting, the committee made no further changes to policy after deciding to extend QE by a further £50 billion at its February meeting. Interest rates were also kept low at 0.5% level. The unemployment rate in February is forecasted to remain at 8.4%. Meanwhile, on the claimant count, economists are forecasting unemployment to have risen by 6.6K in March versus 7.2K in Feb.

• Canada: Bank of Canada will offer detailed forecasts in its quarterly Monetary Policy Report, followed by a press conference by Governor Mark Carney.

• Japan: March trade deficit is forecasted to expand to 0.43T from 0.31T in February.

• New Zealand: Quarterly CPI may show a 0.6% growth against a 0.3% decline in the last quarter 2011.

 

 

Thursday, April 19 :

 

• U.S.: Weekly number of unemployment claims may decline to 370K from 380K on the previous week. Home resales in March are expected to go up slightly (4.62M versus 4.59M in Feb.). Philly Fed Manufacturing Index, however, may decline to 12.1 compared with the previous 12.5.

 

 

Friday, April 20 :

 

• Europe: April German Ifo Business Climate index is forecasted to decrease to 109.6 from 109.8 in March. Also note the annual spring meeting of the International Monetary Fund/World Bank (through April 22) and the extended deadline for some Greek foreign-law bond holdouts (to tender their bonds and for second leg of debt-restructuring accord).

• Britain: March retail sales data is expected to show an appreciable 0.4% growth after suffering a sharp decline in February. Retail sales volumes fell 0.8% in February after rising 0.3% in January and 0.7% in December. “If March retail sales do see significant growth, it will significantly boost the likelihood that overall consumer spending was positive in the first quarter and helped the overall economy return to growth after GDP contracted by 0.3% quarter-on-quarter in the fourth quarter of 2011”, analysts at IHS Global Insight say.

• Canada: CPI may demonstrate a 0.3% growth in March compared with 0.4% in Feb.

 

Sunday, April 22 :

 

• Europe: French presidential election, first round.

[fallenDC]

Danske Bank: trading recommendations

 

Analysts at Danske Bank recommend:

 

- selling EUR/USD targeting $1.2974 and stopping at $1.3094;

- selling GBP/USD targeting $1.5737 and stopping at $1.5955;

- selling USD/JPY targeting 80.25 and stopping at 81.38

[fallenDC]

Euro falls before Spanish bill auctions

 

The common currency touched a one-month low against the greenback and decreased versus its other major peers before the Spanish bill auctions on Tuesday. Investors fear the European debt crisis may continue.

 

Spain will sell 12-month and 18-month bills tomorrow, followed by April 19 auctions of debt due in 2014 and 2022. Yields on Spanish 10-year bonds soared to 6.07% on April 13 (highest since December 1).

 

Westpac Banking: The euro does look like it’s vulnerable to breaking down a lot further in the short term. If Spain’s yields continue to rise, then they’re going to get to a point where they may well need some form of assistance, as Greece did.

 

The euro fell 0.4% to $1.3023, after touching $1.3009 (minimum since March 15).

 

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J.P. Morgan: trading USD/CAD

 

Analysts at J.P. Morgan recommend selling the greenback versus Canadian dollar at 0.9980 stopping at 1.0050 and targeting 0.9800.

 

The specialists try to trade on the US earning season. In their view, the market’s expectations are very low, so there may be some upside surprises. Up to this week 29 companies in the S&P 500 had reported first quarter earnings and 83% of them beat expectations.

 

According to J.P. Morgan, Canada will benefit from stronger US economy. In addition, the analysts think that the bank of Canada will upgrade tomorrow their assessment of the Canadian economic prospects.

 

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CFTC trader positioning data

 

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

 

• The net short euro position swelled by 32k contracts to 101.4k, a largest in about a month. A small number of longs (almost 600 contracts) capitulated, while shorts rose by 21.3k contracts.

• The net short yen position grew by 1k contracts to 66.1k. Both longs and shorts were increased (1.5k and 2.5k respectively).

• The net short pound position rose by about 10k contracts to 18.8k. Longs added 500 contracts, while the short positions grew by 10.5k contracts.

• The net short Swiss franc position was decreased to 9.9k from 14.7k. Short positions were trimmed by less than 100 contracts, while the longs fell by 4.8k contracts.

 

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. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

[fallenDC]

Commerzbank: comments on GBP/USD

 

Analysts at Commerzbank claim that GBP/USD’s uptrend versus the greenback seems vulnerable as the pair didn’t manage to overcome resistance at $1.6000.

