Comments and forex-analytics from FBS

[ryuroden]

May 23: economic events

The Bank of Japan has chosen not to deliver more monetary stimulus this month. The central bank kept benchmark rate unchanged at 0.1% and announced no additional bond purchases. The lack of easing made yen to strengthen versus all of its major peers. In addition, Japan’s trading deficit narrowed from 0.62T in March to 0.48T in April – another driver for Japanese currency.

Risk sentiment today was also hurt by the reports of former Greece Prime Minister Lucas Papademos saying that preparations for the country's exit from the euro zone are being considered. Although Papademos regards such move as unlikely, the risk, according to him, seems real.

Asian stocks lost 1.5% (MSCI Asia Pacific Index). AUD/USD hit the minimal level since 2011 sliding to 0.9741. EUR/USD is consolidating above 2012 minimum of $1.2624.

Also watch today:

• Great Britain: MPC meeting minutes. According to the forecasts, the MPC officials have voted unanimously to keep the monetary policy unchanged. Retail sales in April are forecasted to decline by 0.5% vs. a 1.8% growth in March – that would be a very bad sign indicating that the condition of the recessed UK economy aren’t improving at all.

• Europe: Leaders of the EU 27 member states assemble in Brussels for a crisis meeting. New French President François Hollande will try to push the currency union from austerity to growth promotion and make Germany agree to the euro bonds – debt issued for the euro zone as a whole. Analysts at Westpac say that the outcome of the meeting will hardly stimulate markets.

• Canada: Core retail sales in March may grow by 0.6% compared with a 0.5% increase in February. The nation’s economy for now seems stable enough.

• U.S.: New home sales are also expected to increase to 336K in April vs. 328K in March.

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[ryuroden]

Key options expiring today

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).

Here are the key options expiring today:

EUR/USD: $1.2650, $1.2725, $1.2730, $1.2750, $1.2850 and $1.2870;

USD/JPY: 78.75, 79.00, 79.75, 79.85, 80.00 and 80.30;

EUR/GBP: 0.8040 and 0.8100;

USD/CHF: 0.9300 and 0.9400;

AUD/USD: $0.9900 and $0.9950;

USD/CAD: 1.0120 and 1.0140.

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[ryuroden]

JPMorgan: forecast for fx majors

According to analysts at JPMorgan Chase, the greenback is likely to strengthen versus its major counterparts as a “safe-haven” against the backdrop of possible Greek exit from the euro zone. Analysts expect the economic slump in China and in the U.S. to weaken commodity currencies as the prices will fall. Japanese yen is the only currency that is expected to appreciate against the dollar.

Specialists sharply lowered their forecasts for EUR/USD to $1.22 in Q2 and to $1.24 by the end of 2012. USD/CAD is forecasted to reach C$1.04 by mid-year AUD/USD may fall to $0.96, while NZD/USD – to $0.73. USD/JPY, however, may weaken to 78.00 yen in Q2.

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[ryuroden]

Bank of America: EUR/JPY may gain

According to Bank of America, the common currency may reach its highest level against the yen in almost three weeks.

Analysts expect EUR/JPY to strengthen in a short term to 105.80 yen (50% Fibonacci retracement of a decline from March 21 maximum to May 18 maximum). In their view, the euro is looking oversold (14-day RSI is close to 30, signaling the downtrend may reverse) Since the end of March the euro has declined 8% versus the Japanese currency.

Chart. Daily EUR/JPY

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Edited May 23, 2012 by ryuroden

[ryuroden]

Yen strengthened as BOJ refrained from easing

The Bank of Japan has chosen not to deliver more monetary stimulus this month. The central bank kept benchmark rate unchanged at 0.1% and announced no additional bond purchases (the size of asset-purchase fund remained at 40 trillion yen ($503 billion).

According to the BOJ, Japanese economy is vulnerable due to the strong uncertainty over the global economic prospects and concerns about the euro area. Japanese monetary authorities assure the markets that they are ready to act if markets become destabilized and yen makes a new spike.

The lack of easing made yen to strengthen versus all of its major peers. In addition, Japan’s trading deficit narrowed from 0.62T in March to 0.48T in April – another driver for Japanese currency.

Yesterday Fitch cut the nation’s long-term foreign and local currency issuer default ratings to A+ with negative outlooks citing high rising public debt ratios. However, the downgrade didn’t have much impact on USD/JPY as most Japanese government bonds (JGB) are domestically owned.

