Market news and trade recommendations by FBS

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GBP/USD: Ichimoku analysis (Dec. 27)

Daily. During the past week the pair has settled above Tenkan-sen (TS). This allowed the bulls to resume rebound. However, growth is only in the short term. All lines of the Indicator are horizontal, so there’s no dominating trend. At the same time, the pair’s once again approaching the yearly highs as it’s trading in the $1.64460 area. In the coming days the bulls may attempt to break the December range to the upside. This will open the way towards $1.6600.

Chart. Daily GBP/USD

H4. At H4 the pair was consolidating just below the lines Tenkan and Kijun which have formed the Dead Cross. However, in the second half of the weeks the buyers re-appeared and resumed rebound. The pair formed a Golden Cross (С), and both lines are rising now. Senkou Span A and B are going up as well. Bullish sentiment is strengthening, so the odds that the uptrend will continue are high.

Chart. H4 GBP/USD

 

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USD/CHF: Ichimoku analysis (Dec. 27)

Daily. During the past week the currency pair has been trading inside the Tenkan-Kijun channel. The prices were mostly drifting to the lower border of this range. All lines of the Indicator remain horizontal, so the sideways move may continue. Note that the odds that the downtrend will resume are high as the Cloud remains bearish and the Dead Cross (С) is still in place.

Chart. Daily USD/CHF

H4. Here the trend is sideways as well. Here the pair has also been trading inside Tenkan-Kijun channel which itself is inside the Ichimoku Cloud. However, on Friday the sellers livened up and the pair fell to the lower border of the Cloud. As Chinkou Span went below the price chart, we expect downtrend to develop in the near term.

Chart. H4 USD/CHF

 

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USD/JPY: Ichimoku analysis (Dec. 27)

Daily. USD/JPY is setting new highs. The pair has reached 105.00. So, the bullish rally continues supported by all lines of the Indicator at the daily timeframe. The Golden Cross (С) and the bullish Cloud confirm the positive sentiment. But after the prices test resistance at 105.20, the pair may start corrective decline to Tenkan-sen.

Chart. Daily USD/JPY

H4. At H4 there are yet no problems for further rebounding. All lines of the Indicator are rising as well. The Cloud is bullish. Tenkan and Kijun have once again formed the Golden Cross (С). If the pair managed to hold above support at 104.65 in the coming days, the pair will start the year by testing 105.20 and maybe even 106.00.

Chart. H4 USD/JPY

 

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ANZ: EUR/USD will continue uptrend

Analysts at ANZ point out that EUR gained 6% versus its main counterparts this year. This happened despite the fact that the ECB lowered interest rates to the record low, the euro zone’s economic recovery isn’t very convincing and the region’s unemployment remains extremely high.

ANZ concludes that the EUR depends not on comparative growth dynamics, but on a large current account surplus, improving fiscal position and the union’s progress in resolving the crisis and deepening economic integration. According to the specialists, this situation is unlikely to change in 2014. In their view, the uptrend will remain in place, especially against AUD and NZD. ANZ expects EUR/USD to trade in the $1.40/45 range.

 

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Dec. 30: Asian session

USD/JPY edged up to 105.40. Asian stocks strengthened, curbing demand for haven assets. MSCI Asia Pacific Index of shares advanced 0.2%.Yen declined on a mix of improving sentiment on the global economy, rising investor risk appetite and expectations of more Bank of Japan stimulus.

EUR/USD declined to $1.3730 after spiking to $1.3890 on Friday. Euro rose by the end of the year as the European banks tended to repatriate funds ahead of an asset review by the ECB. Mario Draghi said that he saw no urgent need to cut the euro zone’s main interest rate further and no signs of deflation. GBP/USD declined to $1.6474 after spiking to $1.6578 yesterday.

Commodity currencies are all trading under pressure, but have reversed the early-session drop. AUD/USD found support at $0.8835, holding a bit above the key $0.8820 support (Dec. 10 low). NZD/USD bounced from the $0.8115 low.

 

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BoA: EUR/USD will make a top

Analysts at Bank of America Merrill Lynch have noticed that since 2008 EUR/USD was reversing down near the long-term resistance after completing a 3-legged advance from the previous cyclical low. This time such low is at $1.2041 (July 2012 low).

