Comments and forex-analytics from FBS

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Barclays Capital, Commerzbank: comments on GBP/USD

Technical analysts at Barclays Capital think that British pound will be capped by the $1.6150 level trading versus the greenback. In their view, GBP/USD will return down to the minimums in the $1.5970 area. However, if sterling unexpectedly breaks above $1.6150, trading will become more volatile and the pair will get chance to climb to $1.6250.

Strategists at Commerzbank believe that the advance of British currency will be limited by resistance at $1.6144. If pound closes the day below $1.5957, it will be poised further down. On the other hand, if sterling closes above $1.6144, it will get chance to rise to $1.6230/65. The bank’s general outlook for GBP/USD is bearish as long as it’s staying below $1.6320.

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UBS: EUR/CHF depends on the demand for the greenback

Currency strategists at UBS claim that the recent upward correction of the single currency versus Swiss franc may be explained by the improved investors' sentiment about Greece's future after the nation’s parliament approved austerity measures last week and the euro zone’s finance ministers agreed to provide the country with the fifths tranche of financing. Never the less, the specialists think that uncertainly concerning the situation in the euro area will persist capping the attempts of the pair EUR/CHF to strengthen.

It’s necessary to note that the pair is driven more by the market’s confidence in the greenback which will be influenced by the upcoming earnings season. The specialists say that euro will be able to break its medium-term downtrend versus franc only if financial results of US companies are encouraging enough. In such case confidence in the greenback will increase triggering capital reallocations out of Switzerland.

According to UBS, such outcome is unlikely unless domestic conditions improve more considerably and the Fed becomes more hawkish, so the bank remains bearish on EUR/CHF. As a result, the analysts recommend selling euro on the current maximums.

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Pound versus euro: key factors

Analysts at MSN Money wonder why the single currency that logically has to be undermined by the euro area’s severe debt problems has outperformed British pound this year.

Firstly, the specialists note that all currencies of developed nations currently don’t look much attractive for investors. Even though the European economies are suffering, the market believes that the currency union will survive even if Greece quits as euro will remain the currency of economically strong Germany.

Secondly, it’s about the hawkish approach of the European Central Bank. The ECB is much more wary of inflation than other advanced nations’ central banks, the Bank of England included.

Sterling, however, lacks such drivers. UK economic growth is weaker than expected, while inflation’s rapidly rising. British consumers are affected by rising costs and stagnant wages, so they have little disposable income to spend, retail sales are low – too bad for the consumer-centered economy. The Bank of England doesn’t intend to raise the borrowing costs anytime soon to curb the prices as it will have negative impact on the already weak economy.

So, euro has flourishing Germany and the ECB hiking rates while sterling relies on struggling economy and loose monetary policy.

It’s also necessary to note that pound isn’t a reserve currency, while euro is. Just under a third of the global currency reserves held by governments and central banks are denominated in euro and only 4% is in sterling.

The euro area may not survive the crisis in its current state. On the one hand, it may dissolve or the number of its members may at least reduce, but on the other hand, the region may turn to a more closely-knit political union that would encourage further demand for euro from those who tend to diversify from dollars.

On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets

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US Non-Farm Payrolls forecasts

Economists surveyed by Bloomberg News believe that US Non-Farm Payrolls increased in June by 100,000 after gaining 54,000 in May that was the minimal rise in 8 months.

Such advance, however, won’t be enough to reduce the unemployment rate that is expected to remain at 9.1%. In order to achieve sustainable decline in the joblessness rate, payrolls have to climb by roughly 200,000 a month. The monthly average in the first quarter was only at 166,000.

In June the pace of the payrolls growth is likely to be slower than that as the companies tend to limit costs trying to hold their ground in the time of general economic weakness – last month Ben Bernanke called US economic recovery “frustratingly slow”. The Federal Reserve’s Chairman says that the central bank projects that the unemployment rate will continue declining but at a very low pace.

The situation on the labor market has been during the last few years far from optimistic – since Barak Obama became president in January 2009 unemployment has increased by almost a percentage point, while the economy has lost 2.5 million jobs.