Analysts see the next move to more easing in July after the central bank releases its economic forecasts. NLI Research Institute points out that “Japan is likely finding it more difficult than before to intervene in the currency market given international pressure, so if the yen spikes to around 77 to the dollar, the BOJ may act first through monetary policy to weaken yen.”

The pair USD/JPY is trading within gently sloping downtrend since the end of March.

Chart. Daily USD/JPY

[ryuroden]

RBS: comments on major currencies

EUR: Weaker economic data expected later this week will limit EUR/USD upside potential from current levels.

GBP: The sharper than expected fall in inflation in April may have lowered a potential barrier to more QE. GBP gains will be capped from here. The fair value for GBP/USD is at $1.54, so the pair may extend decline. A dovish set of BoE minutes is likely to support the ongoing squeeze higher in EUR/GBP.

JPY: Japanese policy makers are expressing increased concern over JPY strength. Intervention risk will increase, if USD/JPY approaches 78 yen level.

CHF: Swiss consumer confidence rebounded to the maximal level in a year, adding to the view that the economy is stabilizing. Renewed Euro zone fears are likely to increase demand for CHF amid safe haven flows, but the SNB stands ready to act.

CAD: Core and headline y/y CPI for April increased and March manufacturing and wholesale sales improved. But there was foreign net selling of Canadian securities in March and external headwinds and positioning adjustments weighed on the CAD.

AUD: Aussie has price in a lot of negative developments (lower commodity prices, weaker equities, narrower yield advantage, and domestic political uncertainty). At the same time, uncertainty in Europe suggests risks are still skewed to the downside.

NZD: New Zealand’s government to deliver a credible budget on Thursday. Political stability much stronger than Australia. Recovery frustratingly slow, but looks somewhat oversold compared to the AUD.

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[ryuroden]

Pound is hurt by the news flow

British pound is slapped by very poor retail sales data: the index contracted in April by 2.3% (the biggest decline since 2008) after adding 2% in March.

Also note that the MPC released its May meeting minutes. The essentials are:

BoE is prepared for another round of QE, but doesn’t want to hurry as inflation will remain above the target 2% level in the medium term.

David Miles dissented from the majority opinion and voted for more QE (25-billion-pound increase).

Decision to keep rates unchanged at 0.50%, as expected, was unanimous.

The MPC would continue to monitor the outlook each month and further monetary stimulus could be added if the outlook warranted it.

GBP/USD hit $1.5673, the minimal level since the mid-March after breaching 200-day MA yesterday. Technical analysts at Commerzbank claim that the next target for sterling on the downside lies at $1.5599 (March minimum).

Chart. Daily GBP/USD

[ryuroden]

AUD/CAD: technical comments

AUD/CAD keeps trading in a downward channel since January. Last week a bullish correction followed the break below parity, but the bulls were unable to reverse the long-term downtrend.

However, analysts at RBS see the potential for the pair’s upward reversal. The specialists underline that the pattern resembling such reversal model as “doji” was formed last week (see the weekly chart). In their view, the value of this observation increases as the market is trading in oversold conditions (14-week RSI is close to 30).

According to RBS, one may go long on AUD/CAD at $1.0060. The bank recommends increasing positions if Aussie overcomes 1.0112 (May 17 maximum). Bullish targets lie at 1.0430 onto 1.0557, while stops may be places around 0.9890.

In our view, the picture on the daily and weekly Ichimoku charts is still too negative. We advise you to bear this trade in mind. If the pair rebounds in the 0.9925/00 area (and support looks solid enough), don’t hurry and watch for the parity level. If the rate overcomes 1.0000, get ready to follow the lead of RBS.

Support levels:

- 0.9943 (38.2% Fibonacci retracement of a 2010-2011 growth);

- 0.9925 (support of a channel);

- 0.9913 (2009 maximum, 100% Fibonacci retracement of a 2009 growth).

Resistance levels:

- 0.9977 (May 15 minimum);

- 1.0175 (resistance of a channel);

- 1.0000 (parity);

- 1.0207 (double top in 2010);

- 1.0430 (100-day MA, 123.6% Fibonacci retracement).

Chart. Daily AUD/CAD

[ryuroden]

EUR renewed 2012 minimum

Today EUR/USD slid to $1.2614 renewing the year's minimum. Then euro managed to recover to $1.2650 helped by option buyers. Experts say that there is a barrier at $1.2600 with likely stops just beneath ahead of more sell stops through $1.2580.

