Comments and Forex-analytics from FBS Brokerage Company

[FBS_Official 10]

Ichimoku. Weekly forecast. GBP/USD

 

Weekly GBP/USD

 

British currency has significantly advanced during the past week. On the weekly chart there are plenty of bullish signals.

 

Tenkan-sen and Kijun-sen still hold in place strong “golden cross” formed above Kumo, while the prices managed to close above the Turning line.

 

In addition, the Ichimoku Cloud is still directed upwards and the rising Senkou Span A is actively expanding it upwards that points at the growing power of the bullish players.

 

Daily GBP/USD

 

On the daily chart the prices recoiled from the Ichimoku Cloud that means the uptrend is going to continue.

 

Tenkan-sen went up preparing to cross the Standard line bottom-up forming the “golden cross” above the Kumo. The signal is strengthened by the Chinkou Span that has broken up through the price chart.

 

The Preceding lines have also switched upwards from the previous horizontal mode.

 

As a result, there are enough positive signals on the weekly and daily charts to suppose that this week the bulls will keep dominating at the market.

[FBS_Official 10]

Ichimoku. Weekly forecast. USD/JPY

 

Weekly USD/JPY

Last week the greenback continued strengthening versus Japanese yen – the pair USD/JPY has left the range within which it was trading since the beginning of November.

 

All lines of the Indicators except Senkou Span B have reversed upwards. The Lagging line broke up through the price chart.

 

As the same time it’s necessary to note that the bulls approach the lower border of the Cloud that will provide some resistance. The prices have chance to get inside the Ichimoku Cloud but the odds are that they won’t be able to overcome Senkou Span B.

 

Daily USD/JPY

On the daily chart Tenkan-sen is still moving up, though the bulls’ positions seem to be vulnerable.

 

The Standard line and Senkou Span B became horizontal. The signal from the “golden cross” is rather weak as Tenkan-sen and Kijun-sen intersected below the Ichimoku Cloud. The Cloud itself is very thin, so if the bears take the lead they will be able to break it quite easily.

 

It seems that the market is returning to the sideways mode.

[FBS_Official 10]

Ichimoku. Weekly forecast. USD/CHF

 

Weekly USD/CHF

All lines of the Indicator are flat that means that the pair will keep consolidating at the weekly timeframe. The bears are still strong that is shown by the wide bearish Kumo.

 

Daily USD/CHF

 

On the daily chart the long-term trend is sideways: the Standard line and the Senkou Span B are horizontal.

 

Tenkan-sen, the Turning line, has reversed downwards, so the pair USD/CHF may return to the minimums. Such assumption is confirmed by the Chinkou Span that recoiled down from the price chart. In addition, it’s necessary to note that the prices breached down Kijun-sen.

 

As a result, it’s possible to enter the market selling dollars.

[FBS_Official 10]

Commerzbank: comments on EUR/USD

 

The single currency rose last week above resistance versus the greenback at the 1.4445 level representing 61.8% Fibonacci retracement of the decline from the 2008 maximum and 78.6% retracement of the decline from 2009 high.

 

The pair EUR/USD is approaching the 1995 maximum at 1.4535. Technical analysts at Commerzbank claim that these levels will be able to hold the initial bullish attack.

 

The specialists say that the key support is situated at 1.4177. In their view, the outlook for euro remains positive as long as it’s trading above this level.

[FBS_Official 10]

Soros: China needs strong yuan

 

Famous billionaire investor George Soros claims that Chinese authorities should have let yuan’s rate strengthen in order to stem inflation. The economist notes that Chinese inflation is now out of control and there is the risk of the wage-price inflation.

 

Soros says that the appreciation of the national currency would make cheaper the foreign goods that are imported in China. Data published yesterday shows that China reported its first quarterly trade deficit in seven years as import in the firsts 3 months of 2011 exceeded exports by $1.02 billion. The government will report other first-quarter economic data on April 15. Analysts at Royal Bank of Scotland, however, don’t share the opinion that stronger yuan would help China to reduce inflation. In their view, Chinese price growth is mainly driven by strong domestic demand, while the role imported inflation isn’t very significant.

