Comments and forex-analytics from FBS Brokerage Company

[FBS.com Official]

Nomura, Sumitomo: forecasts for USD/JPY

 

According to the Bank of Japan’s Tankan survey published today, the median forecast of large Japanese manufacturers is that the national currency will trade at 84.20 during the year through March 2012. It’s necessary to note that almost three fourths of the responses to the survey came by March 11 when the country was stricken by the magnitude-9.0 earthquake and the following tsunami.

 

Analysts at Nomura increased their yen forecast expecting the monetary inflows from repatriation of overseas ***ets owned by Japanese investors. The specialists now think that at the end of June the pair USD/JPY will be at 82.5, while in January they were looking forward to 87.5.

 

Strategists at Sumitomo Trust & Banking, on the other hand, say that Japanese currency may weaken as the other world’s economies are likely to show sustainable growth that will make investors’ risk sentiment improve.

 

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[FBS.com Official]

Standard Life Investments: euro may retreat downwards

 

The European currency rose in the first quarter encouraged by the expectations that the European Central Bank will raise the interest rates. However, euro’s prospects may be not quite optimistic.

 

According to Reuters, technical analysis shows that the pair EUR/USD is in the middle of correction to the downside after it added 6% rising from February 14 minimum at $1.3428 to last week’s maximum at $1.4249.

 

Resistance is situated at $1.4249. If euro manages to break above this level, it will be able to rise to November 4 maximum at $1.4283. If the single currency falls below the key psychological support at $1.4000, it will mean that the uptrend for EUR/USD has reversed and euro will be poised down to $1.3850.

 

The fundamental outlook for the single currency seems more uncertain as the concerns about the indebted peripheral nations are combined with the expectations of the ECB rate hike next week.

 

Analysts at Standard Life Investments expect euro to weaken in the longer term as rate increases are already prices in the pair. In their view, 25 basis points lift up won’t give euro much support. The specialists think that the euro zone’s central bank will then pause to evaluate the effects of the hike.

 

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[FBS.com Official]

Mizuho: EUR/USD will advance towards 1.4500

 

Technical analysts at Mizuho Corporate Bank note that although the single currency went down from 2011 maximum at 1.4247 reached on March 22, the pair EUR/USD remained above support at 1.4000 and closed the month at the highest level since December 2009.

 

According to the bank, this will have more impact on euro than the slightly discouraging fact that it formed a spike high and closed inside the “flag formation”.

 

The specialists believe that the bulls are now strong enough to drive euro to the important long term resistance 1.4500 in coming weeks.

 

Mizuho notes that in the near term EUR/USD consolidate between 1.4125 and 1.4225 moving randomly.

 

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[FBS.com Official]

BNP Paribas: USD/JPY may climb to 85 yen

 

Analysts at BNP Paribas note that the downside correction of the pair USD/JPY has stopped already at 83.40. If the greenback gets above 83.65 versus Japanese yen, it will be able to strengthen rising towards selling offers at 83.80.

 

The specialists expect some consolidation after the pair’s active growth during the last several days, though they don’t think that such move will last long. In their view, momentum for the greenback is bullish and US currency may climb to 85 yen during the next few weeks.

 

According to the BNP Paribas, the Bank of Japan has no choice but to keep the interest rates at the record low levels to encourage investors to use yen as the funding currency for carry trades.

 

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[FBS.com Official]

Pimco: yen’s repatriation will exceed market’s expectations

 

Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that Japan will repatriate more funds than markets expect as the country needs to finance its reconstruction after the devastating earthquake and tsunami.

 

The specialists believe that Japan will also be forced to increase borrowing and monetize some part of its debt to fund the rebuilding that, according to the estimates, will require $300 billion.

 

The forecasts that Japan will issue a large amount of debt in coming years are mostly based on the experience of the Kobe quake in 1995, though now the country’s debt situation seems to be much more complicated, notes Pimco.

 

The strategists underline that the greenback, the European currency and Japanese yen are currently facing many difficulties, so they advise investors to borrow money in these currencies to invest in the better-performing emerging markets.

[FBS.com Official]

Barclays Capital: bearish view on USD/CAD

 

Technical analysts at Barclays Capital claim that the pair USD/CAD came to the target levels at 0.9680/65. In their view, this area will hold the initial bearish attack. As long as USD/CAD is trading below resistance at 0.9745, the bank has negative outlook for the greenback. If US currency falls below 0.9665, it will be poised for a decline to 0.9600

 

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[FBS.com Official]

Societe Generale: technical forecast for EUR/USD

 

Analysts at Societe Generale claim that the pair EUR/USD may still fall to Monday’s minimum at 1.4020 and then to the support in the 1.3755/1.3720 area before bouncing to the new 2011 maximums. When the single currency overcomes resistance at 1.4250/55, it will get chance to advance to November 2009 maximum at 1.5145 breaking through resistance at 1.4580.

