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09/08/10

Bank of Tokyo-Mitsubishi: the Fed’s policy will ease
Specialists at Bank of Tokyo-Mitsubishi UFJ Ltd claim that the Federal Reserve’s likely to loosen its monetary policy. Such assumption’s based on the butterfly spread that’s calculated by subtracting doubled 5-year yield it from 2- and 10-year rates.
Bank of Tokyo-Mitsubishi notes that the last time the spread got to its current negative level of 34 basis points was in December 2008 after Lehman Brothers’ collapse and, earlier, in 2001 after the Internet bubble burst. Negative figure shows that there are more bets that the Fed will reduce borrowing costs or hold interest rates near zero for longer.
If the butterfly spread gets gown below the mark reached after the collapse of hedge fund Long-Term Capital Management LP in 1998, it will come close to 1981 levels hit during postwar double-dip recession. Bank of Tokyo-Mitsubishi analysts note that even if the United States avoids recession scenario, its economic growth will be only just above 1% that will strengthen deflation risks.
According to the strategists, the 5-year yield that reflects the potential monetary policy switches lowered that means that the possibility of further easing is already processed and priced in be the market.

Mizuho: short-covering on EUR/USD is possible
The single currency rose last week to 3-month maximum above 1.3300 and managed to close the week above 38% Fibonacci retracement resistance.
Technical analysts at Mizuho Corporate Bank believe that there’s a possibility of short-covering above 1.3510 level representing 50% Fibonacci retracement of decline from December to June.
According to the specialists, in the longer-term it’s necessary to remember the market’s consensus of the pair’s slump to 1.2600 in 3 months and 1.2000 in a year. Mizuho notes that euro’s a bit overbought versus the greenback.

Goldman Sachs: Japan’s and US growth forecast reduced
Economists at Goldman Sachs Group Inc. reduced their estimates of US and Japanese economic growth prospects.
According to the new forecast, Japan’s economy will add 1.4% in 2011 and not 1.7% as it was expected before. As for American one, it’s thought to rise by 1.9%, while the previous prediction was equal to 2.5%.
The macroeconomic data supports such downward revision. Japan’s current-account surplus decreased for the second month in a row affected by export income’s decline. In addition, jobless rate in the country reached 7-month maximum and factory output dropped in June. Goldman specialists are also looking forward to severe consumer spending decline in the country.
The slowdown of American growth may be explained by the fact that lawmakers are against of extending several stimulus measures. The analysts suppose that the unemployment rate which was at 9.5% in July may advance to 10% the beginning 2011. As a result, claims Goldman Sachs, the Federal Reserve may start again conducting unconventional monetary easing.

Barclays: dollar will gain versus yen, Aussie and kiwi
Analysts at Barclays Plc in London claim that the greenback may rise versus Japanese, Australian and New Zealand’s currencies as they believe that the Federal Reserve won’t decide to ease its monetary policy tomorrow.
According to the specialists, if the Federal Open Markets Committee leaves monetary policy unchanged, short-term yields will climb making the greenback advance as well.
The strategists recommend acting in this situation using the pair USD/JPY traditionally connected with short-term interest rates, although they are also sure that AUD/USD and NZD/USD will decline.
If it happens that the Fed announces a clear plan to help the economy dollar may drop below 85 yen and possibly beyond 84 yen.

USD/JPY: comments
The greenback fell versus Japanese currency from 88.10 at the end of July getting to the new 8-month minimum on Friday at 85.00. After that US dollar managed to find support there and rebound to 85.75 during the European trade before meeting resistance and returning to 85.55.
Technical analysts believe that the pair is still within a downtrend targeting to November 2009's minimum at 84.83.
If the pair USD/JPY goes up, resistance levels will be found at 85.70 (August 3/5 minimums), 86.20 (August 6 maximum) and 86.45 (August 5 maximum). If American currency declines, support levels will be at 85.00 (August 6 minimum), 84.80 (November 2009 minimum) and 84.32 (June 1995 minimum).


Bank of England's forecast will be negative
It’s expected that the Bank of England will be negative in its short-term outlook for the British economy. The country’s central bank is likely to forecast weak economic growth and high inflation.
Never the less, the pound may continue gaining before investors will once again become negative on sterling. If the British currency manages to overcome 1.60/1.61 levels, it will be able to rise to 1.65.
The Bank of England’s Governor Mervyn King will speak on Wednesday August 11 at 9:30 GMT.

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10/08/10

Gaitame.com: dollar may decline to 84 yen
Technical analysts at Gaitame.com Research Institute Ltd believe that the greenback may fall to the 15-year minimum versus Japanese yen. Such forecast is based on the Bollinger bands’ analysis that shows the signals of a strong downtrend.
The specialists note that the pair USD/JPY has gone below 20-day MA or the lower Bollinger band for at least 6 times during the past month. Strategists at Gaitame.com expect that if US dollar drops below 84.50 yen level, it'll be likely to lower to 83 yen.
On August 6 American currency decreased to the lowest level since November at 85.02 yen. It didn’t hit the levels below 84 yen since 1995.

Ueda Harlow: Aussie’s down for the second day
Australian dollar was down versus its US counterpart for the second day in a row affected by strengthening concerns about the prospects of world’s economic growth.
Analysts at Ueda Harlow Ltd in Tokyo note that risk aversion seems to be rather high and the market’s worrying mainly about American and Chinese economies due to the negative macroeconomic data from these countries. Annual pace of China’s exports growth declined from 34.1% in June to 22.7% in July, while in the United States consumer spending, pending home sales and factory orders turned out to be below the forecast levels in June.
Aussie weakened also as the National Australia Bank Ltd. reported that its July index of business confidence based on the survey of more than 400 companies between July 26 and July 30 became 2 times lower than it was in June.
Currency strategists note there are no expectations that the rates in Australia will be raised next month.