So, the specialists are looking for a top and turn down. Targets lie at $1.2745 (March 2013 low) and $1.2173.

Chart. Weekly EUR/USD

 

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Analysts on USD/JPY 2014 prospects

We’ve seen an impressive rally in USD/JPY in the year 2013 – the pair rose by more than 3000 pips, recovering 61.8% Fibonacci from the 2007/2011 decline. The gradual widening of the yield spread between the US and Japan should support the pair further, as the Fed’s monetary policy will become less dovish with time, while the BOJ is expected to ease further. Our next bullish targets lie at 107.35 (200-month MA) and 108.80.

JP Morgan strategists warn about a strong bearish correction in the year 2014. “JPY has high risk of mean reversion over the next year because positioning is so stretched (shorts more than 3-sigmas from average). This extreme positioning is why we have flagged USD/JPY as vulnerable to a correction in Q2 (target 100) if the economy fails to reaccelerate quickly from a contraction induced by the consumption tax hike”. However, by the year-end analysts expect the pair to recover to 106.00.

Analysts at Deutsche Bank are much more optimistic on the USD prospects: “We are only about half way through a move that will eventually push up to and probably through 120.00 yen”. DB puts its 2014 USD/JPY forecasts at 106 in Q1, 109 in Q2, 112 in Q3 and 115 in Q4.

Chart. Monthly USD/JPY

 

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Jan. 9: Asian session

US dollar remains strong versus its main counterparts as the signs of improvement in the labor market (ADP said US private employers added a bigger-than-expected 238K jobs in December, the strongest increase in 13 months) support expectations the American economy will be strong enough for the Fed to end bond purchases this year. USD/JPY is trading in the 104.80 area after reaching 105.12 yesterday.

Asian shares wavered on Thursday after a lackluster performance on Wall Street overnight. MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.2% after snapping a five-day losing streak on Wednesday. Despite the yen's weakness, Japan’s Nikkei benchmark shed 1.4%, giving up some of its 1.9% bounce in the previous session.

Australian and New Zealand dollars are trading under pressure for a third consecutive day. AUD/USD dipped to $0.8865 before bouncing to $0.8880. AUD weakened in the Asian trade despite the strong retail sales figures (+0.7% m/m vs. forecasted +0.5%). Australia has also released pretty neutral building approvals data (-1.5% m/m). NZD/USD hit a daily low of $0.8240. New Zealand building consents rose above the forecast by 1.1%. China inflation figures came a little bit below the forecast with CPI rising by 2.5% y/y and PPI falling by 1.4%.

EUR/USD edged up to $1.3586, while GBP/USD is trading in the $1.6450 area.

 

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Soros: China is the biggest risk

George Soros remains pessimistic about the prospects of the Chinese economy. In his view, the growth model that caused its rapid rise has run out of steam. Soros believes China is the main destabilizing factor threatening the global economic recovery, and not other bleak assessments on the euro, the US political stalemate or a Japanese bubble.

Soros sees a worrisome disconnect between China's pledges to move away from excessive investment and overborrowing and toward a services-based economy without sacrificing rapid growth. “There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years," Soros wrote.

 

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Jan. 10: Asian session

Asian shares were little changed on mixed Chinese trade data. Trade surplus contracted, but the jump at imports points to stronger domestic demand and may mean that the nation’s rebalancing away from a reliance on exports to fuel growth. MSCI’s broadest index of Asia-Pacific shares outside Japan inched up by 0.1%. Shanghai stocks trimmed early losses to be almost flat. Japan’s Nikkei also pared losses to be down 0.4%, while the Hong Kong market added 0.5%.

USD/JPY is trading just under 105.00. AUD/USD is trying to recover after having dipped to $0.8880 on China trade balance figures. NZD/USD remains under a slight bearish pressure for a fourth day in a row. Kiwi remains supported by the 55-day MA at $0.8246 as of writing. Australian and New Zealand dollars may be influenced by the US nonfarm payrolls data today.

EUR/USD found support at $1.3550 yesterday and rose to $1.3616 today. GBP/USD is trading in the $1.6480 area.