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

[lollabun]

NZD: Key’s comments, technical levels
Monday, April 23, 2012 - 07:45

New Zealand’s Prime Minister John Key claimed that though the national currency’s overvalued, he wouldn't support the Reserve Bank of New Zealand intervening in the currency market. According to Key, government was doing what it can to support monetary policy by running a tight fiscal policy which removes pressure from the central bank. “Dreaming that we can somehow get the exchange rate down through intervention is la la land stuff,” said the official.

From the fundamental point, kiwi may decline this week as the RBNZ is expected to keep official cash rate at the record minimum of 2.5% on Thursday. In addition, being a risk-sensitive currency New Zealand’s dollar may be affected by the renewed concerns about euro zone’s future.

NZD/USD is trading today on the downside remaining in range between $0.8060 and $0.8320 within which it’s trading since the beginning of March. HSBC China PMI Index for April rose to a 2-month maximum at 49.1, though the reading below 50 still indicates contraction of the industry.

Support for the pair lies at $0.8117 (March 29 minimum), $0.8091 (200-day MA), $0.8062/58 (March 15, 22 minimums), $0.8050 (38.2% Fibo retracement of the advance from November to February).

Resistance is situated at $0.8198 (April 19 maximum), $0.8234/50 (April 17, 16 maximums), $0.8265 (April 3 maximum) and $0.8280/88 (April 12, March 19 maximums).

Chart. Daily NZD/USD
NZD: Key

 

[lollabun]

April 23-27: events to watch
Monday, April 23, 2012 - 08:30

Tuesday, April 24:

• Japan: 20-year JGB auction
• Australia: The Q1 CPI is expected to rise by 0.8% vs. 0.0% in Q4. According to UBS analysts, the CPI data will be close enough to RBA’s forecasts to allow the central bank to trim rates by 25 bps from the current 4.25%.
• Canada: Canada’s Core Retail Sales in February are expected to increase by 0.8%. In January the report reflected a 0.5% decline. The BoC Governor Mark Carney in his speech may give a hint on a more hawkish monetary policy: the central bank could raise interest rates from a record 1% low sooner than expected.
• Great Britain: Public Sector Net Borrowing in March is forecasted to show£15.6 billion budget deficit vs. £12.9 billion deficit in February.
• U.S.: The current expectations are that the April Consumer Confidence index may reach 70.1. New Home Sales in March may increase by 321K vs. 313K in February. However, if the number of new home sales will fall, it may further indicate a slowdown in the U.S real estate market. U.S. 2-year notes auction is scheduled.
• Switzerland: The trade surplus in March is forecasted to decline to 1.99 billion Swiss francs vs. 2.68 billion surplus in February.
• Euro zone: Spanish 3- and 6-month T-bill auction; Italian bond (CTZ, BTPei) auction.

Wednesday, April 25:

• Great Britain: The Preliminary Q1 GDP is expected to grow by 0.1%. In the Q4 2011, the GDP contracted by 0.3%.
• U.S.: A bunch of important data is expected. The Federal Open Market Committee will hand down its monetary policy decision. Members have been slightly more positive on the economic outlook; however, it is still very much in the realm of “cautious optimism”. Any discussion about the prospect of more QE will be important. Core Durable Goods Orders (the de-facto gauge of business investment) are expected to increase by 0.6% in March vs. 1.8% rise in February. 5-year notes auction is scheduled.
• Euro zone: Allotment of ECB three-month long-term refinancing operation. Following the April ECB rate decision in which the rate wasn’t changed at 1% Mario Draghi will speak and may refer to ECB’s plan to calm the markets including implementing LTRO 3 or resuming the SMP. According to UBS analysts, in order to lower the fears circling the euro zone debt situation, ECB's officials are speaking about the likeliness of new SMP. However, Germany is strongly against such a measure or another LTRO, so the ECB may use the strategy of cutting the interest rates. In general, the UBS analysts expect the ECB to remain more dovish than the Fed in 2012.

Thursday, April 26:

• Canada: The BoC Governor Mark Carney speaks.
• New Zealand: The Reserve Bank of New Zealand meets on April, 26. Last month, the RNBZ Governor Alan Bollard forecasted the cash rate to remain unchanged at 2.50% for much of 2012. However, there may be a dovish slant to the statement. The deterioration of Australia's terms of trade is suggestive of New Zealand, especially given the recent sharp drop in milk prices.
• U.S.: Unemployment Claims are forecasted to increase by 378K this week vs. 386K the previous week. U.S. Pending Home Sales in March may increase by 1.4% vs. a 0.5% decline in February. 7-year note auction is scheduled.
• Euro zone: Italian T-bill auction.
• Japan: 2-year JGB auction.

