Comments and forex-analytics from FBS

[FBS.com_official]

ANZ: the prospects of RBNZ rate hike

Analysts at ANZ Bank still think that the Reserve Bank of New Zealand will lift up the Official Cash Rate in December from the record low 2.5% level even despite the series of new earthquakes (magnitude 5.2 and 6) tremors in New Zealand's second largest city of Christchurch that took place on Monday and Tuesday.

In their view, investors are currently pricing in 14 basis points of rate hikes by December compared with 22 points before the latest tremors. According to the specialists the market’s reaction is caused more by the inconvenience created by quakes than by a material threat to the reconstruction and economic recovery. The bank advises to watch New Zealand’s first quarter retail sales figures that will be released on Wednesday. One more important thing is the extent of increase in consumer spending after last year's weakness. The RBNZ will pay much attention to these key indicators.

However, not all economists seem to be so optimistic. Strategists at TD Securities claim that the cataclysms may slow down the recovery and the cautious central bank may delay the hiking process.

[FBS.com_official]

UBS expects EUR/USD to decline

Currency strategists at UBS expect the single currency to decline versus the greenback.

In their view, the dynamics of the pair EUR/USD after ECB’s President Jean-Claude Trichet’s hinted on Thursday at the coming rate hike shows that the potential of policy differentials as euro’s driving force is fading away.

According to the bank, July will characterize by the increased macroeconomic uncertainty in the euro area and the end of the Federal Reserve’s QE2. As a result, risky assets, equities and commodities will decline, while US dollar will be encouraged to strengthen.

[FBS.com_official]

Nomura: yen will weaken versus US dollar by the end of June

Analysts at Nomura claim that the greenback may strengthen to 82.5 yen by the end of the second quarter.

The specialists think that the demand for the Japanese currency may decrease in the coming months. Such assumption is base on the fact that in May there was a significant increase in outward portfolio investment via investment trusts.

In addition, although the nuclear power plants will be gradually restarted in the second half of 2011, there risk that shutdowns will last longer remains. Nomura believes that if the Asian nation doesn’t manage to restart nuclear generators under regular maintenance fuel imports may bounce by 500 billion yen ($6.3 billion) per quarter.

Nomura also advises to sell yen versus British pound.

[FBS.com_official]

Commerzbank: negative outlook for EUR/CHF

Technical analysts at Commerzbank claim that the single currency is close to support at 1.20 versus Swiss franc.

In their view, the pair EUR/CHF may drop to the 3-year downtrend channel at 1.1950. The bank thinks that this level will be able to hold the first attack of the bears, though doubts that it will be able to initiate euro’s upward reversal.

The longer term targets are set at 1.1790 and 1.1600.

[FBS.com_official]

ZKB, BNP Paribas about the possibility of SNB intervention

Economists at ZKB believe that strong franc won’t make the Swiss National Bank intervene at the currency market as Switzerland’s economy still isn’t strong enough, while the SNB’s currency reserves are already too high. The specialists note that the nation’s getting used to the strong national currency, though Swiss exports will stay under negative pressure in the second half of the year.

Strategists at BNP Paribas also don’t regard the possibility of SNB intervention as strong. According to them, as the tensions between EU governments and the ECB remain, EUR/CHF may go down below 1.20.

[FBS.com_official]

Citigroup: code language from the central bankers

Last week the market’s attention was focused on the central bankers with both Ben Bernanke and Jean-Claude Trichet speaking.

Investors were waiting for some key words from the ECB: as the central bank’s President said “strong vigilance” about inflation euro immediately spiked. When Trichet uses the expression “very close monitoring” euro moves quite a bit.

Analysts at Westpac note that as investors got used to coded messages from central banks, so it the tension escalates, the market would react violently in both cases: if the ECB’s head mentioned “strong vigilance” and if he didn’t.

Strategists J.P. Morgan say that central bankers may just want to animate the dry data. Analysts at Citigroup, however, don’t agree with such opinion thinking that their actions are quite deliberate. In their view, 30 years ago the goal of monetary authorities was to surprise the markets while now the central banks, on the contrary, try to prepare investors for future developments in order to eliminate potential shocks.

Sophisticated investors know exactly what “strong vigilance” meant, but individual traders may have plenty of difficulties trying to interpret the “code language” correctly. As a result, Citigroup notes that it’s much easier for retail investors to trade on such factors as high probability of ECB July rate hike based on the market’s expectations. However, on Thursday after forming a spike euro has sharply fallen. An individual trader who needs some time to understand what’s happening may be crushed in such situation.

[FBS.com_official]

JPMorgan Chase, Nomura expect euro to rebound

Analysts at JPMorgan Chase and Nomura expect the single currency to rebound even despite the escalation of concerns about Greece’s future.

