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

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23/11/10

23/11/10

JPMorgan: euro may drop to $1.29
Technical analysts at JPMorgan Chase & Co. claim that the single currency may drop below $1.30 for the first time since September after it formed reversal model “outside down day”.
Yesterday euro set intra-day maximums and minimums that surpassed levels from the previous session and closed 0.3% lower pointing at further declines.
The specialists suppose that if the pair EUR/USD breaks down through last week’s minimum at $1.3448, it would fall down to $1.32 zone representing support of the uptrend line from the June 7 minimum at $1.1877, the weakest since March 2006. If European currency fails at this level, then it’ll slump to $1.29 level at which it traded last time on September 14.
According to JPMorgan, the attempts of the market to get higher mean that the bulls are too weak and that the rate risks dropping more.

RBC: euro’s losing its gains versus the greenback
Currency strategists at RBC none that the European currency would probably have to struggle hard in order to keep the gains it made since investors became optimistic on Ireland’s bailout.
In their view, providing the country with a loan won’t solve all its problems. The specialists note that the region’s economic fundamentals aren’t quite encouraging. According to RBC estimates, Portugal will also have to ask for financial help by February 2011 at the latest.
The pair EUR/USD is declining today from the level of $1.3786 reached yesterday, the maximal since November 11.

Mizuho: dollar is strongly overbought against yen
Technical analysts at Mizuho Corporate Bank note that US dollar retested November’s maximum at 83.79 which is also first Fibonacci 61% retracement resistance. The specialists note that the rate is slightly above the top of the daily Ichimoku Cloud, while the moving averages suggest a long position.
Never the less, Mizuho strategists regard the latest advance of the pair USD/JPY as corrective and expect correction and consolidation to last 1-3 weeks. The greenback seems to be strongly overbought, so the pair is likely to cap during the mentioned period and start declining again.
According to the bank, it’s necessary to take small shorts at 83.75 stopping above 84.05. The rate may lower to 83.25 and then to 82.00/81.65.

UniCredit: drivers for US dollar
Currency strategists at UniCredit note that the greenback may advance more on North Korea and Ireland.
Investors increased today demand for US dollar and Swiss franc as safer currencies after as artillery fire between North and South Korea began by the former. The single currency was weakened by the concerns that Irish elections will hamper bailout negotiations.
The pair EUR/USD went down from 1.3633 to the day’s minimum at 1.3525, while EUR/CHF – from 1.3490 to 1.3379.
UniCredit specialists are looking forward to the upwards revision of US GDP forecast from 2.0% to 2.4% later in the day.
However, the bank warns that dollar’s advance may be limited by the FOMC minutes in case the Fed calls raising core inflation its key goal.

Commerzbank: trend for EUR/USD is bearish
Technical analysts at Commerzbank claim that it’s now absolutely clear that the latest advance of the single currency versus the greenback was nothing but a correction. Yesterday euro’s rebound from 1.3445 faltered at the 20-day MA at 1.3794, so that the pair EUR/USD went down below 1.3600.
Even though the chance a retracement into the 1.3865/1.3965 area can’t be excluded, its possibility has significantly reduced.
The general trend for the pair is bearish. The European currency is poised to 1.3365/35 support (38.2% retracement and the August peak) then to 1.3138 (200-day MA).

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24/11/10


Commerzbank: USD/CHF may rise to 1.0480
Technical analysts at Commerzbank note that the pair USD/CHF keeps consolidating below the psychologically important 1.0 level. The recent down moves of the rate were modest enough to suggest that the greenback has all chances to climb this week. The key support for US currency is found at 0.9780.
The specialists regard the current pattern as a potential base. In their view, if USD/CHF closes above 1.0 it will rise to 1.0329 on its way towards 1.0480.

Commerzbank: EUR/USD will consolidate before falling down
The single currency fell sharply versus the greenback from the Monday’s maximum at 1.3785 and slumped today below its initial downside target of 1.3365/35 hitting 1.3284 low so far. Analysts at Commerzbank expect the pair EUR/USD to consolidate before resuming the longer term downtrend.
The specialists believe that the next euro’s downside targets lie at 1.3230 (6-month support line) and 1.3136 (200-day MA). According to Commerzbank, the rate of the European currency won’t be able to get above 1.3525/1.3625. The bears will dominate the market below the channel at 1.3701.

RBS: ECB and euro under pressure
Currency strategists at Royal Bank of Scotland Group Plc claim that the tough determination of the European Central Bank to remove monetary stimulus and reduce liquidity support for commercial banks is intensifying the euro zone’s debt crisis.
According to the specialists, the market will pressure on the ECB to ease its monetary policy that, in its turn, will negatively weight on the European currency.

