Comments and forex-analytics from FBS

[ryuroden]

Spain: frightening austerity agenda

On Friday, March 30, Spanish Prime Minister Mariano Rajoy delivered the annual budget. Spain is cutting 27 billion euros ($36 billion) from its budget this year as a part of the tough austerity plan. Prime Minister remains committed to reduce the budget deficit to 5.3% of GDP in 2012 from 8.5% in 2011, despite the protests, bursting in Spain.

To meet the goals set in the budget plan, Spain’s regional authorities will have to cut their deficits by 50% this year. As a result, budget spending in both health care and education is expected to be cut. Social unease may increase on the back of these reforms.

According to Spanish Economy Minister Luis De Guindos, the introduced austerity measures are focused on spending cuts rather than tax hikes. Moreover, Prime Minister Rajoy has denied the intentions to raise taxes. However, some economists are convinced that the government will also need to raise income taxes, increase electricity prices, abolish corporate tax breaks, and keep civil servant salaries fixed for a while in order to cut budget deficit.

The appraisal of the Spain’s government’s policy seems to be controversial. Investors believe the further austerity measures would deepen the recession in Spain and in the whole euro zone, given that the Spanish economy is already expected to contract by more than 1.7% this year. Some experts note Rajoy tries to eliminate budget deficit at the expense of economic growth in order to delight the EU officials.

European officials, however, appreciate the value of Spain’s attempts to return market confidence. “Even though Spain is in a difficult situation, the steps it has taken are consistent with its goal to improve the sustainability of its public finances”, said Olli Rehn, EU Commissioner for Economy and Finance.

On Wednesday, April 4, Spanish government conducted the first debt auction since announcing that public debt will surge to 79,8% GDP this year. Spain sold only 2.59 billion euros of debt out of 3.5 billion euros (maximum target). Spain's borrowing cost is actually higher than it was on the day of the first LTRO operation 3 1/2 months ago. The yields on 5-year notes rose to 12-week maximum of 4.5%.

Analysts at CIBC claim that if Spanish yields keep rising, euro will decline. In their view, euro zone’s periphery remains in extremely stressful condition.

[ryuroden]

How do you like the picture at EUR/CHF chart?

The pair has clearly pierced the SNB’s floor which lies at 1.20 posting the 7-month minimum at 1.1997 on the new wave of concerns about Spain’s finances. Switzerland’s central bank replied that it “won't accept any exchange rate below 1.20” reiterating its commitment to buy foreign exchange in unlimited quantities to defend this level.

Analysts at HSBC think that the SNB intervened today. In their view, the evidence is that stops in the 1.2030 area didn’t trigger sustained slump of euro below the minimal level. Strategists at Citi estimate that the central bank sold 1-2 billion euro at 1.20.

Swissquote points out that it was the CPI data released today which made traders test the SNB’s resolve to maintain franc’s cap. The specialists think that the SNB won’t manage to keep on with just verbal interventions from now on.

Swiss inflation accelerated to 0.6% in March from 0.3% in February beating the forecasts. The SNB’s foreign currency reserves increased from 227.2 billion francs in February to 237.5 billion francs in March. Recent data shows that franc’s peg to euro helps to stabilize Swiss economy, though CGF is still about 30% stronger than it was below the crisis.

RBC: Swiss central bank has signaled and repeated its unwavering commitment to the EUR/CHF floor. But though the market believes it for the next 1-3 months, EUR/CHF risk reversals show investors believe the floor will break beyond that. If downside price risks emerge, the SNB's only real tool is to raise the EUR/CHF floor. The floor can last as long as it is compatible with the SNB's mandate of price stability.

[ryuroden]

A few more comments on NFP and today’s trading

Release time: 12:30 p.m. GMT

Societe Generale: the pace of hiring has probable decelerated to 190K in March but likely upward revisions to prior months along with another drop in the unemployment rate to compensate the impact of slightly slower payroll growth. Employment growth between 1% and 1 ½% is weaker than in an 'old normal' recovery and may not be able to generate GDP growth above 2%, but it is pretty good insurance against a slip back into recession. However, QE3 may return to the agenda before June as the pace jobs growth declines. “Payrolls on a bank holiday is a good enough reason to take risk off for anybody.”

Goldman Sachs: forecast for March gain in nonfarm payrolls is raised from 175K to 200K on the better-than-expected ADP employment report.

