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

[FBS_analytics]

Danske Bank: the outlook for EUR/USD

Currency strategists at Danske Bank claim that although the single currency was under strong pressure during the past month, future dynamic of the currency markets will be determined primarily by the interest rate differential that are in favor of euro versus the greenback.

The specialists think that the European authorities won’t support the idea of early Greek debt restructuring and this will help to constrain investors’ concerns. In addition, according to Danske, Greece’s debt problems won’t keep the ECB from lifting up the interest rates. Danske expects the next hike to come in July. As for the greenback, the economists think that it’s going to stay weak as the Federal Reserve has no intention to raise the borrowing costs.

However, the elevated risk premium made the specialists revise downwards the forecast for the pair EUR/USD: 3-month forecast – from 1.50 to 1.48, 6- and 12-month forecasts from 1.50 and 1.40 to 1.46 and 1.38. In the second half of the year US currency will get more support as the Fed’s QE2 program expires in June.

Mizuho: GBP/USD forecast

Technical analysts at Mizuho Corporate Bank regard sterling’s 2-week decline versus the greenback as a correction from an overbought situation. In their view, all elements of the weekly Ichimoku Cloud speak for opening long positions. The strategists expect to see an interim minimum by the end of May.

According to Mizuho, support levels for the pair GBP/USD are found at 1.6145, 1.6050, 1.5935 and 1.5820. Resistance levels lie at 1.6375, 1.6425, 1.6520 and 1.6600.

The specialists advise to buy British currency at 1.6200 stopping below 1.6100 and taking profit at 1.6500. Mizuho thinks that GBP/USD will eventually manage to break above 1.6500 facing strong resistance in the 1.6500/1.7000 area.

BofTM expect EUR/USD to decline

Technical analysts at Bank of Tokyo-Mitsubishi UFJ claim that the single currency may fall to the 2-month minimum versus US dollar after it breaks down through important support at $1.4217 (23.6% Fibonacci retracement of advance from June 2010 minimum to May maximum) and $1.4148 (38.2% retracement of euro’s increase from a January minimum to the May high).

Euro is currently trading in the $1.4180 area. The specialists think that its decline will accelerate when it gets below $1.40.

According to the bank, the target level of the pair EUR/USD now lies at $1.3770 (38.2% retracement of the advance from June 2010 minimum to May maximum).

In June 2010 euro dropped to $1.1876 (June 7). January minimum is situated at $1.2873 (January 10), while the May high lies at $1.4939 (May 4).

Commerzbank: comments on GBP/USD

Technical analysts at Commerzbank note that British pound was trading in the 1.6200 area yesterday. In their view, the outlook for the pair is still negative.

The pair GPB/USD tested yesterday the 1.6155 level that represents 23.6% retracement of sterling’s advance from May 2010, so there is some short covering.

According to the bank, British currency will decline to 1-year uptrend at 1.6067. The specialists advise investors to stay bearish on pound as long as it’s trading below 1.6520. Resistance levels are seen at 1.6271/89, 1.6740/50 and the 200-week MA at 1.6989.

Strauss-Kahn scandal won’t affect euro

Currency strategists at RBS claim that the scandal with IMF Managing Director Dominique Strauss-Kahn won’t affect the single currency as the institution’s decisions on such important issue as bailing out the indebted nation doesn’t depend on one singular individual but is collectively made. In their view, the pair EUR/USD will return upwards to $1.44.

Analysts at Bank of America Merrill Lynch note that John Lipsky, who has stepped in for Mr. Strauss-Kahn at the IMF, is well regarded by market players. According to them, the single currency has settled in range between $1.35 and $1.45. The "violent selloff in the euro" during the last 2 weeks means that investors begin regarding euro as a funding currency and sell it versus higher-yielding emerging market and commodity currencies.

UBS: USD/CHF trend may turn upwards

Technical analysts at UBS note that the trend for USD/CHF became neutral after it’s the greenback managed to rise from the record minimum in the 0.8550 area. The specialists claim that the outlook for the pair will become bullish if US currency breaks resistance in the 0.9000/12 zone.

Danske Bank: 10 reasons for BoE to stay on hold

Here is more interesting analysis from Danske Bank. The specialists give 10 reasons why the Bank of England will keep rates unchanged this year:

1. The output gap is too large, the economy hasn’t recovered enough from the last recession and the economic growth rate is low. In order to help production recover to the pre-recession level a substantial amount of monetary stimulus is necessary.
2. High unemployment (around 3% points above its structural level), the private sector won’t manage to absorb the projected public lay-offs. As a result, many people are likely to lose their jobs when the public sector shrinks.
3. Current inflation is high but inflation expectations are leveling off and there is no wage pressure. There is actually a risk that in the medium term inflation will undershoot the Bank of England’s 2% target. The MPC hasn’t lost its credibility as some critics argue.
4. Consumer sentiment is already very negative as with previous recessions and this may lead to a setback in private consumption.
5. Growth in disposable income for households, measured by earnings growth minus retail price growth, has been negative for more than a year. Higher borrowing costs will squeeze households further and increase insolvencies.
6. Business sentiment is deteriorating. Economic conditions are challenging and indicators show that there’s a threat of contraction during the next months.
7. Broad money growth, closely associated with prices according to the quantity theory of money, has now turned negative – fundamental sign for policy makers not to tighten monetary policy.
8. The UK debt burden is rapidly growing. The cost of servicing debt will rise if interest rates rise too fast. Official projections for government debt rely on too optimistic projections for economic growth, which can be difficult to achieve.
9. Exporters need all the support they can get. If pound strengthens, the trade balance that is already in the bad shape will worsen more. Sterling’s true “undervaluation” might be smaller than believed by most.
10. The hawks in the Monetary Policy Committee are losing faith in the need monetary tightening. Recently Martin Weale, who has been voting for rate hikes since January, indicated that he may vote for rates to be left on hold due to the latest poor data. Danske specialists believe that Spencer Dale, the BoE’s chief economist, has similar considerations.