Merkel is worried about euro zone’s prospects
German Chancellor Angela Merkel called today the prospect of more euro zone’s countries applying for bailout “exceptionally serious” referring to the concerns that the debt crisis may spread to greater economies such as Portugal and Spain. Such words drew critics from other EU officials.
Greek Prime Minister George Papandreou claimed last week that the German position makes the yields for indebted countries such as Ireland or Portugal surge. As a result, their market financing becomes more expensive and the possibility of their default increases.
Investors were selling the single currency on Merkel’s remarks. The pair EUR/USD hit 3-month minimum at 1.3284.
According to the officials at the European Commission, Ireland may need 85 billion euro ($114 billion). Of the total, 35 billion euro would go to banks and 50 billion euro to help finance the government. Analysts at Lloyds TSB Corporate Markets note that investors have completely lost confidence in the efficiency of the nation’s rescue program and its ability to end the European turmoil. As a result, the risk to the euro area’s financial system as a whole keeps surging.
Tomorrow Ireland’s government is expected to announce welfare cuts by about 800 million euro in 2011 as part of its 4-year plan to reduce its budget deficit from 12 to 3% of GDP. The county’s corporate tax rate may remain at 12.5%, while the minimum wage can be diminished by 12%.

Mizuho: interim maximum on USD/JPY
Technical analysts at Mizuho Corporate Bank note that the first signs of interim maximum appeared yesterday on the USD/JPY chart. The greenback reached 7-week at 83.85 yen.
Large doji against Fibonacci resistance and a daily close below the top of the daily Ichimoku Cloud mean that the bulls won’t be able to push the rate in the near term any higher and the pair USD/JPY will likely remain capped by 83.85 level until the end of the week.
Support for the pair will be found at 9-day MA at 82.75 it was on Tuesday.

Rabobank about the situation in Ireland
Analysts at Rabobank claim the Irish bailout won’t make the problems of the euro area vanish. On the contrary, they believe that many issues are going to arise in the next few months. The specialists agree with the opinion that the concerns about Portugal's and Spain's debt woes ruined the recent advance of the single currency.
According to Rabobank, the initiative of Ireland's Green Party to conduct new elections may mean that the country will be an object of concern for a longer period of time. The possibility that the party that participates in the coalition government won’t support Ireland’s austerity plan isn’t high, but if it happens euro may find itself under even more severe pressure. Now political uncertainty increases the volatility of EUR/USD.
The bank also commented on China as investors try to make out when the country’s monetary authorities will tighten monetary policy. The expectation of the rates hike will limit the advance of the currencies closely tied to the pace of the world’s economic growth letting US dollar strengthen against Norwegian krone and Brazilian real.

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25/11/10 & 26/11/10

25/11/10

BNP Paribas: possibility of euro’s strengthening
Technical analysts at BNP Paribas SA believe that the European currency may overcome resistance levels and rebound versus the greenback. In their view, if euro breaks above through $1.338 and $1.342, it may be able to climb to $1.3475 and $1.3535. If the pair EUR/USD goes down below $1.3285 it will likely stop at $1.3235, claim the specialists.
BNP strategists note that short-term upward move of the single currency may mean that its 3-day 5-cent decline is now over.
US dollar rebounded by 2.3% during the past week versus euro, while it was trapped in the narrow ranges versus Swiss franc and Japanese yen gaining only 0.5% and losing 0.5% respectively. The analysts suppose that until US currency climbs against its Swiss and Japanese counterparts as well as until the Dollar Index advances the growth of the greenback versus euro will be limited.

Citigroup: sell euro on the rally to 1.3420/60
Analysts at Citigroup claim that the European currency is trading in a strong downtrend versus the greenback. As a result, they recommend selling euro on any rally to 1.3420/60 zone. It will be necessary to stop the trade if the pair EUR/USD gets above 1.3520. Below this level euro is seen moving to 200-day MA at 1.3135.

Commerzbank: technical levels for EUR/USD
The single currency declined from Monday’s maximum at 1.3785 getting close to the 1.3300 zone. Technical analysts at Commerzbank claim that the initial decline of the pair EUR/USD will be held by 5-month downtrend line at 1.3269 and the 200-day MA at 1.3134.
If euro tries to advance, it will be capped by 1.3520/1.3665 area. The key resistance, according to the specialists, is found at 1.3786.

Morgan Stanley: euro may rise to $1.40 by the year-end
Currency strategists at Morgan Stanley believe that the single currency is able to appreciate versus the greenback and climb by the end of 2010 to the $1.40 area.
In their view, the concerns about spreading of the debt crisis to the peripheral euro nations are already reflected in EUR/USD rate. In addition, they underline that core euro zone economy is still out of danger of contagion. The specialists also suppose that euro may rise versus Swiss franc.


26/11/10

UBS: Swiss franc will advance today versus euro
Analysts at UBS AG expect that Swiss franc will be gaining today versus the single currency even though the Swiss KOF leading indicator is thought to lower from October’s level at 2.17 in to 2.09 in November. The indicator will be released at 10:30 GMT.
The specialists underline that Switzerland’s economy keeps showing better results than the euro area’s one, so the pair EUR/CHF will be trading within the downtrend in the current circumstances.
Strategists at Commerzbank share this opinion and note that the main reason for such dynamics of the rate is the weakness of euro due to the European debt crisis, though so far positive Swiss trade and employment data have their impact as well.