Bank of New York Mellon: “The whisper number could be something larger than 250K. The problem is that everyone is talking about it, but nonfarm payroll data is so unpredictable and if the figure comes in below 200K, stocks are likely to sell off”.

Reuters’ consensus: +203K.

Trading implications

A good reading will encourage short-term Treasury yields and, consequently, the greenback, while the single currency will get under pressure.

For now EUR/USD has managed to find support at the bottom of the daily Ichimoku Cloud after hitting 3-week minimum at $1.3034 yesterday. At the same time, this support looks really fragile as the market’s still seems seriously concerned about Spain.

Analysts at Bank of Tokyo-Mitsubishi claim that euro’s slide below $1.30 looks inevitable.

[ryuroden]

It was a grim week for the euro area

The single currency hit 3-weel low versus the greenback and lost 2.7% this week against Japanese yen showing the steepest 5-day slide since the week ended September 9.

Spain

The main theme of the past week was Spain. Analysts at Citigroup said that the nation was at “a greater risk than ever before” of a debt restructuring. Spain’s main IBEX 35 index touched the lowest in 7 months approaching to its post-credit-crisis minimum.

Spain’s 10-year borrowing costs returned above 5% after bottoming at 4.815% after the ECB’s second long-term refinancing operation (LTRO) in February. In March the indebted country shocked markets by announcing that it had missed its 2011 budget deficit target of 4.4% and set a lower goal of 5.3% for 2012. Spanish government failed to sell the planned amount of debt at this week’s auction (April 4) managing to borrow only 2.59 out of 3.5 billion euro target.

Bank stocks plunge

It’s also necessary to note that this week was the worst for European bank stocks since December with Italy’s Unicredit falling by more than 11% and Banca Poplare di Milano slumping by more than 15%.

ECB: downside economic risks

The ECB President Mario Draghi repeated that downside economic risks prevail and called talk of an exit strategy from LTO premature.

Discouraging data

German February industrial output data: -1.3% m/m vs. the Reuters consensus forecast of -0.5%.

EUR/USD

Scotiabank: watch the bearish signals from MACD, RSI and candlesticks. However, EUR/USD is still caught in sideways trend between $1.30 and $1.35 which has been in place since the end of January. As a result, wait for the breach of $1.2974 support for bearish confirmation.

[ryuroden]

