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18/06/10


18/06/10
Ueda Harlow: pound may rise to 137 yen

Analysts at Ueda Harlow Ltd. claim that British pound may rise to one-month maximum at 137 yen representing the bottom line of the ichimoku cloud if it overcomes the key 136.40 yen level.
The specialists note that there are growth signals on the ichimoku chart such as short-term conversion line at 133.20 yen crossing a longer-term baseline at 131.60.
Sterling can possibly strengthen getting above the neckline to 139 yen level, but it may have difficulties as the economic fundamentals will create downward pressure on the pair in the long-term period.

ANZ National Bank: AUD and NZD gain
Australian and New Zealand’s currencies approached today maximal levels versus the greenback as investor’s sentiment about the situation in Europe improved.
Economists at ANZ National Bank Ltd. in Wellington note that the strong positive driver was provided by the decision of European authorities to release the information about banking system’s conditions announcing banks stress tests’ results.
Strategists at National Australia Bank Ltd. in Sydney claim that Australian dollar needs increases in copper prices and US stocks to rise above key resistance at 87.25 cents.
This week Aussie gained 2.1% against US dollar, while kiwi managed to add 2%.

Commerzbank: euro may reverse at1.2445/1.2570 area
European currency went up from June 7 minimum rising above 1.2410.
Technical analysts at Commerzbank believe that euro is likely to reverse at 1.2445/1.2570 zone and restart moving down. The specialists place intraday support at 1.2210 and 1.2145.
If the single currency strengthens, the pair EUR/USD may climb above 1.2900 retracing to the 1.2951.

Standard Bank: gold may rise to $1,300 an ounce
Analysts at Standard Bank Plc expect gold to rise in 2010 to the record maximum at $1,300 an ounce.
According to the specialists, investor’s demand for euro and dollar will decline as developed economies may show worse growth pace than the emerging ones such as China. Standard Bank economists believe that the United States will never regain its dominance in the world economy, while billionaire investor George Soros foresees severe recession in Europe.
As a result, due to the absence of immediate replacement for the greenback and the single currency market players are likely to turn to gold. Concerns over the value of American and European currencies may induce Russian, Chinese and Indian central banks to add gold to their reserves.

BNP Paribas: euro may show the maximal weekly growth in 2010
The single currency is likely to show the maximal weekly growth versus the greenback in a year. It happened as the concerns about low economic growth of the euro region declined due to the stock markets’ positive dynamics.
Analysts at Standard Bank Plc in London think that investors will try to preserve the gains of the single currency. Currency strategists at BNP Paribas in London note that Spanish bond auction turned out to be more successful than it was expected. As a result, risk appetite went up and the pair EUR/USD managed to overcome resistance at $1.2350 level.

Credit Agricole: yen's gaining versus US dollar
Japanese yen will show the second consecutive weekly advance versus the greenback.
Yen is gaining as Japanese Prime Minister Naoto Kan promised to reduce country’s public debt that is the second biggest in the world. The Prime Minister representing Democratic Party of Japan also increased the general optimism claiming that he will consider opposition party’s idea of consumption tax increase. In order to end stagnation period country’s 40.7% corporate tax will be diminished and the government will promote environment and healthcare industries.
Analysts at Credit Agricole Corporate and Investment Bank in Tokyo believe that the main objective of Japanese structural reforms will be in securing funding sources and the national currency is likely to benefit in this situation.

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21

UBS: yuan finally rose
The People’s Bank of China finally ended 2-year period of yuan’s peg to the greenback. As a result, the currency gained 0.42% rising to 6.7976 per dollar as of 5:30 p.m. in Hong Kong. The yuan reference rate was kept at 6.8275 to prevent short-term speculative capital moves and excessive fluctuations. Chinese currency is now let to diverge by 0.5% from the official rate making the rate more flexible.
According to Chinese central bank, yuan’s growth will help to restrain inflation and turn investment from export-manufacturing to service industries. In addition, such actions of the bank will decrease critical attitude of the USA and G-20 that accused China of using undervalued currency to stimulate exports.
Strategists at UBS AG expect yuan to add nearly 4% this year and 5% next year. The 14 analysts surveyed yesterday by Bloomberg claim that yuan is likely to advance by 1.5% against the dollar to 6.7 by the end of 2010.
Philippine central bank Governor Amando Tetangco commented that the change in monetary policy reflects the recovery of China’s economy that may have a very positive impact on the entire Asian region attracting more foreign capital.

