Comments and forex-analytics from FBS Holdings Inc. brokerage company

[lollabun]

UBS: trading USD/JPY on the BOJ
Tuesday, April 10, 2012 - 13:30

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).

UBS: trading USD/JPY on the BOJ // FBS Markets Inc.

 

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RBS: outlook for EUR/GBP
Tuesday, April 10, 2012 - 14:00

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.

RBS: outlook for EUR/GBP // FBS Markets Inc.

 

[lollabun]

USD/JPY: upward correction may be coming
Wednesday, April 11, 2012 - 08:00

US dollar keeps trading within downtrend versus Japanese yen sliding from March maximums above 84 yen.

USD/JPY has reached the lower line of the price channel and is now likely rebound targeting the upper line of the channel during the next several days.

The greenback may get support from strong bids in the 80.50/55 area and October 2011 maximum in the 79.50/55 region.

State Street Bank: “It’s a bit too early now for the market to trade on the Bank of Japan's meeting on April 27. But expectations of further easing mean the yen is unlikely to keep rising, beyond the 80 yen mark. But the market will probably start trading on it perhaps next week.”

Longer-term outlook

Warning from RBS: “There’s an unrealistic expectation of how early central banks will tighten in the world outside Japan. If the market moves to reflect that and we see 2-year yields in the US and the rest of the world come down back toward Japanese levels, the upward pressure on the yen will reemerge.” The 2-year yield spread between US and Japanese bonds widened to 0.20 from 0.08 percentage point in January. RBS thinks USD/JPY may decline to 73 yen by the end of 2012.

USD/JPY: upward correction may be coming // FBS Markets Inc.

 

[lollabun]

SocGen: trading EUR/USD
Wednesday, April 11, 2012 - 08:15

Strategists at Societe Generale advise to go short on the EUR/USD, entering the trade at 1.3100 with a stop at 1.3250 and a target of 1.2600.

According to analysts, unsuccessful bond auctions in Europe and recent negative U.S. NFP data point to likelihood of another possible round of QE. Before the lackluster reports were out, investors believed QE3 may be beneficial for risky assets. However, now it became clear that the further monetary easing will point at grave problems in the global economy. The risk-off market mode and troubles in Spain and Italy will weigh on the common currency.

SocGen: trading EUR/USD // FBS Markets Inc.

 

[lollabun]

Commerzbank: technical levels for EUR/USD
Wednesday, April 11, 2012 - 08:45

Technical analysts at Commerzbank claim that support for EUR/USD lies at $1.3032. If the pair drops below this level, it will decline to $1.2974/54 (February minimum and 61.8% Fibonacci retracement of the single currency’s advance from January minimums to February maximums) and then to $1.2624.

The specialists claim that resistance for euro is found at $1.3207 (55-day MA) and $1.3487 (February maximum).

Commerzbank: technical levels for EUR/USD // FBS Markets Inc.

 

[lollabun]

Large options expiring today
Wednesday, April 11, 2012 - 09:00

Here are the options expiring today at 2 p.m. GMT.

EUR/USD: 1.3025, 1.3080, 1.3100, 1.3145 and 1.3200;
GBP/USD: 1.5800, 1.5900;
USD/CHF: 0.9140;
AUD/USD: 1.0250, 1.0300 and 1.0425 (large);
EUR/GBP: 0.8260;
AUD/JPY: 83.70;
USD/JPY: 81.00 (large), 81.50, 81.65.

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.
Large options expiring today // FBS Markets Inc.

 

[lollabun]

Westpac: trading EUR/CAD
Wednesday, April 11, 2012 - 09:30

Strategists at Westpac Institutional Bank are bearish on euro vs Canadian dollar and advise to sell the EUR/CAD at $1.3080 level with a stop at $1.3170 and a target of $1.2770.

In their view, Canada’s surprising job growth (82K in March versus 11K forecasted) and possible hawkish actions of the Bank of Canada (on a meeting 17-18 April key interest rate may be hiked from current 1%) will support the loonie. However, if the U.S. labor market data will remain negative, it may weigh on the Canadian currency.

Westpac: trading EUR/CAD // FBS Markets Inc.

 

[lollabun]

Euro area: debt auctions, EUR/USD
Wednesday, April 11, 2012 - 12:15

Germany: sold 3.87 billion of 10-year benchmark bunds euro out of targeted 5 billion euro. Yield declined to 1.77% (from 1.83%).

Italy: sold a total 11 billion of 3- and 12-month BOT’s:

- 3 billion euro of 91-day bills, yield 1.249% (from 0.492%);
- 8 billion euro of 361-day bills, yield 2.84% (from 1.405%).

EUR/USD dip back briefly below $1.3100 on the news that German government failed to borrow as much as it has planned, but then recovered as periphery stocks extended their rallies and as periphery/German bond spreads kept narrowing.

Resistance: $1.3136 (100-day MA), $1.3165 (April 5 maximum) and $1.3200.

Support: $1.3033 (April 9 minimum), $1.3004 (March 15 minimum) and $1.2974 (February 16 minimum).

Euro area: debt auctions, EUR/USD // FBS Markets Inc.

 

[lollabun]

Analysts: outlook for sterling
Wednesday, April 11, 2012 - 12:15

Analysts at Morgan Stanley are bearish on the euro and the pound vs. the greenback. In their view, in a year the EUR/USD and the GBP/USD will weaken to $1.15 and $1.46 respectively. According to the specialists, there are signals that the market's optimism has started to fade as the European economies are still facing plenty of difficulties. Risk aversion and increased asset market volatility will hurt the pound.

UniCredit currency strategists also don’t expect the cable to climb higher than $1.60 unless something extraordinary happens.

However, Mizuho analysts believe the U.K. economy is gradually growing, and the sterling will gather momentum when the global markets stabilize. Moreover, the pound benefits from serving as a safe haven within Europe.

Analysts: outlook for sterling // FBS Markets Inc.

 

[lollabun]

SNB and the market’s confidence
Wednesday, April 11, 2012 - 14:00

The Swiss National bank had no problem in defending the EUR/CHF floor set in September for more than half a year. How the difficulties have finally appeared as last Thursday euro breached the minimal level due to the surge of demand for francs and the SNB had to step in selling about 1 billion euro (so the estimates say) to bring it back.

Swiss monetary authorities repeated their pledges to constrain franc’s appreciation by the level mentioned above. So, if the market once again pushes euro below that point, the SNB will push it up again.

The central bank didn’t eliminate the threat of euro’s plunging below 1.20. The core of the problem is that there are the banks trading EUR/CHF and the transactions of which the SNB can’t monitor in time as they don’t have credit lines with it. If such lines were established and the SNB all dealers on the ICAP-owned EBS system it would be able to prevent piercing of the EUR/CHF floor. In addition, the SNB could mandate some banks to help it defend the floor.

However, the Swiss central bank already accepts more than 100 banks with more than 700 trading desks as counterparties and it’s hard to capture every single legitimate trading account on EBS at all times, so this probably wouldn’t work either.

The fact is: almost a week passed since April 5, but the ‘breaking the floor’ story hasn’t repeated. It means that the market still has enough faith in the SNB. At the same time, new attempts of euro bears to test the central bank’s resolve are still quite likely as the policymakers delivered nothing new.

SNB and the market