Evolution Securities: euro zone needs euro
Analysts at Evolution Securities Ltd. claim that the European banking system may collapse if the region gives up the single currency. According to them, if the countries return to their national currencies, there will be an immediate wave of devaluations across the former euro area and European banks will become insolvent. Such outcome would also have an extremely negative impact on the multinationals as there are now too many cross-border investments in Europe.
The specialists estimate the losses of French, German and British banks in case of euro’s collapse by 360 billion euro ($479 billion). The devaluation after the national currencies are relaunched is thought to be 30%. As a result, Evolution Securities analysts believe that the region’s economies won’t be able to survive separately anymore and all they can do is to keep integrating and moving to the fiscal union.

UniCredit: euro will find strong support at $1.32
Technical analysts at Commerzbank note that the European currency has come to the strong support area that will be able to hold the initial attack of the bears. This support zone is formed by 61.8% Fibonacci retracement at 1.3269, 5-month uptrend line at 1.3253 and the 200-day MA at 1.3133.
Strategists at UniCredit also believe that the pair EUR/USD will struggle to stay above 1.32. However, the bank still supposes that it’s necessary to sell euro if it gets above 1.34 on a positive vote for Portugal's austerity plan.
Citi specialists say that EUR/USD doesn’t slump due to the respectively good demand, but underline that investors shouldn’t forget about serious downside risks for the European currency.

Barclays Capital: US dollar is likely to advance versus yen
The greenback rose today to the 7-week maximum versus Japanese yen at 83.89 overcoming the major resistance at 83.62. US currency was helped by the short-covering in the dollar and fresh yen selling from Japanese margin traders.
If the pair USD/JPY climbs above 84 yen, the market sentiment will likely change and investors will turn to buying dollars.
Analysts at Barclays Capital note that the possibility of the pair’s growth increases as US yields are rebounding. According to the specialists, if the greenback closes today above the daily Ichimoku Cloud and resistance in the 83.70/84.00 area, it will be poised to rise to 84.75 and to the intervention peak around 86.00.

BofTokyo-Mitsubishi UFJ: US dollar may become strong
Analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. believe that by April the Dollar Index may gain 5% more after it had already risen from the minimum December 8, 2009 at 75.631 hit on November 4 getting yesterday above the 80 level. The index founds itself above the top of the Ichimoku Cloud for the third day in a row forming a “golden cross”: 5-day MA crosses above 21-day and 65-day lines. According to the specialists, if the 5-day line consistently stays above the 90-day MA, and the 65-day and 90-day lines go up, dollar’s downtrend will end and the phase of strong greenback will begin.
The dollar Index is measuring the greenback performance versus euro, yen, pound, Canadian dollar, Norwegian krone and Swiss franc. US currency lost 9.4% versus its main counterparts since reaching maximum in June.
When dollar’s uptrend is confirmed, the index may climb by January to 82.170 level representing 50% Fibonacci retracement of a decline from June to the beginning of November. By March-April American currency may reach 61.8% Fibonacci retracement at 83.713.

Commerzbank: 1.5650 – breakpoint for GBP/USD
Analysts at Commerzbank note that British pound broke down through confluence of supports (2-month uptrend line, 55-day MA and double Fibonacci). The next key level on the downside lies at 1.5650. If sterling fails here it’ll become vulnerable for a decline toward its 200-day MA at 1.5346.

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01/12/10

Credit Suisse: franc won’t gain too much in 2011
Analysts at Credit Suisse believe that the encouraging growth prospects and the absence of inflations will allow the Swiss National Bank to continue keeping its interest rate low. The specialists think that the chances of regulatory action will increase in case economic conditions in the country deteriorate.
As a result, according to Credit Suisse, franc won’t appreciate too much the next year. Swiss currency is already significantly overvalued versus euro and dollar. In a year the pair EUR/CHF will trade at 1.35, while the pair USD/CHF will be seen at 0.9600.
As the interest-rate differentials will likely remain stable during 2011, franc’s rate is going to be determined primarily by the risk sentiment and specific risk premium on euro. In the next few months, the single currency’s expected to trade versus its Swiss counterpart in the 1.30/40 area.

Citigroup: euro under pressure due to the ECB
Analysts at Citigroup warn investors of the coming strong pressure on the single currency and the pair EUR/USD in particular. The main reason for such assumption is the reluctance of the European Central Bank to perform rapid and decisive measures to reassure investors convincing them that the crisis won’t spread from Ireland to the other euro zone countries such as Portugal and Spain.
The specialists note that eventually when the threat of euro area’s collapse will become real the EBC will certainly have to act. Never the less, in the near term Europe’s monetary authorities are very unlikely to extend bond purchasing program or give the region’s banks more liquidity support. According to Citigroup, it may happen that the European officials won’t even try to calm the market verbally. As a result, Citigroup expects euro’s decline to be even bigger than it was thought before.

