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

[FBS_analytics]

01/07/10

Citigroup: euro will rise to $1.25
Technical analysts at Citigroup Inc. expect the single currency to rise to $1.25. The specialists believe that euro’s trading range will narrow and the pair will be driven up above its 2-month downtrend. Support at $1.2154, think the analysts, will hold the pair from declining. Citigroup places resistance at $1.2363 and $1.2490-$1.2510.
European currency lost 13% getting down from $1.3667 on April 15 to the 4-year minimum at $1.1877 on June 7 and then recovered to $1.2398 on June 28.

European banks still at risk despite ECB’s lending
Yesterday the European Central Bank lent 131.9 billion euro ($161 billion) to 171 undisclosed firms for 3 months, while the analysts were projecting that 200 billion would be required. Never the less, euro zone banks are still vulnerable and need ECB support.
The region’s central bank’s attempting to make a gradual reduction of stimulus that was being used since Lehman Brothers Holdings Inc.’s collapse in 2008 when financial firms began to avoid crediting each other. Now debt crisis in Greece, Portugal and Spain is strongly harming investors’ confidence. Greek banks, Spain’s 45 savings banks, or cajas, and Germany’s state-owned Landesbanken have problems getting short-term refinancing forcing ECB to keep funding financial sector, claim investors at Zurich-based Swisscanto Asset Management.
Specialists at Schroders Plc. claim that although ECB actions managed to calm the market, some Spanish, Portuguese, Greek and Irish banks will still refinance their significant balance sheets on their own.

Barclays: euro rose after ECB announcement
The single currency rose supported by the ECB’s announcement that eased concerns about European banks’ refinancing abilities.
Euro zone banks have to repay 442 billion euro ($543 billion) of an expiring 12-month funding. In order to make this process smoother the European Central Bank allowed banks to use a 6-day refinancing operation getting unlimited loans at a fixed rate of 1%.
Currency strategists at Barclays Plc in London note that market sentiment improved and claim that the funding operations have currently the most significant impact on the euro rate.

Brown Brothers Harriman: GBP/USD is down for the third day
British currency is contracting versus the greenback for the third day in a row. It happened as the demand for riskier assets went down affected by the negative recent data that the rebound of the world’s economy will be weak, claim strategist at Brown Brothers Harriman Ltd. in London.
According to the survey of British companies performed by Markit Economics and the Chartered Institute of Purchasing and Supply, UK manufacturing growth declined with index falling from 58 in May to 57.5 in June. It’s also expected that US PMI released today by Institute for Supply Management fell from 59.7 in May to 59 in June as it’s expected by the economists interviewed by Bloomberg.

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05/07/10

RBC Capital Markets: euro will have to struggle to gain
Analysts at RBC Capital Markets believe that more successful than expected European Central Bank’s tenders may improve market’s sentiment about the single currency and make investors stop betting on euro’s decline.
Never the less, the specialists keep forecasting the downtrend on euro and expect European currency to struggle. RBC Capital Markets notes that the tenders switched from macro and model accounts on EUR/USD, EUR/CAD and EUR/AUD into wholesale short covering.

Deloitte: concerns about British recession rise
The survey conducted by Deloitte LLP showed that the confidence of chief financial officers at major British currency companies dropped to 12-month minimum due to the fears that the budgets reduction with spending cuts and tax increases of 113 billion pounds ($172 billion) will lead to economic recession.
Only 24% of CFOs seem to be optimistic, while in the first quarter this figure was equal to 40%. In addition, 38% of respondents believe that double-dip recession is possible, while at the beginning of the year such opinion was shared by 33%. However, it’s necessary to mention that CFOs’ sentiment about the availability of credit went up almost to maximal level since 2007.
Deloitte specialists comment that the results of survey demonstrate the increase in concerns about further growth of British economy accompanied by better corporate credit and liquidity outlook.

UBS: EUR/CHF rebound won't last long
Strategists at UBS AG expect that the single currency’s recovery versus Swiss franc won’t last long. It may happen due to the central banks’ demand for franc as a reserve currency and Switzerland’s better fiscal outlook and economic growth in comparison with euro zone's countries. In addition, the risk that the Swiss National Bank will intervene to the market has almost disappeared.
On July 1 the pair EUR/CHF fell to the absolute minimum since 1999 at 1.3074 francs and recovered rising today above 1.33. UBS analysts keep their 3-month euro forecast at 1.35 francs, although they see the risks of decline. All in all, European currency dropped by 10% versus franc since the beginning of 2010.

Mizuho: yen's up versus dollar and euro
Analysts at Mizuho Corporate Bank claim that after the pair USD/JPY closed last week at one of its all-time lowest levels it will continue declining as least during a month.
As for EUR/JPY, last week the single currency hit its minimal level versus yen and is likely to trade volatile during its consolidation within recent ranges this week. While the European currency’s gaining versus many of its counterparts, there’s a spike low on its weekly charts versus yen. It’s also necessary to mention the potential ‘wedge’ formation at the bottom of bear market since October 2009.



