Comments and forex-analytics from FBS Brokerage Company

[FBS.com Official]

UBS, ING: comments on Swiss CPI growth

 

According to the data released today, Switzerland’s CPI added in March 0.6% from the level of the previous month, while the economists were looking forward only to 0.2% increase.

 

Analysts at UBS note that such unexpectedly strong growth of Swiss consumer prices was due to the technical factors. The specialists draw investors’ attention to the fact that the CPI basket was revised: clothing was given much heavier weighting and, as a result, the index has become more volatile.

 

Currency strategists at ING explain the surprising advance of Swiss prices by the seasonal energy and clothing price increases. In their view, these factors are temporary, so there’s still no reason for the SNB to end its expansive monetary policy. The analysts reminded that, according to the Swiss National Bank forecast, the headline inflation won’t break above the 2% threshold before middle of 2013.

 

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[FBS.com Official]

Commerzbank: USD/JPY on its way up to 94.50

 

US dollar recovered from the record minimum at 76.31 hit on March 16 reaching the 6-month maximums above 85.00.

 

Technical analysts at Commerzbank note that the pair USD/JPY is coming closer to the key resistance in the 85.62/84 area, representing the top of the 2007-2011 down trend channel and the 50% retracement of the decline from May 2010.

 

The specialists expect that although there will be some profit taking at those levels, US currency will manage to get higher to 87.55 and 94.50.

 

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[FBS.com Official]

Pimco: Portugal won’t be able to withstand on its own

 

Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that the increase in the ECB interest rates and the resulting stronger euro will have a very negative impact on Greece, Ireland and Portugal.

 

The specialists claim that although the European Central bank has to make decisions for the euro area as a whole, it should probably consider the possibility of hiking rates for the strong countries while conducting more loose policy for the weakest peripheral countries.

 

According to Pimco, the best thing to do for the European monetary authorities is to acknowledge the fact that Greece, Ireland and Portugal face significant solvency challenges and some or all of them will need to restructure their sovereign and sovereign-guaranteed debt. The strategists point out that Greece’s second review of its program with the International Monetary Fund showed that the program is not working.

 

As for Portugal, Pimco thinks that the resign of the national government last month has only put off the inevitable apply for the bailout.

 

Analysts at Commerzbank share this point of view claiming that as the Portugal 5-year bond yields are still at 9.9%, it’s only a matter of time until the country has to ask for help. In their view, the outcome of today’s 6-month and 12-month bill auctions doesn’t matter as Portugal won’t be able to deal with its problems on its own.

 

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[FBS.com Official]

Barclays Capital: yen will lose to euro and dollar

 

Technical analysts at Barclays Capital believe that the pair EUR/JPY is getting ready to reverse its downtrend that was holding since 2008. In their view, if the single currency breaks above 122.30, it will get chance to advance to 127.95. If euro closed the week above the top of the Ichimoku Cloud at 121.95, the bulls will become strong enough to push the rate higher to 139.00 later in 2011.

 

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[FBS.com Official]

Rabobank, Commerzbank: comments on EUR/GBP

 

British pound weakened today versus the European currency as the UK industrial production contracted in February by 1.2% from the previous month’s level, while the economists were looking forward to 0.4% advance. The pair EUR/GBP returned to the trend line support at 0.8775.

 

Analysts at Rabobank International think that such data means that the country’s economy is still too weak Bank of England won’t lift up interest rates until November. The rate hasn’t changed since March 2009. Bloomberg survey shows that the central bank will likely keep the rates unchanged at its tomorrow meeting.

 

Strategists at Commerzbank, on the other hand, claim that the BoE will finally tighten its monetary policy and some more hawkish comments from Britain’s monetary authorities will help pound. According to the bank, sterling will strengthen to 83 pence per euro and trade at $1.60 by the end of the year. The median forecast of the economists surveyed by Bloomberg News is that the pair EUR/GBP will end the year at the 84 pence level.

 

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[FBS.com Official]

Canadian dollar renewed maximum versus the greenback

 

Canadian dollar rose to the more than 3-year maximum versus its US counterpart in the 0.9590 area.

