ryuroden Posted December 23, 2011 Report Share Posted December 23, 2011 The FOMC will become dovish the next year The Federal Open Market Committee is expected to become more dovish due to the annual rotation. As a result, the Federal Reserve Chairman Ben Bernanke will get chance to pursue his active loose monetary policy if he thinks that American economy needs help. The FOMC consists of 12 members – 7 Fed board governors and the president of the New York Federal Reserve Bank have – permanent vote, while the 4 remaining seats are shared by the other 11 FRB presidents which change places on the annual basis. This year 3 out of the 4 rotating seats was occupied by the hawks – Richard Fisher, the president of the Dallas Federal Reserve Bank, Charles Plosser of Philadelphia, Narayana Kocherlakota of Minneapolis. That means that these policymakers don’t think that monetary policy can be used to stabilize economic conditions and would prefer setting long-term target for inflation. Doves, on the other hand, believe that the central bank has to keep interest rates low to support the national economy. Fisher, Plosser and Kocherlakota voted against the pledge to keep short-term rates close to 0 until the middle of 2013 and against the Operation Twist. The old distinction, with hawks concerned about inflation and doves worried about weak growth, has subsided over the past 20 years. Fed officials agree that keeping inflation low and stable is a necessary precondition of good economic performance. This year, a “tough group†of hawks occupied. These officials had little sympathy for the Fed’s innovative efforts to try to lower long-term interest rates, said Brian Bethune, a Fed expert at Amherst College in Massachusetts. In 2012, the Fed is losing 3 hawks and only getting one: Jeffrey Lacker, the president of the Richmond Fed. The other 3 new members: John Williams, the president of the San Francisco Fed, Dennis Lockhart, the president of the Atlanta Fed, Sandra Pianalto of Cleveland are viewed as more consensus-minded and likely to vote with Bernanke. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted December 27, 2011 Report Share Posted December 27, 2011 BBH: demand for yen will remain high next year Analysts at Brown Brothers Harriman believe that in the first quarter of 2012 the demand for Japanese yen will remain high. In their view, yen will remain among the top performers in the G10 in the first quarter of the next year due to such factors as: - demand for safe havens; - Japan’s inability to recycle its current account surplus. According to BBH, the Bank of Japan could conduct new currency interventions. At the same time, the specialists don’t expect the BOJ to establish a definitive floor in the USD/JPY. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted December 29, 2011 Report Share Posted December 29, 2011 ECB balance extended to the record maximum The pair EUR/JPY fell to 10-year minimum at 100.30 yen, the pair EUR/USD dropped to the minimal level since January at $1.2887. Investors are concerned that European Central Bank will inject more cash into the financial system to avoid a credit crunch from the region’s debt crisis. The ECB announced yesterday that after last week’s lending to the euro zone’s banks its balance sheet climbed to the record level of 2.73 trillion euro. Analysts at Westpac think that euro will stay under pressure due to the signs of more formal quantitative easing. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted December 29, 2011 Report Share Posted December 29, 2011 UBS: euro’s unlikely to rebound Analysts at UBS give several reasons why they think that the single currency won’t be able to rebound at the beginning of 2012 as it has done this year gaining several thousands of pips. 1. The ECB is likely to cut rates to a new historic low of 0.50% and might well then embark on outright QE. 2. Greek PSI will last till March 20. However, revenue shortfalls due to the deeper-than-forecast recession may result in additional financing needs, which in the absence of new official money might mean a larger haircut and hence the need of more PSI. 3. If Greece is forced to impose an involuntary restructuring on investors, the crisis will spread to other problem economies – Portugal, Spain and Italy. The measures conducted by the European authorities are arguably not yet powerful enough to stop the contagion. 4. The above Greek scenario would result in Greece’s default. This will trigger credit default swaps (CDS) which imply payouts of more than 80 billion euro. This alone would make the market highly stressed. 5. High possibility of resistance to ESM ratification in some countries as well as more serious social unrest in both debtor and creditor nations. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 4, 2012 Report Share Posted January 4, 2012 UBS, Commerzbank: bullish on EUR/CHF Analysts at UBS advise investors to buy the single currency versus Swiss franc expecting the pair EUR/CHF to rise to 1.25. According to the bank, “the franc is now largely flat on a structural basis†and “the SNB should take note of this before they manage their next stepâ€. As a result, the specialists think that the odds that the Swiss national Bank increases floor for EUR/CHF are now higher. Analysts at Commerzbank also think that the speculation about EUR/CHF floor-raising will help to strengthen euro ahead of the important inflation data release in February. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 4, 2012 Report Share Posted January 4, 2012 Yen: comments and forecasts Japanese yen has strengthened this year versus all major currencies gaining 4.2% against the US dollar and 6.7% against euro, although Japanese authorities have sold at least 14.3 trillion yens ($183 billion) trying to stem the appreciation of the national currency. It’s necessary to remember that the fiscal year in Japan ends on March 31. Usually yen tends to rise in the first months of the year. The advance of Japanese currency accelerates through March. Then in early April the trend changes in the opposite direction as Japanese companies finish seasonal repatriation of profits and the funds start flowing out of Japan. This time, given the prevailing risk aversion environment, Japanese companies may decide to leave their money at home in April. However, if risk sentiment improves, the outflow from yen will strengthen. Until that happens, yen will remain strong and continue to consolidate. So, the future of Japanese currency depends on investors’ risk sentiment and on whether the greenback will be attractive as a safe haven. The pair USD/JPY still stays within the longer-term downtrend which has been developing since the middle of 2007. During the last few months US dollar has been consolidating between 75 and 80 yen. One will be able to speak about the long-term trend reversal only if the pair consolidates above the psychologically important point of 80 yen and then overcomes 100-week MA in the 84 yen zone. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 5, 2012 Report Share Posted January 5, 2012 Pound: comments and forecasts According to Bloomberg Correlation-Weighted Indexes, this year British currency added 0.7% versus the developed nations’ currencies (US dollar increased by 1.1%, while euro lost 1.4%, the Index shows). Sterling added 2.3% against euro and ended the year almost unchanged versus the greenback. Pound will be helped by the fact that the effects from the VAT increase are disappearing and, consequently, the inflation pressure might decrease. In addition, Olympic Games 2012 will encourage tourism and consumer spending. Among sterling-negative factors one should name the consequences of the severe austerity measures, the slump of the world’s business activity and the negative effects of the European debt crisis on British economy. The pace of wage growth in Britain falls behind the pace of the price growth. As a result, disposable income of British people is declining and causes contraction of retail sales provoking general economic weakness of the United Kingdom. This year the pair EUR/GBP was steadily declining under the influence of debt problems in Europe. The European currency fell from the year maximums in the 0.9080 area to the levels in the 0.8300 area hit so far. For now pound’s appreciation doesn’t bother UK monetary authorities. Most likely, the Bank of England will think of taking some measures to curb sterling only if the pair drops to the 3-year minimum at 0.8000. The pair GBP/USD has been trading in a more volatile way: during the past 6 months the British currency has reached the maximum at $ 1.66 and hit the minimum at $ 1.53. Pound is expected to stay above support at $ 1.52. If this level is broken, the pair may test $ 1.50. The rebound may take the pair to $ 1.6150. Depending on what course the things will take in the first quarter of 2012, both Britain and the United States may get into another round of quantitative easing. The experts think that British central bank will increase its asset purchase program in February when the current stage of the purchases is finished. Until that moment the currency moves will be determined by the market forces. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 5, 2012 Report Share Posted January 5, 2012 Citigroup: emerging markets will rebound in 2012 2011 was an unhappy year for the emerging markets: MSCI emerging markets index slumped by 20%. Analysts at Citigroup, however, believe that in 2012 the situation will be different and expect 25-30% rebound in emerging markets’ equity. In their view, negative factors which affected these markets – much sharper interest rate cycle and inflation cycle – will ease. The specialists forecast soft landing in China: inflation will decline to the average level of 4.1%, so that Chinese monetary authorities will be able to conduct more loose monetary policy. The bank thinks that China will make as eight 50-basis point cuts in the reserve requirement ratio this year, with the first coming before Chinese New Year. According to Citigroup, the country’s growth rate will decrease to 7.5-8% in the first quarter before rebounding by the end of the year. The outlook for the emerging markets will be influenced by the global economic environment, particularly Europe. Citi isn’t expecting a worst-case scenario in the euro area. The bank thinks that the emerging market currencies will stabilize against the greenback. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 5, 2012 Report Share Posted January 5, 2012 Byron Wien: forecasts for 2012 Byron Wien, vice chairman of Blackstone Advisory Partners, sees Europe’s future this way: Italy and Greece will default but stay in the European Union, because Europe “has much too much to lose if the European Union dissolvesâ€. Wien says that European authorities will likely manage to come up with a long-lasting plan to solve its financial problems. The specialist is optimistic about US economic prospects expecting the S&P 500 index to get above 1400. In his view, the unemployment rate will fall below 8%, while the economic growth will top 3%. If these predictions come true, Barack Obama will likely win president elections. The economist claims that oil price will drop to $85 a barrel as the supply increases due to the extraction from shale and rock in the United States. Wien remains bullish on gold and says it will trade at $1,800 a troy ounce. Note that last year 8 out of 10 Wein’s predictions were right, reports CNBC. Wein predicted the S&P would end the year at 1500 and the yield on the 10-year Treasuries would close out 2011 at 5%. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 6, 2012 Report Share Posted January 6, 2012 RBS: loonie will strengthen against yen Analysts at Royal Bank of Scotland advise investors to buy Canadian dollar versus Japanese yen. The specialists justify such recommendation but the fact that US economic outlook is getting better, while the prospects of Japanese economy seem rather dim. It’s also necessary to note that the bank’s fair-value model, which takes into account the 5-year bond yield difference, oil prices and the S&P 500 Index, also indicates that Canadian currency has upward potential against yen. Japan’s current account surplus is moderating, weakening the outlook for yen. According to RBC, loonie may rise to 79.5 yen in 3 months where it traded last time on October 31. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 6, 2012 Report Share Posted January 6, 2012 BBH on trading EUR/USD Analysts at Brown Brothers Harriman are bearish on the single currency versus the greenback. The specialists think that the pair EUR/USD will drop to $1.20 by the middle of 2012. At the same time, the bank doesn’t recommend investors to sell euro at the current levels noting the large number of euro shorts: US economic outlook is gradually improving, so the demand for US dollar as the safe haven will decline. According to BBH, it’s necessary to wait for euro’s rebound to $1.2900 and then start selling EUR/USD with a stop in the $1.3050 zone and targeting $1.2600 and $1.2000. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 6, 2012 Report Share Posted January 6, 2012 Merrill Lynch: sell EUR/CAD, AUD/CAD Analysts at Bank of America Merrill Lynch note that oil prices have been range bound for 8 months. If they resume growth, that would be a very positive factor for Canadian dollar. The bank thinks that oil prices may gain $20. Bank of America suggests selling EUR/CAD stopping at 1.3250 and targeting 1.2775 or even 1.24. The specialists note that the pair is trading within a very strong downtrend. In addition, the analysts recommend going short on AUD/CAD as Aussie may be affected by the base metal prices. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 7, 2012 Report Share Posted January 7, 2012 JCER: Japan’s economy may have contracted in Q4 Economists at Japan Center for Economic Research (JCER) think that Japan’s GDP fell by 0.1% in the fourth quarter of 2011. In their view, negative effects from the euro zone’s debt crisis which expressed in stronger yen and declining demand for Japanese product in Europe outweighed the support from reconstruction spending. A third contraction in four quarters risks deepening public opposition to Prime Minister Yoshihiko Noda’s plan to double the nation’s 5% sales tax by 2015. This plan was approved today by the cabinet. The critics of the plan warn that a higher levy would undermine Japan’s fight against more than a decade of deflation. According to JCER, Japanese economy will start gradually recovering in the first quarter of 2012 as more of the 20 trillion yen ($259 billion) in reconstruction money is deployed to the disaster-stricken northeast. The specialists note that the development of the situation in Europe will also have great impact on Japan’s economic outlook. Japanese GDP figures will be released on February 13. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 7, 2012 Report Share Posted January 7, 2012 George Soros on euro zone’s future Famous billionaire investor George Soros says that collapse of the single currency and break-up of the European Union would have catastrophic consequences for the global financial system. Here are the comments of the economist cited by CNBC: “Today, the euro is potentially endangering the political cohesion of the European Union†“If the common currency were to break down, it will lead to the breakup of the European Union itself. And this will be catastrophic not only for Europe but also for the global financial system.†“Unfortunately, they haven't yet solved the acute financial crisis and that is causing the situation to deteriorate...and (it) is not at all clear it will have a solutionâ€. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 7, 2012 Report Share Posted January 7, 2012 Nomura: on the possibility of euro area’s breakup Analysts at Nomura have lined up possible scenarios of euro’s collapse. At the same time, the specialists say that although the risk of breakup rose significantly in 2011, it’s not their central case. All in all, the specialists expect hard year for Europe. Anyway, there may be following breakup scenarios: 1. The big bang breakup (full-blown breakup): the single currency ceases to exist. 2. Sequential breakup: the euro zone comes apart in drips and drabs. The analysts don’t think it's likely to happen as such process, during which weaker euro zone countries gradually exit will come to a halt when the process reaches one of the larger euro zone countries, such as Italy or Spain. At this point, the process would likely become uncontrollable and lead to a big bang collapse, including the core countries. 3. Consensual withdrawal: if member nations quits euro in a legally accepted way, possibly using a clause in the Lisbon Treaty. 4. Unilateral withdrawal: if a country exits the currency union without waiting for legal approval. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 9, 2012 Report Share Posted January 9, 2012 Top forecasters are bearish on euro Bloomberg reports that the accurate foreign-exchange forecasters expect the single currency to fall versus the greenback for the third consecutive year as the euro zone will likely to fall into recession. Wells Fargo: EUR/USD will fall to $1.24 by the middle of the year and then keep sliding to $1.20 as the ECB’s actions will fail to constrain the debt crisis from spreading. Westpac: euro zone’s economy will underperform due to deleveraging, austerity, huge confidence shock and tight financial conditions. Euro will be weakening as the ECB may lower the borrowing costs to about 0 and the risk of Greece’s leaving the currency bloc continues worrying the markets. National Australia Bank: EUR/USD will end the first quarter at $1.25. The differential between US and European economic growth rate in favor of the United States and looser monetary policy of the ECB will keep euro under pressure. Analysts at JPMorgan Chase seem to be more optimistic. According to them, the European currency will rebound by June as the ECB keeps the debt crisis from worsening – the European Central Bank will extend European bond purchases. Euro will rise to $1.34 by the end of the second quarter. Bloomberg surveys: EUR/USD will trade at $1.30 by 2013; European economy will decline by 0.1% in each of the first 2 quarters of 2012; ECB will leave rates unchanged on January 20. Coming events French President Nicolas Sarkozy and German Chancellor Angela Merkel meet today in Berlin to discuss the situation in the region and the future of the currency union. ECB meeting and Mario Draghi’s Press Conference will take place on January 12. Euro-area finance ministers meet in Brussels on January 23, while government leaders gather a week later. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 9, 2012 Report Share Posted January 9, 2012 Nomura: recommendations for EUR/CHF traders Analysts at Nomura believe that the Swiss National Bank won’t increase the floor for the pair EUR/CHF. According to the bank, it’s necessary to buy euro at $1.2145 targeting $1.2450 and stopping at $1.1990. The specialists claim that the pair has come close enough to $1.20 for going long. Nomura notes that if euro slides below $1.2100/25, traders should double the position keeping stop at $1.1990. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 9, 2012 Report Share Posted January 9, 2012 Westpac, J.P.Morgan: recommendations for euro traders Last week EUR/USD fell from above $1.3000 to test the levels below $1.2700. Euro was affected by crisis in Hungary, European government bond sales, the risk of sovereign downgrades and discouraging economic figures. Currency strategists at Westpac are looking for another hared week for the single currency. The specialists think that ECB won’t reduce interest rates on Thursday, January 12. In their view, any efforts of the central bank won’t be able to help euro. Analysts at J.P. Morgan share this opinion and underline that though in recent months, when the ECB cut interest rates euro fell, when policy makers are seen as not acting fast enough to stem the crisis, the single currency falls anyway. The situation in the United States seems quite opposite: the specialists think that the comments from Federal Reserve officials next week are likely to highlight the differences between the prospects for the U.S. and European economies. The bank recommends selling euro at the current levels, stopping at $1.2830 and expecting EUR/USD to fall to $1.2500. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 9, 2012 Report Share Posted January 9, 2012 UBS: bullish outlook for US dollar in 2012 From a broad perspective the greenback keeps trading at historically weak levels. It happens as for the last 10 years US fund managers, foreign central banks and sovereign wealth funds have been diversifying their holdings decreasing the share of assets denominated in American currency. Analysts at UBS claim that there are signs of a pause if not an end of this trend. As US economy starts to pick up showing better results than the other major economies dollar-based investors will likely cease buying foreign assets. The specialists cite the results of the latest IMF Composition of FX Reserves report, according to which the world’s central banks increased their holdings of US dollars back above 61% of their portfolios. In addition, during their trip to Middle East last month UBS strategists have found out that official asset managers are cautious in diversifying significantly out of new petro-dollar revenues. As a result, the bank is bullish in the greenback this year. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 9, 2012 Report Share Posted January 9, 2012 Danske Bank is negative on GBP/USD Analysts at Danske Bank are bearish on British pound versus the greenback claiming that GBP/USD is on its way down to December minimum at $1.5361 and then to 2011 minimum at $1.5270. In their view, the pair GBP/USD won’t be able to overcome January 5 maximum at $1.5628. The specialists say that only a break above $1.5888 would improve the outlook for sterling. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 10, 2012 Report Share Posted January 10, 2012 Societe Generale: forecast for GBP/USD Analysts at Societe Generale claim that if British pound breaches support at $1.5360 (December minimum) trading versus the greenback, GBP/USD will weaken to $1.5270 (October 6 minimum) in 1-3 weeks and then slide to $1.5130 during the next 3 months. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 10, 2012 Report Share Posted January 10, 2012 BMO: 2012 forecast for USD/CAD Analysts at BMO Capital Markets note that for the past 2 months the pair USD/CAD has been trading between the levels above the parity and 1.0523 reflecting swings between risk-on and risk-off. The specialists expect the greenback to strengthen to the levels around 1.0640 as the negative risk sentiment’s likely to prevail during the first quarter of 2012 and there is some chance of Bank of Canada’s easing its policy. In the second half of the year as the risk appetites revives and the prospects for the BoC’s rate hikes build up, the pair may reverse down returning to the parity level by the end of 2012. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 10, 2012 Report Share Posted January 10, 2012 Merkel and Sarcozy warned Greece Germany chancellor Angela Merkel and French President Nicolas Sarkozy claimed yesterday that Greece will be denied a crucial 130 billion euro bailout unless it can reach an agreement with its bondholders. Under the terms of the second bailout, investors are being asked to write down 50% of the value of their holdings of Greek government bonds. There has been speculation that the size of this writedown may yet increase. “We must see progress on the voluntary restructuring of Greek debt,†said the leaders of euro zone’s biggest economies. Merkel added that “the second Greek aid package including this restructuring must be in place quickly. Otherwise it won't be possible to pay out the next tranche for Greece.