Bank of Japan won’t intervene until yen USD/JPY falls to 80 yen
Japanese currency appreciated slightly versus the greenback today. There was a speculation at the market that the country’s investors will repatriate home their gains that they’ll obtain after coupon payments of US Treasuries that are expected in the middle of August.
As it was predicted, Japan’s central bank didn’t change its monetary policy leaving the key interest rate at 0.1%.
According to traders, if US dollar gets down below 84.82 yen level, it will fall to the 15-year minimum against yen. In their opinion, such outcome is quite likely as there are little chances that Japanese monetary authorities will intervene at the currency market unless the pair USD/JPY depreciates to 80 yen area. Japan’s Finance Minister Yoshihiko Noda gave no comments on this point.

Commerzbank: GBP/USD may reverse downwards at 1.6000
British currency strengthened versus the greenback from 1.42 zone in May to find resistance at 1.5968/6000 levels. Technical analysts at Commerzbank believe that in case the pair GBP/USD isn’t able to overcome 1.6000 point, it will reverse downwards.
According to the specialists, support remains in 1.5709/1.5636 region limited by October minimum and 38.2%/50% Fibonacci cluster of the 2009 growth and the slump from 2009 to 2010. Crucial support level is found lower at 1.5530 along the 200-day MA signaling that higher this level sterling’s trend in the medium-term will keep being bullish.
However, Commerzbank strategists still ask investors to pay attention to 1.6000 level as only above it pound can manage to rise to February’s maximum at 1.6072.


Shirakawa: Bank of Japan’s concerned about yen’s growth
Bank of Japan Governor Masaaki Shirakawa claimed today that the members of Japanese central bank's board were discussing much the recent yen’s appreciation. It’s clear, noted the policymaker, that the growth of national currency is likely to worsen business sentiment.
Shirakawa underlined the necessity to study what influence makes this advance on Japan’s economy as a whole.
The fact that the Bank of Japan didn’t change today its key rate means that it keeps such option to act in case of future excessive strengthening of yen when it becomes clear that the country’s economic recovery is in danger.

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11/09/10

Specialists comment Aussie’s decline
Australia’s currency’s declining versus US dollar for the third day in a row as the economic data indicates the slowdown of the world’s economic recovery.
Strategists at MoneySquare Japan Inc. in Tokyo claim that as the uncertainty about the economic situation in China and United States is getting stronger, investors are reducing their demand for riskier and growth-sensitive assets such as Aussie.
Specialists at FXOnline Japan Co. in Tokyo note that yesterday’s announcement of the Federal Reserve that it will reinvest principal payments on its mortgage holdings into longer-maturity Treasuries didn’t manage to improve risk appetite. On the contrary, such move’s going to affect equities and lift up purchases of yen regarded as a refuge currency.
Strategists at National Australia Bank Ltd. in Sydney expect that Australian dollar will be declining during next month. Such forecast is based on the assumption that the country’s central bank won’t raise interest rates, while there will be no double-dip recession in the US and lower performance of Chinese economy is already priced in the currency’s value.
However, it’s necessary to say that Aussie’s depreciation can’t be very significant, because additional yield on Australia’s 10-year debt in comparison with similar Treasury notes rose to the 2-year maximum, point out analysts at FX Prime Corp. in Tokyo.

Schroder Investment Management: US may suffer from deflation
Analysts at Schroder Investment Management Ltd. in Japan claim that the United States already don’t seem to be the driving force of the world’s economy. Yesterday the Federal Reserve announced that the recovery of US economy will pass slower than it was expected. American yields are now in poor condition with 10-year Treasury yield at 16-month minimum.
The specialists think that during the coming 3 years the country faces the risk of deflation. Among the reasons for such outlook the economists name negative impact of the credit bubble and aging population.
Specialists at Pacific Investment Management Co. share such opinion noting that it becomes more and more likely that US will face the same situation as in Japan. Japanese economy was suffering from stagnation and decreasing prices since the middle of 1990s.

Commerzbank: Dollar Index will rise to 84.46
The Dollar Index went down from May maximum at 88.70 to trade only slightly above 80.00 at the beginning of August. The index dropped to support at 80.17/79.92 zone.
Technical analysts at Commerzbank expect that US currency may strongly reverse as the previous minimums, 55- and 200-week MA and 50% Fibonacci support of the growth from 2008 to 2009 will converge in the mentioned support area and then bounce upwards.
According to Commerzbank’s forecast the greenback’s index will rebound from this week’s minimum at 80.085 and rise to the 55-day MA at 84.46 during the next several weeks.

UBS: dollar will be under pressure
Yesterday the Federal Reserve announced that the recovery of US economy will pass slower than it was expected. In addition, American central bank claimed that will reinvest principal payments on its mortgage holdings into longer-maturity Treasuries.
Strategists at UBS in Stamford note that the Fed’s statement turned out to be surprising. US monetary authorities chose not to normalize expansionary monetary policy that they launched as a measure to help the economy during financial crisis. This means that the greenback will remain under pressure. According to UBS, the greenback will fall versus growth-sensitive currencies such as Aussie and loonie on the rate differentials and greater growth prospects in favor of the latter.
Analysts at Commonwealth Foreign Exchange in Washington believe that unexpectedly positive data foreign, especially European data will reinforce the pressure on dollar. However, the economists warn that if it becomes clear that US slowdown’s extending to the whole world’s economy, investors will resume dollar purchases looking for safer assets.
Specialists at Wells Fargo in New York underline that there's a lot of nervousness around American currency. In their opinion, dollar will lose to the single currency today and during the next few days.