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BNP Paribas bets on euro’s advance in 2011

Analysts at BNP Paribas note that different monetary policy approaches of the Federal Reserve and the European Central Bank are widening the yield spread between the US and the euro area in favor of the latter. As a result, the single currency is strengthening versus the greenback despite the European debt issues.

The specialists believe that the pair EUR/USD that is currently trading above $1.40 may get higher as the EU authorities will hopefully agree to help Greece out of the crisis and the Fed and the ECB keep conducting divergent policies.

Then, in 2012, when US central bank is thought to begin monetary tightening, euro may weaken.

However, according to the bank, it’s necessary to note that the European currency is not as strong as one may judge from the exchange rate. In real effective terms, euro is in line with its long-term average. It would be more accurate to talk of the dollar being weak than the euro being strong as the greenback’s real effective exchange rate is indeed well below its long-term average.

BNP Paribas expects to see EUR/USD in the $1.4500 area during the third quarter. Then the pair will rise to $1.4800 by the end of the year. Bank’s forecasts for the next year are at $1.4500 for the second quarter, $1.4000 – for the third and $1.3500 – for the fourth.

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Commerzbank: comments on USD/CHF

The greenback’s advance versus Swiss franc from the record minimum at 0.8274 hit on June 30 was capped by 0.8525 close to the key resistance 0.8555 (minimum of the beginning of May and May 31 maximum) above which the bearish pressure on the pair would ease.

Technical analysts at Commerzbank believe that US currency manage to recover to 0.8593/.8630 (Fibonacci retracement level, 55-day MA) and 0.8850 (38.2% retracement of the 2011 decline).

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J.P.Morgan: trading advices concerning ECB meeting

The market is sure that the European Central Bank will raise its benchmark rate on Thursday, July 7. It’s also pretty clear that the Bank of England will keep the borrowing costs unchanged at its meeting on the same day.

The surprises are unlikely. Never the less, analysts at J.P. Morgan think that it’s still possible to trade on this event. In their view, it’s necessary to concentrate attention on the tone of the central banks’ statements.

The specialists expect the ECB President Jean-Claude Trichet to sound hawkish, while the Bank of England is likely to remain dovish. The natural conclusion from such assumption is the recommendation to buy EUR/GBP. J.P. Morgan advises to open longs at 0.8960 stopping below 0.8870 and targeting 0.9200.

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EUR/USD dropped after Portugal's downgrade

Moody’s Investors Service reduced today Portugal’s long-term government bond ratings from Baa1 to Ba2. As the reason of the downgrade the specialists cited the growing risk that Portugal will require a second bailout before it can return to the private market.

Strategists at Bank of New York Mellon claim that uncertainty is currently higher than long time before. The specialists expect trading to be volatile. In their view, it’s impossible to project now at what level euro’s rate will be in a year as the prospects of the euro zone’s surviving the crisis remain dim.

Portuguese 10-year government bond yield bounced to the record maximum of 12.30%. Irish, Italian, Spanish and Greek yields also climbed on the fears of further ratings cuts.

Analysts at Royal Bank of Scotland are surprised that the news about Portugal’s downgrade provoked such big decline of the single currency versus the greenback. The bank thinks that the downgrades of other peripheral nations’ debt will inevitably come.

Strategists at Societe Generale give several reasons of such strong sell-off. Firstly, the market was long on EUR/USD. Secondly, the bond markets drove the pair by correlation. Thirdly, the greenback is seen as a better safe haven than Swiss franc in short-term perspective (though not in the longer term taking into account US debt ceiling negotiations).

The pair EUR/USD fell on the negative news from $0.4466 to $1.4325. Analysts at Commerzbank claim that if euro gets below $1.4325, it will be poised down to support at $1.4140 and then to the 200-week MA at $1.4021.

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Barclays Capital cut forecasts for GBP versus USD and EUR

Analysts at Barclays Capital, world's second-largest currency-dealing bank after Deutsche Bank, changed their outlook for British pound versus the greenback to bearish.

The specialists now think that GBP/USD will trade in a year at $1.60, while earlier they expected to see the pair in July 2012 at $1.76. One-month forecasts were decreased from $1.66 to $1.59, 3-month – from $1.72 to $1.58, 6-month – from $1.74 to $1.59.