According to JPMorgan, euro will show better results this year than dollar and yen even if the European policy makers put off agreeing on a resolution to the debt crisis as long as the situation seems to be more or less stable. The specialists believe that the market will calm down next week as the currency bloc’s leaders most probably won’t decide to do something drastic such as forcing private investors to share Greece’s debt burden by prolonging maturities. In their view, the pair EUR/JPY may climb to 120 yen this year. The bank also forecasts the pair EUR/USD to reach $1.48 by the end of December.

Economists at Nomura think that the expectation of the ECB rate hikes will ease negative pressure on euro and euro’s not likely to fall into downtrend. The bank claims that the recent decline of the European currency reflects the increase in fiscal premium in the euro zone’s countries. Nomura’s forecast for euro is $1.45 and 127 yen at the end of this year.

[FBS.com_official]

UBS: comments on USD/CHF

The greenback went up versus Swiss franc from Tuesday’s minimum at 0.8350, but was stopped by resistance at 0.8575. As the risk aversion strengthened, the pair USD/CHF went down to support at 0.8465.

Resistance for US dollar is found at 0.8545 (June 16 maximum), 0.8595 (intra-day resistance) and 0.8665 (May 27 maximum). Support levels lie at 0.8465 (June 16 minimum), 0.8350 (June 14 minimum) and 0.8325 (June 7 minimum).

Technical analysts at UBS, claim that the trend for USD/CHF will remain neutral as long as the pair is trading between 0.8443 and 0.8457. If dollar falls below 0.8443, the bearish trend will resume and dollar will be poises down to 0.8348. If US currency rises above 0.8547, it’ll be able to strengthen to 0.8639.

[FBS.com_official]

Citigroup: euro will remain under pressure

Analysts at Citigroup think that if the European Union and the International Monetary Fund agree to provide Greece with another tranche of financial aid that includes 8.7 billion euro ($12.4 billion) from EU and 3.3 billion euro from the IMF in July, euro’s rebound will be modest and short-lived.

The specialists think that the single currency will remain under pressure of uncertainty generated by the process. In their view, euro still faces challenges in the near term.

European finance ministers will meet on June 19 after they failed to reach an accord on the next loan disbursement an emergency session two days ago.

The pair EUR/USD recovered rising above $1.24 after touching yesterday the minimal levels since May 26 at $1.4073.

[FBS.com_official]

Alan Greenspan: Greece will likely default

The former Federal Reserve chairman Alan Greenspan is almost sure that Greece will default. In his view, the chances of such outcome are “so high that you almost have to say there’s no way out”, reports Bloomberg.

Greenspan says that the possibility that European politicians will manage to cope with the crisis is very low. Greek government bonds fell, while the yield on the 2-year notes reached the record maximum of more than 30%. The nation’s authorities didn’t manage to convince the population in the necessity of more austerity measures.

If Greece becomes unable to repay its debts, US economy will face the high risk of recession. If Greece doesn’t default, the possibility of the US economic contraction will be low. According to Greenspan, American recovery is stemmed as businesses are concerned about the long-term outlook. The economist warns that US debt issue is becoming “horrendously dangerous” and US lawmakers probably don’t have another year or two to solve it.

[FBS.com_official]

Sarkozy and Merkel announced “breakthrough” in Greek issue

French President Nicolas Sarkozy and German Chancellor Angela Merkel announced after today’s meeting that there’s a “breakthrough” in solving Greece’s debt crisis: the leaders of 2 largest euro zone’s economies agreed on a new rescue package for Greece.

Germany that was earlier demanding private bondholders pay a substantial share of any new bailout is going to work on the compromise deal with ECB. Analysts at RBS note that such comments helped to improve the investor’s risk sentiment.

The market’s reaction was optimistic: single currency went up versus all of its main competitors on the news.

The pair EUR/USD added 120 pips reaching 1.4290. Resistance for euro is found at 1.4300 (June 13 minimum), 1.4370/75 (20-day MA) and 1.4430/50 (June 13 maximums). Support levels lie at 1.4200/20 (previous maximums), 1.4125 (day minimum) and 1.4070 (June 16 minimum).

[FBS.com_official]

Ichimoku. Weekly forecast. GBP/USD

Weekly GBP/USD

Last week the pair GBP/USD was trading in a volatile way: there was the bearish candle with very long upper shadow and significant lower one formed on the price chart, so that it’s possible to say that the confrontation between bulls and bears was tough.

Tenkan-sen still acts as resistance, while Kijun-sen is playing the role of support.

The “golden cross” made by Tenkan (1) and Kijun (2) above Kumo remains in place. The rising Ichimoku Cloud keeps being rather wide (3) indicating that the bulls haven’t given up their positions.