Commerzbank notes that if we see a sustainable bearish breakthrough below $1.2624 (previous 2012 minimum), EUR/USD will head to support at $1.2530 and $1.2066. Resistance lies at $1.2750 (May 17 maximum). In the longer term the outlook for EUR/USD will remain bearish as long as it’s trading below $1.2875/1.3000.

On the fundamental part, Morgan Stanley claims that “very little is likely to come out of this summit... The pressure remains on the downside in EUR/USD and any rebounds will be sold into in this environment.”

Chart. Daily EUR/USD

[ryuroden]

OECD: GDP growth forecast

According to the Organization for Economic Cooperation and Development (OECD), euro zone’s debt crisis may spill over outside the euro area with very serious consequences for the global economy

The OECD left its 2012 growth forecasts for 34 member-countries unchanged at 1.6% (euro zone’s concerns were offset by the improving prospects of the U.S. economy).

The OECD’s report recommends the ECB to be ready to resume quantitative easing if the situation in the euro region worsens. According to economists, declining inflationary pressure gives space for monetary stimulus.

Table. OECD GDP growth forecast for euro region

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[ryuroden]

May 24: economic events

There are many headlines today. Firstly, the EU summit revealed that the leaders aren’t willing to compromise: the agreement on Eurobonds wasn’t reached.

According to French President Francois Hollande, Eurobonds are necessary to protect the indebted countries from high borrowing costs. German Chancellor Angela Merkel, however, said much stronger economic cooperation in the region is needed before Eurobonds can be issued. EU leaders underlined that they want Greece to remain in the euro area while respecting its commitments.

EUR/USD touched $1.2545 yesterday, the lowest level since July 13, 2010, due to mounting worries about a disorderly Greek exit from the euro zone.

Elsewhere Chinese HSBC flash Manufacturing PMI fell from 49.3 in April to 48.7 in May indicating that business conditions for Chinese manufacturers deteriorated (the index was already below the benchmark level of 50 points).

New Zealand’s trade surplus increased from March reading, but came significantly below the forecasts (355M vs. 450M expected). The nation’s authorities released the budget: deficit’s seen at NZD$ -7.9 billion this year and next before returning to surplus in 2014. NZD/USD is rising after 2-day decline as traders realized that kiwi’s recent depreciation was too rapid.

Today watch for European PMI data (forecast mixed, but the bias is negative), UK revised GDP (recession will likely get confirmed) and US core durable goods and unemployment claims figures.

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[ryuroden]

NZD: economic, fundamental comments

New Zealand delivered a tough annual budget on Thursday, targeted at a return to a budget surplus by 2015.

According to the budget forecasts, deficit will fall sharply in the next two years and a NZ$197 surplus will be reached by 2014-15. Finance Minister Bill English said the new budget will reduce upwards pressure on interest and exchange rates and stop the debt rising. Government is planning to reduce social overhead costs and increase taxes.

ANZ: With spending capped New Zealand's interest rates are likely to stay low for a prolonged period.

New Zealand's trade balance surplus widened in April to NZ$355 million compared with a previous reading NZ$186 million, but came below the forecasts.

The kiwi is strengthening against the greenback on today’s news and on speculation its decline to the lowest levels this year was excessive. Analysts at Westpac expect the downtrend of NZD/USD to extend to at least 0.7370 (Nov 25 minimum) and to 0.7000 in a month. This week a correction to the 0.7650-0.7850 area is expected given its currently oversold reading (14-day RSI is below 30).

Chart. Daily NZD/USD

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[ryuroden]

USD/CHF approached 2012 highs

It’s been a long time since we wrote something about Swiss franc.

The greenback keeps rising versus Swiss franc – USD/CHF has approached the maximal levels since the beginning of the year close to 0.9600. If the pair managed to make to break above this area and close there, US dollar will be able to test 0.9700/0.9800.

Both Tenkan-sen (red) and Kijun-sen (blue) are going up on the Ichimoku chart, though note that the Cloud is still very narrow, so the bulls don’t have much power yet and resistance in the 0.9600 region may prove to be strong. Support lies at 0.9500 (May 18 maximum) and 0.9462 (May 16 maximum). 50-day MA is getting ready to cross the 100-day one bottom-up – it will be a positive signal and the lines will provide good support for the pair.