The forecast for EUR/GBP was raised from 0.82 to 0.90. Euro will rise to 0.93 in a month and to 0.95 in 3 months.

The projections for sterling were moved down after the bank lowered the estimate of UK economic growth in the second half of 2011 and pushed its expectations of Bank of England rate hike from November 2011 to May 2012.

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BoA Merrill Lynch: PBOC raised rates

The People’s Bank of China raised today benchmark deposit and lending rates by 25 basis points and to 3.5% and 6.56% respectively. This is the third increase since the beginning of 2011.

Analysts at Bank of America Merrill Lynch don’t think that the PBOC will lift up the borrowing costs until the next year. In 2012 the specialists expect 2 hikes of 25 basis points each.

The bank believes that Chinese monetary authorities decided to tighten policy projecting inflation spike in June. According to Bank of America, real deposit rates in China remain negative as in May China’s CPI added 5.5% showing the fastest pace of increase since July 2008. As the bank savings of Chinese residents are steadily eroded by inflation they invest their money into the real estate driving up housing prices and fuelling concerns about a nationwide property bubble.

The nation may still need to use proactive fiscal policies to offset some of the negative impact of the latest rate move.

Such move of China’s central bank is likely to raise concerns that monetary tightening will trigger a slowdown in the world’s second-biggest economy.

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Citigroup advises to sell EUR/CAD

The market is short on Canadian dollar. The reasons of such negative sentiment about loonie may be various: investors may be worried about US economic weakness that may affect Canada’s economy or about Canadian growth itself.

Euro’s story is different. The bullish players look forward to more ECB rate hikes in 2011. However, the euro zone’s problems are still unsolved: there’s high pressure from the rating agencies that are issuing warnings about Greece and Portugal. In addition, many economists think that the recent agreement on Greece did nothing but put off more drastic measures needed to overcome the crisis.

Analysts at Citigroup think that the euro area’s issues are likely to intensify, while there may be some unexpectedly positive data from Canada, for example, from US employment report that is released on Friday. In such case Canadian currency will benefit not only from its ties to the United States, but also from the improved risk sentiment.

According to Citigroup, it’s necessary to sell EUR/CAD at 1.3850 stopping at 1.4160 and targeting 1.3050. The strategists advise to hold position for about 2 months.

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Commerzbank: EUR/USD on its way down to $1.3900

The single currency slumped yesterday versus the greenback breaking below the support provided by the Ichimoku Cloud.

Technical analysts at Commerzbank claim that the pair EUR/USD is now poised down to support line at $1.4145 and then to the 200-week MA at $1.4021, the recent minimum at $1.3968 and finally to the 200-day MA at $1.3900.

According to the bank, strong resistance for euro is found at Wednesday's maximum in the 1.4465 area.

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UBS: US dollar still remains the world’s main reserve currency for now

Analysts at UBS believe that although many of the largest market participants such as Asian central banks tend to diversify their assets from holding US dollars, the greenback will for some time more remain the major reserve currency.

According to the COFER (Composition of Foreign Exchange Reserves) report released by the IMF, in the first quarter of 2011 reserves denominated in US dollars decreased by 0.8%, while the holdings in euro trimmed by 5.1%. The single currency was sold probably because of the concerns about the situation in the peripheral euro zone nations, while dollar got under pressure due to the fears about the extension of quantitative easing.

UBS underlines that other currencies such as commodity ones tend to attract increasing demand as the reserve ones.

As for the longer term, US currency risks to lose its status. The bank asked the participants of its annual reserve management seminar what would be the most important reserve currency in 25 years. The majority of respondents think it will be not one, but a portfolio of currencies, 5% of the interviewed said it would be euro, while less than 30% think that dollar will manage to keep the lead.

The bank notes that if the reserve managers add fiscal performance on the list of criteria for investment selection that currently includes yields and liquidity, emerging markets’ currencies will be able to compete with the ones of advanced nations.