Mizuho: “bearish engulfing” on daily USD/JPY
The greenback slumped versus Japanese yen on Tuesday erasing its gains of the previous 3 days.
Technical analysts at Mizuho Corporate Bank claim that small “bearish engulfing” candle formed on the daily chart means that the pair USD/JPY will attack this week pivot level at 85.00.
Never the less, the specialists advise investors to be cautious betting on dollar’s decline as general movement of the pair passes within potential “wedge” pattern, although all elements of this daily Ichimoku Cloud chart suggest a short position. It’s very important to take into account that the greenback isn’t oversold and the trend’s descending but not too strongly.

Asian reserves grew in July
Asia's foreign exchange rose to a record maximum in July. It happened as the growth pace of the region’s economy outruns the one of developed economies. As a result, the fund inflow to the Asian countries is very strong and the importance of Asian central banks is rising.
Reserves held by 11 key Asian central banks without Chinese rose by 2% from $2.803 trillion at the end of June to $2.861 trillion by late July.
China that owns the world's largest reserves reports about the reserves only at quarter ends. It ended the second quarter with $2.454 trillion in reserves.

BoE inflation report
According to the Bank of England’s report, inflation rate will exceed target level of 2% during the major part of 2011. By the end of the next year it will be pulled down to that point and will fall below it in 2012 and rest there during 2013. The members of Monetary Policy Committee noted that future inflation dynamics is still rather uncertain.
Next year GDP growth forecast was cut from the estimate made 3 months ago at 3.6% to 3%. British central bank’s governor Mervyn King underlined once more that the country’s economic recovery will be long and slow.

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12/08/10

Barclays: In August dollar may depreciate to 83 yen
Analysts at Barclays Bank Plc and JPMorgan Chase & Co. believe that the greenback may slump below 15-year minimum versus Japanese yen. Such assumption is explained by the Federal Reserve’s decision to maintain bond holdings. Barclays’ specialists in Tokyo name 79.75 yen level previously reached in April 1995 as the only remaining target for the pair USD/JPY.
In August dollar may depreciate to 83 yen, expects Barclays, as Japan’s monetary authorities are unlikely to undertake direct intervention to the currency market.
As the Fed is becoming committed to quantitative easing that comprises purchases of mortgages and government securities in order to reduce borrowing costs and stimulate growth, American currency and treasury yields find themselves under serious pressure.
Strategists at JPMorgan Chase in Tokyo warn that in such situation the further losses in stocks combined with investors’ risk aversion will bring the greenback to postwar minimum versus Japanese currency in about a month.

Mizuho: USD/JPY will rise to 92 yen by the end of 2010
Strategists at Mizuho Trust & Banking Co believe that by the end of 2010 the greenback may exceed 90 yen level. The specialists pointed out the example of the single currency’s summer successful rebound after sinking earlier this year.
Dollar’s 8.5% decline stimulates US exports reducing concerns about the country’s economic growth, notes Mizuho. The analysts expect that increased corporate earnings will significantly improve American economic data by the end of the year that makes US policymakers support currency’s depreciation ahead of middle-term elections.
Mizuho underlines that weaker euro was the main factor that helped euro zone’s economy during the debt crisis. German exports gained 3.8% percent in June from May. The single currency managed to recover from 4-year minimum at $1.1877 hit on June 7 to $1.3334 on August 6.
Even though it’s possible that the greenback will lower to 80 yen in the near-term, it has all chances to strengthen to 92 yen by the end of the year.
All in all, Mizuho strategists think that US economy will grow, but gradually. The new sharp rising of unemployment that capped after climbing to 10.1% in October seems now very unlikely.

Hedge funds once again turned bearish on euro
During the major part of 2010 investors were contesting in their bets on euro’s decline until they faced the necessity to limit their losses as the single currency began strengthening from the 4-year minimum at $1.1877 hit on June 7.
Euro managed to add 12% to $1.3334 on August 6 as Europe’s economic outlook has significantly improved and indebted nations such as Greece are in process of conducting austerity measures.
The fund’s sentiment about European currency became negative affected by the Federal Reserve's decision to reinvest principal payments on its mortgage holdings into longer-maturity Treasuries that according to some investors means that the demand for this securities will rise strengthening American currency. Yesterday euro’s rate survived the biggest daily loss versus the greenback since October 24, 2008. The common currency dropped from Tuesday’s $1.3184 to $1.2883.
Strategists at Knight Libertas LLC claim that they are looking forward to fundamental problems in the euro area and Xerion Fund of Perella Weinberg Partners LP specialists noted that the market had become too optimistic about European economies in comparison with the American one.

Barclays stopped advising to buy commodity currencies
Analysts at Barclays Plc stopped recommending investors to buy commodity currencies such as Australian and New Zealand’s dollars and Norwegian krone versus dollar, euro and yen.
According to the specialists, very uncertain external conditions represent increasing risk that the growth pace of Chinese economy will decline. China’s economic slowdown in its turn is likely to affect demand for commodities. As a result, small commodity-producing economies get in danger of slower growth and inflation.
In addition, Barclays analysts noted that the prospects of risky currencies seem to be more uncertain.