Friday, April 27:

• Japan: The Bank of Japan is seen as likely to ease its policy further at a meeting on April 27 after coming under intense pressure to help support the still fragile economy. There are widespread expectations that it increases its asset purchase fund by 5 trillion yen to 24 trillion yen. The Overnight Call Rate is expected to remain at 0.10%. The annualized Retail Sales in March may increase by 11.5% vs. 3.4% in February.
• U.S.: The U.S. reports its preliminary estimate of Q1 GDP. Aided by government outlays (military spending and less drag from state and local governments) and strong capital spending, the GDP likely to expand by 2.6% vs. a 3.0% in Q4.
• Euro zone: Italian bond (BTP) auction is scheduled. The KOF Economic Barometer, the outlook of the Swiss economy, in April may grow to 0.26 vs. previous 0.08.
April 23-27: events to watch // FBS Markets Inc.

 

[lollabun]

CFTC trader positioning data
Monday, April 23, 2012 - 09:00

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

• Net euro shorts rose from 101K to 118K;
• Net sterling shorts down from 19K to 13K;
• Net yen shorts down from 66K to 58K;
• Net Swiss franc shorts up from 10K to 14K;
• Net loonie longs up from 28K to 38K;
• Net Aussie longs up from 39K to 48K;
• Net kiwi longs up from 7K to 12K;
• Net US dollar longs down by 4% to $21.65 billion.

Investors continued to make big bets that the single currency, Japanese yen and Swiss franc would weaken against their US counterpart. Commodity currencies such as the Australian and Canadian dollars continued to be favored versus US dollar.

Speculative investors slightly pared their anti-yen bets a little more than a week before the Bank of Japan's upcoming meeting. Anti-yen fervor increased steadily in recent weeks on rising expectations the BOJ would announce new easing measures on April 27.

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.

Picture from regulatorycomplianceblog.com
CFTC trader positioning data // FBS Markets Inc.

 

[lollabun]

Banks' forecasts for FX majors
Monday, April 23, 2012 - 11:15

Data was submitted on April 20

Source: FX Week
Banks' forecasts for FX majors // FBS Markets Inc.

 

[lollabun]

Key options expiring today
Monday, April 23, 2012 - 11:45

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: $1.2900, $1.3100, $1.3200;
GBP/USD: $1.5910, $1.6000, $1.6200;
EUR/GBP: 0.8175, 0.8200;
USD/JPY: 80.00 (large) 81.00, 81.50 and 82.15
EUR/JPY: 105.00 (large) and 106.00;
AUD/USD: $1.0300, $1.0400.

Image from onlineforextradingblog.com
Key options expiring today // FBS Markets Inc.

 

[lollabun]

Waiting for the BOJ: USD/JPY prospects
Monday, April 23, 2012 - 12:00

Economists are almost sure that the Bank of Japan will deliver additional monetary stimulus at its meeting on April 27.

Morgan Stanley: there’s “near 100% probability” of more easing this month.

JPMorgan Chase: “Expectations that the BOJ will ease policy further at this week’s meeting may keep the yen weaker over the next few days. We expect the central bank to add 5 trillion yen to purchases of long-term government bonds.”

Mizuho Securities and SMBC Nikko Securities: there will be more easing.

CMC Markets: the recent rally in USD/JPY will continue for the rest of the year as a result of the Federal Reserve's current policy to avoid further monetary easing. “There is a very good correlation between 10-year US bond yields and USD/JPY, because when yields go up, the dollar goes up. With the Fed deciding not to continue with QE for the time being, QE will only happen if the US economy starts to fall off a cliff.”

UBS: “While yen bears welcome an expansion of the BoJ's regular outright JGB buying operations or a doubling of the inflation goal to 2%, the most the BoJ may be willing to concede at this juncture would be a 10 trillion yen increase in the APP. The gradual Fed-BoJ policy divergence should serve to keep risks tilted towards a move higher towards 85 USD/JPY on a 3-month horizon. While the Fed will be in no rush to categorically rule out QE3, we maintain the case for further easing is less convincing in the US than Japan.”

BNP Paribas: “A modest increase in the asset purchase target being announced next Friday, in the order of 5 trillion yen, looks to be discounted. As such, more than this may be required to see the USD/JPY rally extend. That said, any decision to increase the maturity of JGBs purchases beyond the current 1-2 years could also help support USDJPY.”

Chart. Daily USD/JPY
Waiting for the BOJ: USD/JPY prospects // FBS Markets Inc.

 

[lollabun]

Netherlands' budget debate: to cut or not to cut?
Monday, April 23, 2012 - 12:30

The tensions in Europe keep mounting: now we've got negative news from the Netherlands. The nation's political authorities didn’t manage to come to an agreement on budget cuts, making elections almost unavoidable. Diederik Samsom, head of the Labour Party, said that the elections will take place in September- October 2012.