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Commerzbank: SNB will raise rates in September

Analysts at Commerzbank think that Swiss National Bank will raise the borrowing costs in September for the first time this year.

In their view, the nation’s central bank faces a rather hard task of balancing uncertainty about the euro zone periphery with inflationary concerns in Switzerland.

The specialists claim that strong national currency will likely make the SNS hesitate about hiking rates. However, according to the data released today, Swiss CPI added 0.6% in June from the levels of the previous year after gaining 0.4% in May. Even though inflation growth may be regarded as moderate, there’s an uptrend here. The bank forecasts that in the second half of the year inflation will overcome 1%.

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RBS: Aussie gained on positive employment data

Australian dollar gained for the second day versus the greenback helped by the encouraging labor market data. The number of people employed in Australia rose in June by 23,400 after declining by 500 in May and 28,300 fall in April. Economists were looking forward to an increase of only 15,000. The unemployment rate remained at 4.9%.

Analysts at Royal Bank of Scotland claim that good situation at Australian labor market increases the chances that the Reserve bank of Australia will raise the interest rates this year.

According to Bloomberg, futures traders estimate the possibility of RBA rate cut to 4.5% by December by 34%, while yesterday this figure was equal to 42%.

Strategists at Nomura underline that the prospects of RBA rate hike depend on Australia’s second quarter CPI data that is released at the end of July.

The pair AUD/USD rose today from $1.0685 to $1.0760. Resistance for Aussie is found at the 7-week maximum of $1.0790 that has so far been tested 2 times. Support level is situated at the 55-day MA in the $1.0670 area.

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BBH: ECB will keep raising rates

Analysts at Brown Brothers Harriman think that after the European Central Bank has lifted up its benchmark interest rate today by 25 basis points to 1.5%, it will once again tighten its monetary policy in the fourth quarter of 2011.

In their view, debt problems of the peripheral nations won’t derail the process of rate normalization. The specialists think that ECB’s hawkish approach is justified as the policy is still loose, while the amount of spare capacities keeps declining at faster speed than expected.

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UBS, BBH: comments on EUR/CHF

Analysts at UBS note that the European debt crisis will keep being the main driver of the single currency, Swiss franc and investors’ risk sentiment in the medium term.

In their view, the outlook for the pair EUR/CHF during the summer months seems to be neutral. The specialists don’t expect any sustained upward correction of euro. According to UBS, risks for the pair remain asymmetric: while upside risk is limited, the downside one looks rather significant.

Strategists at Brown Brothers Harriman point out that after Moody’s yesterday downgraded Portugal the market’s concerns about the spreading of the debt crisis.

The pair EUR/CHF declined due to amid renewed tensions in the periphery debt market that’s expressed by the surge of periphery yields and CDS prices.

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ANZ: EUR/USD may fall to $1.3903

Analysts at ANZ Banking Group claim that if the single currency falls versus the greenback getting below the 100-day MA at $1.4273, it may slump firstly, to June 16 minimum at $1.4074 and then to $1.3903 (50% Fibonacci retracement of this year’s advance from $1.2867 to $1.4940) that is the 3 1/2-month minimum.

The specialists claim that the euro has formed consolidation pattern since May 23 to July 4 between the uptrend line connecting the minimums of May 23, June 16 and June 27 and the downtrend line linking the maximums of June 7 and July 4. In their view, the pair EUR/USD currently risks to survive another decline of the similar magnitude as at the beginning of May.

Yesterday the European currency hit the lowest level since June 27 at $1.4220 before returning to the levels above $1.4300.

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BNP Paribas: USD/JPY up head of NFP report

There are, finally, some improvements on the USD/JPY chart. Japanese yen’s declining versus the greenback as the market looks forward to optimistic figures of US Non-Farm Payrolls report.

Economists surveyed by Bloomberg News think that NFP rose by 105,000 in June after adding 54,000 in May. The unemployment rate is expected to remain at 9.1%.

Analysts at BNP Paribas note that the greenback may benefit from NFP data released today at 12:30 GMT if the number of jobs added in June shows either a massive upside surprise or a big disappointment for the market. Otherwise it’s going to be neutral to positive for risk.