Borrowing costs for Spain’s regions climb
It may become much more difficult for Spain to fight its debt problems as borrowing costs for the country’s regions are increasing.
Spanish regional governments were borrowing at the same rates as the central one before the global credit crisis started in 2007. Catalonia’s extra yield over the Spanish one tripled this year, while Galicia has asked central government to freeze payments of its internal debt. Madrid region had to postpone a bond sale last month.
The yield on Catalan 10-year bond is equal to 5.5%, while the yield on similar Spain’s government bonds lost 79 basis points since June 16getting down to 4.09%.
Spanish regions spend twice as much as the state and employ more than half of all public workers.
Analysts at Robeco Group in Rotterdam warn that the situation with Spain’s national government debt will significantly worsen in case the country’s government has to provide financial help to the regions erasing all the efforts of Prime Minister Jose Luis Rodriguez Zapatero to diminish funding costs.

BNY Mellon: euro may have capped
Strategists at Bank of New York Mellon Corp. in London claimed that the single currency’s strengthening versus the greenback may have ended.
European currency managed to recover from 4-year minimum at $1.1877 hit on June 7 to $1.3334 on August 6. It’s quite possible that euro capped and will start a new continuous decline, claims Bank of New York Mellon.
The specialists underline that the bond yields in periphery euro zone countries are getting higher and higher and the region still faces a lot of problems.

Citigroup Global Markets: Greek recession strengthens
Greek economy declined for the seventh consecutive quarter. According to the data released today by Hellenic Statistical Authority, the country’s second quarter GDP lost 1.5% from its first quarter level. On the annual basis it fell by 3.5%, while the economists were looking forward to only 3.4% decrease.
Greek unemployment rate surprisingly advanced in May from 11.9% in April to the maximal level since 2004 at 12%, while economists surveyed by Bloomberg expected it to be at 11.6%.
Economists at Citigroup Global Markets in London claim that the economic situation in Greece may be still worsening. The specialists’ outlook for the country’s negative. The pace of Greek economic decline may increase this year due to the austerity measures, higher inflation and rising unemployment that will affect household and business spending power.

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13/08/10

Goldman: double-dip recession in US is 25-30% possible
Specialists at Goldman Sachs Group Inc. estimate the possibility of double-dip recession in US by 25-30% that, in their opinion, is unusually high. The analysts point out that economic data shows declining pace of American economic growth.
Such outlook is the same as the one of economists at Pacific Investment Management Co., who regard deflation and recession risk in the United States as equal to 25%.
Protection from the economy’s slowdown may be found in such spheres as housing, business spending on equipment, autos and other consumer durable goods, household savings and company hiring, claims Goldman.
Economists surveyed by Bloomberg forecasted on July 31-August 9 that American GDP will rise 2.55% during the second half of 2010, while in the previous month they named 2.8% figure.

Morgan Stanley: dollar will rise to $1.19 per euro
Analysts at Morgan Stanley in London expect that dollar will rise to 4-year maximum at $1.19 per euro that was reached at the beginning of June. Such forecast is based on the assumption that either US economy will recover or the European one will follow its downside dynamics.
According to the specialists, negative macroeconomic data that has been recently released are already priced in dollar’s rate. In case US economic growth is below the expectation, there’s little doubt that the situation in Europe and in the world as a whole will be the same.

BNY Mellon: SNB will resume interventions
Analysts at Bank of New York Mellon Corp. believe that the Swiss National Bank (SNB) will return to its policy of currency interventions. According to the specialists, Switzerland’s central bank will start selling francs in order to prevent national currency from strengthening too much as the country’s again under threat of deflation.
The strategists remind of SNB’s announcement on June 21 that the central bank won’t hesitate to make active actions if the danger of deflation comes up again. Although the situation’s now far from critical, deflation will reappear quite quickly against the general background of global uncertainly if franc begins to climb, claims BNY Mellon.
In such case Swiss central bank will have to choose either to sit on its hands doing nothing to improve the situation or return to the intervention policy even though its efficacy has been openly brought into question.

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16/08/10

JPMorgan: yen will rise to 79 yen per dollar this year
Analysts at JPMorgan Chase & Co. expect that by the end of this year Japanese currency may advance to 79 yen per dollar. The precious forecast of the specialists was that yen will finish 2010 at 93 versus the US currency.
Next month yen’s forecast was lifted up from 90 to 80 per greenback. Yen’s anticipated value per euro was also raised from 116 99 be the end of 2010.

Sakakibara: yen will rise to the record maximum
Eisuke Sakakibara, former Japan’s top currency official, believes that Japanese currency that has already added 7.9% against the greenback may climb further to the all-time maximum versus dollar.
According to the economist, the slump of the pair USD/JPY isn’t the result of yen’s strengthening but the one of dollar’s weakness as US currency’s rate is affected by the lack of confidence in American economic growth prospects.
Japanese monetary authorities didn’t make up a strategy how to hold the climbing of the national currency. Sakakibara expects that the companies will feel the negative impact of yen’s appreciation and stock market’s decline around the end of this year. Japan’s Prime Minister Naoto Kan and Bank of Japan’s Governor Masaaki Shirakawa will meet this week to discuss the situation.
Survey by Gaitame.com Research Institute Ltd. demonstrated that more than a third of Japan’s margin traders think policy makers will intervene to weaken the yen if it strengthens past the 15-year maximum.
The last time when Japan intervened to the currency market was in March 2004 when the yen was around 109 per dollar.