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[JemmyC]

Thank you so much for this updates.

 

[FBS_analytics]

Moody's downgraded major Australian banks

Moody's Investors Service cut the ratings of Australia's big-four banks from Aa1 to Aa2. These banks are Westpac Banking Corp., Australia and New Zealand Banking Group Ltd., National Australia Bank and the Commonwealth Bank of Australia.

The pair AUD/USD declined on the news easing down from today’s maximum at 1.0665 to the levels in the 1.6000 area.

However, the analysts weren’t concerned much by Moody's move. Economists at Westpac note that the ratings agency has brought its estimate of Australia’s major banks in line with S&P and Fitch ratings. Strategists at RBS note that Moody's should have made this 2 years ago.

Analysts about the prospects of Greece’s debt restructuring

The advance of the pair EUR/USD was limited as the European finance ministers admitted yesterday that there’s a possibility that Greece may have to restructure its debt.

Economists at SEB believe that if Greece is allowed to restructure one way or another, the single currency will get under severe pressure as the haircut may undermine investors’ confidence in the euro area. The specialists say that the market players will soon start doubting about how sensible is it to keep holding euro longs.

If the restructuring path is, nevertheless, chosen, there are different views on how intense this process should be.

Strategists at ING claim that in order to keep Greece’s debt/GDP ratio sustainable the nation will need to restructure at least 30% of its debt. Greek 10-year bonds yield reached 15.495%.

Analysts at Credit Suisse say that the situation in Spain and Italy will remain stable if Greek restructuring involves only maturity extension. At the same time, forced restructuring with principal sums reduction is likely to increase systemic risk threatening other peripheral European nations.

Mizuho: comments on USD/JPY

The pair USD/JPY went down from 2-week maximum at 81.77 reached on Tuesday.

Technical analysts at Mizuho Corporate Bank claim that dollar’s advance during the last 8 days was an inverted “flag” and that small “spike high” versus Japanese yen made yesterday may be regarded as the new interim maximum.

The specialists expect the greenback to fall below 9-day MA at 80.92 retesting this week support at 80.00. According to the bank, it’s necessary to sell US currency at 81.50 stopping above 81.80 and taking profit at 80.35.

J.P. Morgan: how to choose a safe haven currency

Currency strategists at J.P. Morgan Asset Management give market players some advises on how to choose a safe haven currency. According to the specialists, it’s necessary to focus on 3 main features.

Firstly, this should be a currency of the country with small current account deficit or surplus as % of GDP. A surplus means the country does not require net capital inflows to offset trade-account outflows. Examples: most emerging Asian countries, Switzerland, Norway.

Secondly, safe havens are usually low-yield currencies: when the risk sentiment is on investors tend to borrow in low-yielding currencies to buy higher-yielding ones; when the market’s risk aversion strengthens and the carry trade isn’t used, demand for the low yielders, on the contrary, increases.

The last but not the least is that, refuge currencies tend to be liquid.

So, speaking about the greenback, it’s possible to say that though it doesn’t suit the first condition – no need to remind how huge US current account deficit is – it has low yields and very liquid bond market that seems enough for it to be bought during risk-off time except the moments when risk aversion is the result of high oil prices. Swiss franc is a great save haven especially when the concerns about the euro zone crisis arise. Yen is also in the list, though it’s necessary to be careful about Japan’s debt dynamics and finding the right entry point taking into account its recent strength. Among the emerging Asian currencies other than Indian J.P. Morgan prefers Chinese yuan and Singapore dollar. Finally, the specialists mention Norwegian krone that’s connected to oil, but enjoys strong safe-haven fundamentals.

The economists at Deutsche Bank think that the end of the Federal Reserve’s QE2 in June will mark the shift in risk sentiment towards its deterioration.

Commerzbank: negative outlook for EUR/USD

Technical analysts at Commerzbank are bearish on EUR/USD. In their view, the single currency is on its way down to 1.3998 (200-week MA), 1.3770 and then to 1.3431/1.3375 (55-week MA and 11-month support).
The specialists claim that some bounces of euro are possible, but they won’t be of great significance to the general negative picture. According to the bank, upward moves will be limited by the resistance of 1.4225/65 and 1.4341.