 

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[FBS.com Official]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

During the past week the British currency didn’t manage to renew maximums and finished the trade lower, in the 1.6100 area.

 

The Ichimoku Cloud is rising (1, 2) and the Tenkan-sen and Kijun-sen still hold the “golden cross” in place moving upwards (3) At the same time it’s necessary to note that the prices have broken through the Standard line.

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Daily GBP/USD

After the prices firstly surged to 1.6400 and then returned to the 1.6000 area during the period from March 17 to 25, the pair GBP/USD behaved modestly last week: the prices edged up to 1.6100.

 

The pound’s rate caught Kumo but closed the week above the upper border of the Ichimoku Cloud (1), while the Cloud itself narrowed – the Preceding lines are moving towards each other (3). All lines of the Indicators are directed horizontally (2). It’s necessary to note that Tenkan-sen and Kijun-sen have almost merged together.

 

The market is in the stated of uncertainty. The prices will likely keep crawling along the Senkou Span B.

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[FBS.com Official]

Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

 

There are no doubts now that the currency intervention of G7 nations was successful. During the past week the bulls have worked hard: the pair USD/JPY added more than 250 pips.

 

The Ichimoku Cloud stopped ext6ending downwards. The Tenkan-sen went up. The lagging Chinkou Span has approached the price chart preparing to cross it bottom-up.

 

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Daily USD/JPY

 

 

Tenkan-sen has gone sharply up (1), the narrow Ichimoku Cloud has turned upwards (2), while the Chinkou Span has broken up through the prices chart (3).

 

So, there are enough positive signals to suggest that the bulls will be leading this week as well.

 

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[FBS.com Official]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

 

US dollar kept rebounding versus Swiss franc from the record minimum in the 0.8890 area. All lines of the Indicator switched to the horizontal mode (2, 3). The Kumo stopped enlarging downwards (1).

 

The bears are a bit used up. We don’t expect any strong moves of the market.

 

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Daily USD/CHF

 

Senkou Span B keeps moving sideways, while the Senkou Span A hints at some rebound (1).

 

Tenkan-sen and Kijun-sen have formed the “golden cross” and the Standard line went up (2). The Lagging line has come close to the price chart (3).

 

The bears are beginning to lose their powers. The bulls, however, haven’t restored their powers after the decline seen so far, though the market’s risk sentiment starts improving. It’s too early to speak about the trend reversal, but the pair USD/CHF may continue correcting upwards towards the Cloud..

 

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Edited April 4, 2011 by FBS

[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency advanced from last week’s minimum at 1.4020 to the maximum at 1.4268 reached during today Asian session.

 

Technical analysts at Commerzbank claim that the pair EUR/USD is limited by the 3-year downtrend. In their view, the resistance is reinforced by November 2010 maximum at 1.4283.

 

The specialists advise investors to concentrate their attention this week on the 4-month uptrend at 1.4072. As long as euro stays above this level it will have chance to rise to the resistance in the 1.4269/83 area.

 

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[FBS.com Official]

Sakakibara: USD/JPY may rise to 90 yen per dollar

 

Former Japanese currency policy official Eisuke Sakakibara claims that Japanese yen will keep weakening during the next few months. The economist believes that the currency may decline to 90 yen per dollar.

 

Sakakibara expressed concerns about foreign money leaving the country in the wake of a m***ive earthquake and subsequent nuclear crisis.

 

The policymaker is known as Mr Yen s when he was a vice minister for international affairs at the finance ministry Sakakibara was leading Japan's intervention to curb the yen's appreciation.

 

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[FBS.com Official]

Mizuho: comments on USD/JPY

 

The greenback rose from the last week’s levels in the 81.00 area to 2011 maximums at 84.70 and managed to close the week above the “triangle” formation from November.

 

Technical analysts at Mizuho Corporate Bank note that there are now more reasons to regard March minimum as an important one and will hold at least during the second quarter.

 

According to the bank, it’s necessary to look forward to the 85.00 resistance level. The next question is whether the pair USD/JPY will trade broadly sideways between 82.00 and 85.00 or whether it will retrace 50% or more of 2010’s decline.

 

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[FBS.com Official]

Gartman: close shorts for EUR/CHF

 

Fund manager Dennis Gartman claimed that he’s exiting short position on the pair EUR/CHF as the single currency broke up through the year-long downtrend line. The specialist notes that euro has climbed from 1.2400 at the beginning of March to reach the 1.3184 level today. The strategist says that he will use any periods of the pair’s weakness to get out of this position.

 

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[FBS.com Official]

RBC: investors keep selling US dollar

 

Analysts at RBC Capital Markets claim that Friday data showed that during the week before March 29 the net short position for US dollar declined to 220 192 contracts from 231 615 the week earlier.