Merrill Lynch: yen forecast up
Analysts at Bank of America Corp.’s Merrill Lynch increased forecasts for Japanese yen versus dollar and euro. The specialists’ judgment is based on the expectations that US interest rates will be lower and risk appetite will fall on the uncertain prospects of the world’s economic growth. As a result, yen will be able to gain on the risk aversion.
Merrill Lynch believes that yen will reach 90 per dollar by the end of 2010, while the previous estimate was at 97. Japanese currency will trade at 104 per euro by year-end while the previous projection was at 112 yen. As for the third quarter, yen forecasts were lifted from 94 to 89 versus dollar and from113 to 107 versus European currency. The forecast for 2011 was also revised from 106 to 97 versus the greenback and from 117 to 107 against euro.

Helaba: euro will keep growing
Technical analysts at Helaba Landesbank Hessen-Thueringen in Frankfurt expect euro to keep rising versus the greenback in the near term as it managed to close above the weekly level of $ 1.2495.
Such assumption is confirmed by the daily momentum indicators such as the MACD that is on the verge of issuing a buy signal, which points to a stronger recovery phase for the euro. In order to hold growth prospects euro has to stay above $1.2407.

Commerzbank: euro’s advance is not likely
The single currency went down from 6-week maximum versus the greenback at $1.2612 as the market expects that the European Central Bank will have to keep interest rates at the minimal level as the austerity measures have a negative impact on the euro zone’s economic growth.
Economists surveyed by Bloomberg expect that the benchmark rate will be left at the current 1% level at the ECB’s policy meeting on July 8.
Analysts at Commerzbank AG in Frankfurt claim that European economy is too weak and not ready to the rates increase. According to them, the probability of euro’s near-term advance against dollar isn’t high.

ACM Markets: USD/JPY in narrow range at 87.75 area
The pair USD/JPY is trading in the narrow range with 87.75 in the centre. It’s likely to keep fluctuating this way as US trade is closed because of the Independence Day. US dollar started rising at the Asian session but didn’t manage to get above 88.00. The following 40 pips decline drove the greenback to the daily minimum at 87.62.
Strategists at ACM Markets claim that Friday’s doji candle may mean that the bearish dynamics of the past 2 week can be a correction.

Resistance levels lie at 88.35 (back side of 3-month downtrend), 88.95 (20 May minimum and recent pivot), then 89.50 (28-29 June maximum). Support levels are found at 87.33 (reaction minimum after Friday’s payrolls data), 86.97 (Thursday’s minimum and 84.82 (2009 minimum).

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06/07/10

TD Securities: euro will fall to $1.13 in the third quarter
Currency strategists at TD Securities Inc. in Toronto expect that the single currency will keep declining. According to the specialists, it’s possible that euro hits parity with the greenback. This may happen because as the European Central Bank is increasing the volumes of government bond purchases. The ECB started buying bonds on May 10 realizing a part of the rescue package in order to help indebted euro zone countries to get out of the crisis.
TD Securities forecasts euro to fall to $1.13 in the third quarter, to $1.08 – by the end of 2010, approach $1 in 2011 and then rebound. The analysts note that it will be very difficult for the European economies to raise their internal competitiveness level.

Deutsche Bank: central banks' demand for euro declined
Strategists at Deutsche Bank AG in London note that many central banks switched to other currencies than euro while forming their currency reserves. According to the specialists, since the single currency was launched it was supported by the demand of the central banks that were trying to diversify their reserves. Now the pair EUR/USD will be left without such support for the next few years.

Standard Chartered: euro will fall to $1.10-$1.12 in the third quarter
Analysts at Standard Chartered in Singapore claim that the recent rebound of the single currency doesn’t mean that the market’s sentiment has changed. Investors are simply getting ready to renew their bearish bets.
In addition, claim the specialists, euro rate will be affected by the slow economic growth of the European region in result of the fiscal tightening measures. Standard Chartered underlines that week euro will be profitable for North European exporters.
According to the analysts’ forecast, the common currency will fall to $1.10-$1.12 in the third quarter and then rebound to $1.30 by 2012.

CIBC: euro will fall to $1.18, then rebound
Analysts at CIBC in Toronto expect euro to weaken to $1.18 in the third quarter and then rise to $1.20 by the end of 2010 and to $1.24 in the middle of 2011.
The specialists believe that the next half of the year will play the role of defining period and a turning point for the pair EUR/USD. The problems of US growth dynamics will be in the centre of market’s attention. As a result, says CIBC, the Federal Reserve won’t be able to turn soon from monetary easing to the tightening of financial conditions. In case domestic demand doesn’t manage to support US expansion, there will be a necessity of weaker dollar to increase trade benefits.
Regarding futures trade, it’s possible to conclude that most traders don’t think that the Fed will lift up rates Fed until the second quarter of 2011.

Wells Fargo: euro will end the year at $1.20
Analysts at Wells Fargo in New York expect the single currency to trade within the downtrend during the second half of the year. The specialists claim that euro will depreciate versus Australian, New Zealand’s and Canadian dollars in the medium term. According to Wells Fargo, European currency will trade at $1.20 by the end of 2010 and may hit $1.08 be the end of 2011.
Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. in London claim that during the next half of the year investors will remain extremely concerned by the prospects of world’s economic growth. As the outlook for the global economy is getting worse, it’s recommended to choose the greenback rather than the currencies of countries that are conducting austerity measures.