Citigroup: euro zone will fight the crisis
Economists at Citigroup Inc. claim that the European Union’s bailout program is the evidence that European leaders are really trying to stop the debt crisis and restore confidence in euro. The specialists are quite optimistic and believe that in the end the euro zone will be able to solve its financial problems.
According to Citigroup, Europe’s governments made a right step deciding to release the information of banks’ stress tests citing the fact that similar measures were very helpful in the United States in 2008.

Citigroup: euro will lose 9% in case of Greece’s default
Economists at Citigroup Inc. expect that the single currency will lose approximately 9% versus the greenback in case of the Greece’s default. Such assumption is made on the basis of quanto credit swaps analysis with the help of which it’s possible to bet on currency volatility and sovereign debt risk.
According to the specialists, investors may use quanto swaps to bet that euro will fall. They can benefit from buying insurance on euro zone’s government debt in dollars and selling protection on the same bonds in the European currency.
The European authorities are regarding the possibility of forbidding default swaps as they are thought to strengthen the fiscal crisis. Citigroup analysts project that if France doesn’t manage to pay back investors euro may contract by 28|%, if Spain – by 20%, Italy – by 17% and if Germany – by 25 %.

Morgan Stanley: yuan's growth will cause decline in US Treasuries
Economists at Morgan Stanley believe that China will reduce pace of purchasing US dollars for its international reserves. This is likely to happen as the termination of yuan’s peg to the greenback mean that the positive sentiment about the world’s economic recovery is strengthening.
The specialists claim that while the revaluation’s short-term bearish impact on Treasuries may be restrained by the positive influence it has on risky assets, in the long-term the amount of dollars possessed by China will go down and so the country would use less dollars to transfer in American Treasuries.

Robert Mundell: more flexible yuan will harm world's economy
Nobel Prize winner Robert Mundell is sure that China’s decision to make its exchange-rate more flexible ending the period of protection from the crisis will harm both its and the world’s economy.
The economist believes that yuan’s connection to the greenback was acting at the main indicator of financial stability in the region. Mundell claims that exporting nations of Asia used to orient their monetary policy on this currency pair. Chinese and American currencies belong to two of their biggest customers. He underlined that China could deal with the balance-of-payments surplus and foreign-exchange reserves’ advance even in terms of a fixed exchange rate.

Bank of Montreal: CAD rose to 5-week high versus USD
Canadian currency rose to the 5-week maximum versus the greenback. The demand for loonie as the asset linked to growth was helped by the confidence in the world’s economic rebound that increased after China allowed yuan to appreciate. In addition Canada finds itself in the centre of attention due to the G-20 and the G-8 summits.
Traders at Bank of Montreal in Toronto claim that China’s actions resulted in the revival of risk appetite. The commodities gained with crude oil, Canada’s largest export, rising to 6-week maximum at $78.87 a barrel. Gold for immediate delivery set today new absolute maximum at $1,265.30 an ounce and copper added 1.8% to $6,548.5 a metric ton.

HSBC: yuan can decline to 6.80 per dollar by the end of 2010
Analysts at HSBC Holdings Plc claim that yuan’s likely to be rather volatile and we’ll observe periods not only of yuan’s appreciation but also of Chinese currency’s depreciation versus the greenback.
The specialists forecast that yuan can decline to 6.80 per dollar by the end of 2010. HSBC believes that the shift in China’s monetary policy was made due to the political reasons in order to ease the tension with the United States.
HSBC economists are looking forward to yuan’s peg to several currencies that may happen earlier than they originally expected.

On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets
 
21/06/10

UBS: yuan finally rose
The People’s Bank of China finally ended 2-year period of yuan’s peg to the greenback. As a result, the currency gained 0.42% rising to 6.7976 per dollar as of 5:30 p.m. in Hong Kong. The yuan reference rate was kept at 6.8275 to prevent short-term speculative capital moves and excessive fluctuations. Chinese currency is now let to diverge by 0.5% from the official rate making the rate more flexible.
According to Chinese central bank, yuan’s growth will help to restrain inflation and turn investment from export-manufacturing to service industries. In addition, such actions of the bank will decrease critical attitude of the USA and G-20 that accused China of using undervalued currency to stimulate exports.
Strategists at UBS AG expect yuan to add nearly 4% this year and 5% next year. The 14 analysts surveyed yesterday by Bloomberg claim that yuan is likely to advance by 1.5% against the dollar to 6.7 by the end of 2010.
Philippine central bank Governor Amando Tetangco commented that the change in monetary policy reflects the recovery of China’s economy that may have a very positive impact on the entire Asian region attracting more foreign capital.