 

The specialists say that if sterling breaks below $1.5821 (uptrend line) it will fall to $1.5602 (March 13 minimum) and $1.5415 (January 19 minimum). There will be some support at $1.5805 (April low) and $1.5770 (March 22 minimum). As for resistance, it’s found at $1.5905 (Fibonacci retracement), $1.6037 (March maximum) and $1.6092 (November 2011 maximum).

 

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BT: bearish view on euro and Aussie

 

Analysts at fund manager BT Investment Management expect Australian dollar and euro lose versus the greenback to 0.9500 and $1.25 respectively.

 

The specialists note that “the next leg of the European crisis is building now” and all eyes are for Spain. In their view, the ECB will have to resume bond buying.

 

As for Australia’s prospects, the firm says that the nation’s growth is “clearly slowing” due to the negatives from China and Treasurer Wayne Swan’s plans for record budget cuts. Economists surveyed by Bloomberg expect Australian’s GDP to add 3-3.5% in 2012, but BT Investment Management thinks this figure is lower and equals 2.5%.

 

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[fallenDC]

BoC is unlikely to raise interest rate

 

The Bank of Canada meets on April 17. The analysts expect the central bank to keep the rates unchanged at 1%. Then the BOC will release full domestic and international assessment April 18.

 

On Thursday, April 18, Canada’s trade surplus declined to C$0.3 billion vs. C$2.2 billion expected and C$1.9 billion in February. However, many analysts believe the economy will continue demonstrating moderate growth.

 

The median forecast in a Reuters poll of 40 economists shows the next interest rate hike will come in the second quarter of 2013.

 

RBC Economics: With U.S. auto sales remaining robust during the first quarter of 2012, we expect the Canada’s automotive and energy export to return to positive growth in subsequent months. We forecast an annualized increase in GDP of 2.5%. The external risks remain sizeable, so the BOC is unlikely to raise the overnight interest rate level.

 

CIBC Economics: The February trade report was downbeat for estimates of Q1 growth, but the quarterly GDP is still expected to grow by 2%. The BOC is becoming less worried about Europe blowing up and more encouraged by U.S. economic performance, but a change in the policy rate soon is unlikely.

 

BMO Capital Markets: As long as the U.S. data remain unstable and the European debt problems unresolved, the BoC will be loathe adding negative drag to the domestic economy by tightening lending conditions.

 

However, some specialists warn the Bank of Canada may change its monetary policy tone to a more hawkish.

 

UBS: The BoC’s growing fears about household leverage and rapid house price gains have led to suggestions that it may even resort to rate hikes purely to mitigate bubble risks.

 

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Barclay’s: short-term GBP outlook turned bearish

 

Analysts at Barclay’s stopped being on British pound as it fell versus the greenback below $1.5900. The specialists claim that the pair GBP/USD will now fall to $1.5800 and $1.5770 and then probably to $1.5610.

 

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Key options expiring today

 

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD: $1.3025, $1.3100, $1.3115, $1.3120, $1.3150;

 

GBP/USD: $1.5850;

 

EUR/CHF: $1.2000;

 

USD/CHF: 0.9200;

 

USD/JPY: 80.00;

 

AUD/USD: $1.0280, $1.0350;

 

EUR/AUD: 1.2650;

 

USD/CAD: 1.0000.

 

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Photo from Reuters

[fallenDC]

RBS: still bearish on EUR/GBP

 

Analysts at RBS claim that the outlook for the single currency versus British pound is still extremely bearish.

 

The specialists point out that EUR/GBP broke lower after the period of sideways consolidation at the beginning of this year.

 

In the medium term for the pair is still at 0.8069. There may be corrections within the downtrend at 0.8192 (the final retracement level from the credit crunch rally), 0.8140 (August 2010 minimum and the level from which the market rallied hard back to 0.8900) and 0.8069 (2010 low and level which has been underpinning price action since then).

 

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Banks' forecasts for FX majors

 

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Forecasts are submitted on April 13

 

Source: FX Week

[fallenDC]

NZD expected to weaken

 

The New Zealand dollar may weaken this week because the Reserve Bank of New Zealand is expected to leave the official cash rate (OCR) at 2.5% level due to CPI forecasts.

 

Release of a quarterly consumer price index (CPI) is scheduled on Thursday, April 19. Economists expect the CPI rose 0.6% in Q1 vs. a 0.3% decrease in Q4 2011. According to experts, the RBNZ will have little reason to raise interest rates this year. The CPI was probably driven up by an increase in the government excise on tobacco. New Zealand's food price index (FPI) released this morning showed prices fell 1% in March vs. 0.6% increase in February, adding to evidence that inflation level is favorable.

 

In March Reserve Bank Governor Alan Bollard held the official cash rate at 2.5% saying the strength of the kiwi would keep interest rates lower for longer.