Nordea: euro will reach 1.25 by the end of 2010
Currency analysts at Nordea Bank AB in Copenhagen expect the single currency to trade at $1.25 by the end of 2010 and then decline to $1.15 in 2011.
The specialists claim that currency forecasting got less difficult during the last year than at the beginning of the global financial crisis. According to them, in March 2009 there was danger of another collapse such as Lehman Brothers’ bankruptcy, while since December risk appetite has contracted, so the rates became determined mostly by fundamentals and rate differentials.

Bank of Tokyo-Mitsubishi: sell pounds versus yen
Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. in London advise investors to sell pounds versus Japanese yen. Such recommendations are based on the expectations of declining pace of Britain’s economic growth caused by austerity measures such as spending cuts. As a result, the Bank of England will have to keep the benchmark interest rate at the minimal level to stimulate the economy. The specialists forecast that sterling will lose 8% against yen lowering to 123 yen per pound.

BNP Paribas: key Australian rate didn't change
Australian dollar gained today versus all of its 16 major counterparts. It happened as the Reserve Bank of Australia left its key interest rate unchanged for the second consecutive month in a row and announced that business investment is likely to rise. Currency strategist at Commonwealth Bank of Australia in Sydney note that investors were looking forward to more bearish news.
According to Australian monetary authorities, the current level of the rate seems to fit the situation in the near-term. In addition Australia’s trade surplus climbed to A$1.65 billion ($1.4 billion) in May due to Asian demand for coal and gold. Strategists at BNP Paribas SA in London believe that there’s a lot of optimism about the Australia’s economic outlook.

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07/07/10

Westpac: dollar may rise to 90 yen
Analysts at Westpac Banking Corp. expect the greenback to gain versus Japanese yen. Such forecast may be explained by the yield differential between Treasuries and Japanese government bonds. 2-year US yield exceeds the similar Japanese rate by more than 50 basis points.
As a result, the specialists advise investors to buy dollars as American currency is likely to rise to 90 yen. It will be necessary to stop trading if US dollar falls to 86 yen level.

Bank of Korea: Greek default's very possible
Economists at the Bank of Korea are sure that it’s very possible that Greece won’t be able to repay its obligations as its economy’s contracting making the country’s debt being too high. Korean analysts expect the borrowings of European country to reach 149% of GDP by the end of 2013 that is more that Greek government will be able to maintain. In 2010 Greece’s borrowing will be equal to 133% of GDP.
According to the Bank of Korea, although default is not inevitable, it will certainly result in severe turmoil on the world’s financial markets.

Krugman: US economy needs more stimulus
Nobel Prize-winning economist Paul Krugman believes that the United States should make all their efforts using all possible fiscal and monetary measures in order not to let the economy return to the recession. The specialist supports the idea of more stimulus that, according to him, is necessary to prevent the problems US and Japan had in1990s.
While many of American policy makers are worried that growing US deficit may cause the same loss of confidence as in the euro zone, Krugman is concerned about whether both short and long-term stimulus measures would be taken to decrease the deficit and whether the authorities will be able to act efficiently.
Krugman suggests using modest tax increases and reasonable spending cuts particularly on health care. The Nobel Prize winner points to the deterioration of the labor market and is in favor of measures to raise employment level as the number of working people dropped in June by 125,000.

China: holdings of US Treasuries
China’s monetary authorities commented on reduction of its US Treasuries’ holdings claiming that this process shouldn’t be associated with political nature, but only with the market conditions. China regards US debt as safe enough with high liquidity and low trading costs.
Chinese Prime minister Wen Jiabao claimed that United States have to take concrete steps to convinve investors that dollar assets are safe after President Barack Obama increased spending to help the economy end the period of recession. According to the White House forecast, US budget deficit will reach this year $1.6 trillion that is 10.6% of GDP. Moody’s Investors Service Inc. noted on May 25 that if the USA doesn’t take measures to cut the deficit, its top Aaa credit rating may be downgraded.
China has the biggest foreign-exchange reserves in the world and holds the largest amount of US Treasuries overseas. The country’s investments in American securities declined from $939.9 billion recorded in July 2009 to $900.2 billion in April 2010.

Bank of Montreal: CAD won’t deviate from its current range
Canadian dollar gained today against its American counterpart for the first time in three days after falling close to C$1.0680. Loonie as the currency connected with growth was helped by the increase in global equity and commodity markets.
Analysts at Bank of Montreal in Toronto believe that initial support will be found at C$1.0550. The specialists claim that the pair USD/CAD isn’t likely to deviate much from its current range ahead of the Bank of Canada’s rate announcement on July 20. In June Canadian key interest rate was lifted up from 0.25% to 0.5%.
Strategists at CanadianForex Ltd. expect Canadian dollar to trade between C$1.02 and C$1.08 during the next three months.

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08/07/10

ICAP: in August Australian rates will be raised
Australian currency climbed to one-week maximum versus US dollar. Aussie advanced as the growth of country’s employment beat the forecast exceeding it in 3 times. Australia’s employment rolls increased in June by 45,900, while the economists surveyed by Bloomberg News were looking forward only to 15,000 gain.
Labor market improvement may raise inflation pace. According to the Reserve Bank of Australia’s estimate, inflation is likely to exceed its target. As a result, economists at ICAP Australia Ltd. in Sydney are sure that Australian central will lift up interest rates possibly in August.
Strategists at Australia & New Zealand Banking Group Ltd. in Sydney claim that the country’s economy keeps extending and the positive growth dynamics will help Australia since there are poor advance prospects for the world’s economy and make the national currency benefit.