Citigroup: euro zone will fight the crisis
Economists at Citigroup Inc. claim that the European Union’s bailout program is the evidence that European leaders are really trying to stop the debt crisis and restore confidence in euro. The specialists are quite optimistic and believe that in the end the euro zone will be able to solve its financial problems.
According to Citigroup, Europe’s governments made a right step deciding to release the information of banks’ stress tests citing the fact that similar measures were very helpful in the United States in 2008.

Citigroup: euro will lose 9% in case of Greece’s default
Economists at Citigroup Inc. expect that the single currency will lose approximately 9% versus the greenback in case of the Greece’s default. Such assumption is made on the basis of quanto credit swaps analysis with the help of which it’s possible to bet on currency volatility and sovereign debt risk.
According to the specialists, investors may use quanto swaps to bet that euro will fall. They can benefit from buying insurance on euro zone’s government debt in dollars and selling protection on the same bonds in the European currency.
The European authorities are regarding the possibility of forbidding default swaps as they are thought to strengthen the fiscal crisis. Citigroup analysts project that if France doesn’t manage to pay back investors euro may contract by 28|%, if Spain – by 20%, Italy – by 17% and if Germany – by 25 %.

Morgan Stanley: yuan's growth will cause decline in US Treasuries
Economists at Morgan Stanley believe that China will reduce pace of purchasing US dollars for its international reserves. This is likely to happen as the termination of yuan’s peg to the greenback mean that the positive sentiment about the world’s economic recovery is strengthening.
The specialists claim that while the revaluation’s short-term bearish impact on Treasuries may be restrained by the positive influence it has on risky assets, in the long-term the amount of dollars possessed by China will go down and so the country would use less dollars to transfer in American Treasuries.

Robert Mundell: more flexible yuan will harm world's economy
Nobel Prize winner Robert Mundell is sure that China’s decision to make its exchange-rate more flexible ending the period of protection from the crisis will harm both its and the world’s economy.
The economist believes that yuan’s connection to the greenback was acting at the main indicator of financial stability in the region. Mundell claims that exporting nations of Asia used to orient their monetary policy on this currency pair. Chinese and American currencies belong to two of their biggest customers. He underlined that China could deal with the balance-of-payments surplus and foreign-exchange reserves’ advance even in terms of a fixed exchange rate.

Bank of Montreal: CAD rose to 5-week high versus USD
Canadian currency rose to the 5-week maximum versus the greenback. The demand for loonie as the asset linked to growth was helped by the confidence in the world’s economic rebound that increased after China allowed yuan to appreciate. In addition Canada finds itself in the centre of attention due to the G-20 and the G-8 summits.
Traders at Bank of Montreal in Toronto claim that China’s actions resulted in the revival of risk appetite. The commodities gained with crude oil, Canada’s largest export, rising to 6-week maximum at $78.87 a barrel. Gold for immediate delivery set today new absolute maximum at $1,265.30 an ounce and copper added 1.8% to $6,548.5 a metric ton.

HSBC: yuan can decline to 6.80 per dollar by the end of 2010
Analysts at HSBC Holdings Plc claim that yuan’s likely to be rather volatile and we’ll observe periods not only of yuan’s appreciation but also of Chinese currency’s depreciation versus the greenback.
The specialists forecast that yuan can decline to 6.80 per dollar by the end of 2010. HSBC believes that the shift in China’s monetary policy was made due to the political reasons in order to ease the tension with the United States.
HSBC economists are looking forward to yuan’s peg to several currencies that may happen earlier than they originally expected.

On-line analytics from FBS always is available on: http://www.fbs.com/analytics/news_markets
 
22/06/10


Lithuania plans to enter euro zone in 2014

Lithuania that survived European Union’s second-deepest recession in 2009 set the target of euro adoption at 2014. The country aims to reduce deficit to 3% of GDP by 2012. To attain this goal it would be necessary to reduce spendings by 5% of GDP. During the last year and first half of this year Lithuanian government already conducted severe austerity measures cutting the budget by 12% of GDP.
The country’s Prime Minister Andrius Kubilius referred to entering the euro area as Lithuania’s strategic objective. Lithuanian authorities are sure that the monetary union will be able to get out of the debt crisis. Kubilius underlined the need of more coordinated fiscal and economic policies in Europe in order to prevent from having such problems in future.