NFP: Bloomberg survey in details

Bloomberg Survey

================================================================

Nonfarm Private Unemploy Hourly

Payrolls Payrolls Rate Earnings

,000’s ,000’s % MOM%

================================================================

Date of Release 04/06 04/06 04/06 04/06

Observation Period March March March March

----------------------------------------------------------------

Median 25 215 8.3% 0.2%

Average 208 220 8.3% 0.2%

High Forecast 250 265 8.4% 0.2%

Low Forecast 175 185 8.1% 0.1%

Number of Participants 80 45 76 49

Previous 227 233 8.3% 0.1%

----------------------------------------------------------------

4CAST Ltd. 200 215 8.2% ---

ABN Amro Inc. 210 230 8.3% ---

Action Economics 210 215 8.3% 0.2%

Aletti Gestielle 200 --- 8.3% ---

Ameriprise Financial Inc 215 210 8.2% 0.2%

Banca Aletti & C spa 230 246 8.2% ---

Bank of Tokyo- Mitsubishi 200 210 8.2% ---

Bantleon Bank AG 190 --- 8.3% ---

Barclays Capital 200 215 8.2% 0.1%

BBVA 200 210 8.3% 0.2%

BMO Capital Markets 190 --- 8.3% 0.2%

BNP Paribas 210 --- 8.3% 0.1%

BofA Merrill Lynch Resear 220 225 8.3% 0.2%

Briefing.com 230 250 8.2% 0.1%

Capital Economics 200 --- 8.3% 0.1%

CIBC World Markets 200 --- 8.3% 0.2%

Citi 185 --- 8.3% 0.1%

ClearView Economics 190 205 8.4% 0.2%

Comerica Inc 200 --- 8.2% 0.1%

Commerzbank AG 220 --- 8.3% 0.2%

Credit Agricole CIB 210 --- 8.3% 0.2%

Credit Suisse 235 --- 8.2% 0.2%

Daiwa Securities America 200 --- 8.3% ---

Desjardins Group 210 --- 8.3% 0.2%

Deutsche Bank Securities 250 250 8.2% 0.1%

Deutsche Postbank AG 230 --- 8.2% ---

Fact & Opinion Economics 240 250 8.2% ---

First Trust Advisors 210 223 8.1% 0.2%

FTN Financial 200 220 8.3% 0.1%

Goldman, Sachs & Co. 200 --- 8.2% 0.1%

HSBC Markets 180 189 8.3% ---

Hugh Johnson Advisors 180 185 8.3% 0.2%

IDEAglobal 210 220 8.3% 0.2%

IHS Global Insight 210 --- 8.2% 0.2%

Informa Global Markets 200 --- 8.3% 0.2%

ING Financial Markets 220 230 8.1% 0.2%

Insight Economics 235 --- 8.2% 0.2%

Intesa Sanpaulo 190 --- 8.3% 0.2%

Iur Capital Llc 195 --- 8.2% ---

J.P. Morgan Chase 215 220 8.3% 0.2%

Janney Montgomery Scott L 201 221 8.3% ---

Jefferies & Co. 195 210 8.2% 0.1%

JH Cohn 225 --- --- ---

Laurentian Bank Securitie 180 185 8.3% 0.1%

LCA Consultores 225 --- --- ---

Maria Fiorini Ramirez Inc 215 225 --- ---

Market Securities 219 --- 8.2% ---

MET Capital Advisors 222 --- 8.2% ---

Mizuho Securities 175 --- 8.3% ---

Moody’s Analytics 200 205 8.3% 0.1%

Morgan Stanley & Co. 175 --- 8.3% 0.2%

National Bank Financial 190 --- 8.3% ---

Natixis 205 --- 8.2% 0.2%

Newedge 205 215 8.3% ---

Nomura Securities Intl. 225 235 8.2% 0.2%

Nord/LB 175 --- 8.3% 0.2%

OSK Group/DMG 192 --- 8.2% ---

O’Sullivan 195 205 8.3% 0.1%

Paragon Research 242 --- 8.2% ---

Parthenon Group 206 224 8.2% 0.2%

Pierpont Securities LLC 235 245 8.2% ---

PineBridge Investments 245 265 8.2% 0.1%

PNC Bank 200 210 8.3% 0.2%

Prestige Economics 200 205 8.3% ---

Raiffeisenbank Internatio 240 245 8.2% ---

RBC Capital Markets 200 205 8.3% ---

RBS Securities Inc. 220 225 8.2% ---

Scotia Capital 220 --- 8.3% ---

SMBC Nikko Securities 250 250 8.3% 0.2%

Societe Generale 190 195 8.1% 0.2%

Standard & Poor’s 225 230 --- 0.2%

Standard Chartered 205 215 8.3% 0.1%

Stone & McCarthy Research 200 210 8.2% 0.2%

TD Securities 175 185 8.4% ---

UBS 200 210 8.2% 0.1%

University of Maryland 200 205 8.3% 0.2%

Wells Fargo & Co. 226 --- 8.2% ---

WestLB AG 220 --- 8.3% 0.1%

Westpac Banking Co. 180 --- 8.3% ---

Wrightson ICAP 230 235 8.2% 0.1%

================================================================

[ryuroden]

RBS is extremely bullish on GBP

Analysts at RBS expect the British pound in April to be on a rise against the euro, yen and Swiss franc. However, the sterling looks less likely to do well against the Australian and the New Zealand dollar.

According to specialists, in April sterling has traditionally been strong against a range of currencies. Moreover, higher than expected construction, manufacturing and services PMIs (56.7, 52.1 and 55.3 respectively) bring bullish sentiment to the market.

At the current run rate, previously announced asset purchases wouldn’t run off until early May. The further expansion of monetary easing is unlikely taking into account the improvement of UK economy.

[ryuroden]

USD/JPY: analysts’ forecasts

The pair USD/JPY was trading sideways this week opening and closing in the 82/83 yen area.

Today the main event for all dollar crosses is the Non-Farm Payrolls release at 12:30 GMT.

Bank of Tokyo-Mitsubishi UFJ: USD/JPY may rise to 84 yen if NFP data exceed expectations.

JP Morgan: USD/JPY will likely trade next week between 81 and 83 yen.