Bank of Tokyo-Mitsubishi: euro won't exceed $1.30 level
Analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. in London claim that the single currency may stop gaining as it’s getting close to a very strong resistance made by euro’s 16% decline since December at $1.2750.
As a result, the specialists believe that European currency won’t manage to get above $1.30 level. Bank of Tokyo-Mitsubishi is bearish on euro in the long-term. According to the analysts, the common currency will possibly drop below parity with the greenback if Greece or had to restructure its debt or one of the euro zone countries left the monetary block.

KBC Bank: EUR/USD will gain above 1.2454
Analysts at KBC Market research Desk claim that the pair EUR/USD is gaining strength as it managed to climb to the 2-month maximum at 1.2695 zone.
The specialists note that the single currency’s now approaching the key resistance at 1.2695/ 1.2702 area representing daily channel top of December maximum/broken daily flag bottom of year’s minimum). KBC expects that while euro’s trading above 1.2454 the pair will grow.
Support is found at 1.2601 (daily short-term MA), 1.2566/1.2553 (daily envelope bottom/hourly reaction minimum), 1.2479/1.2467 (this week’s minimum/previous reaction maximum) and 1.2419/1.2405 (weekly envelope bottom/daily Medium Term Moving Average/ break-up hourly).

Goldman Sachs: Aussie will rise to 95 Canadian cents
Economists at Goldman Sachs Group Inc. claim that Australian dollar may gain against Canadian one as Australia will benefit from Chinese economic growth, while Canada may be affected by the slowdown of US economy.
As a result, the specialists advise investors to buy Aussie looking forward to its advance to 95 Canadian cents. It’s necessary to place stops below 88.5 Canadian cents.
According to Goldman forecast, Australian central bank will raise its key rate from the current level of 4.5% by 25 basis points in 2010 and 75 basis points more in 2011.

Commerzbank: dollar may rise to 90.60
Technical analysts at Commerzbank AG claim that the greenback may strengthen to 90.60 yen if it manages to hold above support area between 87.15 representing December 2008 and January 2009 minimums and 87.00 yen that is 78.6% Fibo retracement of the growth from November 2009 to May 2010. The pair USD/JPY may climb to 89.23/89.93 where 38.2% and 50% Fibo retracements of the decline from the June maximum are found.

RBC: Bank of England won’t raise the rate
British pound declined versus the single currency falling to the 2-week minimum. It happened under the impact of negative economic data that means that the pace of UK economic growth’s getting down affected by government spending reduction.
According to Halifax, UK house prices lost 0.6% in June. Manufacturing production added 0.3% in May after April decline by 0.8% but turned out to be below expectations of 0.5% increase.
Currency strategists at Royal Bank of Canada claim that the tightening of the fiscal policy discouraged the expectations of interest rate hike. Bloomberg survey shows that economists expect that the Bank of England’s benchmark interest rate will be left at the current minimal level of 0.5%.

IMF: global growth forecast’s up
The International Monetary Fund lifted up its forecast for the growth of the world’s economy in 2010 from 4.2% according to April prediction to 4.6%. Such advance will be the most significant since 2007.
The Fund specialists noted that the advance in the first half was above expectations. The risks to the recovery became higher due to the European crisis and are compensated by growth pace of such countries as Brazil, China and India. Among advanced economies the United States and Canada are regarded as best performers.
The IMF underlines that the most important now is to restore financial market’s confidence without affecting economic rebound.

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09/07/10

Bank of Tokyo-Mitsubishi: dollar may rise to 90 yen
Analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. claim that the greenback is likely to advance to the maximal level since June 23 at 90 yen in case it overcomes the key area between 88 and 89 yen.
The specialists claim that US dollar has rebounded from its 7-month minimum and become supported by its 5-day MA that turned upwards.
American currency will face the main resistance in July at 88.86 yen level representing 23.6% Fibo retracement of a decline from May 5 maximum of 94.99 yen to the July 1 minimum at 86.97 yen. The next target level of USD/JPY is at 89.65 yen (21-day MA) and 90.03 yen (38.2% Fibo retracement).
If the 5-day MA intersects above the 21-day one making the “golden cross” formation, the pair’s upward trend will strengthen moving towards the 200-day MA at 90.78 yen.

Saxo bank: daily currency forecast
EUR/USD: if the single currency trades above 1.2670, it may rise to 1.2750. Otherwise, the pair can fall to 1.2600.
USD/JPY: the greenback will be slowly getting upwards to face resistance at 89.0. Support level’s found at 88.40.
EUR/JPY: European currency may attempt overcome resistance at 112.50 on its way to 113.30. If the pair doesn’t manage to advance, it may fall to 111.70.
GBP/USD: pound’s expected to rise to 1.5250, so it’s necessary to buy sterling below 1.5120 stopping below 1.5095.
AUD/USD: Aussie may extend to its previous high at 0.8860, so it’s recommended to buy Australian currency from 0.8690 to 0.8735.
USD/CAD: the pair’s expected to trade between 1.0400 and 1.0480.