†Germany insisted that no country should be excluded of the euro zone, while France underlined that the new treaty implying tighter fiscal integration will be signed on March 1. Merkel and Sarkozy met ahead of the EU summit which takes place on January 30. Today Germany’s chancellor meets the IMF managing director Christine Lagarde. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 10, 2012 Report Share Posted January 10, 2012 FBS analytical review 2011-2012 Main events of 2011. Outlook for 2012. Comments and forecasts for the single currency, Japanese yen and British pound. Financial challenges of 2011 2011 was expected to be the year of global economic recovery after the recession of 2008-2009. The year began rather well: the Federal Reserve had launched the second round of quantitative easing, while Europe managed to take a breath amid the tensions caused by the Greek debt issues. Nevertheless, the results of 2011 seem dismal: instead of moderate economic rebound the developed economies are now facing the risk of stagnation and even contraction. The problems started with the surge of the oil prices due to the turmoil in the Northern Africa and the Middle East. Then Japan suffered from the strongest earthquake and tsunami in its history which led to the Fukushima nuclear disaster. This resulted in the disruption of the supply chains which, in its turn, made commodities more expensive. The situation in the euro area has deteriorated: Portugal was forced to ask Troika – the IMF, the EU and the ECB – for bailout. It became evident that Greece is tormented not by the crisis of liquidity, but by the crisis of solvency and confidence. The response from the euro zone’s leaders came too late and was limited. The crisis began to spread across the region. Large European economies as Spain and Italy got under the market’s pressure and had to conduct austerity measures. Summer was marked with US drama: as American debt exceeded the limit of 14 trillion dollars, Democrats and Republicans were debating on increasing the nation’s debt ceiling and managed to come to the agreement only in time of the deadline. The problem was temporarily resolved, but the whole mess has cost the country the loss of its highest credit rating. Autumn has brought both good and bad news. On the one hand, despite the deterioration of the expectations during the summer the economic situation in the US began improving. On the other hand, the debt crisis kept spreading over Europe seizing more and more nations: the bond yields rallied even in the AAA-rated countries. At the same time, the policymakers on the either side of Atlantics still don’t hurry with the decisive steps aimed to resolve the problems which keep building up. Of course, the world has managed to avoid the worst outcome – the single currency is still in place, while the US government shutdown was fortunately left out of the way. At the same time, the situation remains quite difficult. In 2012 the developed economies and the whole global economy will face serious challenges. Europe may be facing the turning point in its history: the currency union will either have to make a rapid integration progress or begin disintegrating. Now it’s much more difficult for the European states to start recovering than it was a year ago. The recovery would take substantial, but credible and accomplishable fiscal consolidation plans, stable liquidity supplies to the banking sector and much more efficient collaboration of all stakeholders. Global economy will surely increase due to the economic growth of the emerging markets such as China and Brazil, though the lower demand in the developed world will affect these nations as well, so possibility of the global economic slowdown is high. Euro: comments and forecasts The majority of the analysts are bearish on EUR/USD. The European currency keeps trading within the downtrend despite some positive news, such as the ECB’s massive 3-year credit auction. The single currency has little chance to repeat the advance it managed to make at the beginning of 2011, when it gained several thousand pips. The ECB is expected to cut rates to a new historic minimum of 0.50% or even lower and might as well embark on outright QE. The pair EUR/USD may fall to $1.2550 in the first quarter of the year and then slide to $1.2000. One might benefit from selling euro versus Australian dollar as the latter will be supported due to Australia’s trade connections with China, which aims to encourage the national markets with more loose monetary policy. The yield spread between 2-year US and German bonds is holding close to -12 – it’s