 

Loonie was helped by the growth of the global equities that encouraged the demand for higher-yielding currencies. Strategists at Canadian Imperial Bank of Commerce believe that loonie’s strength is caused mainly by the weakness of US dollar due to the nation’s fiscal problems. In addition, the interest rate differential is in favor of Canadian dollar.

 

Technical analysts at Commerzbank note that the pair USD/CAD has breached the support line from October to April at 0.9607 and is now poised for a decline to 0.9577 and then to the psychologically-important 0.95 region. The specialists say that they will maintain the negative outlook for the greenback as long as it’s trading below the 55-day moving average at 0.9832.

 

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[FBS.com Official]

Portugal has finally asked EU for help

 

Portugal’s Prime Minister Jose Socrates announced yesterday evening in a televised statement that the country will apply to the European Commission for bailout, reports Bloomberg.

 

Socrates underlined that it’s not possible anymore to put off asking for help as the nation’s political crisis pushed borrowing costs to record levels. Socrates who leads the Socialist Party offered to resign on March 23 after parliament rejected proposed budget cuts, leaving him in charge of a caretaker government with limited powers until a June 5 election.

 

According to the information from the unidentified source, Portugal is aiming for a package that may be worth as much as 75 billion euro ($107 billion). Specialists at Credit Agricole say that Portugal may initially ask for a bridging loan to support its finances until a new government has been formed, while the full package will be delivered only after the elections.

 

Analysts at UBS note that the fact that Portugal will seek for bailout didn’t surprise the markets at all as they have long ago priced in such outcome. Economists at UniCredit also don’t think that Portugal’s announcement will provoke a new wave of the European crisis.

 

Portuguese government bonds due March 2012 were sold yesterday at an average yield of 5.902%. That’s more than Germany pays for 30-year bonds. The yield on Portugal’s 10-year government bond rose to a high of 8.80% this week. The premium that investors demand to hold Portuguese debt over German bunds reached the maximal level since euro was launched of 544 basis points on April 5.

 

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[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency climbed from last week’s minimum at 1.4020 to the 15-month maximums in the 1.4350 area breaking above the 3-year downtrend.

 

Technical analysts at Commerzbank think that although the RSI indicator has not confirmed the maximum the momentum for the pair EUR/USD will remain bullish as long as it’s trading above 1.4137. The break higher will be confirmed if euro closes the week above 1.4269/83.

 

According to the bank, resistance levels are now found at 1.4425 (long-term double Fibonacci retracement) and 1.4535 (1995 maximum).

 

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[FBS.com Official]

Barclays Capital: comments on EUR/CHF

 

Technical analysts at Barclays Capital claim that the single currency has to close the day above the 1.3205 level versus Swiss franc that represents neckline of the “double bottom” formation in order to get chance to rise to 1.38/40.

 

As for the near-term trade, the outlook for the pair EUR/CHF will remain bullish as long as it’s trading above 1.3040. As a result, the specialists recommend buying euro on dips.

 

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[FBS.com Official]

US government may shut down tomorrow

 

US government shutdown on Friday seems to be more and more likely. It will happen if the American lawmakers fail to come to an agreement on how to finance the government as the Federal budget for the current fiscal year that began on October 1, 2010, hasn’t been adopted yet.

 

Strategists at Bank of America Merrill Lynch aren’t very concerned about the matter claiming that US sovereign debt rating and the greenback won’t be affected much in case of the temporary shutdown.

 

In 1995 such happened already twice. The first time, the dollar was little moved versus euro or yen, while the second time that took place a month later, US currency actually rose against yen.

 

It’s necessary to remember that a much more important deadline is looming for the US government and investors should focus their attention on the outcome of the debate on raising the debt ceiling. Strategists at Citigroup note that it’s possible to shut down the government without defaulting, but the real default would lead to terrible consequences for the greenback.

 

Anyway, the bank says there are few reasons to be long for the greenback unless some global catastrophe makes investors rush to safe havens. According to Citigroup, dollar’s accounting for about two-thirds of global reserves, so the supply exceeds demand and investors will seek opportunities to sell the currency.