The picture seems bullish, so buying on the dips seems reasonable enough. In the longer term we expect US currency to keep gradually appreciating versus its Swiss counterpart.

In the situations of uncertainty investors usually tend to go to safe havens – US dollar and Japanese yen. Swiss franc used to belong to this category, but the SNB’s policy response (EUR/CHF peg at 1.20), but the demand for Swiss currency isn’t now as high as it used to be.

Chart. Daily USD/CHF

[ryuroden]

Germany avoids recession, but PMIs upset

 

On Thursday final GDP release confirmed that Germany, avoided technical recession: the largest euro zone’s economy grew in Q1 after a worrisome contraction in Q4 2011. Germany resumed growth due to increase in exports and private consumption.

ING analysts comment the rejection of Francois Hollande’s idea of Eurobonds by Angela Merkel: “While the euro zone is still searching for growth, Germany already has it”. Commerzbank claims that after the (EU) summit without any results there's still a lot of uncertainty about Greece. "The last thing we need in this situation is the German economy getting into trouble,” the specialists say.

However, German business confidence came below expectations in May on Greek concerns, and so did the economic activity data (PMIs).

Table. Euro zone's economic data (May 24)

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[ryuroden]

EUR/USD hit 2-year minimum

Bears push the single currency lower and lower – EUR/USD hit today 2-year minimum at $1.2515 and where will be the bottom? Or, more precisely, will there be a bottom?

Euro got another blow as the PMI data of the euro zone’s leading economies came worse than expected (more information here).

Commerzbank: although the outlook is negative, euro’s slump was rapid enough, so to confirm another down leg in the term the pair needs to close below $1.2530 (78.6% Fibonacci retracement of the pair’s advance from 2010 to 2011). Otherwise, EUR/USD will rise to $1.2720 and $1.2820/30.

Danske Bank: downside for EUR/USD and a test of $1.2500 seems imminent.

RBS: sell EUR/USD at targeting $1.2329 (2008 post financial crisis minimum) and stopping above $1.2640/90 (the range caught 2 lows in 2006, 2009 minimum and then almost caught the Jun 2010 maximum).

BNP Paribas: “With a Greek exit once again being discussed, the pressure on the euro should continue especially with the lack of clarity on any of the pressing issues.”

Westpac: “Further push in Greek polls towards the pro-bailout parties and a relaxation of Germany’s stance on the aforementioned policies are the key risks to EUR shorts.”

Chart. Daily EUR/USD

[ryuroden]

Pound recovers after negative GDP

Sterling strengthens against the greenback despite the negative GDP release. The British currency is supported by the preliminary business investment: indicator increased in March by 3.6% vs. a 3.3% decline in February.

Great Britain’s economy contracted more than initially estimated due to a slump in construction. Q1 GDP shrank by 0.3% (vs. a preliminary estimated a 0.2% contraction). In current economic conditions many analysts expect the Bank of England to run a new round of bond purchases.

Societe Generale: If there’s a heightening of tensions in the euro crisis in the next few months, the bank would respond. We expect another GDP fall in Q2 and a return to growth in Q3.

Support:

1.5606 (March minimum);

1.5504 (38.2% Fibonacci retracement of the Jan - Feb rally).

Resistance:

1.5820 (April strong support);

1.5929 (February maximum);

1.6000 (psychological);

1.6091.

Chart. H4 GBP/USD

[ryuroden]

Key options expiring today

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).

Here are the key options expiring today:

EUR/USD: $1.2525, $1.2550, $1.2600 and $1.2625;

GBP/USD: $1.5700 and $1.5750;

USD/JPY: 79.40/50 and 80.00;

AUD/USD: 0.9750 and 0.9800;

EUR/GBP: 0.8050 (smaller at 0.8000).

Image from yourmoneydictionary.com

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[ryuroden]

Citigroup: if Greece leaves euro area…

Analysts at Citigroup believe that the odds of Geek exit from the euro area (“Grexit” as they say now) are increasing and account currently for 50-75%. In their view, the most important question is whether other countries will follow.

According to Citigroup, if Greece is the only nation leaving the euro area its exit will be a positive factor for euro as with the elimination of the weak link the rest of the region will become stronger.