Analysts at Brown Brothers Harriman claim that unless the Bank of Japan announce some aggressive easing measures on Tuesday, April 10, yen’s dynamics will be determined by external factors. The specialists underline that the LTROs in Europe may have already given all positive effect they could and that political and economic headline risk in the weeks ahead are on the downside. As a result, BBH believes that safe-haven demand for yen will increase and USD/JPY may decline to 80-81 yen, while EUR/JPY may slide to 104-106 yen.

[ryuroden]

The week ahead: events to watch

Monday:

• New Zealand, Australia, Germany, France, Switzerland, Italy and Great Britain: Bank holidays (Easter).

• Ben Bernanke speaks (11:15 p.m. GMT) in Stone Mountain. The Fed’s Chairman will likely mention the unexpectedly weak NFP (payrolls added only 120K in March vs. the expected increase of 207K).

Tuesday:

• Japan: The release of monetary policy statement and overnight call rate is scheduled. At a policy-setting meeting the BOJ is supposed to refrain from further quantitative easing steps due to weak yen and signs of improving economic conditions, although policymakers could take action at the following meeting on April 27. With interest rate expected to stay near zero, the BOJ doesn’t possess a remarkable liberty of action.

• China: Trade balance in March is likely to be less terrifying than in February: analysts forecast the trade deficit to decline from 31.5 billion to 3.0 billion. Investors have become increasingly nervous about China's depressed economy in recent sessions.

• Greek T-bill auction.

Wednesday:

• Italian T-bill auction.

Thursday:

• Australia: Labor market data should be widely watched. The unemployment rate in March is forecasted to increase slightly from 5.2% to 5.3%. Number of employed people may increase by 6,700 versus February’s 15,400 contraction. Weak February figures may mean that strong Aussie burdens the Australian economy and that the RBA may decide to cut rates in the coming months.

• U.S.: PPI growth accelerated from 0.1% in January to 0.4% in February. In March American producer prices are seen gaining 0.3%. The PPI is climbing more than the Fed anticipated, though the central bank claims that the rise in energy prices is only temporary. Higher prices diminish the chances for additional QE. Trade deficit in March may contract from $52.6 billion to $51.9 billion. However, according to TD Economics, rising energy prices will continue to widen the trade deficit in February; analysts expect the deficit to rise to $53 billion, the maximum since October 2008. A slight decrease in a weekly number of unemployment claims is forecasted (355,000 versus previous 357,000 – a 4-year minimum posted last week). However, broader outlook on the U.S. labor market in 2012 remains cloudy.

• Italian bond (BTP) auction.

Friday:

• China: Economy is expected to contract in the first quarter: GDP may decline to 8.4% from 8.9% in the last quarter 2011. Strategists at Barclays Capital warn that the Aussie and other commodity currencies could be weighed down until it is clear the China’s slowdown has bottomed out.

• U.S.: Consumer Price Index is forecasted to rise to 0.2% in March versus 0.1% in February. TD Economics analysts expect the downward trajectory in annual CPI (drop to 2.5% y/y from 2.9% y/y in February) regardless of the surge in energy prices.

• Ben Bernanke speaks (5:00 p.m. GMT). There may be a surge of volatility on the Chairman’s comments.

[ryuroden]

Mizuho: short-term bearish on USD/JPY

Analysts at Mizuho Corporate Bank believe that the greenback may drift lower versus Japanese yen sliding to 80.00 in the next 2 weeks.

“When we look at the amount of short positions in the yen, we see that they really have not decreased. Their volume is large. At some point, these positions will be closed, leading to an increase in the yen. Employment data can serve as an impetus for this,” say the specialists.

[ryuroden]

Ifr Markets: option expiration for today

Analysts at Ifr Markets, key analytical data provider, claim that today the following options expire:

EUR/USD: $1.3400, $1.3225, $1.3300, $1.3500, $1.3315.

USD/JPY: 82.25, 84.00 83.15, 83.00.

EUR/JPY: 108.00.

AUD/JPY: 83.75.

AUD/USD: $1.0200, $1.0300.

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

[ryuroden]

CFTC trader positioning data

Monday, April 9, 2012 - 08:00

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

• The net short euro position dropped to 79.5k contracts, the smallest such net position since late November 2011. Long positions increased 5.8k contracts, while shorts shrank by 3.8k contracts.

• The net short yen position declined to 65.1k contracts from 67.6k. Longs rose by 3.7k, whereas shorts rose by 1.1k contracts.