Chinese second quarter GDP is higher than Japan’s one
China’s economy outperformed Japanese one becoming world’s second-largest economy according to the second quarter results. Analysts at Goldman Sachs Group Inc. forecast that China will outrun the United States that occupies currently the first place in the world with annual GDP of about $14 trillion by 2027.
Japan’s nominal second quarter GDP was equal to $1.288 trillion, while China reported $1.337 trillion figure. All in all, in the first half of 2010 Japan kept its higher place.
It’s necessary to note that in 2009 China surpassed US as the biggest automobile market and Germany as the largest exporter. The nation is the world’s primary buyer of iron ore and copper and the second-biggest importer of crude oil. All of this means that China’s influence on the global economy’s surging.
Kenneth Rogoff, a Harvard University professor and former chief economist of the IMF, however, underlines that China’s property market is beginning to collapse that will hit the nation’s banking system. In addition, China’s output was also larger than Japanese in the fourth quarter of 2009, but was again lower in the first 3 months of 2010. The specialists also claim that it’s necessary to pay attention to the seasonal factor that may be different for the nations.
Economists at Mizuho Securities Asia Ltd. claim that taking into account the fact that Chinese growth pace in the second quarter was equal to 10.3%, while Japanese accounts for only 2%, it’s possible to make out that Japan won’t retake its position and China’s lead will be only increasing.

Lloyds: EUR/CHF fell on the risk aversion
Currency strategists at Commerzbank AG claim that the risk aversion strengthened affected by Japanese data. Japan’s economy gained 0.4% in the second quarter from the level of the previous year, while economists surveyed by Bloomberg News were looking forward to 2.3% increase. That makes investors increase demand for safer assets such as Swiss currency. As a result, the single currency dropped today versus Swiss franc.
Analysts at Credit Agricole CIB believe that it’s mainly Germany that contributes to European growth, while peripheral countries still have a lot of problems.
Specialists at Lloyds Banking Group note that yield spreads between the bonds of peripheral euro zone countries and German ones widened and the stock markets’ dynamics is negative.
The single currency lost more than 650 pips since reaching 2-month maximum at 1.3925 last August 10. It went down below 1.3300 to new 6-week minimum at 1.3269. Support levels for EUR/CHF are found at 1.3254 and 1.3210. Resistance levels are found at 1.3375 and 1.3452/7.

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18/08/10

Barclays: pound won't be able to hold gains
Technical analysts at Barclays Plc believe that any advance of the British currency made this week may be erased.
According to the specialists, bearish weekly engulfing candle would mean that the pair GBP/USD won’t be able to hold any growth. The strategists believe that pound may rise this week to $1.6010 and then reverse. As a result, the bank recommends investors to sell sterling when it approaches $1.5825.
Last week British currency lost 2.2% after reaching the maximum since February. GBP/USD is currently trading in 1.5525 area.

Loonie strengthens on purchase offer for Potash Corp.
Canadian currency advanced versus all of its major competitors helped by the world’s stock markets’ growth and $39 billion purchase offer from BHP Billiton Ltd. to Potash Corp. of Saskatchewan Inc, claims Bank of Nova Scotia’s Scotia Capital.
The specialists note that Canada’s Potash, the world’s largest fertilizer producer, rejected takeover proposal from Australian BHP Billiton as too low and, consequently, provoked speculation about a higher bid.
Analysts at Citigroup Inc. note that successful price given for Potash will increase investors’ demand for loonie. In their view, such offer for Canadian company means that the country’s resource sector remains attractive for investors even in the current conditions when the market sentiment seems to be pessimistic. Strategists at Royal Bank of Canada underline that loonie has become nowadays a powerful petro-currency.
The pair USD/CAD dropped from yesterday’s maximum at 1.0437 and is trading currently in 1.0320 area.

RBC: Canada’s CPI will be above forecast
Strategists at Royal Bank of Canada believe that the release of Canada’s CPI scheduled on Friday, August 20, will be important for USD/CAD future dynamics.
Economists surveyed by Bloomberg expect that in July Canada’s annual inflation rate gained pace. According to them, the country’s CPI added 1.9% from the previous year, while the increase in June was equal only to 1%.
RBC specialists believe that it’s very likely that the reported figure will turn out to be above the market’s expectations.

Commerzbank: pound may fall to 1.5201 versus dollar
British currency lost 200 pips falling from 1.5700 yesterday session’s minimum at 1.5500 today. Technical analysts at Commerzbank note that GBP/USD broke down through the uptrend channel support line at 1.5610 and test support area at 1.5526/02.
The specialists believe that if sterling gets below 1.5502 (200-day MA), it will survive further decline to 1.5304/1.5274 area (38.2%/50% Fibonacci cluster) and then to 1.5201 (55-day MA).

If pound manages to rebound, resistance levels will be found at 1.5709 and between 1.5750 and 1.5820 (August 5 minimum). According to Commerzbank, the outlook remains bearish while the pair’s trading below 1.60 level.

Yen’s up on demand from Japan
Japanese currency was up today stimulated by demand for yen provided by Japan’s investors and exporters.
Specialists at Shinkin Asset Management note that the pair USD/JPY keeps trading within downtrend. The specialists claim that there’s speculation at the market that there are a lot of dollar offers above 86.50 yen level that makes the players think that it’s useless to chase the greenback above 86.00 yen.
Moreover, there was information received from Japanese bank’s manager that the country’s exporters were placing dollar offers from around 86.50 yen to 89.00 yen, while their previous selling levels were found at 90 yen area.
According to Tokyo Financial Exchange data, Japanese margin traders' net long positions in USD/JPY were still high on Tuesday at 146,095 contracts and about $1.46 billion in value, although below maximum at 182,966 contracts reached on August 6. Such margin traders who bet on American currency will benefit when it climbs. Such trade will limit the currency’s growth. In case the greenback plummets, Japanese retail margin traders will have to reduce long dollar positions strengthening dollar’s decline.
The market keeps being concerned about the possible intervention of the Bank of Japan. As the speculation of some steps of the central bank to prevent the national currency from appreciation may help dollar to recover versus yen in the near-term, US currency will drop to 83 yen if there will be no measures taken.