However, one should remember that we are dealing with the market’s sentiment: if Greece leaves, the fears about other peripheral economies will mount and risk premiums will surge making it impossible for these nations to meet the fiscal and growth targets. As a result, the fate of euro would depend on the ability of the European authorities to convince the market of their determination to stick to euro. Taking into account the current inability of the policymakers to reach consensus and deliver some credible anti-crisis measures, euro will likely remain under heavy pressure until investors become convinced of the policymakers’ resolve.

The specialists think that if Greece leaves the currency union, Portugal and Ireland will ask for second aid packages; Spain will get some form of aid; the ECB will cut its benchmark rate to 0.5% and probably resume longer-term refinancing operations. In addition, Portugal, Ireland, Spain and Italy will be downgraded.

Image from http://greece.greekreporter.com

[ryuroden]

May 25: economic background

EUR/USD fell by 2.5% this week amid the renewed concerns about Greece. New round of risk aversion weighs on the high-yielding currencies and supports the US dollar as a “safe haven”: AUD/USD dropped by 0.7%, NZD/USD declined by 0.3% and USD/CAD grew by 0.4%. GBP/USD went down by 0.9% on concerns that Britain’s monetary policy may become more “dovish”. USD/JPY strengthened by 0.6% despite the overall trend remains downward. USD/CHF added 1.6% this week.

Italian Prime Minister Mario Monti claimed yesterday that the majority of EU leaders approved the idea of common euro-area bonds at this week’s summit and that and Italy can help persuade Germany which is currently against this proposal. From the first sight Monti’s comments look inspiring, but Luxembourg Prime Minister Jean-Claude Juncker said quite the opposite thing after the meeting: joint Eurobonds didn’t find much support. To describe the situation we need one word – uncertainty.

German Gfk consumer climate released today came unchanged this month at 5.7 in line with forecasts. Consumer views on economic conditions remain stable. The same can’t be said about business climate and activity – remember poor data released yesterday.

Japanese National Core CPI rose by 0.2% in March – still below 1% target set by the Bank of Japan. That means that deflation risks remain and more QE is likely. That’s confirmed by Tokyo CPI which contracted in April by 0.8% (vs. -0.6% expected and -0.5% in March). Yen weaken against US dollar after the release.

Asian stocks fell – MSCI Asia Pacific Index lost 0.5%. There was an earthquake in New Zealand, but with no damage reported market’s reaction wasn’t strong.

There are no major news releases today. For more information consult FBS economic calendar.

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[ryuroden]

EUR/USD: what’s next?

The single currency hit 2-year minimum this week on the concerns that Greece may leave the euro area – how long the bears have been waiting for this to happen! What’s next?

After the parliamentary elections the indebted country is closer to the exit from the euro zone than ever before. The uncertainty is likely to dominate the market before the new elections on June 17. In the beginning of the week market participants looked to the EU summit; however, on Wednesday EU leaders didn’t reach any agreement on the question of Eurobonds. Nevertheless, they underlined that they want Greece to stay in the euro zone. On Thursday euro zone released a bunch of negative PMI data.

Analysts at BBH underline that the market sentiment is still very fragile. In the longer term EUR/USD needs improvement of the euro zone’s economic figures. In the short term, however, there’s room for correction on short covering. Bank of Tokyo-Mitsubishi UFJ also look forward to some consolidation in the $1.25 area.

Analysts at Scotia Capital note that euro’s RSI is at 21, so the currency is oversold and may temporarily recover, especially as markets have already priced in much of the negative scenario for Greece. The specialists underline that they don’t believe that EUR/USD may show any sustained advance. The bank sees the pair ending 2012 at $1.25 expecting no collapse of the European currency.

Despite this talk about some retracement higher, analysts do think that EUR/USD will breach $1.2500 (option barrier) and start descending to $1.1875 (June 2010 minimum). Societe Generale proposes to go short at $1.2600 stopping at $1.2750 and targeting $1.2100.

Chart. Weekly EUR/USD

[ryuroden]

AUD and NZD retreated from 6-month lows

Australian and New Zealand’s dollars which have been rapidly falling against the greenback this month due to the market’s risk aversion are recovering versus their US counterpart for the second day.

AUD/USD hit this week 6-month minimum at $0.9690 losing 6.2% in May. Support for the pair lies at $0.9663 (November minimum). Resistance for Aussie is found at $0.9814 (yesterday’s maximum) and $0.9850 (the 10-day MA).

AUD was helped by advance of commodities and stocks.