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[FBS_analytics]

Goldman Sachs lowered US dollar forecasts

Currency strategists at Goldman Sachs reduced US dollar forecasts versus the single currency, Japanese yen and British pound due to the poor US economic data. The bank believes that the Federal Reserve won’t raise the borrowing costs until 2013.

According to the specialists, the greenback will decline to $1.45 per euro in 3 months, to $1.50 in 6 months and $1.55 in a year. In addition, Goldman lowered 3-month estimate of the pair USD/JPY from 84 to 82 yen, 12-month prediction was also down from 90 to 86 yen. The target for GBP/USD was increased from $1.79 to $1.85.

The analysts note that the prospects of US economic growth are less convincing than the outlook for many other nations as America faces a lot of problems among which there are high unemployment, weakness in the real estate sector and the inevitable fiscal consolidation. As a result, investors aren’t confident enough to invest more in the United States on the long-term basis.

US currency has lost 6.4% against euro since the beginning of this year, while the Dollar Index has fallen by 4.9%. US GDP showed in the first quarter annual growth of 2.3% that is less than 2.5 % in Europe and 9.7% in China.

Japan’s economy contracts: analysts’ comments

According to the data released today, Japan’s GDP showed in the first 3 months of the year annual drop of 3.7% (-0.9% from the previous quarter) after losing 3% in the final quarter of 2010, while the economists were looking forward only to 1.9% decline.

Analysts at Mizuho Securities warn that the second quarter slump may be even greater as consumer spending and exports contract. In their view, in the third quarter Japanese economy may start recovering helped by the fixing of the supply-chain disruption and the beginning of reconstruction process.

Specialists at Daiwa Institute of Research claim that even though Japan’s economy may begin rebounding in the fourth quarter, it will fall by 0.4-0.5% in the fiscal year ending March 2012. Economists at RBS Securities note that Japanese companies that have seriously suffered after the earthquake won’t be much eager to increase business spending as the situation remains too uncertain.

Analysts at Barclays Capital are looking forward to see a V-shaped recovery in Japan in the period from July to September and afterwards driven by the self-sustaining recovery in production, an increase in government consumption and reconstruction.

Bullard gives the outlook for the Fed’s monetary policy

Federal Reserve Bank of St. Louis President James Bullard claimed that US central bank is likely to keep its monetary policy unchanged until late this year. In his view, declining inflation expectations let the Fed to maintain monetary stimulus measures.

Bullard regards Treasuries as the key indicator of the public’s views on inflation. The yield spread between 10-year notes and Treasury Inflation Protected Securities fell from 2.67 points on April 11 to 2.26 percentage points today.

According to Bullard, he and other Fed members expect US economy to gain 4% during the rest of the year, while economists surveyed by Bloomberg name 2.7% for the year.

If the real growth lags Bullard’s optimistic projection, the central bank won’t hurry to tighten policy. So, everything depends on the US economic performance, underlined Bullard.

The St. Louis Fed President thinks that the tightening should begin by shrinking the Fed’s balance sheet that may be done in 5 years if the Fed stops reinvesting maturing mortgage-backed securities or outright asset sales.

Commerzbank: comments on GBP/USD

Technical analysts at Commerzbank note British pound will test one-year uptrend support line at 1.6082/45 trading versus the greenback. In their view, these levels will be able to hold initial bearish attack.

However, the specialists think that the longer-term bullish trend is wearing out as sterling gets closer to 200-week MA at 1.6969. The strategists also underline that the weekly RSI has turned lower.

According to the bank, if the pair GBP/USD falls below 1.6074/45, it will be poised down to

UBS: loonie will fall to C$1.05 per dollar by the year-end

Canadian dollar keeps strengthening against US dollar helped by the advance of crude oil price that has reached $100 a barrel. Raw materials including oil account for about half of Canada’s export revenue. The pair USD/CAD fell from 0.9792 on May 17 to the levels in the 0.9665 area today.

Strategists at UBS claim that Canada’s central bank isn’t in the mode of raising the borrowing costs yet. In their view, loonie will fall to C$1.05 versus its American counterpart by the end of the year. The specialists note that the country’s policymakers will be concerned by the risks of fiscal contraction in the United States and slowdown of the emerging-market growth.

Analysts at TD Securities have put off their forecast of Bank of Canada’s rate hike from July to September. Economists at Canadian Imperial Bank of Commerce decided to keep the forecast of July tightening, leaving though the option to change opinion in case the world’s economic outlook gets worse.

Look for Canada’s CPI report released tomorrow: economists surveyed by Bloomberg expect annual inflation pace to have risen from 3.3% in March to 3.4% in April.

World Bank: dollar's hegemony will be over by 2025

The World Bank expects that by 2025 the greenback will lose its dominant role in the global economy, reports the Financial Times. The economists believe that the European currency and Chinese yuan will occupy the equal position with US dollar in new multi-currency monetary system.

According to the World Bank, the emerging market economies will grow at 4.7% rate between now and 2025, while the advanced ones – only by 2.3% over the same period. 6 countries – Brazil, China, India, Indonesia, Russia and South Korea will account for more than half global growth in 14 years.

Euro is regarded as the main rival of US currency and its importance will increase provided that the euro area finds the way out of the debt crisis and the problems associated with bailing out European countries are solved.