The release of BoE MPC meeting minutes
The minutes of Bank of England Monetary Policy Committee’s meeting released today showed that the MPC members voted again 8-1 with Andrew Sentence who keeps proposing to increase the key interest rate by 0.25%.
Among the arguments for easing there were the credit conditions in the country, weak demand and austerity measures aimed to cut the budget. The main reasons for lifting up the rates included the fact that economy’s getting better as surveys indicate the strength of manufacturing in the third quarter and risk of CPI growth marked by surging cost of agricultural commodities.

Westpac: Aussie declined versus yen
Australia's currency lost to the majority of its main competitors as the number of skilled vacancies in August decreased by 0.3% in August from July and the pace of wage growth went down in the second quarter. As a result, investors became surer that the country’s central bank will leave the key interest rates unchanged at 4.5%.
Strategists Commonwealth Bank of Australia note that Aussie depreciated versus yen affected by the speculation that Japanese monetary authorities won’t intervene to the currency market in order to prevent the national currency from excessive strengthening. Specialists at Westpac Banking Corp. in Sydney advise investors to sell Australian dollar against yen as there’s a lot of uncertainty at the market and investors will prefer Japanese currency.
AUD/JPY dropped from yesterday’s maximum at 77.68 to current levels in 76.90 area.

China doubled KTB holdings
China increased South Korean bond holdings (KTB) more than twice during the first half of this year to 3.99 trillion won ($3.4 billion). China’s holdings of Treasuries decreased, consequently, by 6% and became equal to $843.7 billion.
The specialists from Beijing’s University of International Business and Economics note that the global financial crisis and European debt crisis reduced the significance of both the dollar and euro, while role of some emerging-market currencies rose. As a result, economists believe that it’s reasonable for China to allocate some reserves to financial assets in major Asian economies.
China’s monetary authorities chose KTB due to their attractiveness and high liquidity and in order to differentiate foreign exchange reserves.
Specialists at Societe Generale SA in Tokio claim that China may buy about 4 trillion won of KTB by the end of 2010. Such move’s likely to create strong demand-supply imbalance in the Korean debt securities making the yields slump.

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19/08/10

UBS: euro will rise to $1.328 before declining to $1.15
Analysts at UBS AG believe that the single currency may gain 3.2% climbing to August 9 maximum at $1.328 and then reverse and drop to the 7-year minimum against the greenback at $1.15 in 3 months.
The specialists note that although they bet on EUR/USD decline in the medium term, it’s important to point out that in the shorter term there are much chances of euro’s strengthening. In case quantitative easing remains and market gets confident that the Federal Reserve manages not to let the double dip, demand for riskier assets will rise and dollar may find itself under pressure, supposes UBS.
Yesterday the Fed purchased outright $2.551 billion of Treasuries for the first time since October. Earlier, on August 10 the central bank announced about its decision to invest payments of its holdings of mortgage bonds in debt securities.
In addition, the strategists note that one more positive factor for the European currency is that positive surprises in euro zone countries’ growth leave behind the American ones. Moreover, concerns about easing help to narrow spreads between bonds issued by major and peripheral European nations.

Commerzbank: EUR/USD is testing 1.2787/32 support
European currency failed at 1.2900/20 resistance area and fell to the minimal level at 1.2780.
Technical analysts at Commerzbank note that the pair EUR/USD is testing June-August support line and Jul 21 minimums at 1.2787/32. According to the specialists, only these levels can trigger euro’s advance to 1.3000 zone if the common currency manages to get above Tuesday’s maximum at 1.2918.
If the pair goes down below 1.2732, it will likely drop to 1.2673 (May 21 maximum). The next support level will be found at 1.2642 (55-day MA).

Okasan Securities: euro’s again under pressure
European currency fell for the second consecutive day versus the greenback as concerns about euro area’s economic recovery strengthened again.
German magazine Der Spiegel reported today that Greek austerity measures have a very negative impact on the country’s economy citing the figures that show that unemployment rate in some areas climbed to 70% increasing social tensions.
In addition, Stoxx Europe 600 Index was down for the second day in a row losing 0.3%.
Currency strategists at Commerzbank AG in Frankfurt note that fiscal measures conducted in Europe will be affecting the region’s growth during the coming years. The specialists believe that the single currency will stay in range between $1.27 and $1.30 in case there will be no negative data shocks.
Analysts at Okasan Securities Co. in Tokyo recommend selling euro as there’s no real improvement in euro area’s macroeconomic fundamentals.
Economists at NTT SmartTrade Inc., the unit of Nippon Telegraph & Telephone Corp., underline that the pressure on European currency strengthened as Japanese margin traders placed automatic orders to sell the currency if it declined to a $1.2850 level.

Dollar’s down after capping at 85.95 yen
The greenback began the day advancing versus yen on the speculation that the Bank of Japan will hold an emergency policy meeting. The pair USD/JPY went up from Wednesday’s minimum at 85.20 to cap at 85.95 where US dollar reversed and retreated downwards. American currency is trading currently above today’s opening price in 85.50/60 area.
Japanese currency weakened as the country’s Ministry of Finance reported that Japanese investors bought a net 2.18 trillion yen ($25.6 billion) of foreign debt in the week of August 8-14 that is the highest purchase volume since January 2005.
The Sankei newspaper reported today that the Bank of Japan began analyzing what monetary easing steps may be used to support the country's economy. The most likely variant is that the central bank will either expand the fund supply volume from 20 to 30 trillion yen ($352 billion) or extend the duration of cheap, fixed-rate loans to banks from 3 to 6 months. Never the less, analysts at Barclays note that these measures will be implemented later than the market expected.
The majority of traders don’t believe that Japan’s monetary authorities will conduct direct intervention to lower the rate of national currency unless yen approached 80 level.