TD Securities: AUD advances as risk appetite improves
Australian currency’s showing the biggest weekly 4.3% advance in 9 months versus the greenback as the market’s sentiment towards the rebound of the world’s economy improved lifting up the demand for riskier higher-yielding assets. New Zealand’s dollar’s also up adding 3.3% this week that’s the most since May 2009.
Investors’ concerns about economic recovery also eased after ECB’s President Jean-Caude Trichet claimed that euro zone’s economy is strong enough and there’s no need for pessimism.
Analysts at TD Securities Ltd. in Singapore expect that the interest rates in Australia will be raised in the near-term and this information will make the national currency benefit as it isn’t yet included in price.

Mizuho: EUR/JPY may advance to 113.43
Technical analysts at Mizuho Corporate Bank expect that Japanese currency will be trading in 88.50 area, particularly, inside a ‘rectangle’ formed by 87.00 and 88.50/89.00 levels. The pair USD/JPY was showing lower maximums and minimums during last 3 weeks. The specialists believe that it may advance before further slump in July.

As for EUR/JPY, notes Mizuho, the trade seems to be rather volatile. According to the analysts’ forecast, the European currency will demonstrate corrective rebound against the trend on the bears’ market. As a result, the pair may attempt to rise to June’s maximum at 113.43.

KBC Bank: EUR/USD technical comments
Technical analysts at KBC Bank claim that EUR/USD is trading in the overbought area. According to the specialists, support levels are found at 1.2647/34 (daily envelope/short-term MA), 1.2620 (hourly reaction minimum), 1.2553 (hourly reaction minimum) and 1.2479/58 (reaction minimum/medium-term MA). Resistance levels are situated at 1.2713 (reaction
maximum), 1.2726/30 (broken flag bottom), 1.2757/63 (1st target off), 1.2454 (daily envelope) and 1.2780 (weekly envelope).


US Treasury: no currency manipulators among trading partners
US Treasury Department finally released yesterday its report on international exchange rate policies that was originally scheduled on April 15. According to the published data, none of the main trading partners of the country was named currency manipulator.
US authorities claimed it’s not clear yet whether the changes in Chinese monetary policy will help to revaluate yuan to the proper level rebalancing the world’s economy. Treasury Secretary Timothy F. Geithner underlined that United States are going to watch closely yuan’s appreciation during the next 3 months to make sure that China’s loyal to its new policy. Geithner was also speaking about the possibilities of increasing of the amounts of American export to China that would help improving the situation at US labor market.
Economists at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York claim that China managed to gain time by removing yuan’s peg to the greenback claiming that the country’s exchange rate policy is as careful as it should be because Chinese faults may affect the global economy.

BNP Paribas: euro under negative pressure
The single currency went down from its 2-month maximum versus the greenback. Strategists at BNP Paribas note that euro’s recovery began to lose its pace. The specialists claim that the pair EUR/USD will meet rather strong resistance at $1.27 level.
According to BNP Paribas, the outlook for the European currency’s negative. In the medium term euro will be under pressure of concerns about the growth of European economy and euro zone banks’ stress tests.
One more negative factor for euro that is regarded as a funding currency is the demand for high-yielding commodity currencies, for example, Australian dollar.

CAD jumped as jobless rate decreased
Canadian dollar bounced after the data showed that the country’s unemployment rate dropped by 0.20% and became equal to 7.9% that’s the minimum in 1.5 years. As a result new increase in Canada’s interest rates became more possible.
The greenback lost 0.75% falling versus loonie from 1.0416 at today’s opening to hit the minimum at 1.0334. CAD/JPY rose from 84.72 at the trade opening to new 2-week maximum at 85.66 zone. EUR/CAD slumped by 110 pips to new 1-week minimum at 1.3102.

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12/07/10

Ueda Harlow: Prime Minister Naoto Kan lost elections
Japanese currency hit 2-week minimum versus the greenback. It happened after the election results showed that Democratic Party of Japan headed by Prime Minister Naoto Kan that got 44 seats in the upper house of parliament lost to the opposition Liberal Democratic Party that won 51 seats.
The main reason of Kan’s losing voters’ confidence was the proposition to increase 5% sales tax that put the problems of huge national debt in the center of attention.
Specialists at Standard & Poor’s say that such situation can possibly affect Japan’s debt rating making it more difficult for the authorities to conduct necessary reforms of the public sector and the taxation system.
Analysts at Ueda Harlow Ltd. in Tokyo claim that foreign investors may start selling yen at the signs of political instability.

UBS: sterling will fall to $1.40
Analysts at UBS expect sterling to fall to $1.40 versus the greenback. As a result, the specialists advise investors to sell pounds against dollars stopping the trade if British currency appreciates getting higher than $1.5270.
UBS claims that there are many factors to make investors being bearish on sterling. According to the analysts, the Bank of England isn’t likely to lift up interest rates as the rest members of the Monetary Policy Committee won’t support Andrew Sentence’s initiative.
In addition, last month’s positive influence of the new budget is already included in pounds rate and can support it no more. More than that, the predicted amounts of budget reduction will affect the pace of UK economic growth.

Mizuho: euro may appreciate to 1.28
Technical analysts at Mizuho Corporate Bank claim that last week the single currency was struggling hard versus the greenback and managed to close on Friday at 1.2638 that’s above the 9-week MA and first Fibonacci resistance.
The specialists suppose that the pair will be following a rather stable road upwards. This week EUR/USD is likely to consolidate in 1.2600 area. It’s possible that euro will gradually appreciate to 1.2800.
As for the pair EUR/JPY, the specialists believe that this week it will trade sideways above 109.50 but won’t rise above 114.00.

