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

[wynnasuju]

ECB: austerity vs. growth
Thursday, May 3, 2012 - 09:00

What fate awaits the common currency and the euro zone? In quest of the answers, markets expect the ECB meeting (Wednesday, 13:30 GMT) with impatience. Moreover, today Spain holds its first 3- and 5-year bond auction since S&P cut the countries credit rating BBB+ last week.
The ECB has added more than 1 trillion of cheap euros into the banking system and cut interest rates to a record low of 1.0% in December to stimulate growth. Some analysts believe that the ECB funding operations, launched in December and at the end of February, supported the indebted periphery countries and prevented a global credit crunch.
However, according to recent economic releases, including the PMI’s, eight euro zone countries are now in recession, while others are struggling to grow. The discontent with the austerity measures in the region grows, making the current European leaders extremely unpopular.
Market participants understand the euro zone’s economy requires a supporting stimulus, but analysts split over the terms and the instruments of the policy easing.
Danske Bank: Recent economic data is mixed, but not so weak that it will trigger a rate cut. The ECB remains in ‘wait and see’ mode as it assesses the impact of the two 3-year LTROs.
There is a speculation that the ECB policymakers are planning to replace the “fiscal compact”, signed in March, by a so-called “growth compact”. However, according to analysts at Danske Bank, the renewed focus on growth does not necessarily mean the rate cut in June.
Societe Generale: It seems too early for another wave of easing, but that is where the risks are skewed. The outcome is continued downward pressure on EUR/USD. We still expect it to break below $1.30.

Photo: europe-today.ru

ECB: austerity vs. growth // FBS Markets Inc.

 

[wynnasuju]

Markets on the watch for NFP
Thursday, May 3, 2012 - 12:00

According to the recent ADP Employer Services report, the number of employed people grew by 119K workers in April (the smallest increase in the last seven months). The figures fell below the estimated 170K growth and 201K gain in March.

CMC Markets: The release suggested that the surprisingly weak March U.S. non-farm payrolls weren't a one-off stutter and that the U.S. recovery may be losing momentum.

Factory, manufacturing and construction sectors reduced the number of jobs in April; however, the reduction was slightly offset by the increase of services sector jobs.

On Friday (13:30 GMT) non-farm payrolls release is scheduled. Investors are scratching heads: whether or not the figures will come in line with forecasted 176K. In March employment changed by 120K jobs. Negative NFP report will definitely revive talks about the further monetary policy easing.

The ISM Manufacturing PMI came out better than expected on Tuesday (54.8 vs. consensus-forecast 53.0 and 53.4 in March). However, ADP report makes rapid economy rebound look challengeable: U.S. labor market is obviously far from recovery.

Markets on the watch for NFP // FBS Markets Inc.

 

[wynnasuju]

AUD/USD drops further on RBA statement
Friday, May 4, 2012 - 07:00

The Australian dollar keeps weakening against its major counterparts because of the investor’s bets on further rate cuts increased.

According to the RBA Monetary Policy Statement, released on Friday, the RBA sees average growth of 3% in 2012, down from a February estimate of 3.5%. Consumer prices will rise 2.5% in the year to December, from a previous prediction of 3%. Underlying inflation is predicted to be at 2.25% from a previous 2.7%, the central bank said.

U.S. non-farm payrolls data, eagerly awaited today (13:30 GMT), may influence on the cross strongly. Economists forecast the number of employed people to grow by 176K in April compared with 120K increase in March.

BMO Capital: If the NFP report comes stronger than expected (higher than 176K), go short on AUD/USD. Reserve Bank of Australia lowered the key interest rate this week and, given the problems of the Australia’s economy, may cut them further. On the contrary, positive NFP figures will make the Fed unlikely to loosen monetary policy.

AUD/USD declined 1.8% this week and is currently trading in the $1.0262 area. Resistance for the pair lies at 1.0300, 1.0395, 1.0420, 1.0450, 1.0475 (local maximum), while support – at 1.0245, 1.0225 (local minimum) and 1.0200.

Chart. Daily AUD/USD

AUD/USD drops further on RBA statement // FBS Markets Inc.

 

[wynnasuju]

ECB press conference: highlights
Friday, May 4, 2012 - 08:30

The European Central Bank’s meeting, held on Thursday, was one of the most expected events of the week for the currency market.
The ECB left the benchmark rate at a record 1% low. Some market marticipants, however, expected the rate cuts after ECB President Mario Draghi last week said the bank was changing the growth and inflation outlook.
According to Draghi, the economic activity stabilized at low levels in Q1 2012. The inflation in 2012 is likely to exceed the target 2% level due to commodities price and indirect taxes growth. Downside risks are still strong, but the ECB forecasts a slow economic rebound in 2012.
ECB President has partially dispelled investor’s hopes on a third round of the LTROs: according to him, the positive effect of the second LTRO yet to come. Mario Draghi said the operations supported the financial sector to avoid a credit crunch and strongly improved the funding conditions for the banks.
Commerzbank: There are significant downside risks to the ECB’s growth outlook. Draghi indirectly hinted at next month’s ECB meeting when the bank will publish its new projections. Since the ECB may lower its growth forecasts, the rate-cut discussion will stay with us.
Berenberg: The pain threshold of the ECB for more policy action is high and has not been reached. Deteriorating survey data may be revisited at the next meeting, leaving the door for policy action at the June meeting open very slightly.
Nomura: The ECB will wait to see how its lending to banks will feed into the real economy. Economic conditions need to deteriorate significantly in the weeks ahead before the ECB will consider loosening monetary policy further at the June meeting.

