Comments and Forex-analytics from FBS Brokerage Company

[FBS_Official 10]

OECD: economic forecasts for the second quarter

 

Pier Carlo Padoan, the OECD chief economist, claimed today that the European Central Bank's anticipated 25-basis-point rate rise won't have any significant negative impact on the euro zone's economy. According to Padoan, the situation in the US is different as the Fed is not as concerned about inflation as the ECB because it still has to fight high unemployment.

 

The OECD lifted its annualized growth forecast for the US in the second quarter from November estimate of 2.5% to 3.4%, for France – from 1.6% to 2.8% and Canada from 2.6% to 3.8%. The OECD lowered its second-quarter growth forecast for the UK from 1.3% to 1% and Italy from 1.6% to 1.3%. It forecasts growth of 2.3% for Germany, the euro zone's largest economy.

 

The organizations note that the developed countries should set budget consolidation as their priority. Padoan said that Portugal's instability remains the main source of worry. The country should hurry to solve its political problems and the new government has to be formed as soon as possible.

[FBS_Official 10]

Geithner: US debt will reach ceiling by May 16

 

Treasury Secretary Timothy Geithner warned the Congress that US debt will reach the country's $14.294 trillion debt ceiling no later than May 16. Earlier the Treasury Department estimated that the limit will be hit between April 15 and May 31.

 

If US lawmakers don’t raise the ceiling by this May 16, the Treasury will have to employ a range of extraordinary measures to prevent the United States from defaulting on its obligations. However, Geithner said that these measures could put off the inevitable only for eight weeks or so and the US won’t be able to borrow within the limit after about July 8, 2011.

 

The data on March 31 showed that the debt subject to the legal borrowing limit was $14.218 trillion, or roughly $76 billion under the legal cap. Typically, that's a little over two weeks of borrowing, although debt levels can fluctuate up or down on a daily basis.

 

Geithner underlined that the Treasury won’t start a “fire sale” of financial assets such as gold because this will damage financial markets making investors lose confidence in the US solvency.0:00 /07:43How to cure U.S. budget 'stupidity' If Congress doesn’t increase the debt limit, a broad range of government payments would have to be stopped, limited or delayed, including military salaries and retirement benefits, Social Security and Medicare payments, interest on the debt, unemployment benefits and tax refunds.

 

According to the official estimates, American government will need to borrow $738 billion by the end of this fiscal year.

[FBS_Official 10]

Nomura: euro risks are still high

 

Analysts at Nomura Securities claim that the single currency has been trading so far as if there was no sovereign debt crisis. The market has ignored the issues in Portugal, Ireland and Greece and the risk premium on euro has been declining since January after risk premiums were driving all the EUR/USD moves in 2010.

 

The specialists note that in case of positive outlook for euro that wouldn’t be a problem, but since the crisis is still unresolved everything may go wrong. In their view, investors have priced in about 85 to 90 basis points of interest rate hikes this year, so if the ECB doesn’t meet the expectations that will certainly harm the single currency.

 

The strategists believe that the risks of debt restructuring are rather high. According to Nomura, the restructuring solely in Greece, Ireland and Portugal will cost the core euro zone around $235 billion, while a restructuring that also involves Spain would require from the ECB about $480 billion. These numbers aren't insurmountable, but getting to them would be very difficult from the political point of view.

 

The analysts recommended selling euro versus Norwegian krone and maybe British pound.

[FBS_Official 10]

BofT-Mitsubishi: yen will keep weakening

 

Japanese yen fell to the 6-month minimum at 85.52 versus the greenback. After G7 nations conducted joint intervention on March 18 to stop yen’s appreciation that hit the postwar record maximum at 76.25 yen per dollar, the currency lost 5.1% surviving the biggest decline among 10 developed-nation currencies.

 

Analysts at Bank of Tokyo-Mitsubishi UFJ expect that the Bank of Japan will fall behind the other major central banks in ending monetary stimulus measures as the nation’s economy needs support to recover from the biggest earthquake in its history. In their view, yen is likely to remain the weakest currency for a long time.

 

The BOJ 2-day policy meeting has begun today and it is thought that the country’s monetary authorities may decide on new fund-providing measures. According to Bloomberg that is citing unnamed sources, the central bank is considering offering a credit program to spur banks to lend to companies with cash-flow shortages.

[FBS_Official 10]

UBS, ING: comments on Swiss CPI growth

 

According to the data released today, Switzerland’s CPI added in March 0.6% from the level of the previous month, while the economists were looking forward only to 0.2% increase.