a positive factor for US dollar. Last time the negative reading was posted in March 2010 and held till July 2010 – this period corresponds to the slump of the pair EUR/USD from the levels in the $1.3300 zone to the multi-year minimum of $1.1875. Pound: comments and forecasts According to Bloomberg Correlation-Weighted Indexes, British currency added 0.7% versus the developed nations’ currencies (US dollar increased by 1.1%, while euro lost 1.4%, the Index shows) in 2011. Sterling gained 2.3% against euro and ended the year almost unchanged versus the greenback. Pound will be helped by the fact that the effects from the VAT increase are disappearing and, consequently, the inflation pressure might decrease. In addition, Olympic Games 2012 will encourage tourism and consumer spending. Among sterling-negative factors one should name the consequences of the severe austerity measures, the slump of the world’s business activity and the negative effects of the European debt crisis on British economy. The pace of wage growth in Britain falls behind the pace of the price growth. As a result, disposable income of British people is declining and causes contraction of retail sales provoking general economic weakness of the United Kingdom. Last year the pair EUR/GBP was steadily declining under the influence of debt problems in Europe. The European currency fell from the year maximums in the 0.9080 area to the levels in the 0.8300 area hit so far. For now pound’s appreciation doesn’t bother UK monetary authorities. Most likely, the Bank of England will think of taking some measures to curb sterling only if the pair drops to the 3-year minimum at 0.8000. The pair GBP/USD has been trading in a more volatile way: during the past 6 months the British currency has reached the maximum at $ 1.66 and hit the minimum at $ 1.53. Pound is expected to stay above support at $ 1.52. If this level is broken, the pair may test $ 1.50. The rebound may take the pair to $ 1.6150. Depending on what course the things will take in the first quarter of 2012, both Britain and the United States may get into another round of quantitative easing. The experts think that British central bank will increase its asset purchase program in February when the current stage of the purchases is finished. Until that moment the currency moves will be determined by the market forces. Yen: comments and forecasts Japanese yen has strengthened in 2011 versus all major currencies gaining 4.2% against the US dollar and 6.7% against euro, although Japanese authorities have sold at least 14.3 trillion yens ($183 billion) trying to stem the appreciation of the national currency. It’s necessary to remember that the fiscal year in Japan ends on March 31. Usually yen tends to rise in the first months of the year. The advance of Japanese currency accelerates through March. Then in early April the trend changes in the opposite direction as Japanese companies finish seasonal repatriation of profits and the funds start flowing out of Japan. This time, given the prevailing risk aversion environment, Japanese companies may decide to leave their money at home in April. However, if risk sentiment improves, the outflow from yen will strengthen. Until that happens, yen will remain strong and continue to consolidate. So, the future of Japanese currency depends on investors’ risk sentiment and on whether the greenback will be attractive as a safe haven. The pair USD/JPY still stays within the longer-term downtrend which has been developing since the middle of 2007. During the last few months US dollar has been consolidating between 75 and 80 yen. One will be able to speak about the long-term trend reversal only if the pair consolidates above the psychologically important point of 80 yen and then overcomes 100-week MA in the 84 yen zone. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
ryuroden Posted January 10, 2012 Report Share Posted January 10, 2012 UBS: another recommendation to sell euro Everybody is bearish on euro, so does UBS. Analysts advise investors to open shorts on EUR/USD at $1.2755, stopping at $1.3050 and targeting $1.2250. In their view, by the end of the first quarter the European Central Bank will lower its benchmark interest rate to 0.5%. As a result, euro will lose support of the yield differentials. In addition the bank thinks that euro will stay under pressure due to the compulsory Greek debt restructuring. Moreover, it’s necessary to note that US economy is outperforming the European one, so that the Federal Reserve won’t launch the third round of quantitative easing – the factor positive for the greenback. Quote Breakeven Trading100% deposit return guarantee! Link to comment Share on other sites More sharing options...
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