Financial markets in November
The greenback turned out to be the best investment instrument in November – the Dollar Index added last month 5.2% surpassing stocks, bonds and commodities. As a result, the forecasts of those who thought that US currency will weaken on the Fed’s extension of the quantitative easing proved wrong.
The advance of US dollar may be explained by the rising bond yields and the signs of economic recovery. The expectations that the Fed’s purchases of Treasuries will help to avoid deflation and spur the recovery pushed US government bonds lower, driving the 10-year yield to from 2.6% at the end of October to 2.96% on November 16.
American currency gained the most versus euro – by 7.43%, versus Denmark’s krone – by 7.37% and against Norway’s krone – by 6.17%.
At the same time the stocks all over the world declined as the risk sentiment worsened due to the European debt crisis and high possibility of tightening in China in order to combat inflation. Euro Stoxx 50 Index lost 6.4%, Spanish IBEX 35 slumped by 14% and Shanghai Composite went down by 5.3%.
In addition, according to Bank of America Merrill Lynch’s Global Broad Market Index, bonds including the reinvested interest fell by 1.1%. Thomson Reuters/Jefferies Commodity Index decreased from 25-month maximum reached at 320.38 on November 9 and closed the month at 301.41.

What can stop euro from falling?
Now when Ireland agreed with the EU and the IMF on the 85 billion euro bailout it became clear that no single development will be able to stop euro’s slump as too many euro zone countries face fiscal difficulties and have huge debts.
The markets still keep all their attention on the European crisis even despite the region’s positive economic data. The pair EUR/USD fell by 8% from maximum at $1.4283 reached on November 4.
What happened to Ireland has proved the €440 billion European Financial Stabilization Fund is effective enough to save euro area member countries from defaults in the short term. However, the process is going to be very hard for every country that needs a bailout cause high political risks. In addition, the mandate of the fund will be over in 2013 any long-term mechanism to resolve debt crisis will affect private creditors before and then the taxpayers.
Specialists at Brown Brothers & Harriman underline that even Ireland’s issues aren’t solved yet as investors worry that the Irish parliament won't approve the country's budget on the next week vote.
There’s an opinion that investors won’t begin buying euro until Portugal and Spain will also get access to guaranteed funding on the conditions of IMF/EU. Otherwise, euro risks falling to $1.28.

Barclays Capital: 1.5670 и 1.57 – resistance for GBP/USD
Strategists at Barclays Capital claim that although pound tested on Tuesday the levels below 1.55 trading versus the greenback, sterling bears didn’t get enough strength to lower the rate more. As a result, the specialists think that the pair GBP/USD will be rather stable in the near-term.
However, the attempts of the British currency to get higher will be limited by the resistance between 1.5670 and 1.57 and Barclays Capital supposes the rate may survive a decline to 1.5350/00 before consolidating.

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03/12/10

03/12/10

Barclays Capital: US payrolls will beat the forecasts
The greenback has retreated today versus Japanese yen from 83.89 at the opening of the trade to set the minimum at 83.53.
The key even for the pair USD/JPY today is US non-farm payrolls November data released at 1330 GMT. Analysts at Barclays Capital expect that the data to be much better than the forecasts, so dollar may be able to climb to 84.50.
According to the Dow Jones survey, payrolls will add 144,000, while the unemployment rate will stay at 9.6%. Barclays specialists are looking forward to 170,000 advance in payrolls and the unemployment decline to 9.5%.

Goldman Sachs: the ECB will increase the rate only at the end of 2011
Analysts at Goldman Sachs believe that the European Central Bank may put off increasing its benchmark interest rate from the third to the fourth quarter of the next year.
In their view, even though the euro area’s economy is doing quite well, European monetary authorities aren’t going to endanger it by the monetary tightening taking into account the region’s debt crisis. The most serious risk, according to Goldman, is the question of financing the indebted peripheral European nations.

Mizuho: short positions on USD/JPY
Analysts at Mizuho Corporate Bank note that US dollar’s advance versus Japanese yen has paused and the rate is now found in the middle of 3-month trading range.
The specialists are still bearish on the greenback. In their view, it’s necessary to take shorts expecting the rate of US currency to fall to 83.18 and 82.80. The stops are recommended at 84.45.
Support for the pair lie at the horizontal Cloud top at 83.00. USD/JPY is now struggling with the 9-day MA in the 83.60 area.

Barclays Capital: loonie’s rising versus the greenback
Technical analysts at MIG Bank note that the greenback broke through support at 1.0057 trading versus its Canadian counterpart. The pair USD/CAD is now risking to test support in 0.9978/30 area. If the rate fails to hold here, it’ll fall to 0.9819/0.9710. Such outcome seems inevitable unless US dollar rises above 1.0210.
Strategists at Barclays Capital expect loonie to gain in case US economic data turns out to be positive today as US and Canada’s economies are strongly connected and Canada’s free of worries about the monetary stimulus that tend to affect the greenback. Never the less, the specialists believe that the Bank of Canada will decide at its meeting next week to continue keeping monetary policy loose as the recent increase of inflation was driven by housing costs. As a result, Canadian dollar may find itself under pressure, says Barclays Capital.

BofA Merrill Lynch: euro will fall to $1.25 in 2011
Technical analysts at Bank of America Merrill Lynch believe that the single currency’s slide seen during the last months brought it the through key levels on the Ichimoku Chart. According to them, there are strong chances that euro falls to $1.25 in the first half of 2011.
The pair EUR/USD climbed from the 4-year minimum at $1.1877 on June 7 to the 9-month maximum at $1.4282 on November 4. Then it broke below the bottom of an Ichimoku Cloud at $1.3374, while its shorter-term conversion line crossed down its longer-term baseline. In addition, the rate of the European currency also went below the 50% Fibonacci retracement of the mentioned advance from June to November at $1.3080.
The specialists underline that the momentum is now definitely downward, so the descending trend is going to continue at least during the next several quarters. Bank of America Merrill Lynch expects that the single currency is targeting the $1.2796 (61.8% Fibonacci retracement) and $1.2445 (76.4% retracement).