Centre-right Prime Minister Mark Rutte said on Saturday the negotiations broke down because Geert Wilders, the leader of the Party for Freedom, refused to agree to 14-16 billion euros of budget cuts indispensable to eliminate the excessive budget deficit. Wilders is strongly against the budget cuts in welfare, health and unemployment benefits.

The negotiations between the political parties started after the Dutch economy entered the recession this year. According to forecasts, by the end of 2012 the Dutch budget deficit will increase to 4.6% compared with the 3.0% ceiling set by the ECB.

The uncertainty over budget cuts and reforms, and the time it takes to organise elections, may lead to higher interest rates and higher yields on Dutch government bonds.

If the Netherlands does not cut spending, it is likely to lose its coveted triple-A credit rating, leading to higher borrowing costs. The country may step into a lingering political crisis, hindering the euro zone’s economic rebound.

On Monday Dutch government holds an emergency meeting.

Chart. Dutch 10-year bond yields
Netherlands' budget debate: to cut or not to cut? // FBS Markets Inc.

 

[lollabun]

RBS: comments on GBP/USD
Monday, April 23, 2012 - 13:30

Analysts at RBS claim that there’s less upside for GBP/USD as Britain and the United States have very similar economies and the relative out-performance of the US economy may push GBP/USD lower over the short-term.

At the same time, the specialists don’t see the potential for significant declines as the Federal Reserve is still a long way from raising interest rates. In addition, there will be more concerns about US fiscal policy later this year and into 2013.

“The policy mix suggests that most of any GBP/USD declines that are seen over the coming months are likely to be given back into 2013,” the bank says.

There’s significant resistance at $1.6167 (2011 maximum), while support is found at $1.5800/5900.

Chart. Daily GBP/USD

RBS: comments on GBP/USD // FBS Markets Inc.

 

[lollabun]

April 24: important economic releases
Tuesday, April 24, 2012 - 07:30

At the beginning of today’s trade all eyes were for Australia: the nation’s annual inflation was at 1.6% in Q1. This is the slowest pace of CPI growth since 2009. Aussie declined versus the greenback as the market strengthened in thought that the Reserve Bank of Australia will cut its benchmark rate on Tuesday, May 1. On April 3 central bank Governor Glenn Stevens signaled he may end a 3-month pause in interest-rate cuts as soon as next month if weaker-than-forecast growth slows inflation.

Data to watch today:

• Great Britain: Public Sector Net Borrowing in March is forecasted to show£15.6 billion budget deficit vs. £12.9 billion deficit in February.

• Canada: Canada’s Core Retail Sales in February are expected to increase by 0.8%. In January the report reflected a 0.5% decline. The BoC Governor Mark Carney in his speech may give a hint on a more hawkish monetary policy: the central bank could raise interest rates from a record 1% low sooner than expected.

• U.S.: The current expectations are that the April Consumer Confidence index may reach 70.1. New Home Sales in March may increase by 321K vs. 313K in February. However, if the number of new home sales will fall, it may further indicate a slowdown in the U.S real estate market. U.S. 2-year notes auction is scheduled.

• Euro zone: Spanish 3- and 6-month T-bill auction; Italian bond (CTZ, BTPei) auction.
April 24: important economic releases // FBS Markets Inc.

 

[lollabun]

Yen’s strengthening as a safe haven
Tuesday, April 24, 2012 - 07:45

US dollar has been declining versus Japanese yen since the beginning of this week on the concerns about the battle for leadership in France and the Netherlands and its potential negative impact on the efforts to resolve the region’s debt crisis.

Analysts at Rochford Capital don’t think that yen’s safe-haven status will be steadily undermined because of the Bank of Japan’s very loose monetary policy (the BOJ is expected to announce more QE on Friday after expanding bond purchases by 10 trillion yen ($123.6 billion) and set ting a 1 percent inflation goal).

This week we’ll here from the United States first: the Fed will announce tomorrow the results of 2-day FOMC meeting (monetary policy statement, projections for growth, unemployment and inflation). Strategists at Bank of America Merrill Lynch see risks that economic and rate forecasts will be considered hawkish that is positive for the greenback.

USD/JPY tested today 4-day minimum of 80.85.

IFR Markets: “Despite the push down, Tokyo players still look to be better buyers on dips, especially sub-81.00. Granted, more stops loom below, especially sub-80.80 but a move to this level could be onerous barring more legs down in the JPY crosses.”

Support levels are at 80.60 and 80.30 yen.

Chart. Daily USD/JPY
Yen