Commerzbank: euro will decline to 1.2204/1.2145
The single currency rose from 1.1875 at the beginning of June to yesterday’s maximum at 1.2465.
Technical analysts at Commerzbank believe that the pair EUR/USD has reached the target of its upward correction at 1.2445/1.2570 area representing 2009 minimum and 38.2% retracement of April’s decline to 1.2570. As a result, the specialists expect euro to go down to 1.2204/1.2145 where 20-day MA and May 19 minimum are found.
After lowering to 1.2204/1.2145 European currency may climb to 1.2920/6 zone.

Mizuho: AUD and NZD down due to economic decline prospects
Australian and New Zealand’s currencies fell from monthly maximum affected by the negative sentiment that European banks’ funding problems will harm the rebound of world’s economy. In addition, Aussie and kiwi got under pressure due to the decline of Chinese yuan caused by the speculation of the country’s central bank intervention to the forex market in order not to let the national currency appreciate too much.
European Central Bank President Jean-Claude Trichet said nations which broke European Union’s fiscal rules may face tougher punishments and mentioned such measures as more strict fiscal reporting requirements or a limitation or even suspension of voting rights.
Strategists at Mizuho Trust & Banking Co. in Tokyo claim that fiscal consolidation is likely to provoke contraction of world’s economy that would diminish demand for commodity currencies such as Australian and New Zealand’s dollars.

Ria Capital Market: pound declined on Osborn’s announcements
British currency went down reacting on the speculation that the government’s intention to balance the budget by the end of its first term will have a negative impact on the economic growth.
The Chancellor of the Exchequer George Osborne announced that the government will cut the deficit to 20 billion pounds by 2015-2016 reducing spending by 30 billion pounds every year.
The 10-year gilt yield hit 8-month minimum at 3.41% as spending reduction performed by Osborne made British debt more attractive for investors and diminished the possibility of UK losing its AAA rating. Strategists at Ria Capital Market Ltd. regard such policy as the evidence government’s efforts to improve the fiscal situation.

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23/06/10

Societe Generale: buy yuan options
Analysts at Societe Generale SA recommend investors to use options in order to benefit from the volatility of Chinese currency in the next month caused by the euro zone’s debt crisis.
According to the specialists, the possibilities of yuan’s decline and advance are equal, so it’s necessary to buy straddles that unite call and put options. On Monday yuan had the biggest gain since 2005, while yesterday it survived the most significant fall in 18 months.
Societe Generale strategists claim that the pair USD/CHY will trade the same way as the other dollar pairs if the concerns about the severe European situation rise again.

Deutsche Bank: euro will fall to 1.10 in a year
Analysts at Deutsche Bank FX research team expect the European currency to fall to 1.2000 during the next 3 months and to 1.1000 area in a year.
Euro has already hit the 4-year minimum below 1.19 and the specialists claim that we observe the long-term downtrend. Further depreciation seems to be quite likely as the cheap levels aren’t attained yet. Deutsche Bank says that euro’s purchasing power parity versus the greenback is equal to 1.15-1.20 that is close to the current trading area. When the single currency was launched its rate began from 1.18 zone.
In addition, interest rate differentials between the United States and the European Union are thought to go up in the middle term as the FED may raise rates faster than the ECB. As a result, this will have a negative impact on euro as well.

BNP Paribas: euro will decline in the middle term
The single currency dropped to one-week minimum versus the greenback and yen. It happened due to the groeth of investors’ concerns about financial condition of the European banks. French bank Credit Agricole SA claimed that will write down the value of its stake in Greek Emporiki Bank by 400 million euro ($490 million). On June 21 Standard & Poor’s Ratings Services outlined that Spanish banks will have many difficulties in 2010 and 2011 due to the rise in credit losses and weak revenue generation.
The data released today by Markit Economics showed that the composite index based on a survey of euro-area purchasing managers in services and manufacturing declined from 56.4 in May to 56.
Strategists at BNP Paribas SA in London bet on euro’s decline in the middle term. They note that the demand for yen is rising as it represents less risky asset.