Euro zone’s growth outlook
The European Central Bank didn’t change yesterday its 2011 economic growth forecast – euro zone’s GDP is expected to gain next year about 1.4%. The estimate for inflation was lifted from 1.7% to 1.8%. As for 2012, the ECB expects European economy to add 1.7%.
John Taylor, the head of the world’s largest currency hedge fund FX Concepts LLC, thinks that the euro area faces recession in 2011 as the bailout packages won’t be able to put an end to the European sovereign debt crisis. The specialist even notes that some weaker countries may have to leave the currency union.

Goldman Sachs: gold price will peak in 2012
Economists at Goldman Sachs believe that gold prices will continue to rise in 2011 due to the low interest rates, the second round of the quantitative easing in the United States and high investors’ demand for gold as a safer asset. In a year gold price will climb to $1,690 an ounce, think the analysts.
Then in 2012, when US economic growth is going to gain pace and the country’s real interest rates will start rising, gold price will reach its maximum $1,750 an ounce and begin easing down. According to Goldman, the average gold price for 2012 is equal to $1,700. The bank raised the growth forecast for American economy to 2.7% in 2011 and 3.6% in 2012.
The specialists note that although they expect gold to gain value the next year it’s necessary to hedge against the declines of the price and suggest using a covered call option and fully finance a put option.

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06/12/10

06/12/10

RBS: Aussie’s decline won’t last long
Strategists at RBS Australia claim that the retreat of the Australian dollar from its maximum versus the greenback at 0.9938 reached on Friday, December 3, won’t last long.
The specialists note that investors are now looking forward to the Reserve Bank of Australia’s rate statement that’s released tomorrow. Market’s currently pricing in 2.0% chance that the central bank will reduce the rate so any signs of tight approach from RBA will make the Aussie gain.


Mizuho: USD/JPY may drop to 81.85
Analysts at Mizuho Corporate Bank note that there was a “bearish engulfing” candle formed last week on the USD/JPY chart. According to them, this is a sign that the greenback has set an interim maximum at 84.39 and will be declining.
The specialists claim that US dollar may find support at the 9-week moving average at 82.31. However, investors have to beware of the market events that can turn out to be unfavorable and make the rate break down.
Mizuho strategists advise to try selling at 82.90/83.05 and stopping above 84.00. The pair’s expected to lower to 81.85.

Bernanke told about possible expansion of QE
Federal Reserve Chairman Ben S. Bernanke said that the pace of US economic growth is very weak. According to the official, 2.5% growth is needed only to keep unemployment stable.
Last month the unemployment rate rose from 9.6% in October to the maximum since April at 9.8%, while the number of new jobs was just 39,000 a month. Bernanke warned that if everything remains in the current state, a more normal unemployment rate of 5-6% will be reached only in 4-5 years.
As a result, it’s quite possible that the Fed will increase bond purchases from $600 billion as it was announced in November, claimed Bernanke in his interview to CBS. The decision will be taking according to the efficiency of purchase program and the outlook for economy and inflation.
There’s a political disaccord in the United States on the problem – Republican lawmakers are against quantitative easing as they believe it will stimulate inflation and won’t help to cut unemployment. Moreover, American quantitative easing has found a lot of critics in the world – from such countries as China and Germany and from emerging nations.
Specialists at Westpac Banking Corp. note that as Bernanke was defending his decisions to a mass American audience on television, weak dollar isn’t the objective of US monetary authorities, but a side effect of quantitative easing necessary to support the country’s economy.

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07/12/10

Forecast Pte: EUR/USD will fall if it stays below $1.3471
Technical analysts at Forecast Pte claim that the single currency may lose its recent gains versus the greenback if it fails to overcome resistance at $1.3471. The specialists note that this level represents 38.2% Fibonacci retracement of euro’s decline from November 4 maximum at $1.4282 to the November 30 minimum at $1.2969.
As the pair EUR/USD has remained below this resistance level in the past two days, the upside seems still limited. Forecast Pte strategists note that the single currency hasn’t even retraced the 38.2% level of the recent down move regarding euro’s inability to strengthen as a bearish sign. In their view, euro may extend its November fall.
So, if the European currency keeps trading below $1.3471, it may go down to test the $1.3000 level and, more particularly, November 30 minimum at $1.2969 and the December 1 minimum at $1.2971 to August-September minimums at $1.2588 and $1.2644 respectively.

Societe Generale: EUR/USD may drop to $1.2585
Technical analysts at Societe Generale SA believe that the European currency’s likely to drop to last week’s minimum at $1.2970 against US dollar as it didn’t manage to break above a key resistance area of $1.3445/1.3450. In case euro fails at $1.2920, it will fall to the $1.2585/90 zone. The last time the pair EUR/USD was trading so low was on August 24 when the rate hit the 1.2587 mark.