Mitsubishi UFJ: positive data for GBP/USD
British currency fell from yesterday’s maximum at 1.5685 and bottomed today at 1.5510. Then pound jumped to session’s maximum at 1.5665 as retail sales added 1.1% in July while the economists were looking forward only to 0.4% increase.
In addition, government’s net borrowing decreased last month to 3.17 billion pounds ($5 billion) from 5.52 billion pounds the previous year.
Strategists at Bank of Tokyo Mitsubishi UFJ Ltd. in London that such positive data will be supporting pound in the near term.
If the pair GBP/USD keep rising, resistance levels will be found at 1.5690/00 (August 16/17/18 maximums), 1.5750 (50% retracement of decline from August 8 to August 18) and 1.5820 (August 11 maximum). If sterling declines, support levels will lie at 1.5500 (August 18 minimum), 1.5470 (July 15 maximum) and 1.5380/90 (161.8% Fibonacci extension of decline from August 16 to August 18).
If cable manages to overcome 1.5700 level, it will gain upward momentum, claim technical analysts. If pound gets down below 1.5497, it may fall to 1.5473/40.

Minezaki: yen’s growth weights on exporters
Japanese vice Finance Minister Naoki Minezaki claimed today that he’s concerned that European and American attempt to depreciate their currencies in order to support national exports. As a result, yen added 6.9% versus the greenback and 4% versus the single currency.
The policymaker thinks that the nations shouldn’t try to benefit at the expense of other states. According to him, the current situation strongly affects Japan’s exporters.
Minezaki said monetary easing won’t help to solve Japan’s deflation as it, in his view, can’t be defeated with more liquidity.

Franc rose on strong trade balance data
Swiss franc strengthened today versus 15 of its 16 major competitors helped by the positive macroeconomic data from Switzerland.
The country’s trade surplus climbed in July to a record level 2.89 billion francs ($2.77 billion) from 1.77 billion francs the previous month strengthening the expectations that the Swiss National Bank (SNB) will lift up its benchmark interest rate.
Analysts at Danske Bank A/S in Copenhagen claim that the recovery in the external demand is important factors to keep Switzerland’s rebound going and for the SNB to move toward a less expansionary policy.
Switzerland’s central bank changed its approach to franc’s appreciation at its meeting on June 17. The SNB noted that it’s not possible to hold the interest rates at the minimal 0.25% level in the medium term because that will lift up inflation. As for deflation risks, they have almost disappeared.

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20/08/10

GBP/JPY may fall to 4-week minimum
Technical analysts at Gaitame.com Research Institute Ltd. claim that British currency may fall to the 4-week minimum versus Japanese yen. Such forecast is based on the fact that pound was trading below its 60-day MA during the last four days.
The specialists note that sterling’s under pressure. According to them, if British pound goes down below the bottom of Bollinger band, the pace of its decline may rise and the target level for GBP/JPY will be at 130.85 set on July 22.
The 20-day moving average was found at 135.17, while the lower Bollinger band occupied 132.14 level.

BofT Mitsubishi UFJ advises to sell EUR/CHF
Analysts at Bank of Tokyo Mitsubishi UFJ Ltd. note recommend investors selling euro versus Swiss franc regarded as a refuge currency expecting that the latter will depreciate to 1.2000. It’ll be necessary to stop the trade if the pair EUR/CHF gets above 1.3800 level.
According to the specialists, euro’s dead-cat bounce is ending and the single currency’s likely to survive another round of losses as euro area’s economic prospects are still weak. Swiss franc added 7.4% versus European currency since the beginning of the summer.
In addition, the bank underlines that Swiss monetary authorities won’t resume their actions to hold franc from excessive appreciation any time soon. As for the greenback and yen that are safe-haven currencies as well, they became less attractive to investors because it’s expected that US and Japanese governments will use additional monetary measures in order to help economic growth.

Bank of Japan is estimating the impact of yen’s appreciation
The Bank of Japan in process of estimating the effect of the yen’s appreciation to a 15-year maximum greenback on Japanese economy. As a result, it’s possible to conclude that it won’t loosen monetary policy in the near term.
It may be possible that Japan’s central bank is looking forward to revised GDP figure that will be released on September 10. The next BOJ meeting is scheduled for September 6-7.
Japanese Finance Minister Yoshihiko Noda claimed today that his ministry is communicating with other G7 nations on currencies amid concern the strong yen will cause further the country's slowing economy. Noda also repeated that he’s attentively watching the dynamics of currency markets. He will meet with Prime Minister Naoto Kan next week to discuss economic and currency issues.
According to economists at Dai-Ichi Life Research Institute in Tokyo, the BOJ emergency meeting may be held if yen becomes too volatile or rises above 80. Japanese currency hit the maximal level of 84.73 yen per US dollar on August 11. Yields on 10-year bond didn’t show weekly advance since July 9.

EUR/USD slumped to 1.2700
The single currency’s plummeting after having failed at the former uptrend support line from June minimums at 1.2830. The pair EUR/USD is currently trading only slightly above 1.2700.
The target of euro’s decline may be situated at 1.2475. Support levels are found at 1.2650 (intra-day level) and 1.2520 (July 13 minimum). If the single currency manages to recover, resistance levels will be at 1.2815/35 (session maximum/intra-day resistance), 1.2900 (August 19 maximum) and 1.2925/35 (August 12/18 maximums).