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[FBS_analytics]

Commerzbank: comments on USD/JPY

Technical analysts at Commerzbank note that the greenback is testing Fibonacci resistance at 81.85 trading versus Japanese yen.

In their view, the pair USD/JPY will be limited on the upside the 100-day MA at 82.25. The specialists are looking for dollar’s consolidation ahead the next move up to 200-day MA at 82.77. If US currency manages to rise above this level, it will be poised up to the key resistance of the 4-year downtrend at 84.49.

According to the bank, if the pair declines, it will meet support at 80.98, 80.15 and the recent minimum of 79.55.

Gaitame.com: comments on GBP/USD

Technical analysts at Gaitame.com Research Institute expect British pound to drop to the minimum since April 1.

The specialists claim that the trend line from January 7 to March 28 minimum might have limited sterling’s upward momentum as it went lower. Moreover, Gaitame.com underlines that the pair GBP/USD is currently below its 20- and 60-day MA.

As a result, the analysts conclude that bullish trend is wearing off and the pound will get weaker for some time. According to Gaitame.com’s forecast, GBP/USD may fall to the $1.6065 level that’s situated on the trend line that connects December 28 and 29 minimums.

CBA: Australian companies expect AUD/USD to advance

Commonwealth Bank of Australia conducted survey among Australia’s small and medium companies.

The nation’ exporters think that by September Aussie will reach maximum at $1.16. In their view, their position is very unfavorable as this level is situated 25% above the mark when they lost price competitiveness. The survey showed that 48% of Australian exporters are going to hedge their currency exposure over the next 3 months selling A$5 million ($5.3 million)-A$500 million a year. Australia’s importers believe the pair AUD/USD will peak at $1.14 by the end of 2011.

Analysts at Commonwealth Bank sum up noting that Australian enterprises expect the national currency to stay significantly above the parity this year and at the beginning of 2012 renewing its post-float record highs.

Australian dollar has added 31% against its US counterpart during the past year rising from $0.8072 on May 21, 2010 to $1.1012 on May 2, 2011.

BofT-Mitsubishi UFJ: US dollar will keep rising versus yen

Analysts at Bank of Tokyo-Mitsubishi UFJ think that US dollar’s recent uptrend versus Japanese yen may continue. In their view, the trade may shift higher to the range between 81.00 and 82.50.

The specialists note that USD/JPY may be encouraged by the better-than-expected American economic data as it was yesterday when the nation’s economy posted only 409,000 initial jobless claims during the week before May 14, down from 438,000 the week earlier. As there is not much selling pressure from Japan exporters in recent weeks following the March 11 earthquake, there aren’t many factors to stop dollar’s advance.

According to the bank, it’s necessary to pay attention to US bond auctions scheduled on Tuesday, Wednesday and Thursday as investors tend to watch the moves of US Treasury yields.

Mizuho: forecasts for EUR/USD and GBP/USD

Analysts at Mizuho Corporate Bank note that during the last 5 days British pound was trading sideways versus its US counterpart getting support from the daily Ichimoku Cloud and Fibonacci retracement levels. The specialists say that the outlook for the pair GBP/USD will become bullish if it closes the week above 1.6350.

Economists think that euro’s advance is temporary. In their view, upward move of the pair EUR/USD will be limited by concerns about the possibility of debt restructuring in Greece. As a result, according to Mizuho, euro is likely fall below $1.40 staying under pressure during the next month.

Goldman Sachs increased NZD/USD forecast

Analysts at Goldman Sachs increased their forecasts for the pair NZD/USD.

According to the specialists, even though New Zealand’s dollar is significantly overvalued it will be stronger versus its American counterpart then they have projected earlier due to the improving economic recovery in the country and persistent weakness of the greenback.

The 3-month target for kiwi was lifted up from $0.75 to $0.78 and the 12-month prediction – from $0.76 to $0.78.

Economists surveyed by Bloomberg News, expect New Zealand’s currency to end the year at $0.76.

UBS: comments on AUD/USD

Aussie managed to recover versus its US counterpart so far rising from the levels in the 1.5000 region to the 1.0680 zone.

Analysts at UBS claim that as long as Australian dollar is trading below resistance in the 1.0717 area the outlook for the pair AUD/USD will remain negative. The specialists say that on the downside the target levels for Australia’s currency are found at 1.0505 and 1.0443.

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[FBS_analytics]

UBS: SNB won’t raise rates in the near future

Currency strategists at UBS claim that the Swiss National Bank won’t lift up interest rates as long as the national currency is very strong versus euro.

As a result, the specialists think that franc’s appreciation to the record highs against the single currency is only temporary. In their view, the European Central Bank as opposed to the SNB will continue tightening monetary policy this year when the situation at the peripheral euro zone bond markets stabilizes.
As for the near term, uncertainty about the future of Greece and other indebted European nations will keep the pair EUR/CHF under negative pressure, believes UBS.

Mizuho: Swiss franc will renew highs versus US dollar

Technical analysts at Mizuho Securities claim that Swiss franc may rise to the record high trading versus the greenback.