 

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[FBS.com Official]

Westpac advises to buy AUD/USD

 

Australian dollar once again renewed today the post-flow maximums versus the greenback at 1.0488. Aussie also strengthened to 30-month high against Japanese yen.

 

Australia’s currency was supported by the encouraging macroeconomic data: the unemployment level dropped in March from 5% to 4.9%. The number of jobs increased by 37,800, while the economists were looking forward only to 24,000 increase.

 

Currency strategists at Westpac claim, that for US dollar bears buying Aussie seems to be the best trading strategy. In March the pair AUD/USD gained 3.3%, while the pair AUD/JPY increased by 7.2%.

 

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[FBS.com Official]

BNP Paribas: comments on USD/JPY

 

Technical analysts at BNP Paribas claim that US dollar’s advance versus yen has slowed down as the pair USD/JPY approached resistance provided by the bottom of the weekly Ichimoku Cloud at 85.75. Today the greenback won’t be able to overcome this level.

 

In their view, upside momentum for US currency is declining. According to the bank, although yen will continue weakening during the coming weeks, the pair won’t be able to get above the top of the weekly Cloud at 87.94.

 

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[FBS.com Official]

Gaitame.Com: euro may weaken versus yen

 

Technical analysts at Gaitame.Com Research Institute Ltd. claim that the single currency doesn’t manage to close above 123 yen, it will fall below the trend line connecting its March 29 and April 7 minimums.

 

In their view, the pair EUR/USD may lose more than 4% easing down to the 12-day MA at 118.42 yen and the previous level of resistance at 116 yen.

 

Euro reached the highest level since May 5 at 122.94 yen on April 6. The last when the European currency traded below 116 yen was on March 29.

 

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[FBS.com Official]

Commerzbank: bullish outlook for EUR/USD

 

The single currency gained almost 400 pips versus its US counterpart during the last 2 weeks and managed to break above the 3-year downtrend line.

 

Technical analysts at Commerzbank claim that if the pair EUR/USD closes the week above 1.4285, the recent bullish breakthrough will be confirmed. In their view, the outlook for euro is positive as long as it’s trading above the 4-month uptrend that’s currently at 1.4157.

 

According to the bank, the key resistance levels are found at 1.4445 (long term double Fibonacci retracement) and 1.4535 (1995 maximum). The specialists expect that these levels will hold the initial attack of the bulls.

 

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[FBS.com Official]

Mizuho: Fed won’t follow ECB in hiking rates

 

According to Mizuho Securities, the fact that the European Central bank raised yesterday the key interest rate by 25 basis points to 1.25% in order to stem inflation doesn’t mean that the Federal Reserve will also hurry to follow the tightening path.

 

The specialists note that the ECB President Jean-Claude Trichet claimed that the main reason of the rate hike was the oil prices’ surge. The Fed, however, traces other, less volatile indicators such as the core inflation that excludes food and fuel prices and is much lower. According to the Bureau of Labor Statistics, consumer prices less food and energy rose by 0.2% in February in comparison with January’s level.

 

To sum up, the bank is sure that the Fed won’t be influenced by the ECB's move that, of course, will harm the greenback.

 

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[FBS.com Official]

BOJ: the results of policy meeting

 

The Bank of Japan announced yesterday the launch of the new 1-trillion-yen loan facility for the reconstruction of those regions that were most affected by the March earthquake.

 

Analysts at Danske Bank claim that this program may hardly be regarded as an aggressive move as the total quantitative easing so far exceeds 40 trillion yen. The new loan facility will be available for maturities up to one year and with a 0.1% interest rate.

 

In addition, the BOJ claimed that eligible collateral for loans will be expanded, but details won’t be announced until the next monetary policy meeting on April 28.

 

It’s also necessary to note that, as it was expected, the central bank reduced the outlook for the nation’s economy. According to the BOJ, in the short term Japanese economy will be strongly affected by the disruptions in the supply chain and these problems will be resolved by June or July.