Capital Economics: Europe will benefit from euro zone’s collapse
Specialists at Capital Economics believe that euro zone’s collapse will stimulate the economies of the European countries saving them from stagnation. Currency union’s break up would help to raise competitiveness and economic growth pace not only for its weaker members, but for the region as a whole.
Indebted Europe’s nations are now suffering from austerity measures needed to reduce huge budget deficits. If Italy, Spain, Ireland, Portugal and Greece drop euro and return to their national currencies, they would be able to let the latter depreciate helping to increase the amounts of exports, claim Capital Economics.
In Germany’s case restored deutsche mark would gain, so the domestic demand would also advance having a positive impact on employment and economic growth. As a result, imports from euro countries will be also supported and European economy will get rebalanced.

Top banks are bearish on euro despite its rebound
Only a month ago such large financial institutions as Paribas SA, Royal Bank of Scotland Group Plc and UBS AG claimed that the single currency’s moving to the parity with the greenback speaking about the high risk of euro area’s collapse. If someone bought euro at the 4-year minimum of $1.1877 hit on June 7 would have gained 6.4% when it rose to $1.2641 on July 9. Euro’s depreciation was also quite beneficial for European, especially German, exporters.
Strategists at UBS admit that the negative forecasts very too strong. Even though bond markets of the currency union are still very weak, there’s no more risk of the euro zone’s break up. Never the less, analysts keep expecting that debt crisis may spread from indebted Greece and Spain to Germany and France. The specialists note that the macroeconomic fundamentals are against euro. Fiscal tightening measures will lead to the decline in the region’s economic growth pace forcing the ECB to keep the rate at the minimal level affecting euro in the second half of 2010.
The expectations of BNP Paribas haven’t changed. According to the bank, the ECB’s monetary easing policy will diminish the demand for the European currency making its rate decline to $1 by March 2011.
Strategists at RBS Securities believe that European bailout program can do nothing more but put off the crisis and that by the end of 2011 euro will fall to $1.10. If the crisis expands after the Greek default, the common currency may slump below the parity.

Ishimoku
Weekly GBP/USD.
Bull didn’t manage to maintain the rebound at the pound’s market. The bottom line of the Cloud and horizontal Kijun-sen (4) didn’t let the prices further up. In addition, the candle formed the week before last turned out to be the model of the “hanging man” that was also confirmed by the last black candle.
It’s possible that the market’s rebound has finished and the downtrend may resume in the near-term.

Daily GBP/USD.
As expected, on the daily chart the prices tried to rebound from the level of Tenkan-sen line. Never the less, all attempts were in vain. As a result, on Friday bears decided to take initiative and began confidently pulling the market downwards. The Turning line (3) may fail supporting the rate and the lowered Senkou Span B (2) is one of the main signs of pound’s decline versus the greenback in the near time.
That’s why it’s recommended only to sell this week.

Weekly USD/JPY.
The pair USD/JPY has suddenly started to correct downwards and formed on the candle chart “piercing pattern”.
Never the less, Ishimoku Cloud keeps extending downwards due to the falling Senkou Span (1), while Tenkan-sen and Kijun-sen formed the “dead cross” figure.
It’s possible that upward correction won’t last for a long time – only before the prices meet the Turning line (3). After Tenkan-sen generates resistance the downtrend will be resumed.

Daily USD/JPY.
On the daily chart the market, as it was expected, consolidated at the beginning of the week around the opening prices. However, on Wednesday bulls managed to change the situation in their own favor: the market pushed off from 87.00 and jumped upwards breaking inside Tenkan-Kijun channel (3, 4).
Never the less, this rapid progress is regarded only as correction as the general situation remains downward: Ishimoku Cloud is descending; Chinkou Span lies under the prices chart.
That’s why at the beginning of the next week the prices may keep sluggish rebound up to the middle of Tenkan-Kijun channel. However, after that the rate will return to the Turning line (3).

Weekly USD/CHF.
It was the fifth week that ended by the total bulls’ defeat. The bulls didn’t managed even slightly restore the franc’s market. The rate moves towards the bottom line of the Ishimoku Cloud inside which it’s found now.
Tenkan-sen (3) and Senkou Span A (2) declined even stronger pointing at the negative sentiment of the market. Never the less, the “golden cross” formation (5) is still in its force.

Daily USD/CHF.
There was one more belt-hold line on the daily chart that may work this time and reverse the market upwards.
There are 2 stimulating moments. Firstly, the prices are now near rather strong support at the bottom line of the Cloud at 1.0500. In addition, Chinkou Span that had a maximal deviation from the price chart is likely to make bears stop their trade.
That’s why it’s possible that prices rebound this week and break through the Turning line (3).

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13/07/10

JPMorgan Chase: AUD и NZD will rise to 9-week maximums
Analysts at JPMorgan Chase & Co. claim that Australian and New Zealand’s dollars are likely to advance to 9-week maximums or even more in case they manage to get above June maximums.
Aussie is expected to rise to 200-day MA at 89.76 US cents and then toward 90.78 cents close to 76.4% Fibo retracement of decline from 2010 maximum in April to the minimum in May. The currency meets important resistance close to June maximum at 88.59 cents.
Kiwi may strengthen to 72.15 cents and then to 73.30 cents close to the April maximum. The New Zealand’s dollar’s 200-day MA lies at 71.19 cents and it exceeded last month’s maximum of 71.60 cents on June 23. Resistance for the currency is situated between 71.20 and 71.60 cents.