 

According to Bloomberg, in the past two years China’s currency gained only 4.6% versus the greenback, while during the same period Indonesian rupiah added 31% and South Korean won rose by 22%.

 

Economists surveyed by Bloomberg expect that inflation accelerated in March to 5.2% staying above the government targets for a ninth month.

[FBS_Official 10]

BNP Paribas, Commerzbank expect EUR/CHF to rise

 

Technical analysts at BNP Paribas believe that the European currency will consolidate versus Swiss franc above its 200-day MA found in the 1.3140 area.

 

The specialists point at the general weakness of US currency. In their view, the pair EUR/CHF will rise at least to 1.34 in the next 1-2 months.

 

Strategists at Commerzbank are as well bullish on euro even though the fact that it didn’t manage to close above February maximum at 1.3205 may lead to some near-term profit taking. The bank advises to buy euro in case it dips to 1.3000 and 1.2965.

[FBS_Official 10]

Analysts expect weak US dollar

 

The most accurate currency strategists believe that US dollar won’t be able to recover from 16-month minimum versus the European currency as the Federal Reserve is unlikely to lift up the interest rates after its $600 billion asset-purchase program expires in June.

 

Analysts at Wells Fargo and St. George Bank expect that the greenback’s rate won’t change much until the end of June as the Fed falls behind other major central banks in monetary tightening. Then dollar may begin gradually regaining its positions versus euro and yen.

 

Specialists at Schneider Foreign Exchange, Societe Generale and Bank of Nova Scotia think that US currency will continue weakening after the worst start of the year since 2008.

 

Strategists think that US dollar won’t repeat the advance it made after the end of the first round of quantitative easing in March 2010 when the Dollar Index added 10% during the 2 months.

 

Here are the forecasts for the pair EUR/USD:

 

Bank of Nova Scotia in Toronto: $1.45 (year-end)

 

Schneider: $1.42 (year-end)

 

Wells Fargo: $1.40 (end of June), $1.34 (year-end)

 

St. George: $1.38 (year-end)

 

Societe Generale: $1.50 (year-end)

 

Bloomberg survey: $1.36

[FBS_Official 10]

Sentance keeps calling for BoE rate hike

 

The member of the Bank of England’s Monetary Policy Committee Andrew Sentance signaled that last week he for the third time voted for the half-point interest-rate increase. However, hawkish Sentence remained in the minority as on April 7 the central bank left the benchmark interest rate unchanged at 0.5%.

 

According to Sentance, UK central bank has to avoid losing control of consumer prices. The VAT increase conducted at the beginning of the year will hold the prices only temporarily, thinks the specialist.

 

British Office for National Statistics will release March CPI data tomorrow. It’s widely thought that the annual inflation stayed at the highest level in almost 2 1/2 years of 4.4%.

 

The policymaker said that the market expects that the next year the BoE borrowing costs will reach 2%.

 

Last week the pair GBP/USD climbed to the maximal level since January 2010 at 1.6427. Sentance says that the rate hike won’t make pound surge to maximums seen 3-4 years ago – on the contrary, gradual appreciation of sterling will help to reduce the imported inflation that comes from rising oil and commodity prices.

[FBS_Official 10]

Barclays Capital: bearish outlook for USD/CHF

 

Technical analysts at Barclays Capital note that the greenback keeps trading within the medium-term downtrend against Swiss franc.

 

The specialists expect that the pair USD/CHF will drop to 0.8980 in the near term. If US currency doesn’t manage to hold above this level, it will be poised to fall to 0.8760.

 

According to the bank, the bearish pressure will decrease only if the greenback closes above 0.9205.