In their view, the pair USD/CHF is in the clear downtrend. US dollar was constrained by the resistance line connecting maximums of February 11, April 1 and May 16. On May 4 American currency hit the all-time minimum of 0.8552.

The specialists underline that the pair has been staying below the bearish Ichimoku Cloud since February 17. According to Mizuho, USD/CHF is moving down to 0.85 or 0.80.

Aussie rebounds though uncertainty is still high

Australian dollar managed to recover after yesterday’s slump versus its American counterpart. Aussie was helped by the advance of commodities that account for the major part of Australia’s exports: copper gained 1% in London and oil increased by 0.6% in New York. The market was also influenced by the comments from Goldman Sachs: the analysts expect oil, copper and zinc prices to go up.

However, specialists at Chuo Mitsui Trust & Banking warn that the market will keep being very unstable. The euro zone’s debt woes are going to remain in the center of investors’ attention. In their view, commodity currencies will decline versus safe havens such as US dollar and Japanese yen.

The pair AUD/USD is up in the 1.0560 area after sliding from Friday’s maximum at 1.0710 to Monday’s minimum of 1.0478.

Commerzbank: negative outlook for GBP/USD

British pound went down from 1.6300 getting yesterday below 1-year uptrend line at 1.6096/78. Then the pair GBP/USD managed to find support at the 50% Fibonacci retracement of 1.6054.

Technical analysts at Commerzbank, however, think that sterling’s recovery won’t last long. In their view, the pair won’t be able to overcome 1.6236. The specialists expect British currency to drop under 1.6000 towards 1.5935 and the 55-week MA at 1.5700.

Analysts’ comments on Italian debt

Standard & Poor’s has changed the outlook for Italian debt to negative. As Italy is the euro area’s third largest economy, the analysts certainly can’t remain ignorant to such move of the rating agency trying to estimate the danger of the nation’s contagion with the debt crisis.

Economists at Brown Brothers Harman claim that although they expect the credit rating of peripheral euro zone states to undergo further downgrades this year, the specialists don’t see enough grounds for S&P to cut the estimate of Italian debt. The economists underlined that Italy’s debt figures remained high but stable during the latest crisis, while the debts of other European nation surged. According to BBH, there’s the risk of downgrades of Belgium and France.

Analysts at Societe Generale sound more pessimistic as they speak about the possibilities of default. In their view, while Greece, Ireland and Portugal may default in the short term, Italy and Spain are for now out of such risk. The bank points out that unless market conditions improve, the situation in the euro area could get even worse.

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[FBS_analytics]

BNZ: NZD/USD may rise to $0.8213

Analysts at BNZ claim that New Zealand’s dollar is currently one of the most demanded currency in the world: it surged versus its US counterpart from $0.7990 yesterday approaching today the $0.8200 area.
The specialists note that kiwi is helped by the reports that China Investment Corp., Chinese sovereign wealth fund, has planned to invest 1.5% of its foreign-exchange reserves to in New Zealand’s assets.

According to BNZ, NZD/USD is poised up to the post-float maximum at $0.8213 hit in February 2008. The strategists think, however, that as there are too many bulls on kiwi right now, the pair may pause for some time. The bank says that resistance for New Zealand’s currency is found at $0.8214, while support lies at $0.8110.

UBS, BoT-Mitsubishi: US dollar will strengthen

US dollar bears are reducing their short positions on American currency ahead of the end of the Fed’s QE2 in June, reports Financial Times.

The Federal Reserve’s bond purchases flooded the county’s financial system with the excessive amount of the national currency. The greenback has weakened becoming widely used as a funding currency in carry trades. The stock of money in the US has tripled from $844 billion in August 2008 before the Fed’s first round of quantitative easing began to more than $2,390 billion.

Economists at Standard & Poor’s think that the expiration of QE2 will ease the fundamental pressure on dollar seen during the recent years. In their view, there may be a wave of short covering as investors buy back dollars that they sold earlier and this could mean that the USD downtrend’s over.

According to CME data, during the week before May 17 speculators cut the value of their US dollar shorts by $8 billion to $25.5 billion, the minimal level since January.

Specialists at UBS note that pension funds have also been reducing bearish bets on American currency so far. According to the bank, dollar will be able to get higher as the Fed’s decision to finish QE will reduce the usage of dollar in carry trades and improve the confidence of Asian central banks and reserve managers in the US currency.

Strategists at Bank of Tokyo-Mitsubishi UFJ pointed out that investors are worried about the inability of US Parliament to push through the legislation that would increase US debt ceiling. As the risk sentiment deteriorates due to this matter and also because of the euro zone’s debt crisis, the demand for safe havens such as Swiss franc, Japanese yen and also US dollar is going to increase in the coming months. However, one should remember that if US debt limit isn’t lifted by the beginning of August, the United States will face the danger of default.

Commerzbank: euro’s advance is a correction

The single currency has recovered from Monday’s minimum at 1.3970 to the levels above 1.4200 trading versus the greenback.

Technical analysts at Commerzbank regard the upward move of the pair EUR/USD as correction, though they expect euro to climb a little higher before failing at 1.4340/65 or 1.4570 representing 38.2% and 61/8% Fibonacci retracement.