 

Never the less, the net short position for greenback is holding above 200 000 during the 8th consecutive week. The specialists note that the same was seen during the broad slump of US currency that took place in October and November of 2007, though that time the net short held no more than 7 weeks in a row.

 

In addition, the specialists underlined that the net long on the Australian dollar rose from 51 734 to 85 656 contracts approaching the record maximum at 88 900.

[FBS.com Official]

Morgan Stanley: recommendation for AUD/USD

 

Australian dollar has significantly strengthened from 2011 minimum versus the greenback at 0.9705 hit after the Japan’s earthquake rising to its post-float maximums. The market players are now trying to figure out whether Aussie’s surge will continue or it’s time to turn bearish.

 

On the one hand, there are still many factors in favor of the pair AUD/USD. Firstly, Australia has the highest benchmark interest rate of 4.75% among the developed nations that makes its ***ets and currency attractive for investors. Secondly, though the analysts don’t expect the Reserve Bank of Australia to raise the interest rates in the nearest terms they think this will happen before the end of the year. Finally, the country’s economy benefits from the advance of commodity prices.

 

Strategists at Morgan Stanley, however, warn that Australian central bank may cut the interest rates this year as the non-mining part of Australian economy remains weak. In addition, stronger Aussie can also harm the economic rebound.

 

To sum up, long positions on AUD/USD are to be kept in place though traders should be ready that the market’s sentiment may change very quickly.

 

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[FBS.com Official]

Commerzbank: EUR/CHF is likely to decline

 

The pair EUR/CHF rose from the minimums in the 1.2420 area hit after Japan’s March earthquake to last week’s maximum at 1.3184.

 

Technical analysts at Commerzbank claim that euro was capped by the resistance provided by 200-day MA and February maximum at 1.3203.

 

The specialists expect some profit-taking and believe that euro may be now poised for a decline at least to 1.3000/1.2965. In their view, it would be better if euro managed to hold above the 38.2% retracement of the move higher from the 1.2400 spike low.

 

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[FBS.com Official]

Ban Bernanke: the Fed is watching inflation

 

The greenback is strengthening versus the single currency during the second day: the pair EUR/USD is moving down to 1.4150. US currency is driven by Ben Bernanke’s comments: the Federal Reserve Chairman claimed that it’s necessary to keep a close eye on inflation.

 

According to Bernanke, inflation expectations are likely to remain stable, while the rise in commodity prices may slow and, consequently, the increase in inflation will be transitory. The policymaker said that if he is wrong in his predictions, US monetary authorities will have to act timely in order to maintain the price stability.

 

Bernanke noted that the Fed expects many foreclosures this year and this, in its turn, will affect home prices and construction as well as the country’s economic recovery. In his view, the pace of US economic rebound is not as strong as it should be.

 

Analysts at JPMorgan Chase claim that while Bernanke’s remarks showed the vigilance on inflation expectations, the Chairman was certainly less hawkish than some regional Fed presidents, for example Philadelphia Fed President Charles Plosser and St. Louis Fed President James Bullard.

 

Economists at Bank of Tokyo-Mitsubishi UFJ say that Bernanke’s comments mean that the market might be underestimating the degree to which the Fed could tighten monetary policy. As a result, US dollar has chances to strengthen. The bank also reminds that the euro zone’s debt crisis is far from being solved and that’s another reason that could push EUR/USD lower.

 

Specialists at Prestige Economics claim that the Fed seems to be concerned about inflation including the growth of food and energy prices, its monetary policy will depend on what happens with commodity prices. The average price of gasoline in the US rose from $3.07 on January 1 to $3.66 on April 3.

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[FBS.com Official]

Commerzbank: comments on GBP/USD

 

Technical analysts at Commerzbank note that as the British pound broke through resistance band between 1.6170 and 1.6177 versus its US counterpart, it may now rise to 1.63.

 

Never the less, the specialists believe that the bears will remain stronger as long as the pair GBP/USD is trading below 2010 maximums in the 1.6465 area. According to the bank, if sterling falls below the February minimum at 1.5962, it will be poised for a decline to 1.56.

 

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[FBS.com Official]

Julius Baer: SNB will follow the ECB in raising rates

 

Currency strategists at Swiss bank Julius Baer expect that the single currency will end the second quarter of the year slightly below 1.30 versus Swiss franc. In their view, the Swiss National Bank (SNB) will follow the European Central Bank in raising the interest rates.

 

The specialists believe that as the euro zone’s debt problems are gradually being resolved, the demand for franc as the safe haven will be limited. According to the bank, during the 3 months from April to June forex market will be dominated by the monetary policy normalization all over the world.

 

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[FBS.com Official]

J.P.Morgan, Citigroup: pound will rise versus euro

 

This week there is a lot of information from the central banks: there are all in all seven central bank meetings and nine Fed officials scheduled to speak. The Reserve Bank of Australia decided to keep the benchmark rate unchanged at 4.75%.

