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Forecasts for January NFP figure
Friday, February 3, 2012 - 10:15

US Non-Farm payrolls data for January is released today at 1:30 p.m. GMT.

Bloomberg median forecast: +140K

Reuters’ median estimate: +150K

Prior three months:

December: 200K

November: 100K

October: 110K

ADP Non-Farm Employment Change: +170K vs. +292K in December.

Initial jobless claims 4-week MA: 375.8K vs. 374K at the end of December.

Challenger January job cuts: -53.5K vs. 18-year average of -101K.

Citigroup expects NFP to add only 100K. The bank underlines that the good outcome would only reinforce the recent trend of good US data, while a weak payrolls number could signal that expectations have begun to adjust.

Analysts at Ueda Harlow think that if US labor market figures turn out to be good and stocks rise, investors will get out of the dollar because of the low rates.

Forecasts for January NFP figure // FBS Markets Inc.

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Bullish euro forecast? Really?
Friday, February 3, 2012 - 12:00

Analysts at Bank of New York Mellon think that the dynamics of the pair EUR/USD will depend more on dollar’s prospects than on those of euro.

The specialists think that as US economic data tends to improve that will encourage global risk appetite. As a result, the greenback will be widely used as a funding currency for the carry trade: investors will borrow in US dollars in order to invest in higher-yielding overseas assets. BNY Mellon thinks that American currency will get under pressure, especially in the second half of the year.

According to the bank, EUR/USD may rise to $1.40 by the end of 2012 and maybe even to $1.45.

It seems quite unusual to read such bullish euro forecast, don’t you think?


Chart. Daily EUR/USD

Bullish euro forecast? Really? // FBS Markets Inc.

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[wynnasuju]

February 6: market situation, coming events
Monday, February 6, 2012 - 06:15

The Asian session was marked by the weak Australian data: retail sales declined by 0.1% in December (m/m). This increases the possibility of the Reserve bank of Australia’s rate cut tomorrow (consensus opinion). The RBA reduced borrowing costs by 25 bps both in November and December. In January the central bank didn’t meet. It’s necessary to note, though, that some economists think that the RBA may stay on hold expecting the retail banks to follow up their warnings on funding costs and not pass on the easing. Another point in favor of keeping the rates unchanged – good US labor market data released on Friday (unemployment fell to 8.3%).

The weekend came and went, but Greek negotiations aren’t over yet. Greece’s Prime Minister Lucas Papademos will once again meet private creditors today as yesterday the talks finished with several points still under discussion. Papademos said the leaders of Greek political parties had agreed on a series of primary issues, such as additional new spending cuts equal to 1.5% of GDP in 2012. Never the less, the Prime Minister’s statement does not mention anything on the proposals causing the most friction, which include a further reduction of minimum wage, elimination of the 13th and 14th months of salary, and massive lay-offs in the public sector.

The Troika – the European Commission, the IMF and the ECB – is currently in Athens to examine the country’s finance, it progress on promised reforms, and to estimate its funding needs. Jean-Claude Juncker, the Eurogroup president and Prime Minister of Luxembourg, claimed that Greek default remains a possibility. There will be labor union strikes in Greece on Tuesday.

The market’s risk sentiment is affected by the tensions in the Middle East, particularly in Syria and Iran.

EUR/USD went down below $1.3100. USD/JPY kept its advance rising above 76.50 yen.

To watch today:
• France's debt auction (plans to sell 8.5 billion euro ($11 billion) of bills.
• St. Louis Federal Reserve President James Bullard and President of the FRB of Dallas Richard Fisher speak amid the speculation that the Fed may avoid further monetary easing.


Chart. Daily EUR/USD

February 6: market situation, coming events // FBS Markets Inc.

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The odds of QE3 in the US declined?
Monday, February 6, 2012 - 07:45

US positive labor data released on Friday triggered speculation that the Federal Reserve may avoid further monetary stimulus.

Analysts at Brown Brothers Harriman are sure that the possibility of additional QE declined. Strategists at UBS note that if US employment data remain this strong going forward, the likelihood of further Fed easing will be lower than what the market priced in after the FOMC January 25 meeting.