Chart. Daily AUD/USD

NZD/USD hit this week 6-month minimum at $0.7458 losing 8% in May. Support for the pair lies at $0.7460 (May 23 minimum) and $0.7369 (November minimum). Resistance for kiwi is found at $0.7574 (yesterday’s maximum).

Many analysts claim that NZD’s rising as it has been oversold so far. Another positive factor is that Moody’s Investors Service reaffirmed the nation’s AAA credit rating.

Chart. Daily NZD/USD

At the same time, note that Australian and New Zealand’s will likely remain under pressure due to the European uncertainty.

[ryuroden]

USD/JPY: technical comments

USD/JPY weakens on Friday and has already managed to offset yesterday’s growth. On Wednesday the pair tested the key 80.00 resistance, but then started sliding. After a three-month rally (Jan-March) the cross trades in a downward channel.

However, according to analysts at Commerzbank, the further USD/JPY rally can’t be ruled out. Break through the 80.00 resistance could let the pair grow to 80.60 in a near-term. Specialists at RBS recommend going long on USD/JPY at current levels with a stop at 77.90 and a target at 84.00.

As can be seen from the H4 chart, now USD/JPY stays below the downward 200, 100 and 55 MAs, indicating bearish market sentiment. Weekly close below 80.00 will extend the chances for a further downtrend.

Support:

79.33 (May 25 low);

79.20 (61.8% Fibonacci retracement from a Jan – March rally);

79.00 (May 18 low);

78.50 (200-day MA).

Resistance:

79.81 (today’s high);

80.00 (psychological);

80.13 (50% Fibonacci retracement);

80.60 (neckline of a head-and-shoulders pattern).

Chart. Daily USD/JPY.

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[ryuroden]

Danske Bank: reasons for CHF decline

EUR/CHF rocketed yesterday to 1.2075 Swiss francs after trading in a tight sideways channel since early April. What were the reasons for such an unexpected depreciation of a Swiss franc?

According to analysts at Danske Bank, the cross went up due to unconfirmed data that the SNB might introduce a tax on deposits in order to make the Swiss currency less attractive for the investors. However, some analysts believe in the likeliness of an intervention by the Swiss National bank. The SNB refused to comment the first speculation and denied the second.

On Friday the EUR/CHF cross returned to its comfort zone around 1.2015, but is still a little bit higher than it was during the last weeks. Analysts at Danske Bank believe the spike has provided some breathing room for the franc, which has been pressed up against the EUR/CHF floor at 1.20 set by the SNB. Specialists doubt that the lift of the threshold is likely to happen in the near-term.

Support for the pair lies at 1.2008, 1.2007 (21-day MA), 1.2000 (SNB Target Sep.6) and 1.1990 (Apr.5 minimum), while resistance – at 1.2075 (May 25 maximum), 1.2081 (Mar.16 maximum), 1.2100 (psychological) and 1.2108 (200-day MA).

Chart. Daily EUR/CHF

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[ryuroden]

EUR is up on Greek polls

The single currency opened with a gap up versus the greenback after setting new 2-year minimum at $1.2495 on Friday. Today EUR/USD managed to strengthen to $1.2600.

The market’s sentiment improved as the polls showed that the pro-bailout party in Greece would now be leading ahead of the second elections due on June 17. New Democracy which supports the plan negotiated by Greece’s government with international lenders was 5.7 percentage points over Syriza, the main opposition force to the bailout. In addition, there is talk of restructuring European banks.

Data from CFTC (Commodity Futures Trading Commission) showed that the number of shorts on EUR/USD reached the highest level since 1999 of 195K. As a result, shorts may be trimmed on any sign that anti-austerity parties are running out of steam.

The uncertainty, however, remains high, so the baseline scenario is still for euro to slide to $1.20.

Resistance: $1.2620 (May 24 maximum), $1.2820 (May 22 maximum).

Support: $1.2495 (May 25 minimum), $1.2483 and $1.2442.

Chart. Daily EUR/USD

[ryuroden]

BOTMUFJ: bearish on EUR/JPY

The single currency maintained last week its bearish bias versus Japanese yen bottoming at 99.35.

Analysts at Bank of Tokyo-Mitsubishi UFJ are bearish on EUR/JPY.

The specialists point out that euro breached 76.4% Fibonacci retracement of its advance from the January minimum and March maximum in 100 yen area.

In their view, the pair may slide to 97.04 (January minimum).

Chart. Daily EUR/JPY