 

If the BOJ assumptions come true, the negative impact on Japanese economy will be largely concentrated in the second quarter of the year, while in the second half of the year the country may start recovering. The revised macroeconomic forecasts will be released on April 28 as well.

 

Economists surveyed by Reuters expect that the pair USD/JPY will keep gradually rising in the long term. According to the median forecast of the analysts of about 60 banks, US dollar will trade in the 84.00 area during the next 3 months, finish the third quarter at 86.00 and reach the 90.00 area in the first quarter of 2012.

 

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[FBS.com Official]

UBS: euro and yen are overvalued versus the greenback

 

Currency strategists at UBS claim that despite the European Central Bank’s rate increase the single currency is overvalued. The specialists think that the fair value for the pair EUR/USD is at $1.20.

 

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The bank is very bearish on Japanese yen claiming that the natural disasters will force the Bank of Japan to hold rates at the record minimum while other major world central banks tighten their policy. According to UBS, the pair USD/JPY will rise to 90 yen by the end of this year and finish 2012 at 100 yen per dollar.

 

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[FBS.com Official]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

British currency has significantly advanced during the past week. On the weekly chart there are plenty of bullish signals.

 

Tenkan-sen and Kijun-sen still hold in place strong “golden cross” formed above Kumo (1), while the prices managed to close above the Turning line (2).

 

In addition, the Ichimoku Cloud is still directed upwards and the rising Senkou Span A is actively expanding it upwards that points at the growing power of the bullish players.

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Daily GBP/USD

 

On the daily chart the prices recoiled from the Ichimoku Cloud that means the uptrend is going to continue.

 

Tenkan-sen went up preparing to cross the Standard line bottom-up forming the “golden cross” (1) above the Kumo. The signal is strengthened by the Chinkou Span that has broken up through the price chart (2).

 

The Preceding lines have also switched upwards from the previous horizontal mode (3).

 

As a result, there are enough positive signals on the weekly and daily charts to suppose that this week the bulls will keep dominating at the market.

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[FBS.com Official]

Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

Last week the greenback continued strengthening versus Japanese yen – the pair USD/JPY has left the range within which it was trading since the beginning of November.

 

All lines of the Indicators except Senkou Span B have reversed upwards (1, 2). The Lagging line broke up through the price chart (3).

 

As the same time it’s necessary to note that the bulls approach the lower border of the Cloud that will provide some resistance. The prices have chance to get inside the Ichimoku Cloud but the odds are that they won’t be able to overcome Senkou Span B.

 

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Daily USD/JPY

On the daily chart Tenkan-sen is still moving up (1), though the bulls’ positions seem to be vulnerable.

 

The Standard line and Senkou Span B became horizontal (2, 3). The signal from the “golden cross” (4) is rather weak as Tenkan-sen and Kijun-sen intersected below the Ichimoku Cloud. The Cloud itself is very thin, so if the bears take the lead they will be able to break it quite easily.

 

It seems that the market is returning to the sideways mode.

 

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Edited April 11, 2011 by FBS

[FBS.com Official]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

All lines of the Indicator are flat that means that the pair will keep consolidating at the weekly timeframe. The bears are still strong that is shown by the wide bearish Kumo.

 

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Daily USD/CHF

 

On the daily chart the long-term trend is sideways: the Standard line (1) and the Senkou Span B (2) are horizontal.

 

Tenkan-sen, the Turning line, has reversed downwards (3), so the pair USD/CHF may return to the minimums. Such assumption is confirmed by the Chinkou Span that recoiled down from the price chart (4). In addition, it’s necessary to note that the prices breached down Kijun-sen.

 

As a result, it’s possible to enter the market selling dollars.

 

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[FBS.com Official]

Commerzbank: comments on EUR/USD

 

The single currency rose last week above resistance versus the greenback at the 1.4445 level representing 61.8% Fibonacci retracement of the decline from the 2008 maximum and 78.6% retracement of the decline from 2009 high.

 

The pair EUR/USD is approaching the 1995 maximum at 1.4535. Technical analysts at Commerzbank claim that these levels will be able to hold the initial bullish attack.