National Australia Bank: UK rates won’t be raised in 2010
The minutes of the June 10 meeting of Bank of England’s Monetary Policy Committee published today showed that while 7 members voted for keeping the key interest rate at 0.5%, policy maker Andrew Sentance declared in favor of increasing the rate for the first time in almost 2 years.
Sentence offered to hike rates to 0.75%. The economist underlined that inflation rate continues to grow after recession. In April annual pace of British consumer price advance reached 17-month maximum. In May inflation rate was equal to 3.4%, while the government’s limit is situated at 3%.
Central bank’s governor Mervyn King warned, however, that inflation is caused only by energy-cost and exchange-rate fluctuations. Bank of England officials predict it will fall in the aftermath of the economic slump.
The economists at National Australia Bank in London claim that the current vote division will be stable for some time with Sentence as the only advocate of rates hike and the majority of members for the monetary easing. The specialists don’t expect that rates will be up in 2010.

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24/06/10

RBS: euro will lose 20% versus the greenback
Analysts at RBS Securities Japan Ltd. in Tokyo expect the single currency to lose 20% trading versus the greenback. The specialists claim that the attempts of European countries to cut sovereign debt will harm economic growth and trigger deflationary pressure.
According to RBS, as far as it’s possible to judge by interest rates and inflation differential euro is still expensive against US dollar and may remain so even after 20% depreciation.
European currency declined by 14% in 2010. The economists say that European economy may eventually benefit from euro’s decline. RBS forecasts that euro area’s economy will gain 1.2% in 2010 and 1.3% in 2011, while the US one is thought to grow by 3.4% and 4.3% respectively and Japan – by 3.2 % and 1.8%. In Europe Germany that accounts for one third of the currency union’s economy will be at the head of fighting the crisis.

Commerzbank: GBP/USD – neutral/positive trend
British currency hit its minimum at 1.4685 in the beginning of the week and then gained strength rising to Asian session’s maximum at 1.5000 on Wednesday.
Technical analysts at Commerzbank claim that the trend for the pair GBP/USD is now regarded as neutral/positive as long as pound stays above the 20-day MA at 1.4674. The specialists underline that sterling climbed above resistance at 55-day MA and ruined 6-month downtrend.
If the pair goes up, Commerzbank places key resistance zones at 1.5240/50 (double Fibonacci retracement) and 1.5445 (the top of the 7-month channel). If the rate approaches to the latter, pound is likely to reverse.

USD/CAD: comments
The greenback rose versus its Canadian counterpart from Monday’s minimum at 1.0135 to the new 2-week maximum at 1.0460. During Asian trade and at the beginning of the European one USD/CAD consolidated at 1.0400 reflecting the Fed’s decision to keep the main interest rate at the minimal level on the deterioration of financial environment.
The analysts claim that the uptrend is still intact. The situation, however, would be more certain if US dollar could climb above 1.0375 and 1. 0311. Support levels are found at 1.3075, 1.0315 and 10311. If the rate goes up, resistance levels will be found at 1.0418, 1.0455 and 10500.

BNY Mellon: yen’s gaining after the Fed’s announcement
Japanese currency advanced versus the greenback as investors’ demand for it as a safer asset went up.
According to yesterday’s report, US new homes sales contracted in May by 33%. Such slump can be explained by the expiration of tax credit that means the market is still vulnerable without government’s help. Currency strategists at Bank of New York Mellon Corp. in London commented on the discouraging US data saying that the country’s economy isn’t yet steady on the rebound’s path and yen is going to benefit from such outlook.
Explaining their decision to keep the key interest rate at the record minimum the Federal Reserve officials claimed that the country’s economic recovery would be slow and financial conditions worsened due to the external situation.

China: yuan’s revaluation won’t help the US
Chinese Foreign Ministry Spokesman Qin Gang claimed today that yuan’s revaluation won’t solve US economic problems such as unemployment, overconsumption and low savings rate. Chinese authorities keep being against turning this issue to the object of political tension.
Even now when China’s currency is no more tied to the greenback, US lawmakers try to make the President Barack Obama continue pressuring China. The Congressmen try to permit legislatively the tariffs on imports to let American companies compensate the advantages that weak yuan gives Chinese producers.