[FBS_Official 10]

JPMorgan: EUR/USD may correct downwards

 

Billionaire investor George Soros thinks that the ECB’s move to lift up the key interest rate last week to 1.25% was “quite inappropriate” as the one-size-fits-all monetary policy of the ECB and strengthening currency affect the peripheral euro zone nations.

 

Strategists at Bankhaus Metzler claim that the period of euro’s strength will soon be over. In their view, the pair EUR/USD has a chance to reach resistance at $1.4580 in the near-term and then correct downwards to the $1.38/35 during the next 3 months.

 

Analysts at JPMorgan say that if euro doesn’t manage to get above $1.45 it will decline in the short-term. The specialists advised to buy the European currency on dips.

[FBS_Official 10]

BMO Capital advised to sell New Zealand’s dollar

 

New Zealand’s dollar was rising versus the greenback during 3 weeks reaching yesterday the 0.7846 level. The strategists at BMO Capital think, however, that kiwi’s advance has come to an end.

 

Among the factors negative for the NZD there are the discouraging consequences of the earthquake, interest rates that were lowered in early March and rather modest fundamentals of the country. So, if stock markets tumble, investors lose risk appetite and the US currency begins rising, it will be gaining at fastest pace versus New Zealand’s dollar, say the specialists.

 

According to BMO, it’s necessary to sell kiwi at the current levels placing stops above 0.7905 and taking profits at 0.7630.

[FBS_Official 10]

BNP Paribas: Aussie may keep growing

 

Australia’s dollar fell the most in 4 weeks against yen and eased from its maximum versus the greenback after Japan raised the severity rating of Fukushima Dai-Ichi power plant, damping demand for higher-yielding assets. According to Tokyo Electric Power Co., the total amount of radiation leaks from the affected power plant may exceed that of the 1986 Chernobyl disaster.

 

Despite the deteriorated risk sentiment analysts at BNP Paribas claim that the overall outlook for the pair AUD/USD remains positive and Australian currency still has all chances to resume its way up.

 

The specialists base such assumptions on strong China’s trade data that means the steady demand for Australia’s goods.

 

In addition the bank draws investors’ attention to the dovish comments of some Federal Reserve members Yellen, Dudley and Evans hinting that the US central bank won’t hurry to raise the rates after the $600-bilion bond purchase program ends in June.

 

Finally, BNP Paribas thinks that during the meetings of G20 and the IMF the nations will fail to find the solution of the world’s economic imbalances, so the currency reserves diversification is likely to continue encouraging the demand for Aussie.

[FBS_Official 10]

Stiglitz: new global reserve currency needed

 

Nobel-prize laureate Joseph Stiglitz believes that in order to prevent trade imbalances that are well reflected in the US national debt, the greenback should be replaced by the new global reserve currency.

 

Last week US dollar fell to the 15-month minimum versus euro at $1.4480, while the US trade deficit widened in January to the 7-month maximum of $46.3 billion.

 

The famous economist says that the position of the United States could be much worse if the situation in Europe wasn’t so severe.

 

Stiglitz notes that the existing monetary system creates high risk that the period of low growth, inflationary bias and instability will last long. Such system is fundamentally unfair, says the specialist, as it means that poor countries are lending to the US at close to zero interest rates. To finance its budget deficits, the USA sells bonds to overseas investors and governments, boosting the dollar reserves of those nations. According to International Monetary Fund, overseas holdings of dollar reserves rose to $3.14 trillion in the fourth quarter of last year.

[FBS_Official 10]

Commerzbank: bullish outlook for USD/JPY

 

The greenback’s advance versus yen stalled yesterday at 85.50 and the pair USD/JPY dropped below 84.00. Technical analysts at Commerzbank note that it happened due to the general strength of yen. In their view, the outlook for US currency is still bullish.

 

The bank says that the pair paused right ahead of the resistance in the 85.62/84 area representing the top of the 2007-2011 down channel and the 50% retracement of the decline from May 2010.

 

The specialists believe, however, that after some profit taking dollar may rise to 87.55 and 94.50.