According to the bank, the general outlook remains bearish. The European currency is poised down to 1.3770 (38.2% retracement of the pair’s advance from 2010 to 2011) and then 1.3463/1.3390 (55-week MA and the 11-month support line).

Otmar Issing: euro area could have avoided the crisis

Former European Central Bank Chief Economist Otmar Issing, who worked in the ECB from 1999 till 2006, came up today with rather tough comments about Greece. According to him, the nation managed to enter the euro zone using deception.

Issing says that the current crisis occurred due to the lack of monitoring and the absence of adequate sanctions for the violation of the currency union’s rules. In his view, the euro area could have avoided the turmoil if the required efforts were made.

The economist thinks that Greece won’t be able to repay its debts on its own even after the country approved an accelerated asset-sale plan and a package of budget cuts necessary to draw a fifth tranche of its bailout. As a result, Issing forecasts that the single currency will survive the crisis, but some nation may have to leave the euro area.

Deutsche Bank: EUR/USD will decline to support at $1.3500

So, EUR/USD went down from the maximums in the 1.5000 area reached at the beginning of May to the 1.4000 zone earlier this week moving within the downtrend.

Analysts at Deutsche Bank expect the single currency to lose 5 or 6 big figures more trading versus the greenback.

At the same time the specialists underline that euro’s decline will be limited by the 1.3500 level where it’s likely to find firm support that will hold during the weeks ahead.

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[FBS_analytics]

Jyske Bank: EUR/CHF keeps declining

The single currency is trading at the record minimum versus Swiss franc in the 1.2130 area after it fell from last week’s maximums around 1.2470.

Analysts at Zuercher Kantonalbank think that the pair EUR/CHF will remain under negative pressure in the short term staying today in range between 1.2200 and 1.2100. In their view, any rebounds of euro will be only temporary.

Specialists at Jyske Bank think that the pair is poised down to 1.20/19 where a great number of stop losses are concentrated.

Credit Agricole: negative outlook for EUR/USD

Analysts at Credit Agricole claim that the outlook for the single currency versus the greenback this week seems to be negative. As the main reason for the bearish forecast the specialists cited the lingering concerns about woes of euro zone’s periphery.

According to the bank, last week the pair EUR/USD managed to recover a bit, though investors still lack confidence in the region. The strategists underlined that there were no positive news to drive euro higher, just the absence of new bad events.

Even though there are some factors that may encourage the European currency, investors are to be very cautious, warns Credit Agricole. The analysts expect the tough rhetoric calling on Greece to implement more austerity measures will continue ahead of the disbursement of the next tranche of aid from EU and IMF.

Commerzbank: GBP/USD upward correction has finished

British pound went up versus the greenback from last week’s minimums in the 1.6060 area (50% Fibonacci retracement of sterling’s advance this year) rising above 1.6500 on Friday.

Technical analysts at Commerzbank think that the pair GBP/USD has reached the target of its upward correction and will reverse downwards in the 1.6480/6520 area (May 11 maximum).

According to the bank, below these levels British currency will be poised to 1.5935 and 1.5733 (55-day MA).
RBC: NZD/USD once again renewed maximum

New Zealand’s dollar rose today’s morning to $0.8215, the highest level versus its US counterpart since its free float began in 1985.

Kiwi was encouraged by the release of the nation’s trade data that showed that trade surplus in April reached the record maximum of 1.113 billion exceeding the 603-million estimate in more than 2 times.
Currency strategists at RBC Capital Markets note that after hitting the maximal level, the pair NZD/USD eased down to the levels in the 0.8170 zone. The specialists note that euro is coming under a little bit of pressure that’s weighting on New Zealand’s currency. In their view, NZD/USD will remain supported as the country’s Prime Minister Key confirmed that China expresses interest in buying New Zealand’s bonds. According to RBC, support for the pair is found at 0.8125, while resistance is situated at 0.8220.

As for the greenback, analysts at ANZ National Bank think it will keep weakening. The specialists advise to watch US economic data tomorrow that they expect to be quite unfavorable: S&P/Case-Shiller index of property values in 20 cities (released at 1:00 pm GMT) and Institute for Supply Management-Chicago PMI (due at 1:45 pm GMT).

BCC revised forecast for UK GDP and BoE rate hikes

The British Chambers of Commerce lowered the country’s economic growth forecasts and pushed back its forecast for the Bank of England’s rate hike.

The organization reduced Britain’s GDP growth forecast from 1.4% to 1.3% in 2011 and from 2.3% to 2.2% in 2012. This year growth will be slower as in the first quarter the national economy expanded less than it was expected. In 2012 GDP advance will be limited by higher inflation rate and a faster pace of rate increases.

According to BCC, UK central bank will lift up its benchmark rate from the current levels of 0.5% to 0.75% in August (in March the specialists said it would happen in May). The BoE key rate is thought to climb to 1% this year and to 2.75% by the end of 2012.

Economists at BCC think that it would be much better if the BoE increased the rates later – in the fourth quarter. However, the organization believes that British businesses will manage to deal with small increases of the borrowing costs. In any case, UK policymakers have to act with great caution and mustn’t be too aggressive in monetary tightening, underlined BCC.