Deutsche Bank: oil price forecast’s raised
Analysts at Deutsche Bank AG increased their 2011 oil price forecast from $80 to $87.50 a barrel. In their view, the flattening in the crude oil forward means that oil price rallies are becoming based on more solid foundations.

Mizuho: USD/JPY will trade in the 82.00/83.00 area
The greenback fell retracing 50% of its November growth trading versus Japanese yen. The pair USD/JPY hit 3-week minimum at 82.35 at the Asian session. Technical analysts at Mizuho Corporate Bank believe that US dollar will be fluctuating between 82.00 and the top of the daily Ichimoku Cloud at 83.00 during the next sessions.
The specialists note that support levels for USD/JPY are found at 82.52, 82.31 and 82.00, while resistance levels lie at 82.80, 82.99/07 and 83.45.

MIG Bank: 0.9930/0.9978 – support for USD/CAD
The pair USD/CAD lost about 30 pips today as the greenback got under pressure due to the improved risk sentiment. Investors’ attention seems to be currently focused on the Bank of Canada’s interest rate decision that will be announced at 3:00 pm GMT.
Technical analysts at MIG Bank note that US dollar broke through the initial support at 1.0057 last week and formed a potentially bearish “outside week pattern” confirming an important peak at 1.0286. If US currency breaks down through the next support in 0.9930/0.9978 zone, it may lower to 0.9710/0.9819 area extending the long-term downtrend.

In order to rebound climbing to 1.0373 and 1.0673/1.0853 USD/CAD has to overcome resistance at 1.0145/1.0286.

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09/12/10 & 10/12/12

09/12/10

BNP Paribas: Aussie’s growth will be limited
Australian dollar surged versus its US counterpart on the encouraging labor market data. The pair AUD/USD went up from 0.9790 before jobs report rising above 0.9860. The country’s unemployment fell from October’s level of 5.4% to 5.2% in November and the payrolls increased during the past month by 54,600 while the analysts were looking forward only to 19,100 advance.
Never the less, analysts at BNP Paribas note that Aussie’s gains may be still rather limited due to several reasons. The main negative factor for Australia’s currency will be the withdrawal of liquidity from China that’s trying to fight rising inflation, whether it's this weekend or next weekend. The specialists underline that any change of China’s monetary policy will affect AUD/USD as China is Australia's largest trading partner. According to BNP Paribas, the pair will face strong resistance at 1.0003.

UBS: SNB won’t raise rates
Currency strategists at UBS AG expect that the Swiss National Bank (SNB) will leave its benchmark interest rate at the current low 0.25% level on its December 16 meeting.
According to UBS, the SNB won’t be able to ignore the concerns about the economic and fiscal state of some euro zone countries that makes investors increase demand for franc as a refuge currency. The specialists note that Switzerland’s inflation rate is close to its historic minimums while the national currency keeps appreciating both versus euro and on a trade-weighted basis.
As a result, UBS believes that the time for monetary tightening hasn’t come yet and that rates won’t be lifted until June 2011.

Mizuho: euro will rise to $1.3400/50
Technical analysts at Mizuho Corporate Bank expect the European currency to gain today versus the greenback. The specialists claim that a small “doji” candle formed yesterday at the 9-day MA at 1.3211 will make the pair EUR/USD return upwards to bottom of the Ichimoku Cloud in the 1.3400/50 area.
According to Mizuho, it’s necessary to buy euro at 1.3300 stopping below 1.3180.

UBS: exchange rate volatility will rise in 2011
Analysts at UBS AG believe that foreign-exchange rates will behave the next year in a very volatile manner. In their view, this will happen as the pace of the economic growth in the emerging markets and in the developed ones diverges, while the central banks use monetary stimulus measures to spur recoveries and the euro area keeps struggling to fight serious debt crisis. There is also high risk of policy-maker error in relation to interest rates, quantitative easing and fiscal tightening, notes UBS.
The specialists expect that annual exchange-rate price swings on some major currencies may double. In particular, the single currency’s trading range may widen from $1.1877-$1.4579 this year to $1.1-$1.5 in 2011. The greenback’s rate may travel from 70 to 100 yen, while in 2010 it traded between 80.22 and 94.99 yen.
As a result, UBS thinks that companies need to increase hedges against greater exchange rates fluctuation.

Deutsche Bank: necessary EBC steps counter the debt crisis
Analysts at Deutsche Bank AG believe that the European Central Bank has to join efforts with the euro zone’s commercial banks in order to combat the region’s debt crisis.
According to them, the ECB could encourage lenders to buy bonds of indebted nations – Spain, Italy, Portugal and Ireland. This may be achieved if the central bank limits collateral for 1-year central bank loans against a pledge of investment-grade sovereign papers rated less than AAA. As a result, banks won’t need to give more collateral in case the value of the risky bonds drops, so the lenders will become more eager to hold these debt securities.
The specialists note that the yields on the periphery debt seem to be quite attractive for investors. All that’s necessary is to grant the marker players more freedom.
Deutsche Bank’s offer would reduce pressure on the ECB that has purchased since May the bonds of suffering European economies by 69 billion euro. In addition, governments will be able to cut their budget deficits, while the plan won’t let them relax too much as the collateral would re-enter the market after a year.
The strategists note that the plan will be really effective if European governments, in their turn, will conduct long-term measures such as strengthening the rules for fiscal discipline in the euro-area and the ECB indicates it will raise in 2011 its benchmark interest rate from the record minimum of 1% if the euro area’s economy manages to hold such move.