 

Analysts at UBS note that such unexpectedly strong growth of Swiss consumer prices was due to the technical factors. The specialists draw investors’ attention to the fact that the CPI basket was revised: clothing was given much heavier weighting and, as a result, the index has become more volatile.

 

Currency strategists at ING explain the surprising advance of Swiss prices by the seasonal energy and clothing price increases. In their view, these factors are temporary, so there’s still no reason for the SNB to end its expansive monetary policy. The analysts reminded that, according to the Swiss National Bank forecast, the headline inflation won’t break above the 2% threshold before middle of 2013.

[FBS_Official 10]

Commerzbank: USD/JPY on its way up to 94.50

 

US dollar recovered from the record minimum at 76.31 hit on March 16 reaching the 6-month maximums above 85.00.

 

Technical analysts at Commerzbank note that the pair USD/JPY is coming closer to the key resistance in the 85.62/84 area, representing the top of the 2007-2011 down trend channel and the 50% retracement of the decline from May 2010.

 

The specialists expect that although there will be some profit taking at those levels, US currency will manage to get higher to 87.55 and 94.50.

[FBS_Official 10]

Pimco: Portugal won’t be able to withstand on its own

 

Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that the increase in the ECB interest rates and the resulting stronger euro will have a very negative impact on Greece, Ireland and Portugal.

 

The specialists claim that although the European Central bank has to make decisions for the euro area as a whole, it should probably consider the possibility of hiking rates for the strong countries while conducting more loose policy for the weakest peripheral countries.

 

According to Pimco, the best thing to do for the European monetary authorities is to acknowledge the fact that Greece, Ireland and Portugal face significant solvency challenges and some or all of them will need to restructure their sovereign and sovereign-guaranteed debt. The strategists point out that Greece’s second review of its program with the International Monetary Fund showed that the program is not working.

 

As for Portugal, Pimco thinks that the resign of the national government last month has only put off the inevitable apply for the bailout.

 

Analysts at Commerzbank share this point of view claiming that as the Portugal 5-year bond yields are still at 9.9%, it’s only a matter of time until the country has to ask for help. In their view, the outcome of today’s 6-month and 12-month bill auctions doesn’t matter as Portugal won’t be able to deal with its problems on its own.

[FBS_Official 10]

Barclays Capital: yen will lose to euro and dollar

 

Technical analysts at Barclays Capital believe that the pair EUR/JPY is getting ready to reverse its downtrend that was holding since 2008. In their view, if the single currency breaks above 122.30, it will get chance to advance to 127.95. If euro closed the week above the top of the Ichimoku Cloud at 121.95, the bulls will become strong enough to push the rate higher to 139.00 later in 2011.

[FBS_Official 10]

Rabobank, Commerzbank: comments on EUR/GBP

 

British pound weakened today versus the European currency as the UK industrial production contracted in February by 1.2% from the previous month’s level, while the economists were looking forward to 0.4% advance. The pair EUR/GBP returned to the trend line support at 0.8775.

 

Analysts at Rabobank International think that such data means that the country’s economy is still too weak Bank of England won’t lift up interest rates until November. The rate hasn’t changed since March 2009. Bloomberg survey shows that the central bank will likely keep the rates unchanged at its tomorrow meeting.

 

Strategists at Commerzbank, on the other hand, claim that the BoE will finally tighten its monetary policy and some more hawkish comments from Britain’s monetary authorities will help pound. According to the bank, sterling will strengthen to 83 pence per euro and trade at $1.60 by the end of the year. The median forecast of the economists surveyed by Bloomberg News is that the pair EUR/GBP will end the year at the 84 pence level.

[FBS_Official 10]

Canadian dollar renewed maximum versus the greenback

 

Canadian dollar rose to the more than 3-year maximum versus its US counterpart in the 0.9590 area.

 

Loonie was helped by the growth of the global equities that encouraged the demand for higher-yielding currencies. Strategists at Canadian Imperial Bank of Commerce believe that loonie’s strength is caused mainly by the weakness of US dollar due to the nation’s fiscal problems. In addition, the interest rate differential is in favor of Canadian dollar.

 

Technical analysts at Commerzbank note that the pair USD/CAD has breached the support line from October to April at 0.9607 and is now poised for a decline to 0.9577 and then to the psychologically-important 0.95 region. The specialists say that they will maintain the negative outlook for the greenback as long as it’s trading below the 55-day moving average at 0.9832.