Should Greece quit the euro area?
Economists at Standard & Poor’s claim that it could be better for some European countries to leave the euro zone than suffer a lot of problems staying in the monetary union. According to them, there is the serious risk that other EU countries will get involved into the crisis.
The specialists at Germany’s Ifo economic institute believe that renouncing the single currency would be a better way out for Greece than the necessity to cut budget by 14% of GDP.
European Central Bank, on the other hand, regards the austerity measures as the sole opportunity for Greece to deal with the crisis.
The median forecast of 8 economists surveyed by Bloomberg showed that in 2010 Greece’s economy will decline by 3.9%, while the total euro area’s economy will expand by 1.1%.

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25/06/10

Morgan Stanley: pound forecast's raised
Analysts at Morgan Stanley increased their sterling forecasts for 2010 and 2011 versus the greenback and the single currency.
According to the specialists, pound will reach $1.43 by the end of 2010 and $1.52 by the end of 2011, while the previous estimate was only at $1.29 and $1.41 respectively. Morgan Stanley expects now sterling to climb to 81 pence per euro by year-end and to 77 pence by the end of 2011, while before they thought that British currency would trade at 90 and 83 pence respectively.
The forecast change is explained by the budget released on June 22 and the prospects of inflation rate growth. The new budget supposes such austerity measures as levy on banks, a higher sales tax and spending cuts. British government plans to reduce the budget shortfall by 113 billion pounds ($169 billion). The country’s inflation rate went up to 17-month maximum at 3.4% in May while the upper limit is set at 3%.

Bof T Mitsubishi: euro and pound will fall versus dollar
Analysts at Bank of Tokyo Mitsubishi UFJ expect European and British currencies to decline versus the greenback in the coming months. It’s likely to happen, claim the specialists, as fiscal tightening performed by these countries will slow down their growth pace in comparison with the United States.
Bank of Tokyo Mitsubishi mentioned that the austerity measures are done in order to reassure the ratings agencies that, in their turn, acted to provoke financial crisis.

Mizuho: loonie's rising on high oil price
Canadian dollar rose versus its US counterpart for the first time this week. It happened due to advance of crude oil by 1.2% to $77.41 per barrel on the Nymex and the evidence of American economy’s growth pace slowdown. Strategists at Mizuho Financial Group Inc. claim that loonie will benefit while commodity prices are high.
Some central bank are regarding now the possibility of using loonie as a reserve currency to diversify the reserves declining the share of euro, dollar and yen as this currencies are associated with high debts. Analysts at UBS AG expect the International Monetary Fund may to add Canadian dollar in a basket of currencies it uses in transactions.

Bank of Montreal: risk aversion strengthens yen
It’s the sixth day in a row when Japanese yen’s rising versus the single currency. Yen’s supported by the expectations that G20 nations won’t be able to find the way out for the indebted euro zone’s countries at this weekend’s meeting.

Strategists at Bank of Montreal in Toronto claim that the market is again dominated by the risk aversion. The specialists point out that there are 2 main strategies. On the one hand, European countries promote austerity measures, while the United States are in favor of spending and stimulus policy. Bank of Montreal says that it’s possible that the summit will produce no outcome.

Bank of Nova Scotia: Canada’s rate unlikely to be raised
It’s possible to assume watching the derivatives trading that the Bank of Canada won’t lift its key interest rate at each of this year’s four remaining meetings devoted to monetary policy. Yields on December 2010 bankers’ acceptances lost yesterday 6 basis points hitting the minimal level since May 26.
Bank of Nova Scotia’s data shows that the probability that the central bank will increase borrowing costs by 25 basis points at a July 20 meeting dropped from 80% at the start of the week to 67% yesterday.
Economists at Bank of Montreal claim that the recovery of Canadian economy will be slower that it was expected. Canadian retail sales contracted in April falling five times below the forecast and inflation also decreased in May. The specialists believe that the Bank of Canada may raise the rate at its next meeting but then stop for a period of time in order to stimulate the economy.

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28/06/10

John Taylor: bailout won't save Europe
March forecast of John Taylor, famous investor managing the world’s largest currency hedge fund FX Concepts LLC, has come true as US dollar strengthened from $1.35 to $1.20 per euro.
Now Taylor believes that US currency may take pause for some time before the new surge that may come if it’ll become clear that the European bailout isn’t helping euro region to get out of the crisis.
The plan of financial help for the indebted euro zone’s countries creates false confidence among the investors that will lead to the serious shock in September. The economist predicts that be the end of 2010 euro will fall to $1. According to his estimates, the holders of euro will be very lucky if the rebound of the single currency lasts during July.