ING Bank: Bank of England won’t raise rates
Analysts at ING Bank claim that although the recent British macroeconomic data turned out to be rather positive, the possibility that the Bank of England will raise interest rates in 2011 seems to be thin as the negative risks for the country’s economy haven’t been eliminated yet. Never the less, as the prospects of the second round of the quantitative easing are fading away, pound will manage to gain some support.
The specialists believe that BOE Monetary policy committee (MPC) will split into 3 groups with Sentance and Posen loyal to their opposing positions (first calling for the interest rate hike and the second – for the QE), while the most policymakers keep seeing the risks of both reducing growth and rising inflation. The BOE MPC December rate decision will be released at 12:00 GMT.

Barclays Capital: pound may rise to $1.5910
Strategists at Barclays Capital note that pound’s advance versus the greenback from November minimum at 1.5484 is continuing and that sterling may strengthen to the top of the daily Ichimoku Cloud at 1.5910.
If the British currency closes the day above this level, it will be possible to conclude, according to Barclays, that the current move is more than just a bounce within the downtrend and pond may climb to 1.6125-85.
Yesterday's spike low at 1.5665 is currently acting as support for the rate, claim the specialists.


10/12/10

UBS: USD/JPY trade volume restored
Analysts at UBS AG claim that Japanese monetary authorities will have to confront the “full force” of the market if they decide to conduct another currency intervention to stop yen’s appreciation versus the greenback.
According to the specialists, after Japan intervened in the foreign-exchange market on September 15 trading volumes of the pair USD/JPY have significantly declined as hedge funds and other investors became very cautious and left the market. Now, as 10-year Treasury yields began rising in November and reached a 6-month high this week 2-way flows in dollar-yen returned to the pre-intervention level.
UBS believes that if US yields fall back, even temporarily, and Japan is forced to intervene again to prevent dollar from falling, the country’s Ministry of Finance will have to act against the full force of the bearish market.

Mizuho: USD/JPY is declining to 83.40
Technical analysts at Mizuho Corporate Bank note that US dollar is fluctuating under the recent maximums at 84.30 and 84.39 trading versus Japanese yen. In their view, the greenback’s likely to hold today below these levels.
If the pair USD/JPY closes the day under its 9-day MA at 83.37, it will test on the downside the top of the daily Ichimoku Cloud and then decline to the 26-day MA at 82.48 forming a potential small “double top” in the 84.31/84.41 area.
According to Mizuho, it’s necessary to sell at 83.65 adding to 84.00 and stop above 84.50. Yen may fall to 83.40/83.00 and possibly to 82.35.

UBS: bearish view on EUR/CHF
Technical analysts at UBS AG keep betting on euro’s decline versus the Swiss franc. According to them, the pair EUR/CHF may find support at 1.2933, while its growth will be limited by the resistance at 1.3229.
If the single currency breaks below the mentioned support, it will be poised to drop to 1.2766. The pair EUR/CHF is currently trading in the 1.2990 area.

Commerzbank: pound won’t rise above $1.5823/90
Technical analysts at Commerzbank expect that pound’s advance versus US dollar will be capped by the resistance in the 1.5823/90 area representing the resistance line and the 38.2% Fibonacci retracement of November’s decline. The specialists note that if the pair GBP/USD fails at its current trading levels it will be pulled back down to 1.5650 or even lower.
If sterling loses its strength and goes down, it will likely close below the double Fibonacci support at 1.5510/05 (38.2% retracement of growth from May to November) to the 1.5296/1.5363 zone of September minimum and 200-day MA.

Rabobank: buy Aussie and loonie on the dips
Currency strategists at Rabobank claim that any decline in commodity currencies due to the potential increase in China’s interest rates during the next few days should be regarded as an opportunity to buy them.
The specialists draw investors’ attention to the fact that Chinese monetary authorities have undertaken a lot of monetary easing at the end of 2008, so the tightening measures that they are to conduct now will be considered by the market as a kind of policy normalization. One more factor in favor of commodity currencies is connected, as a matter of fact, with high commodity prices.
As a result, the bank notes that any retreats of Australian and Canadian dollars will be likely reversed.

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13/12/10

Commonwealth: Aussie may fall to $0.97
Currency strategists at Commonwealth Bank of Australia note that Australian dollar is trading versus its US counterpart range-bound between 0.9810 and 0.9896. The specialists note, however, that by the end of the week the pair AUD/USD may get under pressure.
According to the bank, there aren’t many investors willing to take risk ahead of the 2-day Fed meeting starting Tuesday. The analysts believe that US monetary authorities will try to look more optimistic after the beige book and try to understate weak payrolls number. As a result, American yields may get a little higher and push up USD against all crosses.
Commonwealth expects Aussie to approach 0.9700 by the end of the week.