 

The specialists say that the key support is situated at 1.4177. In their view, the outlook for euro remains positive as long as it’s trading above this level.

 

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[FBS.com Official]

Soros: China needs strong yuan

 

Famous billionaire investor George Soros claims that Chinese authorities should have let yuan’s rate strengthen in order to stem inflation. The economist notes that Chinese inflation is now out of control and there is the risk of the wage-price inflation.

 

Soros says that the appreciation of the national currency would make cheaper the foreign goods that are imported in China. Data published yesterday shows that China reported its first quarterly trade deficit in seven years as import in the firsts 3 months of 2011 exceeded exports by $1.02 billion. The government will report other first-quarter economic data on April 15. Analysts at Royal Bank of Scotland, however, don’t share the opinion that stronger yuan would help China to reduce inflation. In their view, Chinese price growth is mainly driven by strong domestic demand, while the role imported inflation isn’t very significant.

 

According to Bloomberg, in the past two years China’s currency gained only 4.6% versus the greenback, while during the same period Indonesian rupiah added 31% and South Korean won rose by 22%.

 

Economists surveyed by Bloomberg expect that inflation accelerated in March to 5.2% staying above the government targets for a ninth month.

[FBS.com Official]

BNP Paribas, Commerzbank expect EUR/CHF to rise

 

Technical analysts at BNP Paribas believe that the European currency will consolidate versus Swiss franc above its 200-day MA found in the 1.3140 area.

 

The specialists point at the general weakness of US currency. In their view, the pair EUR/CHF will rise at least to 1.34 in the next 1-2 months.

 

Strategists at Commerzbank are as well bullish on euro even though the fact that it didn’t manage to close above February maximum at 1.3205 may lead to some near-term profit taking. The bank advises to buy euro in case it dips to 1.3000 and 1.2965.

 

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[FBS.com Official]

Analysts expect weak US dollar

 

The most accurate currency strategists believe that US dollar won’t be able to recover from 16-month minimum versus the European currency as the Federal Reserve is unlikely to lift up the interest rates after its $600 billion asset-purchase program expires in June.

 

Analysts at Wells Fargo and St. George Bank expect that the greenback’s rate won’t change much until the end of June as the Fed falls behind other major central banks in monetary tightening. Then dollar may begin gradually regaining its positions versus euro and yen.

 

Specialists at Schneider Foreign Exchange, Societe Generale and Bank of Nova Scotia think that US currency will continue weakening after the worst start of the year since 2008.

 

Strategists think that US dollar won’t repeat the advance it made after the end of the first round of quantitative easing in March 2010 when the Dollar Index added 10% during the 2 months.

 

Here are the forecasts for the pair EUR/USD:

 

Bank of Nova Scotia in Toronto: $1.45 (year-end)

 

Schneider: $1.42 (year-end)

 

Wells Fargo: $1.40 (end of June), $1.34 (year-end)

 

St. George: $1.38 (year-end)

 

Societe Generale: $1.50 (year-end)

 

Bloomberg survey: $1.36

 

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[FBS.com Official]

Sentance keeps calling for BoE rate hike

 

The member of the Bank of England’s Monetary Policy Committee Andrew Sentance signaled that last week he for the third time voted for the half-point interest-rate increase. However, hawkish Sentence remained in the minority as on April 7 the central bank left the benchmark interest rate unchanged at 0.5%.

 

According to Sentance, UK central bank has to avoid losing control of consumer prices. The VAT increase conducted at the beginning of the year will hold the prices only temporarily, thinks the specialist.

 

British Office for National Statistics will release March CPI data tomorrow. It’s widely thought that the annual inflation stayed at the highest level in almost 2 1/2 years of 4.4%.

 

The policymaker said that the market expects that the next year the BoE borrowing costs will reach 2%.

 

Last week the pair GBP/USD climbed to the maximal level since January 2010 at 1.6427. Sentance says that the rate hike won’t make pound surge to maximums seen 3-4 years ago – on the contrary, gradual appreciation of sterling will help to reduce the imported inflation that comes from rising oil and commodity prices.

 

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