[FBS_Official 10]

Portugal has finally asked EU for help

 

Portugal’s Prime Minister Jose Socrates announced yesterday evening in a televised statement that the country will apply to the European Commission for bailout, reports Bloomberg.

 

Socrates underlined that it’s not possible anymore to put off asking for help as the nation’s political crisis pushed borrowing costs to record levels. Socrates who leads the Socialist Party offered to resign on March 23 after parliament rejected proposed budget cuts, leaving him in charge of a caretaker government with limited powers until a June 5 election.

 

According to the information from the unidentified source, Portugal is aiming for a package that may be worth as much as 75 billion euro ($107 billion). Specialists at Credit Agricole say that Portugal may initially ask for a bridging loan to support its finances until a new government has been formed, while the full package will be delivered only after the elections.

 

Analysts at UBS note that the fact that Portugal will seek for bailout didn’t surprise the markets at all as they have long ago priced in such outcome. Economists at UniCredit also don’t think that Portugal’s announcement will provoke a new wave of the European crisis.

 

Portuguese government bonds due March 2012 were sold yesterday at an average yield of 5.902%. That’s more than Germany pays for 30-year bonds. The yield on Portugal’s 10-year government bond rose to a high of 8.80% this week. The premium that investors demand to hold Portuguese debt over German bunds reached the maximal level since euro was launched of 544 basis points on April 5.

[FBS_Official 10]

Commerzbank: comments on EUR/USD

 

The single currency climbed from last week’s minimum at 1.4020 to the 15-month maximums in the 1.4350 area breaking above the 3-year downtrend.

 

Technical analysts at Commerzbank think that although the RSI indicator has not confirmed the maximum the momentum for the pair EUR/USD will remain bullish as long as it’s trading above 1.4137. The break higher will be confirmed if euro closes the week above 1.4269/83.

 

According to the bank, resistance levels are now found at 1.4425 (long-term double Fibonacci retracement) and 1.4535 (1995 maximum).

[FBS_Official 10]

Barclays Capital: comments on EUR/CHF

 

Technical analysts at Barclays Capital claim that the single currency has to close the day above the 1.3205 level versus Swiss franc that represents neckline of the “double bottom” formation in order to get chance to rise to 1.38/40.

 

As for the near-term trade, the outlook for the pair EUR/CHF will remain bullish as long as it’s trading above 1.3040. As a result, the specialists recommend buying euro on dips.

[FBS_Official 10]

US government may shut down tomorrow

 

US government shutdown on Friday seems to be more and more likely. It will happen if the American lawmakers fail to come to an agreement on how to finance the government as the Federal budget for the current fiscal year that began on October 1, 2010, hasn’t been adopted yet.

 

Strategists at Bank of America Merrill Lynch aren’t very concerned about the matter claiming that US sovereign debt rating and the greenback won’t be affected much in case of the temporary shutdown.

 

In 1995 such happened already twice. The first time, the dollar was little moved versus euro or yen, while the second time that took place a month later, US currency actually rose against yen.

 

It’s necessary to remember that a much more important deadline is looming for the US government and investors should focus their attention on the outcome of the debate on raising the debt ceiling. Strategists at Citigroup note that it’s possible to shut down the government without defaulting, but the real default would lead to terrible consequences for the greenback.

 

Anyway, the bank says there are few reasons to be long for the greenback unless some global catastrophe makes investors rush to safe havens. According to Citigroup, dollar’s accounting for about two-thirds of global reserves, so the supply exceeds demand and investors will seek opportunities to sell the currency.

[FBS_Official 10]

Westpac advises to buy AUD/USD

 

Australian dollar once again renewed today the post-flow maximums versus the greenback at 1.0488. Aussie also strengthened to 30-month high against Japanese yen.

 

Australia’s currency was supported by the encouraging macroeconomic data: the unemployment level dropped in March from 5% to 4.9%. The number of jobs increased by 37,800, while the economists were looking forward only to 24,000 increase.

 

Currency strategists at Westpac claim, that for US dollar bears buying Aussie seems to be the best trading strategy. In March the pair AUD/USD gained 3.3%, while the pair AUD/JPY increased by 7.2%.

[FBS_Official 10]

BNP Paribas: comments on USD/JPY

 

Technical analysts at BNP Paribas claim that US dollar’s advance versus yen has slowed down as the pair USD/JPY approached resistance provided by the bottom of the weekly Ichimoku Cloud at 85.75. Today the greenback won’t be able to overcome this level.