Millennium Asset Management: dollar won’t rise versus euro
Specialists at Millennium Asset Management in London claim that $1.20 level corresponds to the fair value of euro. As a result, they’ve removed one of the arguments in favor of euro’s depreciation.
More than that, note the specialists, the greenback’s growth prospects were connected with the outstanding performance of American economy that isn’t realizing. On the other hand, investors seem to be concerned about possible double dip recession in the United States.
According to Commerce Department’s data released on June 25, US first quarter economic growth pace of was equal only to 2.7% in comparison with 3% last month’s consensus. The underlying problems of the country’s economy are in smaller advance in consumer spending and a bigger trade deficit.

Technical Alpha: pound will rise to $1.53/56
Technical analysts at Technical Alpha in New-York expect pound to rise versus the greenback as it overcame the key cloud’s resistance on the daily Ichimoku chart. The specialists underline that on June 23 British currency went above the upper and lower lines on the chart for the first time in six months.
The target of sterling’s advance lies between the long-term downtrend resistance line at $1.53 and 50% Fibo retracement of the fall from August 2009 to May 2010 at $1.56. Technical Alpha supposes that cloud area on the chart, which acts as support when prices are above may let pound have the minimal July levels between $1.4878 and $1.4580.

Westpac: Aussie will decline to 84 cents
Analysts at Westpac Banking Corp. expect Australia’s currency to lose 4% against US dollar dropping to 84 cents. As a result, the specialists recommend selling Aussie versus the greenback on its current advance to 88.15 cents. The trade should be stopped if AUD exceeds 89 cent level.
According to Westpac, the decline of Australian dollar may be caused by the slowdown of Chinese economy.

BNP Paribas: euro will decline on fiscal tightening
Strategists at BNP Paribas SA believe that the efforts of euro area’s governments to conduct fiscal tightening measures while the United States keeps being loyal to monetary easing will result in euro’s decline.
The specialists believe that to assure European economic and fiscal recovery relatively more powerful economies will need to accept higher exchange rates. The single currency is likely to be used for funding while Asian and commodity currencies are going to benefit. The analysts claim that any euro’s attempt to rise above $1.24 would represent selling opportunity for investors.

Bof NY Mellon: yuan’s free trading is likely is the next few years
Strategists at Bank of New York Mellon Corp. believe that the euro zone’s debt crisis can make China authorize yuan’s free trading.
The country’s now hesitating about its euro investments as much as it’s concerned about dollar holdings. The sole way out in this case is to stop increasing the amount of its foreign-exchange reserves. This, in its turn, would require currency liberalization as it won’t be necessary for the People’s bank of China to perform daily market interventions.
Never the less, free floating of Chinese currency isn’t a matter of a short-term period as country’s authorities won’t regard the matter seriously during the next few years.

JPMorgan Chase: EUR/USD forecast’s raised
Strategists at JPMorgan Chase & Co. improved their forecast for EUR/USD as it’s now quite evident that the United States won’t increase interest rates in the near future.
JPMorgan Chase predicts that the single currency will trade at $1.25 area until the second quarter of 2011 resting flat versus the greenback. The previous forecast was that euro will start declining by the end of this year dropping to $1.20 and getting down to $1.18 by the end of the first quarter of 2011.

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29/06/10

Standard Chartered: dollar will rise to 95 yen
Analysts at Standard Chartered Plc expect the greenback to hold key support at 88.50 yen and gain 6% to the maximal level since August. Standard Chartered team’s using key closing lows at the bottom of the range in order to define key support levels.
US currency is very likely to rise to 95 yen level representing the top of a range since December. According to the specialists, risk-reward will make investors buy USD/JPY in hope for the pair’s returning upwards after losing 2.1% in June.
The median forecast of economists surveyed by Bloomberg showed that dollar may strengthen to 97 yen by the end of 2010.

Saxo bank: daily currency forecast
EUR/USD: it’s recommended to sell European currency while the pair’s rising to 1.2270 stopping above 1.2290. The target level is set at 1.2210.
USD/JPY: it’s advised to sell dollars while the pair’s advancing to 89.10 putting stops above 89.50 with the target at 88.60.
EUR/JPY: it’s recommended to sell the single currency while the pair’s going up to 108.08 putting stops above 108.25 with the target at 107.
GBP/USD: the trend for the pair is regarded as neutral.
AUD/USD: it’s recommended to sell Aussie while the pair’s rising to 0.8660 putting stops above 0.8690 with the target at 0.8600.
USD/CAD: the greenback is expected to rise to 1.0440, so it’s necessary to buy dollars at 1.0360/80 zone.