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Well Fargo: US dollar may resume growth versus euro

Strategists at Wells Fargo compare the situation in Greece in May of 2011 with what was a year ago. In their view, there are both common points and differences.

As for the similarities, the source of investors’ fears remains the same, the Fed’s quantitative easing program is approaching its end and there are a lot of short USD positions. As a result, it’s possible to expect that the greenback’s weakness will be limited and that US currency will once again start strengthening in the coming weeks and months.

Though last summer the Fed began signaling the second round of quantitative easing, the specialists don’t think there will be QE3 this year, so the chance of dollar’s fall as in the second half of 2010 is also lower.

According to Wells Fargo, the most likely outcome in Europe is that Greece will keep conducting austerity measures in exchange for further financial aid. The analysts say that though this would harm euro less than debt restructuring, European authorities may be accused of avoiding more decisive and fundamental steps in resolving the crisis. However, the economists admit that the US is also facing important risks such as weak economic data and the debate on raising the debt ceiling.

Never the less, taking into account short US dollar positions, the impending end of Fed easing and European woes the analysts still think that the greenback may resume advance. Well Fargo kept the 3-month forecast for the EUR/USD at 1.4200 and the 12-month at 1.3400.

Commerzbank: Swiss franc crosses today

EUR/CHF: the analysts note that the pair has found interim technical support in the 1.2050 area and may advance to resistance at 1.2320 (March minimums). The key resistance for euro is situated at 1.2404 – while it’s trading below this level, the outlook for the pair will remain negative.

USD/CHF: the specialists advise to buy US currency at 0.8425 adding at 0.8270 and stopping below 0.8250. In their view, it’s necessary to take profit at 0.8550.

Westpac: New Zealand’s dollar may renew maximums

Currency strategists at Westpac think that New Zealand’s dollar may renew maximal levels versus the greenback in the next few weeks. The pair NZD/USD hit post-float high of 0.8262 on May 31.

The specialists note that New Zealand’s strong economic data keeps showing that the nation’s economy’s recovering. In their view, the only possible negative factor for kiwi in the near term may be a negative shock to global risk appetite caused by the problems in other regions of the world.

According to the bank, any RBNZ intervention is unlikely in the current situation as the trade weighted index of the NZD is still below 2007-2008 intervention levels and it seems useless trying to fight against the greenback’s general weakness. Westpac says that support for NZD/USD is situated at 0.8120 and that in the short term downward corrections of kiwi’s rate will be limited by this level.

UBS: positive outlook for GBP/USD

Technical analysts at UBS claim that the outlook for British pound versus the greenback is positive. In their view, the pair GBP/USD is poised up to resistance in the 1.6418 area. If sterling manages to rise above these levels, it will get chance to advance to 1.6495. According to the bank, key support for the pair is situated at 1.6302 – while pound’s trading higher UBS stick to the optimistic view on UK currency.

RBC Capital Markets: advised on how to trade EUR/USD

Currency strategists at RBC Capital Markets note that while trading euro it’s very important to choose right time frame.

According to RBC, if the agreement on Greece’s bail out is reached the concerns about the restructuring of the nation’s debt in the short-term will be eliminated and the pair EUR/USD may bounce by 300 pips. As a result, there will be a buying opportunity for short-term investors.

However, many analysts regard some kind of debt restructuring for Greece as inevitable claiming that this will eventually hit euro. So, for longer term investors RBC recommends using euro’s rally as an opportunity to set up longer term EUR shorts.

In addition, as the pair EUR/USD is strongly by the overall shifts in risk sentiment, the analysts say it would be better to trade euro versus a currency such as New Zealand’s dollar that tends to perform similarly in similar risk environments.

Analysts about the possibility of QE3 in the US

As US labor market and housing data is quite discouraging many analysts start wondering whether American monetary authorities will extend monetary stimulus to promote the rebound of the nation’s economy in form of the third round of quantitative easing.

The greenback was under pressure this year as the QE2 made the interest rates in the United States decline, while the other nations in the world were tightening monetary policy. So, the market has been looking forward to the end of the Fed’s $600-billion bond purchase program to see some relief in US currency. However, the weak macroeconomic data made brought serious doubts to the market.

Analysts at MF Capital think that declining bond yields point at the weakness of American economy. In their view, the Federal Reserve will find it necessary to act and continue buying Treasuries.

Economists at Citigroup note that the fact that US stocks are bringing better revenues than bonds. The specialists reminded that the last time it happened in a sustained way was when markets were pricing in the current round of easing. That time dollar was also weakening. Although the greenback’s trading not as weak as at the end of April, the pace of its depreciation during the last week was high enough, so it’s possible to assume that forex markets is preparing to the new stimulus program. According to the bank, Federal Reserve’s chairman Ben Bernanke will be able to persuade the FOMC to support QE3 only if US GDP posts negative dynamics in at least one quarter. As a result, Citi estimates the probability of new round of QE as low.

Economists at JPMorgan Chase are sure that the QE2 will be the last as additional monetary stimulus will lead to rather bad political consequences.