Daily GBP/USD

The outlook for GBP/USD based on the daily chart has deteriorated – Tenkan-sen and Kijun-sen that formed the “golden cross” the week before last have crossed once again, this time for the “dead cross” (1).

The situation is unstable – this can be observed as the Ichimoku Cloud (3) remains extremely thin – neither bulls, nor bears are able to take over the market.

The prices went down below the trend line and the momentum is bearish. At the same time, the Standard line is moving horizontally and Friday’s “hammer” figure means that he pair is trying to form a base at the current levels, so we see the potential for the rate’s consolidation and the bulls strengthening their positions.

[FBS.com_official]

Ichimoku. Weekly forecast. USD/JPY

Weekly USD/JPY

On the weekly chart resistance for the pair is still generated by both the turning line (1) and the Standard line (2). Tenkan-sen keep going down to Kijun-sen. In addition, the greenback remains under pressure of the bearish Ichimoku Cloud (3).

At the same time, there’s some hope for the rate’s consolidation: the inverted “hammer” may indicate that the bulls may move the market up from these levels. It’s necessary to wait for bullish confirmation.

Daily USD/JPY

As it was expected, the “dead cross” (5) formed by Tenkan-sen and Kijun-sen below Kumo a week ago and the wide Ichimoku Cloud didn’t let the bulls get higher. The prices met strong resistance of the Standard line (1) and breached the Standard line (2).

At the same time all lines of the Indicator have become horizontal that allows us to assume that the bulls will probably manage to regain some of the lost grounds.

[FBS.com_official]

Ichimoku. Weekly forecast. USD/CHF

Weekly USD/CHF

The satiation at the USD/CHF chart doesn’t change much. On the weekly chart one can still see the classic downtrend. The longer-term outlook is so bearish that it would be very difficult for the pair to overcome the downtrend.

During the last 2 weeks the bulls managed to move a little bit higher but there’s nothing that could indicate that this advance was more than correction.

The bearish Cloud remains rather wide. Kijun-sen and Senkou Span B (2 and 3) are directed horizontally, while Tenkan-sen and Senkou Span A (1 and 4) keep declining.

Daily USD/CHF

On the daily chart it’s possible to see that US currency is gradually moving up. The prices managed to overcome resistance provided by the Turning line (1) that is now acting as support.

The bears still dominate the market and will soon try to erase the upward correction.

It’s also necessary to note that Tenkan-sen and Kijun-sen still keep in place the “dead cross” (5) formed below the descending Cloud (both borders of Kumo are moving down – 3, 4).

[FBS.com_official]

Nordea and Westpac recommend selling euro

The turmoil in Greece keeps escalating. The nation’s Prime Minister George Papandreou initiated yesterday a 3-day debate a confidence motion in his government.

In order to get the fifth loan under last year’s 110 billion-euro bailout Greek Parliament has to approve 78 billion-euro ($111 billion) package of budget cuts. However, the opposition parties aren’t inclined to let this happen. Euro-area finance ministers urge Greece to pass laws to cut the deficit and sell state assets left open whether the country will get the full 12 billion euro promised for next month

Currency strategists at Nordea Bank claim that the single currency is under pressure due to the uncertainty about Greece’s future and the concerns about global economic growth. In their view, the pair EUR/USD may drop to $1.40 by the end of the week.

Analysts at Westpac advise to sell euro on its advances above $1.43. The specialists doubt that Greek policymakers will manage to push through all austerity measures EU and IMF demand from them.

The median forecast of analysts surveyed by Bloomberg News is that euro will fall to $1.40 by December.

[FBS.com_official]

Deutsche Bank: negative outlook for EUR/USD

Analysts at Deutsche Bank think that the European currency has already reached this year’s maximum versus the greenback at 1.4940.

The specialists believe that the pair EUR/USD be steady declining during a year from now. In their view, euro will slide to 1.3500 by the end of the third quarter, to 1.3000 by the end of 2011 and to 1.27 in 12 months.

[FBS.com_official]

Citigroup expects EUR/CHF to decline

Analysts at Citigroup expect the single currency to fall to 1.17 versus Swiss franc even though they believe that CHF is overvalued against euro in the longer term.

The specialists are surprised by good performance of Switzerland’s economy taking into account the strength of its national currency. In their view, franc may be driven by the capital flight both from Middle East and North Africa and euro area’s periphery. In addition, it’s also necessary to remember about the continuing problem with CHF-denominated mortgages in Hungary.

As a result, Citi sees the high risk of EUR/CHF decline in the short term, especially in case of high risk aversion.

[FBS.com_official]

MIG Bank: comments on USD/JPY

Analysts at MIG Bank still expect that the greenback will be able strengthen versus Japanese yen starting new bullish cycle.

For the pair USD/JPY to do this, it has to close above 82.00 and then rise above the post earthquake maximum of 83.30.