Analysts at Barclays Capital expect the CPI to surprise to the upside at 0.7%. Key interest rate is unlikely to be cut further, because it remains at a historic low since March 2011. Analysts expect the AUD/NZD to strengthen.

 

According to currency strategists at RBC, the New Zealand dollar is overbought. Moreover, they add that low risk sentiment weighs on the commodity currencies, including the kiwi. The New Zealand dollar may also be influenced by the results of the Spain bond auction held on Thursday.

 

It’s necessary to note that kiwi will get some support from China’s trading band widening as extra flexibility would likely help New Zealand exporters.

 

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[fallenDC]

Euro down before Europe's data

 

The common currency weakened against the greenback before Europe’s data releases.

 

German ZEW Economic Sentiment index is forecasted to decline from 22.3 (a 21-month high) to 19.7. Spain will sell 12-month and 18-month bills today. On the back of the deepening crisis country’s borrowing costs may grow. Yields on the nation’s 10-year notes touched 6.16% yesterday, edging toward the 7% level that may require international help.

 

The euro’s yesterday’s growth (EUR/USD strengthened to $1.3147) is nothing but a short covering. Early Tuesday the common currency trades in the $1.3090 area. Resistance lies at $1.3147 (yesterday's top), $1.3264 and $1.3380 (April 2 maximum), while support – at $1.2994 (yesterday’s low), $1.2880 and $1.2754. Moving below yesterday’s bottom or above yesterday’s high may define a trend of the euro.

 

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[fallenDC]

Japan pledged $60 bln to expand IMF’s firepower

 

Japan said today that it provide $60 billion in loans to the International Monetary Fund, which acts as a lender of last resort for governments, in order to increase the fund's financial firepower and stop the contagion with the euro zone debt crisis. Japanese Finance Minister Jun Azumi encouraged European authorities to take more action in return.

 

The Fund wants to boost its funding by $600 billion. However, the IMF will face serious difficulties trying to secure firm commitments at meetings of the fund, the World Bank and the G20 this week: the US has showed reluctance to find troubled economies, while such nations as China, Brazil and Russia don’t rush to give commitments either.

 

The IMF Managing Director Christine Lagarde claimed last week that the fund may need less money as economic risks had subsided. Reuters reports that $400-$500 billion sum seems more likely. Euro zone countries have committed about $200 billion and other European Union nations an additional $50 billion.

 

There was speculation that big US bank have been buying on behalf of the IMF over last 24 hours. This process may continue during the European and North American sessions.

 

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Image from sodahead.com

[fallenDC]

EUR/JPY: technical levels

 

According to JPMorgan Chase technical analysts, the EUR/JPY is approaching to its support zone (104.25 -104 yen). On the Fibonacci chart, the 50% retracement between a January low and a March high lies at 104.24 yen. Analysts expect the currency pair to bounce from these levels.

 

Strategists at Jyske Bank recommend selling EUR/JPY with a stop-loss at 107.52 yen. In their view, due to strong declines on Friday and Monday this is the first significant resistance for the pair. However, on a daily Ichimoku chart resistance is seen at 106.15-106.30 levels (above the cloud). Moreover, the RSI indicates divergence. Analysts see strong support in the 103.5-104 yen area.

 

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[fallenDC]

Key options expiring today

 

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

 

Here are the key options expiring today:

 

EUR/USD: $1.3000, $1.3090, $1.3125 and $1.3150;

GBP/USD: $1.5800 and $1.5815;

EUR/GBP: 0.8200 and 0.8250;

USD/JPY: 80.50, 80.75, 81.00 and 81.10;

USD/CHF: 0.9265;

AUD/USD: $1.0200, $1.0220, $1.0285, $1.0300, $1.0310, $1.0400.

 

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Photo Reuters

[fallenDC]

EUR/USD: updates

 

Europe cheered the markets up with positive data: both German and European ZEW economic survey beat expectations, while Spanish and Greek auctions were successful enough.

 

Spain sold 3.18 billion euro of 12- and 18-month debt out of targeted 2-3 billion euro. The yields were higher, but that wasn’t a surprise.

 

Euro zone’s core CPI growth accelerated from 1.5% in February to 1.6% in March (y/y), while the headline CPI added 2.7% versus the forecast of 2.6%.

 

At the same time, it seems that the market participants hurry to take profit. Nobody believes in euro ability to strengthen. EUR/USD posted daily maximum at $1.3172, but the retreated to the levels around $1.3145. It’s necessary to note though that the pair managed to stay above 100-day MA which is now playing the role of support.

 

All in all, trading is quite volatile today. Euro will get chance to rise to $1.3380 (April 2 maximum), if it overcomes the recent highs in the $1.3210 zone.

 

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