• The net short pound position went down to 8.8k contracts from 11.1k. Both longs and shorts increased (2.7k and 380 contracts respectively).

• Swiss franc net shorts decreased to 14.7k from 15.1k contracts. Longs grew by 322 contracts and shorts were pared by almost 100 contracts.

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

[ryuroden]

USD/JPY down on U.S. jobs figures

The greenback touched a one-month low versus the yen on Monday on the back of last week's lower-than-expected U.S. labor market figures. Investors are worried that the Fed may need more monetary stimulus to support the economy.

In March non-farm payrolls rose by 120K versus 240K in February and far lower-than-forecasted 207K, demonstrating the smallest increase since October. The unemployment rate decreased slightly to 8.2% from 8.3%.

Commonwealth Foreign Exchange: The question for the dollar is whether this is as viewed as an outlier in an otherwise improving trend in labor markets, or if it's viewed as enough to revive talk of another round of QE. At the very least it will keep the door open to additional policy easing, more so than before the number was released.

Japan, however, showed the first current account surplus in two months in February (1.178 trillion yen, down 30.7% from a year earlier, but stronger, than forecasted). Exports stopped contracting thanks to robust demand in the U.S. and Southeast Asia.

Early Monday the USD/JPY dropped as low as 81.19 yen on its lowest level since the beginning of March. The support for the dollar lies at 81.07 yen (a 38.2% retracement of its rally in Feb.-March), 80.59 yen (March 6 minimum), 80.25 yen (Feb.29 minimum) and 80.01 yen (Feb.28 minimum). The resistance levels for the pair are 82.56 yen (Apr.6 maximum), 82.88 yen (21-day MA) and the 82.99 (Apr.3 maximum).

[ryuroden]

Saxo Bank: comments on euro, yen and franc

Analysts at Saxo Bank in London note that as the market’s focus shifts to Spain, the European Central Bank will face a lot of difficulties in the coming months.

The specialists claim that for now the ECB did well to contain spikes in peripheral sovereign yields through its long-term refinancing operations (LTROs) in December 2011 and February this year. However, Saxo Bank warns that if the concerns about Spain keep mounting, it will be very hard for the ECB to calm the market alone: more political co-ordination will be needed.

According to Saxo, French elections and new leadership will drive EUR/USD up, though the pair won’t be able to rise above $1.35/1.36, so a reversal downwards in this area’s expected.

As for Japanese yen, the analysts say that yen’s decline “in the next few months, this yen move will be overshot, and we will see a bit of a consolidation in these carry trades, which will mean the yen consolidates robustly against several of these currencies.”

Speaking about Swiss franc’s prospects, the economists say that the Swiss National bank is unlikely to raise EUR/CHF floor from 1.20 until the third quarter or even later.

[ryuroden]

Ichimoku. Weekly forecast. GBP/USD

Weekly GBP/USD

British pound tested the levels above the Ichimoku Cloud last week, but then drifted lower and closed below Kumo.

At the same time, the pair managed to find support at Tenkan-sen (1), so the bulls haven’t lost all chances to turn the situation in the short term to their benefit. The pair also has some support of the uptrend line connecting January and March minimums.

However, the Turning line stopped moving up and switched to the horizontal mode following Kijun-sen (2) and pointing at sideways trend. Kumo isn’t wide, but still bearish (3).

We are looking forward to consolidation in the coming weeks. The ability of the bulls to bring the prices above the Cloud will be decisive for the future dynamics of GBP/USD.

Daily GBP/USD

On the daily chart the prices breached the Turning line (1), but were supported by the Standard line (2) and the upper border of the rising Ichimoku Cloud.

On the one hand, the situation looks stable: Tenkan and Kijun have so far formed “golden cross” which should be strong enough as the lines intersected above Kumo.

On the other hand, Tenkan-sen and Kijun-sen became horizontal and the Cloud has dangerously narrowed.

On the downside, if GBP/USD breaches support of the Kijun and enters the Cloud, it will likely slide to the bottom of Kumo. On the upside, if after a few days of consolidation sterling manages to rise above Tenkan, it will get chance to strengthen to the maximums of the early April.

[ryuroden]

US yields’ advance is likely to slow down

So far there was a lot of talk about rising US Treasury yields which helped to push USD/JPY up and breach its long-term downtrend. Is this really a reversal of the 30-year bullish market characterized by increasing bond prices and declining yields and the demand for treasuries will start declining? Not likely.