According to the bank, support for US currency is situated at 80.00 and 79.80 (Fibonacci level).

[FBS.com_official]

Westpac Bank: comments about NZD/USD

New Zealand’s dollar declined today versus its US counterpart on the rising risk aversion caused by the concerns about Greece.

Analysts at Westpac Bank expect the pair NZD/USD to trade between $0.8000 and $0.8200 this week. In their view, the pair will eventually break range the bottom of this range, not the top.

Apart from the European issues, the markets also watch the FOMC’s meeting that will finish on Wednesday and Ben Bernanke’s press conference the same day. The bank thinks that the Fed may simply underline that the monetary policy will remain loose without specifying the details.

NZD/USD went down from today’s maximum at $0.8120 to the levels in the $0.8050 area. Support for the currency is now seen around $0.8040, while resistance starts at $0.8200.

Kiwi is much more influenced by global financial problems than by the domestic ones. When they are resolved, albeit temporarily, New Zealand’s dollar will once again resume the uptrend.

[FBS.com_official]

Commerzbank: GBP/USD within downtrend

British pound went down from Friday’s maximums in the 1.6200 area found support in the 1.6110 zone managing to recover to 1.6185.

Technical analysts at Commerzbank regard this move of the pair GBP/USD as correction. In their view, sterling will find resistance at 1.6225. The specialists think that pound won’t be able to rise above 1.6370. There’s also a barrier at 6-week resistance line of 1.6420.

According to the bank, the trend for the pair is negative and it’s poised down towards the 55-week MA at 1.5831.

[FBS.com_official]

BBH: Greece’s default is inevitable

Analysts at Brown Brothers Harriman, the oldest and largest private bank in the United States, claim that if the single currency drops below 1.42 versus the greenback, it will be poised down to 1.40 completing the retracement of the advance made in the second half of May.

According to the specialists, the second bailout for Greece may come in time to prevent the global crisis, but probably too late for Greece.

The bank thinks that there’s no chance the nation will be able to avoid default. The strategists say that the question is when it will happen and how well euro zone and G7 finance ministers will manage to constrain the negative consequences of this event.

[FBS.com_official]

Commerzbank, Societe Generale: risks for EUR/USD

The single currency went down from Friday’s maximums in the 1.4340 area to find support yesterday at the levels in the 1.4200 region before returning back up close to 1.4400.

Technical analysts at Commerzbank regard the recent advance of EUR/USD as a correction. In their view, the general outlook for euro remains negative in the short and medium terms and the pair won’t be able to rise above 6-week resistance line at 1.4600.

Strategists at Societe Generale also claim that euro’s move up is fragile. According to the bank, the pair risks revisiting may minimum of 1.3970. The specialists think that EUR/USD is consolidating so far after the decline from 1.4700. Societe Generale expects that after a short pause euro will resume going down.

[FBS.com_official]

Deutsche Bank: USD/CHF will reverse upwards

Analysts at Deutsche Bank think that US dollar might have reached a bottom trading versus Swiss franc when it hit the record minimum of 0.8326 on June 7.

The specialists expect the downtrend for the pair USD/CHF to reverse upwards. In their view, the greenback will be experiencing the steady recovery during the next year.

According to the bank, US currency will rise to 0.9300 by the end of the third quarter and to 0.9800 by the end of 2011. The next year the pair may get above the parity climbing to 1.0500 in 12 months.

[FBS.com_official]

BMO: trade recommendations ahead of FOMC

The 2-day FOMC meeting begins today. It’s drawing special investors’ attention as this is the last one before the end of QE2.

Analysts at Bank of America Merrill Lynch claim that though the Fed’s Chairman Ben Bernanke will sound a little more cautious about the economic outlook, he will remain stick to the forecast that the nation’s economy will rebound in the second half of the year. In their view, the $600-billion bond purchasing program will finish as planned and US monetary authorities will switch to the neutral monetary policy.

Strategists at BMO Capital Markets note that after the last three Fed’s meetings spreads between US and Australian 2-year bonds widened. As a result, the specialists recommend buying Australian dollar and selling the greenback at $1.06 stopping at $1.05 and taking profit at $1.09.

[FBS.com_official]

Mitsubishi UFJ: risks associated with US debt

Analysts at Mitsubishi UFJ Morgan Stanley Securities claim that investors are still rather calm about US debt problems expecting the nation to raise the debt ceiling in the coming weeks.

In their view, if the market was already that nervous about American debt, dollar’s rate was lower. However, the specialists note that any signs the ceiling may not be raised and the more dovish comments from the FOMC this week will put the greenback under negative pressure.

Earlier, Fitch Ratings claimed that it would lower its ratings on the US to restrictive default if the country fails to raise its debt ceiling and misses a coupon payment on August 15.