Commerzbank: euro will stay under pressure this week
Analysts at Commerzbank believe that the single currency will remain under pressure ahead of the EU summit schedule on Thursday. In their view, investors will be looking forward to the details of the permanent crisis management mechanisms to replace the transitional EFSF and EFSM programs.
European Financial Stability Facility or EFSF has borrowing capacity of 690 billion euro.
At least the German Finance Minister is expecting a decision on the form of the mechanism, which would remove a lot of the uncertainty in the market.

UBS: EUR/CHF ahead of SNB meeting
Currency strategists at UBS AG claim that although the fundamentals point at the potential decline of the single currency versus Swiss franc, the market players won’t want to have short positions by the Swiss National Bank (SNB) meeting that will take place on Thursday.
The specialists note that Switzerland’s economy is showing very encouraging results, the SNB could tighten its monetary policy. Never the less, headline and core CPI is near zero, so the rate hike currently seems very unlikely.

Mizuho advises to buy pound versus US dollar
Technical analysts at Mizuho Corporate Bank note that British pound is clinging to the bottom of the daily Ichimoku Cloud. The specialists also point that the 9-day MA is limiting the recent minimums, while the Chinkou Span is getting a small lift from November Cloud.
According to Mizuho, if the pair GBP/USD closes the day above the 26-day MA in the 1.5850 area, momentum will become bullish.
The bank recommends buying pounds on the decline to 1.5700 and stopping below 1.5650. Sterling’s expected to advance to 1.5975/1.6000.

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14/12/10

14/12/10

BoA-Merrill Lynch: yuan’s undervalued only by 3-4%
Economists at Bank of America-Merrill Lynch claim that Chinese yuan seems to be rather close to its fair value and is undervalued only by 3-4%. The specialists note that China’s currency appreciated in real terms since 2005, while the country’s current account surplus has significantly declined.
Merrill Lynch expects that in 2011 Asian currencies will keep advancing, but not very strongly as most of them are now fairly valued. Taking into account increasing inflationary pressure and monetary tightening, the bank advises to decrease investments in Chinese equities and not invest in Hong Kong.

DBS Bank: China’s in favor of euro’s strengthening
Strategists at DBS Bank expect that euro and the pair USD/CNY will strengthen. In their view, this will happen as China’s diversifying its foreign exchange reserves from the greenbacks in favor of the single currency.
The specialists note that Chinese authorities regard US economic and fiscal problems more serious than the European ones. China approves of euro area’s decision to aim at the long-term stability of euro, even though the austerity measures will certainly harm the region’s growth in the short term.
Stronger euro will make yuan rise helping China to fight rising inflation. In addition, DBS believes that the market prefers China to raise the reserve requirement ratio instead of lifting up the interest rates as it reassures investors that China’s economic growth pace is high enough.

Mizuho: euro will rise above $1.3472
Technical analysts at Mizuho Corporate Bank note that the single currency’s going up today versus the greenback even despite the gloomy comment from the British ex-Prime Minister Gordon Brown who said that a failure of the Euro would be an economic and political disaster.
The pair EUR/USD bounced from the 9-day MA as the Chinkou Span was driven by November’s sharply rising daily Ichimoku Cloud. Today euro will try to overcome the 26-day MA at the 1.3472 level representing the bottom of the Cloud and 38% Fibonacci retracement resistance. In addition, more gains of the European currency will occur in case of more short coverings, believe the specialists.
According to Mizuho, it’s necessary to buy at 1.3400 adding to 1.3300 and stopping below 1.3150. The pair’s expected to rise to 1.3625 and then to 1.3800.

Mizuho: USD/JPY may decline
Technical analysts at Mizuho Corporate Bank note that the pair USD/JPY looks instable as it’s trading in the range between the recent maximum at 84.41 and the top of the daily Ichimoku Cloud found slightly above 83.00.
The specialists expect that if the greenback closes the day below its 9-day MA at 83.36, momentum will become downward and the rate will slip to 83.15 and then to 82.35.
Mizuho recommends selling US currency on the growth to 83.75 stopping above 84.50.

Analysts’ comments ahead of FOMC Statement
The FOMC Statement and the Federal Funds Rate will be announced today at 8:15pm GMT. Below there are some analysts’ comments on the matter.
Analysts at Barclays Bank Plc note that the Federal Reserve may underline today that it’s going to continue the current quantitative easing justifying such policy by high unemployment rate and sluggish inflation. As a result, US mid- and long- term yields as well as dollar, especially the pair USD/JPY, may find themselves under pressure.
Currency strategists at Nomura believe that more time has to pass before investors will make out whether the US economic recovery is sustainable enough to drive up yields. As soon as American economy begins improving, the county’s investors will become more eager to take risks and go overseas looking for higher yields. As a result, the demand for the greenback will diminish and the currency will remain weak.
Specialists at UniCredit say that the single currency may keep trying to climb to the key resistance at 1.35. However, today’s data and event can create a threat for euro. Investors shouldn’t forget that the euro zone’s problems are far from being solved, claims UniCredit.

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