Standard Chartered: dollar forecast is cut
Analysts at Standard Chartered Plc reduced their forecast for US dollar as the premium provided by American rates decreased under the impact of Treasuries’ advance.
The yield differential between 10-year Treasuries and the same Japanese government bonds narrowed, so investors haven’t much stimulus to prefer the first. In addition, Group of 20 meeting established the target for decreasing budget deficits and inflation remains weak. For Switzerland, on the contrary, deflation risks have almost disappeared and the Swiss National Bank won’t need to intervene to the market.
As a result, the specialists lowered projection for USD/JPY from 98 yen in the third quarter and 100 yen by the end of 2010 to 93.5 and 95 yen respectively and from 1.25 francs by September 30 and 1.23 francs by December to 1.19 and 1.17 respectively. The specialists underline that Japanese yen and Swiss Franc will benefit helped by market volatility and uncertainty.

Commerzbank: EUR/CHF will keep falling
Analysts at Commerzbank AG expect Swiss franc to rise to the record maximum versus the single currency. Such forecast is based on the assumption that the country’s central bank won’t intervene in the market selling the national currency as inflationary risks strengthen.
Money supply surged in May and Swiss economy keeps recovering, so the concerns about possible deflation have vanished and EUR/CHF is projected to trade within downtrend. Swiss franc has already extended by 6.9% versus euro during this quarter.

JPMorgan: euro will decline till the end of 2010
Specialists at JPMorgan expect that the greenback will trade at $1.20 per euro by the end of 2010. US dollar will decline against its Australian and Canadian counterparts to 92 and to 95 cents respectively.
JPMorgan’s second-quarter client survey showed that American, European and Japanese companies suppose that euro’s downtrend versus US currency will prolong through the rest of 2010. The majority of respondents believe that the single currency will stay below$1.30, while the average estimate lowered from $1.34 in the March to $1.22.
Strategists at Standard Bank Plc expect that the single currency will decline not only versus the greenback, but against several currencies. Euro dropped by 0.45% versus US dollar in June and lost 2.4% against its main competitors as show Bloomberg Correlation-Weighted Currency Indices.

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30/06/10

NTT SmartTrade: weak US growth prospects
The greenback declined for the first time in 3 days trading versus the single currency affected by the concerns about US economic recovery prospects.
According to the economists’ survey conducted by Bloomberg, the index of the Institute for Supply Management-Chicago Inc. fell from 59.7 in May to 59 this month. Analysts at NTT SmartTrade Inc. claim that the rebound of American economy seems to be weak that is very negative for US dollar.
US currency weakened from $1.2188 in New York yesterday to $1.2219 per euro at 6:48 a.m. in London.

Commerzbank: pound's growth won't last long
Analysts at Commerzbank AG claim that the advance of British currency won’t last long as the spending cuts performed by the country’s government will have a negative impact on UK’s economic growth. As a result, the Bank of England would have no other way but to keep rates at the minimal level.
The specialists underline that sterling was supported last week by emergency budget that helped to increase investors’ confidence in pound and the fact that one member of the central bank’s Monetary Policy Committee voted for the rate hike that provoked the expectations of possible rates’ hike. Commerzbank believes that such speculation came untimely and points at the current austerity measures performed by British government.
As a result, the strategists expect that pound’s decline will begin when the country’s central bank will confirm their assumptions.

Barclays Capital: clients bet on euro's decline
The survey performed by Barclays Capital among its clients showed that the single currency will keep declining versus the greenback in the third quarter of this year although it’s not likely to collapse.
The majority of respondents believe that euro will be trading within the downtrend, while only 4% think that the European currency will gain. The idea of euro’s collapse is shared by less than 10% of interviewed. Most clients of Barclays Capital prefer light positions.

UBS AG: EUR/CHF may fall to 1.30
Analysts at UBS AG believe that Swiss franc may strengthen versus the single currency and the pair EUR/CHF is likely to fall below 1.30. Such forecast is based on the assumption that investors will increase their demand for franc as a safer currency and Switzerland’s central bank won’t intervene to the market.
The fact that Swiss national bank isn’t selling the national currency means that franc can appreciate to the level that will harm the country’s economy.
Franc rose by 3.9% versus euro since June 17 when the SNB announced that deflationary risks have almost vanished.

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