 

In their view, upside momentum for US currency is declining. According to the bank, although yen will continue weakening during the coming weeks, the pair won’t be able to get above the top of the weekly Cloud at 87.94.

[Tams 20]

can you really trade from these info?

or are they merely promotional fillers?

[FBS_Official 10]

We just share our analytics with you.

Its up to you to decise.

We hope that it would be usefull for your trading.

[Tams 20]

We just share our analytics with you.

Its up to you to decise.

We hope that it would be usefull for your trading.

 

I mean, do you actually believe there are substance to your analysis ?

[FBS_Official 10]

I mean, do you actually believe there are substance to your analysis ?

 

I wouldn't post it if I don't.

[FBS_Official 10]

Gaitame.Com: euro may weaken versus yen

 

Technical analysts at Gaitame.Com Research Institute Ltd. claim that the single currency doesn’t manage to close above 123 yen, it will fall below the trend line connecting its March 29 and April 7 minimums.

 

In their view, the pair EUR/USD may lose more than 4% easing down to the 12-day MA at 118.42 yen and the previous level of resistance at 116 yen.

 

Euro reached the highest level since May 5 at 122.94 yen on April 6. The last when the European currency traded below 116 yen was on March 29.

[FBS_Official 10]

Commerzbank: bullish outlook for EUR/USD

 

The single currency gained almost 400 pips versus its US counterpart during the last 2 weeks and managed to break above the 3-year downtrend line.

 

Technical analysts at Commerzbank claim that if the pair EUR/USD closes the week above 1.4285, the recent bullish breakthrough will be confirmed. In their view, the outlook for euro is positive as long as it’s trading above the 4-month uptrend that’s currently at 1.4157.

 

According to the bank, the key resistance levels are found at 1.4445 (long term double Fibonacci retracement) and 1.4535 (1995 maximum). The specialists expect that these levels will hold the initial attack of the bulls.

[FBS_Official 10]

Mizuho: Fed won’t follow ECB in hiking rates

 

According to Mizuho Securities, the fact that the European Central bank raised yesterday the key interest rate by 25 basis points to 1.25% in order to stem inflation doesn’t mean that the Federal Reserve will also hurry to follow the tightening path.

 

The specialists note that the ECB President Jean-Claude Trichet claimed that the main reason of the rate hike was the oil prices’ surge. The Fed, however, traces other, less volatile indicators such as the core inflation that excludes food and fuel prices and is much lower. According to the Bureau of Labor Statistics, consumer prices less food and energy rose by 0.2% in February in comparison with January’s level.

 

To sum up, the bank is sure that the Fed won’t be influenced by the ECB's move that, of course, will harm the greenback.

[FBS_Official 10]

BOJ: the results of policy meeting

 

The Bank of Japan announced yesterday the launch of the new 1-trillion-yen loan facility for the reconstruction of those regions that were most affected by the March earthquake.

 

Analysts at Danske Bank claim that this program may hardly be regarded as an aggressive move as the total quantitative easing so far exceeds 40 trillion yen. The new loan facility will be available for maturities up to one year and with a 0.1% interest rate.

 

In addition, the BOJ claimed that eligible collateral for loans will be expanded, but details won’t be announced until the next monetary policy meeting on April 28.

 

It’s also necessary to note that, as it was expected, the central bank reduced the outlook for the nation’s economy. According to the BOJ, in the short term Japanese economy will be strongly affected by the disruptions in the supply chain and these problems will be resolved by June or July.

 

If the BOJ assumptions come true, the negative impact on Japanese economy will be largely concentrated in the second quarter of the year, while in the second half of the year the country may start recovering. The revised macroeconomic forecasts will be released on April 28 as well.

 

Economists surveyed by Reuters expect that the pair USD/JPY will keep gradually rising in the long term. According to the median forecast of the analysts of about 60 banks, US dollar will trade in the 84.00 area during the next 3 months, finish the third quarter at 86.00 and reach the 90.00 area in the first quarter of 2012.

[FBS_Official 10]

UBS: euro and yen are overvalued versus the greenback

 

Currency strategists at UBS claim that despite the European Central Bank’s rate increase the single currency is overvalued. The specialists think that the fair value for the pair EUR/USD is at $1.20.

 

The bank is very bearish on Japanese yen claiming that the natural disasters will force the Bank of Japan to hold rates at the record minimum while other major world central banks tighten their policy. According to UBS, the pair USD/JPY will rise to 90 yen by the end of this year and finish 2012 at 100 yen per dollar.