[FBS_Official 10]

UBS: US dollar may advance this year

 

Analysts at UBS believe that the greenback may climb this year. In their view, the faster-than-expected economic growth and rising inflation will make the Federal Reserve to tighten monetary policy. The bank didn’t specify when it expects US central bank to start lifting up the rates.

 

The specialists think that when the Fed’s $600-billion asset-purchase program ends in June, investors’ sentiment towards US currency will significantly improve.

 

According to UBS, the current trading levels of dollar crosses against euro and Australian dollar haven’t priced in the risk that the Fed can end quantitative easing. It has not priced in the risk that US policy will lead to stronger growth in America.

 

The euro may decline because the market is expecting more interest-rate increases by the European Central Bank than policy makers are likely to deliver. The market is pricing in 5 rate hikes in the next 12 months, says UBS, while the ECB is likely to raise the rates only twice more this year.

 

The pair EUR/USD added 7.3% this year. UBS forecasts that in a year the euro will be at $1.30.

[FBS_Official 10]

Barclays Capital: comments on EUR/CHF

 

Analysts at Barclays Capital expect that pair EUR/CHF to decline to the 1.2930/00 area.

 

The specialists note that the single currency has formed a small “head and shoulders” top on the daily chart.

 

According to the bank, bearish pressure on euro will ease only if the pair manages to close the day above 1.3205. In such case the 5-month double-bottom will be completed. The strategists, however, think that such outcome is unlikely taking into account the general strength of franc.

[FBS_Official 10]

Societe Generale on ECB, BoE and Fed’s rates

 

Strategists at Societe Generale claim that the ECB rates stayed at the record low during the 2 years. In their view, the time has come for ECB to show that the borrowing costs won’t stay at the emergency level forever.

 

The key question is now the extent of the tension between the core inflation in the euro area, which remains very low at round 1%, and the rising non-core components that, according to the market’s expectations, have driven headline inflation in March up to 2.6%.

 

The specialists say that it’s necessary to regard the ECB rate hike not as monetary tightening but as transfer from the troubled economies to the successful growing ones. As a result, the tensions that already exist in the euro area will strengthen.

 

“The British MPC regards inflation as a window to be looked through, while the ECB thinks of it as of a wall to be knocked down” says Societe Generale. The strategists mean that the differences in the approaches of the 2 central banks are a bit exaggerated. In their view, the Bank of England won’t lag the ECB following the European Central Bank in May. The BoE is likely to tighten at the similar pace, hiking rates by 25 basis points.

 

As for the United States, the end of quantitative easing in June may be regarded as relative tightening. The analysts remind that there is the aggressive fiscal tightening to be delivered. The Fed’s standing point is that the core inflation as well as the headline one seems to be well-behaved in the US, so any rate hike soon is unlikely.

[FBS_Official 10]

RBS lifts up forecast for AUD and NZD

 

Analysts at Royal Bank of Scotland believe that Australian and New Zealand’s dollars will keep gaining versus their American counterpart during the second and third quarters of the year. Such forecast is based on the assumption that the US Federal Reserve won’t raise the interest rates and, consequently, the greenback will lack strength.

 

The specialists expect Aussie to reach the maximum of $1.10 by September 30 and then ease to $0.98 by the end of 2012. The kiwi is seen gaining to $0.84 in the third quarter before declining to $0.77 by the end of the next year.

[FBS_Official 10]

Commerzbank: technical levels for GBP/USD

 

Technical analysts at Commerzbank note that it seem that the British pound is unable to overcome resistance in the 1.6425/65 area trading versus the greenback. The mentioned zone represents the double Fibonacci retracement and the 2010 maximum.

 

The specialists think that sterling is now poised for a decline to 1.6180 and even lower mowing down towards 1.5963/1.5880.

 

According to the bank, the bearish pressure will ease if pound breaks above 1.6465. In such case the pair GBP/USD will get chance to rise to November 2009 maximum at 1.6880 and then to 1.7040/50.