Reasons of high demand for Treasuries:

1) Reduction of supply: data from CRT Capital Group LLC shows that the net amount of Treasuries available will decline by 30% once proceeds from maturing securities are reinvested and fall by an average of $99.4 billion of investable cash a month. Average maturity of government debt has risen from 49.4 months in last quarter of 2008 to 62.8 months with the help of Operation Twist (shorter maturities in the Fed’s holdings are replaced with longer-term debt to cap longer-term rates), while the amount of American debt increased by $4 trillion.

2) Treasuries remain the safe haven #1 with few alternatives as the global economic prospects remain uncertain and there are severe problems looming over particular regions, such as the euro area. Investors see the improvement of US economy, but the majority agrees that it’s too early to be entirely optimistic.

3) The banks need to add safe assets to meet new reserve rules under the Dodd-Frank financial-overhaul law and Basel III regulations. US commercial lenders have already bought the same amount of Treasuries as in the while 2011.

4) Corporations have record cash on hand which they put in Treasuries seeking fixed income as they fear that the market may get shaken once more.

High demand means lower yields. Although 10-year US yields rose from 1.88% at the end of 2011 to about 2.4% in March, consensus forecast didn’t chance since January – it still shows the yields will finish 2012 at 2.49%. This means that investors aren’t ready to trim their Treasury holdings. Buyers bid $3.19 for each dollar of the $538 billion in notes and bonds sold this year – the highest demand since 1992 when such data became available. The only obstacle which may slow the rate of Treasuries purchases is rising inflation.

[ryuroden]

EUR/USD: prospects remain unclear

On Monday, April 9, activity on the European markets remains weak due to Easter holidays in Germany, France, Switzerland, Italy and Great Britain. Given the rising Spanish bonds yield and increasing uncertainty about the country’s prospects, the future of the euro doesn't look bright. Data on U.S. labor market, released on Friday, also seems to be negative (non-farm payrolls rose by 120K versus the expected 207K). Most analysts believe the U.S. labor market data won’t have a significant effect on the market.

BNP Paribas: The NFP data are quite comforting, since the cuts that occurred in March are very likely to be reversed afterwards.

SunbirdFX: The euro may strengthen from the $1.300 strong support level to $1.315 or break the Head & Shoulders pattern lying above the support and slide to $1.280.

[ryuroden]

US and Asian sessions briefly

US:

The Fed’s Chairman Ben Bernanke didn’t mention monetary policy in his speech, though noted that American economy is far from a complete recovery which was taken by the market as an argument for further easing. As a result, the greenback weakened versus the majority of its counterparts.

Speeches are also scheduled for Dallas Fed President Richard Fisher, Atlanta Fed President Dennis Lockhart and Minneapolis Fed President Narayana Kocherlakota.

Asia:

Bank of Japan’s meeting: rates unchanged at 0.1%, no new easing measures announced.

Although such decision was in line with the forecasts, USD/JPY fell by about 25 pips after the announcement from Asian session high at 81.86 yen.

Morgan Stanley MUFG Securities, Mizuho Securities and SMBC Nikko: the BOJ will expand asset purchases when it next meets on April 27.

China: trade balance +$5.3 billion; imports +5.3% (y/y), exports +8.9% (y/y).

Australia: NAB business confidence rose, job advertisements +1% (m/m).

Stock markets show mixed performance.

[ryuroden]

EUR/USD: bears vs. bulls

Bearish outlook

The common currency grew 2.95% in the first quarter on the back of the approval of a second bailout package for Greece after a debt-swap with the country’s private-sector investors. The worries of the market participants about the new wave of the crisis declined due to the operation.

In the second quarter, according to Westpac analysts, the austerity measures, deleveraging and poor growth are steadily driving the economy into a recession. “The ECB may need more QE and the Fed is basically on hold, and that should mean interest-rate differentials move in the dollar’s favor”, analysts say.

BBH: Political risk ahead of the French and Greek upcoming elections and eventual weakening economic reports in the Euro zone should push the EUR/USD below the $1.297/1.300 range. Eyes will be on the Italian bond auction on April 12.

Bullish outlook

However, some analysts are positive on the prospects of the common currency. In their view, the EU policymakers possess enough financial mechanisms to help indebted countries to surpass the crisis. Spain and Italy are unlikely to require financial aid and the U.S. isn’t growing fast enough for the Fed to start raising interest rates.