 

The climax is going to be on Thursday, when there will be rate decisions from the Bank of Japan, the Bank of England and, certainly, from the European Central Bank.

 

Strategists at J.P. Morgan note that the expectations of higher rates is already priced in the single currency, so euro may decline once any rate hike is announced. As for the Bank of England, no one expects it to lift up the borrowing costs, so if the UK monetary authorities sound hawkish, pound may get some support.

 

Analysts at Citigroup advise investors to buy pound versus the European currency. In their view, the euro area’s credit risk will increase relative to Britain’s. The specialists believe that the pair EUR/GBP will decline to 0.8400. The trade should be stopped if the euro rises above 0.9062.

 

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[FBS.com Official]

OECD: economic forecasts for the second quarter

 

Pier Carlo Padoan, the OECD chief economist, claimed today that the European Central Bank's anticipated 25-basis-point rate rise won't have any significant negative impact on the euro zone's economy. According to Padoan, the situation in the US is different as the Fed is not as concerned about inflation as the ECB because it still has to fight high unemployment.

 

The OECD lifted its annualized growth forecast for the US in the second quarter from November estimate of 2.5% to 3.4%, for France – from 1.6% to 2.8% and Canada from 2.6% to 3.8%. The OECD lowered its second-quarter growth forecast for the UK from 1.3% to 1% and Italy from 1.6% to 1.3%. It forecasts growth of 2.3% for Germany, the euro zone's largest economy.

 

The organizations note that the developed countries should set budget consolidation as their priority. Padoan said that Portugal's instability remains the main source of worry. The country should hurry to solve its political problems and the new government has to be formed as soon as possible.

[FBS.com Official]

Geithner: US debt will reach ceiling by May 16

 

Treasury Secretary Timothy Geithner warned the Congress that US debt will reach the country's $14.294 trillion debt ceiling no later than May 16. Earlier the Treasury Department estimated that the limit will be hit between April 15 and May 31.

 

If US lawmakers don’t raise the ceiling by this May 16, the Treasury will have to employ a range of extraordinary measures to prevent the United States from defaulting on its obligations. However, Geithner said that these measures could put off the inevitable only for eight weeks or so and the US won’t be able to borrow within the limit after about July 8, 2011.

 

The data on March 31 showed that the debt subject to the legal borrowing limit was $14.218 trillion, or roughly $76 billion under the legal cap. Typically, that's a little over two weeks of borrowing, although debt levels can fluctuate up or down on a daily basis.

 

Geithner underlined that the Treasury won’t start a “fire sale” of financial ***ets such as gold because this will damage financial markets making investors lose confidence in the US solvency.0:00 /07:43How to cure U.S. budget '******ity' If Congress doesn’t increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds.

 

According to the official estimates, American government will need to borrow $738 billion by the end of this fiscal year.

[FBS.com Official]

Nomura: euro risks are still high

 

Analysts at Nomura Securities claim that the single currency has been trading so far as if there was no sovereign debt crisis. The market has ignored the issues in Portugal, Ireland and Greece and the risk premium on euro has been declining since January after risk premiums were driving all the EUR/USD moves in 2010.

 

The specialists note that in case of positive outlook for euro that wouldn’t be a problem, but since the crisis is still unresolved everything may go wrong. In their view, investors have priced in about 85 to 90 basis points of interest rate hikes this year, so if the ECB doesn’t meet the expectations that will certainly harm the single currency.

 

The strategists believe that the risks of debt restructuring are rather high. According to Nomura, the restructuring solely in Greece, Ireland and Portugal will cost the core euro zone around $235 billion, while a restructuring that also involves Spain would require from the ECB about $480 billion. These numbers aren't insurmountable, but getting to them would be very difficult from the political point of view.

 

The analysts recommended selling euro versus Norwegian krone and maybe British pound.

 

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[FBS.com Official]

BofT-Mitsubishi: yen will keep weakening

 

Japanese yen fell to the 6-month minimum at 85.52 versus the greenback. After G7 nations conducted joint intervention on March 18 to stop yen’s appreciation that hit the postwar record maximum at 76.25 yen per dollar, the currency lost 5.1% surviving the biggest decline among 10 developed-nation currencies.

 

Analysts at Bank of Tokyo-Mitsubishi UFJ expect that the Bank of Japan will fall behind the other major central banks in ending monetary stimulus measures as the nation’s economy needs support to recover from the biggest earthquake in its history. In their view, yen is likely to remain the weakest currency for a long time.

 

The BOJ 2-day policy meeting has begun today and it is thought that the country’s monetary authorities may decide on new fund-providing measures. According to Bloomberg that is citing unnamed sources, the central bank is considering offering a credit program to spur banks to lend to companies with cash-flow shortages.

 

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