As a result, the greenback now may be under less pressure than it was expected earlier. Consequently, UBS thinks that the risky currencies, such as Australian and New Zealand’s dollar will be capped and won’t be able to reach 2011 maximums. Euro, Swiss franc and Japanese yen which are the candidates for the role of the funding currency will fall against US dollar. The specialists underline that the single currency will become less and less correlated with the risk-on mode of the market.

In the short term analysts at J.P. Morgan recommend selling euro versus US and Canadian dollars. The economists say that euro may gain this week if the ECB doesn’t cut rates, so they advise to watch and see if EUR/USD manages to get to $1.3200 and then go short there stopping at $1.3600 and target $1.2800.


Chart. Daily EUR/USD

The odds of QE3 in the US declined? // FBS Markets Inc.

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CFTC trader positioning data
Monday, February 6, 2012 - 08:30

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that:

• Euro shorts declined, but remained excessive. Net shorts account for around 158K contracts, down from the previous week’s total of 171K.
• British pound shorts fell from 31K contracts on January 24 to 26K on January 31. Sterling positions are improving for the second week in a row.
• Japanese yen net longs increased from 44K contracts reported on January 24 to 57K on January 31. Yen speculative positions are just below their maximum in over a year which was reached on January 10 when contracts surpassed the August 2 level of 59K.
• Swiss franc net shorts declined from 13K contracts on January 24 to 11K net short contracts on January 31. The shorts decrease for the second consecutive week.
• US dollar longs were reduced by 1/3rd but overall positioning is not yet very significant, at around 100K contracts. Non-commercial futures traders, usually hedge funds and large speculators, decreased their total US dollar long positions from a total long position of $20.09 billion on January 24 to $14.22 billion on January 31.

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound.

CFTC trader positioning data // FBS Markets Inc.

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[wynnasuju]

GBP/USD: technical levels
Monday, February 6, 2012 - 09:30

British pound may decline versus the greenback to $1.5620/43 as the bears are currently trying to push the pair below Friday’s minimum of $1.5749. Support for GBP/USD lies at $1.5705 (February 1 minimum) and $1.5600.

The short-term outlook, however, still remains bullish. If sterling manages to get above $1.5883 (last week’s maximum), it will be able to climb to $1.6000 and $1.6165 (October 2011 high).


Chart. Daily GBP/USD

GBP/USD: technical levels // FBS Markets Inc.

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USD/JPY: technical levels, intervention risk
Monday, February 6, 2012 - 10:00

Analysts at UBS think that Japan’s monetary authorities will intervene if USD/JPY dives below 75 yen. At the same time, it seems that until the critical level is tested, Japan will use only verbal interventions, claims Credit Agricole.

Support for the pair is situated at 76.42/03 (January 31 maximum/February 1 minimum), while resistance lies at 76.87 (38.2% Fibonacci retracement of the decline from January 25 to February 1) and 77.15 (Ichimoku base line and 100-day MA).


Chart. Daily USD/JPY

USD/JPY: technical levels, intervention risk // FBS Markets Inc.

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[wynnasuju]

Short-term outlook for euro: analysts’ comments
Monday, February 6, 2012 - 11:30

Analysts at Morgan Stanley are bearish on the single currency. In their view, the pace of euro’s decline will be determined by whether Greece can meet the restructuring and austerity claims laid out by the Troika. So far, many of the major political forces in Greece have rejected demands to reduce minimum wages down to Portugal's levels, fearing that the economy would move further into recession, notes the bank.

Strategists at Commerzbank also think that EUR/USD will likely weaken as Greek situation remains unresolved. In their view, the area below $1.3050 could become critical as it could increase worries that the 10-day trading range between $1.3030 and $1.3230 will break on the downside.

Specialists at ING claim that the pair may test support at $1.3000. According to the bank, Greece will be eventually reach solution, but only after the stressful period of uncertainty. Euro will likely test the downside levels, says ING. However, the analysts warn that there’s the risk of a short-squeeze to the $1.3300 area.


Chart. Daily EUR/USD

Short-term outlook for euro: analysts

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