USD/JPY consolidated between 85.20 and 85.50
The greenback went down from yesterday’s maximum at 85.90 to the weekly minimum at 84.90. The pair USD/JPY found support there and recovered consolidating during today’s Asian and European trade between 85.20 and 85.50.
Technical analysts at ACM - Advanced Currency Markets note that dollar’s advance will be limited by 86.50 and 86.89 in case the Bank of Japan won’t perform to the market. Even the single currency manages to overcome these levels, USD/JPY won’t rise above 86.89 (2 August maximum) and 87.67-88.10 (50-day MA, psychological barrier and 28 July maximum).
If US dollar climbs, resistance levels will be at 85.55/65 (session’s maximum/intra-day resistance), 85.95 (August 19 maximum) and 86.40 (August 13 maximum). If the pair declines, support levels will be at 85.10/20 (August 17/18 minimums).

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23/08/10 & 24/08/10

Aussi falls on nation’s federal election results
The Australian dollar fell against all 16 major counterparts as the nation’s federal election on August 21 failed to deliver a majority government for the first time in 70 years.
Analysts at JPMorgan Chase & Co. said that the aussi is going to stay heavy, markets don’t like uncertainty and it’s also going to add to the negative sentiment on the global outlook which will probably see Aussie struggle anyway.
If the pair will close below 88.50, the next support must be at 87.70, analytics claim.
AUD/USD is now trading at 0.8955. The currency has declined 1.5% in August as opinion polls forecasted a big chance of a minority government.
Australian bond futures fell, with the 10-year contract for September delivery at 95.075 on the Sydney Futures Exchange from 95.095 on Aug. 20. The implied yield on the futures rose two basis points to 4.925 percent.
Analysts at RBC Capital Markets Ltd. in Sydney said that Australia’s dollar “will bear the brunt of the uncertainty”.
China’s demand for coal and iron ore with investments in Australia’s mining industry help to decline unemployment rate in Australia to 5.3%. By the reason of recover in employment RBA move up the benchmark rate 6 times between October 2009 and May 2010 to 4.5% like no one in a Group of 20 member.

Commerzbank: next support to EUR/USD at 1.2523/1.2490
Euro downside recovery from August high at 1.3335 expanded lower. EUR/USD found support at 1.2667 – 55-day moving average.
Commerzbank analysts claim that if the pair smashes below the 55-day MA near 1.2667, next support will be the 1.2523/1.2490 area — mix of the mid-July low, 1.25 level and the June maximum at 1.2490.
In case of bullish movement, resistance will be at 1.2802 and 1.2923 — June-to-August uptrend line boarder and last Wednesday 1.2923 high.
But below here we will remain short-term bearish said in Commerzbank.

UBS: Sell euro against Swiss franc
Analysts at UBS AG advise traders to sell the euro against the Swiss franc when EUR rises because economic “conditions remain bearish”.

EUR/CHF resistance lies at 1.3320, key support level at 1.3074 — the record low it reached on July 1.
The euro has fallen 11% against the franc this year.
Analysts claim that with daily and intraday momentum studies pointing down, 1.3074 is now key support. If cleared it would expose the psychological 1.3000 threshold.
The franc was little changed at 1.3160 per euro.
Swiss National Bank President told Tages-Anzeiger on Aug. 21 the threat of inflation reduces the likelihood it will intervene to weaken the currency.


24/08/10
Forecast Pte: AUD/USD targets 5-week low

Technical analyst at Forecast Pte said the AUD/USD may drop to 5-week low if the pair closes today below strong support at 88.76.
Analyst claim that Aussie is in a “down move” and could fall past 88.76 cents — 38.2% Fibonacci retracement of the AUD/USD rally from a July 1 low to an Aug. 6 high.
Besides that, daily technical indicators such as the moving average convergence/divergence, or MACD, indicate the potential downtrend for the Aussie versus the greenback.
Technical analyst said that the Aussie needs to breach the level of 88.76 cents. For this week, it’ll consolidate and then continue lower to as weak as 86.34 cents, the July 19 low.
Now, Australia’s dollar traded at 88.97 U.S. cents from 89.13 cents in New York yesterday, when it touched 88.33 cents — the lowest level since July 22.
MACD was at 0.0017 today, compared with 0.0051 for the signal line. The drop of the MACD below the signal line suggests the Aussie will weaken.
The MACD is calculated by subtracting the 26-day exponential moving average, or EMA, from the 12-day EMA. A 9-day EMA of the MACD, called the signal line, is plotted on top of the MACD, functioning as a trigger for buy and sell signals.

RBC: GBP/CAD may fall
Royal Bank of Canada said cable may fall against loony if it trip below C$1.6241.
The British pound found resistance at C$1.6328 and C$1.6377. The sell signal for sterling was derive from a trend reversal when the pound fell below C$1.6328.
It may be a short-term selling for a test of initial support at 1.6241. If the GBP/CAD drops below this level, the pair will find support near 1.6179/1.6151.
From the beginning of this year, the British pound has fallen 4.2% against the Canadian currency.
Now it traded at C$1.6290.

Commerzbank: GBP/USD below 200-day MA
Technical analysts at Commerzbank said the cable fall on Asian session to 1.5400 low, breaking below the 200-day MA at 1.5469, although superficial rebounds are not ruled out.
We cannot see pound rebounds until it trades below the 200-day MA. Only we can notice a near term tepid rebounds, said at Commerzbank.
In case of downside movement, while GBP/USD trades below strong 1.5636 — past week maximum — and 1.5714 — October low — resistance, a decline towards the 38.2% Fibonacci at 1.5322 and 55-day MA at 1.5289 remains in the pipeline.

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