The pair USD/JPY went up from last week minimums at 80.25 breaking yesterday above resistance in the 81.00/15 area. The next resistance levels are situated at the 100-day MA of 81.60 and the 200-day MA at 82.09. Support levels are found in the 81.10/00 and 80.80/77 zones.

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NAB: buy Aussie on the dips

Analysts at National Australia Bank claim that if Australian dollar falls back to the $1.0400 region trading versus its US counterpart, investors should use it as possibility to buy Aussie.

The specialists are optimistic about the world’s economic outlook. In their view, the soft patch in growth will be over by September. In their view, China will go through soft landing, Greece will go further somehow and there will be no recession in the United States – that will secure the ground for Australia's commodity prices supporting Aussie.

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BBH: euro may be able to strengthen to the recent maximums

Analysts at Brown Brothers Harriman note that the single currency hit yesterday support at $1.4220 and managed to return above 1.4300 due to the hawkish comments of the European Central Bank.

The specialists claim that the pair EUR/USD may go up reaching the recent maximums in the $1.4550 zone. In their view, the ECB will likely continue tightening its monetary policy this year, while the EU financial support rules out the possibility of an un-orderly default in Greece.

Never the less, the bank isn’t so sure about further growth of euro. The economists underline that the European currency will still find itself under pressure of the euro zone’s debt crisis. For the pair could reach 2011 maximum in the $1.50 area, it has to break above $1.4550 on the sustainable basis. In any case trading is going to remain volatile affected by the risks associated with peripheral European nations.

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Commerzbank: comments on USD/CHF

The greenback went up versus Swiss franc from Wednesday’s minimum at 0.8365 to the 5-month downtrend resistance line at 0.8495.

Technical analysts at Commerzbank claim that the bearish pressure on the pair USD/CHF will ease if manages to close above 0.8554 (May 4 minimum and May 31 maximum). In this case US dollar will be poised up to 0.8593/8630 (Fibonacci level and the 55-day MA).

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Commerzbank: EUR/USD prospects after NFP

Analysts at Commerzbank think that the greenback won’t be able to gain versus the single currency on the Non-Farm Payrolls data.

The specialists think that even if the data goes in line with the forecasts, US dollar won’t be able to keep moving up.

The bank claims that the market talks about 130,000-140,000. If US economy gets less than 100,000 jobs, investors will get disappointed, especially in the unemployment rate increases.

As the specialists are looking forward to a discouraging result, the pair EUR/USD, in their view, has all chanced to find support.

The European currency returned today below $1.4300. Support levels are situated at $1.4220 (July 7 minimum), $1.4155 (uptrend support from May minimums) and $1.4100 (July 26 minimum). Resistance is situated at $1.4365/75 (50-day MA), $1.4395 (July 5 minimum) and $1.4465 (July 6 maximum).

[FBS.com_official]

Reuters poll: experts’ forecasts on GBP/USD

According to monthly poll conducted by Reuters among 60 banks and analysts, British pound that has declined versus the greenback from $1.6800 to $1.5900 in the second quarter will remain at these levels for some time.

The respondents think that the pair GBP/USD will trade in the $1.6100 region during the next half of a year. The median forecast shows that sterling will start slowly strengthening only in 2012. The surveyed expects see pound reaching $1.6300 and then pulling back down to $1.6200 by the middle of the next year.

[FBS.com_official]

MIG Bank, Commerzbank: bullish view on USD/JPY

Technical analysts at MIG Bank claim that as the greenback has overcome resistance at 81.30 trading versus Japanese yen, it’s moving up to 82.25. In their view, the pair USD/JPY will face some resistance at 81.80/85.

Specialists at Commerzbank also note that US dollar has managed to break above the daily Ichimoku Cloud at 81.31. According to them, above this level American currency will be poised up to the 55-day MA at 81.62 and then to the 200-day MA at 82.10. If dollar climbs above the latter, it will go higher to the downtrend line from 2007 to 2011 at 83.13. The bank sees support levels at 80.40 and 80.00.

Economists at Citigroup think that strong US Non-Farm Payrolls data will push USD/JPY to the levels in the 82.00 area.