Pimco: US bonds are safer than European
Specialists at Pacific Investment Management Co. admitted to have been transferring funds from European debt to US Treasuries during several past months as they regard the latter as safer assets. In addition, Pimco advises investors to turn to the bonds in Canada, Australia, China, South Korea, Brazil and Mexico avoiding the ones of Greece, Portugal, Spain and Italy.
According to the analysts, the United Stated is still regarded as flight-to-quality country, while the greenback keeps being the world’s most important reserve currency and it’s very unlikely that the situation may change in favor of euro.
Treasuries’ 2010 advance was due to concern about possible defaults in some euro zone countries and US inflation rate that hit the minimal level in four decades that helps to preserve the value of a bond’s fixed payments.

Mizuho: yen's trading sideways
Technical analysts at Mizuho corporate Bank note that Japanese currency was trading sideways during the last 5 days versus all of its counterparts. According to the specialists yen’s rate is likely to continue moving in the same manner.
The specialists think that the pair USD/JPY will be trading above 87.00. Yesterday’s small spike maximum against first Fibo resistance means the temporary maximum in 89.00 area, while daily and weekly MAs suggest a short position.
As for the pair EUR/JPY, it’s also stuck in rather small zone and will be trading flat above 109.50, but not higher than 114.00.

Moody's: Portugal's credit rating’s decreased
The single currency survived significant decline today after ratings agency Moody's decreased Portugal’s credit rating by 2 steps to A1 that means growing debt burden and weak economic growth prospects. As a result, the concerns about indebted peripheral euro zone countries strengthened again.
Currency strategists at Royal Bank of Canada Europe Ltd. claim that the downgrade will once again turn the market’s attention to the European debt problems. Even though this information didn’t shock investors it made a negative pressure on euro.
In addition, German investor confidence declined for a third month in July. ZEW index of investor and analyst expectations fell from 28.7 in June to a 15-month low of 21.2, while economists surveyed by Bloomberg were looking forward only for a decline to 25.3%.

Wolfgang Schaeuble: stress tests will restore investors' confidence
One more factor of euro’s decline is the concern about euro zone banks’ stress tests results. European Union regulators are examining the strength of 91 banks to determine whether they can survive potential losses on sovereign-bond holdings.
European authorities are trying to make banks refinancing themselves in the market before applying for the state support. German Finance Minister Wolfgang Schaeuble claimed today that banks that fail stress tests will “in the worst case” need government aid to strengthen their balance sheets noting that the tests will make the current situation clearer.
EU finance ministers will gather in Brussels today to discuss the procedure of stress tests and the disclosure of its findings.
Analysts at Tokyo Tomin Bank Ltd. claim that it may happen that stress tests won’t be enough to restore investors’ confidence in European banking system and economy in general affecting euro rate.

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14/07/10

Royal Bank of Scotland: sell euro at $1.30
Analysts at Royal Bank of Scotland Group Plc advise investors to sell the single currency if it rises to $1.30 area.
According to the specialists, there’s important resistance around $1.3275 that already acted as a support in March and April and the breakdown of which led the pair to several year minimums. Royal Bank of Scotland claims that it’s necessary to regard euro’s rebound and stability in euro zone’s debt markets without forgetting common currency’s slump in the previous half of the year. Economic tightening will pressure the region’s economic growth.
Euro’s slightly losing to the greenback. The single currency’s trading at 1.2700. Yesterday there was a 2-month minimum at $1.2739.

BNP Paribas: China's economic growth may slow down
Analysts at BNP Paribas claim that during the next half of the year the markets will be concerned that growing inflation pace may cause “hard landing” of Chinese economy.
According to the specialists’ forecast, the world’s fastest growing economy’s growth pace will fall to 9.8% in 2010 and then to 8.4% in 2011. That will happen as inflation rate’s expected to climb to the 20-months maximum, so China’s government won’t able to conduct monetary easing. Tightening measures will affect consumers’ demand and country’s economic growth.
As a result, there will be a lot of uncertainty about the situation in China. Economists surveyed by Bloomberg News believe that tomorrow data will show that Chinese second quarter GDP gained 10.5% after 11.9% increase in the first 3 months of the year.

UBS: end of recommendation to sell pounds versus dollars
Analysts at UBS AG stopped advising investors to sell pounds versus the greenback. Such decision may be explained by the growth of British currency. Sterling got above the bank’s upper limit that was established to prevent losses.
The pair GBP/USD is now trading at the level of $1.5220 and isn’t yet able to overcome key resistance at $1.5250 – 61.8% Fibo retracement of decline from November to May.

MF Global: loonie will consolidate in narrow range
Canadian dollar went down from 3-week maximum at C$1.0277 versus the greenback. Crude oil that is Canada’s biggest export lost today 0.7%.
Strategists at MF Global Holdings Ltd. believe that loonie will consolidate before Bank of Canada’s meeting on July 20 on which the country’s central bank will determine interest rates. The specialists expect that after the recent advance Canadian currency will trade in the narrow range in the short-term.
Last week’s loonie’s 2.8% growth may be explained by the speculation that higher borrowing costs weren’t fully included in the price. On June 1 the rate was raised to 0.5% and Bank of Canada Governor Mark Carney claimed that the future dynamics of the rate will depend on Canada’s economic growth pace.