Photo: Getty images

ECB press conference: highlights // FBS Markets Inc.

 

[wynnasuju]

Euro slides on political uncertainty
Monday, May 7, 2012 - 07:45

The common currency fell to a three-month low after France and Greece voted against pro-austerity politicians on Sunday.

As expected, Francois Hollande got 51.7% of the vote in the French presidential election held on Sunday against about 48.3% given for incumbent Nicolas Sarkozy. According to analysts, his victory may be interpreted more as an outcry against the austerity policy, pursued by Sarkozy, than the support of Hollande's own program.

Societe Generale: Mr. Hollande’s victory was largely expected, but it does act as a trigger to increase demand for the dollar.

Parliamentary elections in Greece increase bearish pressure on the euro: the debt crisis shaved the popularity of two main parties, attempting to eliminate budget deficit and to collaborate with EU. Centre-right New Democracy led with 19%, down from 33.5% in 2009. Left-wing coalition Syriza came surprisingly in second place with 16.7%, while centre-left PASOK stood in third place with 13.3%, down from 43.9% in the last elections.

UBS: If Greece chooses to resolve the crisis on its own, the EU may refuse credence and financial aid.

FX Prime: There are major concerns about the euro. What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.

EUR/USD dropped to $1.2954 early Sunday, but then bounced back to $1.3010. However, the key $1.3000 support, the lower bound of a side channel (exists since January), was broken.

Analysts at Nomura Holdings expect the pair to consolidate in the $1.26-1.28 area within a few weeks.

Chart. Daily EUR/USD

Euro slides on political uncertainty // FBS Markets Inc.

 

[wynnasuju]

JP Morgan: trading EUR/JPY
Monday, May 7, 2012 - 09:00

Analysts at J.P. Morgan Asset Management recommend selling EUR/JPY at current levels, setting a stop at 106.00 and a target of 102.50.

According to specialists, the Hollande’s victory was already priced in, while Greece will weigh on the euro. They underline that the market is unstable: any comments from Hollande after the election or something later in the week may influence the pair.

Chart. Daily EUR/JPY

JP Morgan: trading EUR/JPY // FBS Markets Inc.

 

[wynnasuju]

Analysts: outlook for AUD/USD
Monday, May 7, 2012 - 10:30

The Australian dollar opened the week on a downside amid concern election results in France and Greece will deepen the euro zone’s crisis. However, throughout the day positive news from Australia improved the market sentiment.

FX Prime: There are major concerns about the euro. What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.

Europe’s economic and political mayhem is may influence the economies, regarded as safe havens: policymakers may cut interest rates to weaken the currencies.

Societe Generale: In a weakening global environment, countries that can cut rates will do so and their currencies can fall. Europe is an economy with a currency that isn’t expensive, with not much scope or appetite for cuts.

Westpac Banking: We’ve got what may well prove to be the next wave of instability from Europe. There’s a clear voter rejection of austerity evident. We’d expect the Aussie and the kiwi to remain under pressure.

Australia’s retail sales grew by 0.9% in March after a revised 0.3% gain in February. Number of new building approvals increased by 7.4% after an 8.8% decline in February, pointing that the housing market improved in March.

Standard Chartered: The data was actually very strong, so it’s more like it’s putting a floor on the Aussie weakness that we’re seeing. It’s difficult to see the Aussie bouncing in this environment where risk sentiment is pretty weak.

The AUD/USD pair is currently trading in the 1.0180 area. Analysts at ANZ expect the Aussie to trade at $1.07 by December versus the greenback. According to Bloomberg forecast, the currency will end 2012 at $1.04.

Chart. Daily AUD/USD

Analysts: outlook for AUD/USD // FBS Markets Inc.

 

[wynnasuju]

GBP/USD: is the demand back?
Monday, May 7, 2012 - 12:30

Demand for sterling grows regardless of the increased risk aversion on the currency markets: GBP/USD strengthens on Monday after declining last week for five consecutive days.

The cross has already overcome its Friday’s closing price and reached $1.6172 level. However, only a strong break above $1.6200 resistance will reverse the bearish trend.

On Tuesday watch out for UK retail sales and housing prices data releases.

Chart. Daily GBP/USD

GBP/USD: is the demand back? // FBS Markets Inc.

 

[wynnasuju]

UBS: outlook for the US dollar
Monday, May 7, 2012 - 13:00

Last week the US Dollar Index increased from 78.60 on Monday to 79.60 on Friday. According to analysts at UBS, the greenback was supported by the worrisome data coming from Europe and by the low likeliness of new round of QE in US. Poor Friday’s NFP data was offset by an improvement in other key indicators (for example, unemployment declined).

Specialists at UBS continue to believe in the greenback as they do not expect the US economy to slow down sufficiently to allow the Fed’s doves to push for additional asset purchases.

Chart. US Dollar Index

Source: Bloomberg

UBS: outlook for the US dollar // FBS Markets Inc.

 

[wynnasuju]

CharmerCharts: trading GBP/USD
Tuesday, May 8, 2012 - 08:00

The sterling continued weakening against the greenback on Tuesday after yesterday's growth. Bank holiday in UK on Monday hindered the reaction of the pound on the results of French and Greek elections.

Analysts at CharmerCharts see the target dor the cable at 1.6110/085 levels. They believe the break below 1.6065 may cause another wave of selling pressure which should drive the price lower for 1.6005 to 1.5990.

Resistance for GBP/USD lies at 1.6180, 1.6200 and 1.6245. On the downside, supports might act at 1.6135 and 1.6115.

Chart. Daily GBP/USD

CharmerCharts: trading GBP/USD // FBS Markets Inc.