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Citigroup expects both US economy and dollar to fall

Analysts at Citigroup studied the correlation between the performance of US dollar and the nation’s economic data during the two years after Lehman Brothers’ bankruptcy in 2008.

According to the specialists, the greenback rose and fell inversely to American economy gaining in times of its weakness as investors were buying dollar as a refuge. Then the demand for US currency fell as the Fed’s monetary stimulus programs encouraged the market’s risk appetite.

However, such relationship may be over as the as prospects for additional economic stimulus diminish, claims Citigroup. The economists believe that despite unemployment above 9% and other woes, there may be no next round of easing or other measures such as 2009 American Recovery and Reinvestment Act. In their view, the market may start to think that US economic slowdown is a positive factor for others and dollar will fall together with American economy.

Citigroup strategists have developed US Surprise Index that shows that US economic data is bringing the worst results since December 2008.

Commerzbank: comments on EUR/USD

The single currency bounced yesterday from the 1.4564 area representing 61.8% Fibonacci retracement of May's decline consolidating just below 1.4700.

Technical analysts at Commerzbank claim that the pair EUR/USD is now poised to 1.472 that's the 78.6% retracement level. In their view, euro will likely fail at that point and retreat downwards.

Bernanke’s comments. US rates will remain low

Yesterday Federal Reserve Chairman Ben Bernanke called US economic recovery “frustratingly slow”. According to the policymaker, monetary policy still has to be loose as the country’s economy is still underperforming and the unemployment level remains very high. At the same time, the Fed pledged to make all effort to keep inflation under control.

As a result, the interest rates in the US will likely remain extremely low during the extended period of time. However, the Fed’s chief gave no hint about the prospects of the third round of quantitative easing the markers were expecting so desperately.

Bernanke thinks that American growth will accelerate in the second half of the year as fuel prices moderate and disruptions of parts supplies ease as factories in Japan recover from an earthquake and tsunami.

All in all, Bernanke sees the central bank’s goal in providing good fundamentals for US currency in the medium term. To do this, the Fed, in his view, has firstly to keep inflation low and stable and then to support the economy. In addition, Bernanke underlined the necessity to reduce budget deficits to ensure long-term growth without too quick spending cuts as it would derail the recovery.

The pair USD/JPY fell to 1-month minimum getting below 80 yen. Support for the greenback is found at 9.55 (May 5 minimum), while resistance levels are situated at 80.35/40 (June 6/7 maximums) and 80.60/70 (May 29/31 minimums).

UBS: comments on USD/CHF

Technical analysts at UBS have slightly bearish outlook for the greenback versus Swiss franc in the short term. In their view, it’s necessary to watch support at 0.8300. If the pair USD/CHF drops below this level, it will be poised down to 0.8165. According to the bank, resistance for US dollar is situated at 0.8453.

EUR/USD: attention to Trichet speaking tomorrow

Tomorrow European Central Bank President Jean-Claude Trichet will hold a press conference to discuss monetary policy. It’s recommended to listen if he says “strong vigilance” on inflation and describes the current policy as “accommodative”. If Trichet uses these words, then the analysts and forecasters will be almost sure that the EBC will lift up its benchmark interest rate in July.

Reuters poll on USDJPY

According to the monthly survey of 60 banks and analysts conducted by Reuters, the greenback will recover to 82.00 during the next month.

The pair USD/JPY is expected to reach 83.00 in the third quarter and then climb to 85.30 by the end of the year.

The median forecast for the greenback in the first half of 2012 is also positive. Surveyed economists think that US currency will cost 90.00 yen in a year.

Sterling: Moody’s warning, MPC meeting tomorrow

British pound declined today versus the greenback and the single currency as Moody’s Investors Service warned UK authorities that the country could lose its top AAA credit rating if its economic growth remained weak and the government failed to meet its budget deficit reduction targets.

The Bank of England will announce tomorrow its interest rate decision. Taking into account the discouraging data seen so far in Britain, the central bank’s most likely to keep the rates unchanged at the record minimum of 0.5% even though inflation is at 4.5% that’s well above the target and may go even higher. It’s also necessary to note that the hawks Martin Weale and Spencer Dale who called for the rate hike have revised their views due to recent weak UK data.

The ECB, on the contrary, is expected to increase the borrowing costs next month. The prospects of widening rate differential between the euro area and the UK will make investors increase demand for EUR/GBP.

The single currency climbed today to 1-month maximum versus sterling at 0.8974. Later, however, euro’s advance was erased due to the concerns about the European debt crisis and signs of stagnating global growth.

UBS: forecast for NZD/USD

Currency strategists at UBS advise selling New Zealand’s dollar versus its US counterpart ahead of the Reserve bank of New Zealand’s meeting. The RBNZ rate announcement is due at 21:00 GMT. The consensus is that the central bank will leave the rate at the current level of 2.5%.

According to UBS, kiwi latest appreciation is largely unjustified. The economists believe that taking into account the recent economic data that wasn’t quite favorable the RBNZ will try to cool the market’s optimism. In their view, the pair NZD/USD will ease down to 0.78 in a month and to 0.70 in 3 months.

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