MF Global: dollar declines versus yen after US retail sales
The greenback fell versus Japanese yen for the first time in 6 days .
According to strategists at MF Global Holdings Ltd., it happened as US retail sales contracted in June by 0.5% while the economists were looking forward to only 0.3% decline. As a result, concerns about the worsening of the country’s economic situation strengthened again.
The dollar dropped by 0.3% from 88.74 yesterday to 88.44 yen at 8:59 a.m. in New York.

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15/07/10

Goldman Sachs: dollar will drop versus euro by January
Analysts at Goldman Sachs Group Inc. expect the greenback to drop versus the single currency by January. It’s already the second time in two months that Goldman Sachs changes its forecast. In June the analysts announced that they projected US dollar to climb to 7-year maximum against euro.
According to the specialists, dollar will weaken as the pace of US economic growth will decline, while European macroeconomic data seems rather strong and euro zone’s political and fiscal problems are less serious than it was expected. Goldman establishes poor growth prospects for United States up to the second half of 2011.
In addition, the analysts lifted up yen prospects. Japanese currency’s likely to rise against American one to the maximal level since 1995 as the possibility that the Federal Reserve will increase interest rates and that Japanese authorities would intervene at the currency market reduced.
Goldman Sachs also notes that euro may lower to 1.27 francs in 3 months as investors will increase demand for Swiss currency as for the safer one.

Mizuho: euro's rebound will fail
The single currency was trading in 1.2720 area on short coverings during the past week. Technical analysts at Mizuho Corporate Bank believe that the situation is likely to change.
According to the specialists, EUR/USD has approached the top of the daily Ichimoku Cloud. The majority of economists claim that euro’s short-covering rebound is nothing but interim and project the decline of the European currency, claims Mizuho.
The current outlook for the pair seems to be bullish. Euro turns out to be slightly overbought and the 9-day MA is successful in lifting its rate up. Mizuho analysts note that if the pair closes the week above 1.2800, there will be another round of short-covering.

Bank of Japan kept benchmark rate at 0.1%
The Bank of Japan left its benchmark interest rate at the current level of 0.1% claiming that low rates are making the country’s economy stronger.
Japanese monetary authorities claimed that national economy is developing according to BOJ April outlook, domestic demand’s recovering and the rebound of corporate sector extends to the households. The BOJ specialists pointed that it’s necessary to ensure markets trust Japan’s fiscal sustainability and keep watching the currency market as advance of yen and decline in stock markets may affect the economy.
According to the BOJ, the Europe’s financial market is still far from stability. The central bank hopes that stress tests of euro zone banks will help to improve the situation.
In addition, policy makers lifted up their growth forecast for the year ending March 2011 from 1.8% according to April estimate to 2.6% and reduced next year’s projection from 2% to 1.9%. Economists at HSBC Securities Japan Ltd. in Tokyo note that such upward revision can’t be regarded as sign of BOJ’s confidence about Japan’s economic recovery as there are too many risks from Europe and the United States.

Macquarie Securities: 11 European banks won’t pass stress tests
Analysts at Macquarie Securities expect that 11 European banks won’t pass the EU's stress tests as they need to have a higher amount of capital in case euro zone bonds will lose their value. Among such banks are all Greek banks, Bankinter, Postbank, Banco Popolare, BCP, Commerzbank and Sabadel.
These banks will firstly have some time to recapitalize themselves. If raising funds at the market isn’t successful the troubled banks will have to apply for governments’ help and then to EU support.
According to Macquarie Securities specialists, even though the number of banks that will potentially fail the tests is rather small, but there’s no doubt that this fact will affect the entire banking sector of the region.
Macquarie Securities is relatively sure in such financial institutions as BNP Paribas, UBS, SEB, DnB NOR, Nordea, and Erste Bank.

Eisuke Sakakibara: euro will fall to 100 yen be the end of 2010
Eisuke Sakakibara, the former Japan’s top currency official that was right to predict yen’s advance to 90 yen per US dollar in November 2008, expects that the single currency will decrease to 100 yen be the end of 2010. The economist claims that European Union and its euro are surviving disintegration.
European currency has already lost 15% versus Japanese yen since the beginning of this year and hit the 8-year minimum at 107.32 yen on June 29. Euro was weakening under the negative impact of euro zone’s debt crisis that made investors raise demand for yen as a safer asset.
In addition, Sakakibara shares the opinion that US economic growth will slow down.

Spain got 3 billion euro from bond auction
European currency rose versus the majority of its counterparts as Spanish bond auction turned out to be more successful than it was expected easing concerns about peripheral euro zone countries.
Spain managed to get 3 billion euro ($3.8 billion) selling 15-year bonds. The bids were 2.57 times higher than the securities offered. In the previous bond sale in April this ratio was equal to 1.79.
Strategists at Societe Generale SA in London note that the current outlook for the pair EUR/USD is characterized by the absence of negative news for euro and poor US growth prospects. The specialists claim that there will be no serious obstacles to the European bonds supply until September.

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