HSBC: EUR/USD is expected to trade in the range $1.30/35. There are no signs at the market that Spain alone can push the pair below $1.3000. However, if something extraordinary happens and the euro breaks this level, the next support line lies at $1.2600.

Rabobank: euro may climb to $1.35 in 9 months and to $1.40 a year from now as the Fed keeps interest rates at a record low and the U.S. moves to cut its budget deficit after presidential elections in November.

[ryuroden]

Bank's forecasts for FX majors

Data were submitted on April 5

Source: FX Week

[ryuroden]

Commerzbank: comments on EUR/JPY

Technical analysts at Commerzbank claim that the single currency may rebound versus Japanese yen from support in the 105.93/65 area (200-day MA, 38.2% Fibonacci retracement of EUR/JPY’s advance in 2012). There’s also an upper border of the Ichimoku Cloud at 106.15 yen.

The specialists think that the pair may rise to resistance at 108.07/65 from where it will start suffering from negative pressure. In their view, euro’s sell off may begin at 111.13 (April 2 maximum) and the pair may decline to the lower border of the Cloud at 103.50.

[ryuroden]

The banks recommend selling euro

Danske Bank: sell EUR/USD at $1.3097, target $1.3004 and stop at $1.3169.

Commerzbank: sell EUR/USD at $1.3350, target $1.3025 and lower stops from $1.3415 to $1.3355.

The pair has been trading in a very volatile way today. Data from France and Germany wasn’t bad, but Sentix Investor Confidence was disappointing with -14.7 in April from -8.2 in March.

[ryuroden]

RBS: trading GBP/USD

Technical analysts at RBS recommend buying British pound versus the greenback at on the dips to $1.5810/35 stopping at $1.5750 and targeting $1.6072.

The specialists note that GBP/USD will face strong resistance in the $1.6072/91 (“tweezer top” formed in November 2011). There’s also resistance at the recent highs of $1.5930 and $1.5987. If the forecast doesn’t realize, then the important downside levels lie at $1.5666 and $1.5585.

[ryuroden]

UBS: trading USD/JPY on the BOJ

Analysts at UBS believe that the Bank of Japan will deliver the expected easing at its second meeting this month on April 27. The specialists underline that this way Japanese central bank will have time to adjust their policy to what the Federal Reserve comes up with on April 24-25 justifying the policy with an updated Outlook Report.

In their view, the BOJ may:

- Extend Asset Purchase program from the end of 2012 to June 2013 or longer;

- Extend APP by at least another 5 trillion yen, concentrated in government bonds component;

- Remove the limit of buying the JGBs via the APP of only those issues with 2 years left to maturity or less;

- Raise inflation target from 1% to 2%.

How to trade using such assumption: UBS expects USD/JPY to drift down to 80.00/50 and then start rebound after the BoJ meeting on April 27 aiming to 85.00 yen in 3 months (if the Fed’s approach remains unchanged).

[ryuroden]

RBS: outlooj on the EUR/GBP

According to RBS analysts, the Britain’s economy is moving in a positive direction. The outlook is still not clear-cut, but recent better-than-expected data show that in Q1 the economy of the region is growing.

Specialists direct our attention to the bunch of positive PMI data (particularly, service and construction PMIs). Mixed household, public and financial sectors data don’t permit to make a completely favorable long-term forecast, but the GDP seems to have improved in Q1. Stronger growth will help the government to meet the deficit reduction plans.

Specialists forecast the EUR/GBP to weaken to 0.8080 level. However, the 'doji' pattern on Friday and the upward movement at the beginning of the week promise a correction to 8280/8315 levels. Strategists recommend going short with a stop loss at 0.8352. The downside targets remain at 0.8223 and 0.8192 levels.

[ryuroden]

Mizuho: dollar may rise to 105 yen

According to analysts at Mizuho Corporate Bank, the greenback may strengthen to 105 yen over the next couple of years (a highest level since October 2008).

On a weekly Ichimoku chart, the USD/JPY rose above the Kumo (3), clamped between the Kijun (2) and Tenkan (1) lines. Mizuho specialists say this pattern means the dollar will strengthen further to 85 yen and then to 105 yen. On a monthly chart, analysts expect the pair to overcome the top of the cloud in two years.