[FBS_Official 10]

Mizuho: USD/JPY is consolidating in the 83.50/85.50 area

 

Analysts at Mizuho Corporate Bank claim that in comparison with the USD/JPY volatile fluctuations seen in March, the pair is now going through a consolidation. As it was expected, dollar bounced from the top of the large “triangle” formation.

 

The specialists expect the greenback to remain today in range between 83.50 and 85.50. In their view, it’s necessary to buy US currency on the dips to 83.80 stopping below 83.45 and taking profit at 84.50 or maybe at 85.15.

[FBS_Official 10]

BIS: reserve currencies will lose

 

Economists at the Bank for International Settlements claim that nearly all reserve currencies may depreciate.

 

After studying the relationship between foreign-exchange turnover and per capita income the specialists came to the conclusion that the richer the country, the greater the turnover in their currency. As a result, it was shown that there is a relatively consistent relationship between forex turnover, trade, and GDP per capita – practically all the countries are found directly at the regression line.

 

At the same time, according to BIS, such the currencies of the United States, Japan, Great Britain, Australia and some other nations have far more forex turnover than their trade and GDP would suggest. The economists conclude that the demand for these currencies will fall. China, on the other hand, had turnover well below what its fundamental economic activity would suggest, so the forecast for yuan is quite opposite.

[FBS_Official 10]

Citi: time to cut longs on riskier currencies

 

Analysts at Citigroup claim that during the last several weeks investors’ trading strategies were determined by the positive risk sentiment. However, it’s time to finish such trade now, say the specialists.

 

According to Citigroup, the market has already priced in all possible encouraging news. The bank underlines that when the majority of players come to the single view, it should be regarded as a warning signal meaning that the situation may change in the unfavorable way quite quickly.

 

Such factors as the nuclear danger in Japan and Portugal’s applying for a bailout deteriorate the market’s attitude towards risk. The economists say that investors begin thinking that some currencies, like the Australian dollar, have surged too rapidly.

 

As a result, Citi recommend cutting longs on Canadian dollar and Norwegian krone and reducing shorts on the greenback and Swiss franc.

[FBS_Official 10]

The Guardian: 3 possible scenarios for Europe

 

EU is going to provide Portugal with bailout estimated by 80-90 billion euro on the conditions of severe budget cuts. Yet these conditions may affect the country’s economy as did those imposed on Greece and Ireland. Nouriel Roubini says that such terms are likely to prevent the problem nations from reducing their debt. Irish GDP lost 11% during 2 years, while Greece's economy contracted by 6.5% during the past year.

 

British newspaper The Guardian outlines for Europe 3 possible scenarios.

 

1. The «good news» scenario

 

The peripheral economies continue to shrink, though the contagion won’t spread to Spain. Spanish banking system looks rather solid, while most of the country's sovereign debt is held by Spaniards. In the wake of Portugal's crisis, interest rates investors are demanding from Spain have actually slightly declined. EU officials keep reassuring the market that Spain won’t need financial support, though it’s necessary to remember that the same was said about Portugal last year.

 

2. The «bad news» scenario

 

Spain with its slower growth and higher unemployment than in Portugal may seriously suffer from surging yields. As a result, the country may be forced to apply for the bailout. Spanish government has to pay 4.9% to sell 10-year bonds, close to the 5.5% offered by the European Financial Stability Fund (EFSF) for countries that have been thrown out of the financial market. In addition, Spain would probably need more than 400 billion euro. The EFSF that will exist until 2013 can raise 750 billion in total. But with Ireland and Portugal require at least 160 billion euro. Taking into account the fact that from the political point of view it’s hard to expand the rescue fund, Spanish bailout would drain the fund and Belgium or Italy may become the next weak link.

 

3. The «really bad news» scenario

 

Although Spain is unlikely to default in 2011, political protests counter the austerity measures are likely to strengthen, while Greece or Ireland may default. As a result, other peripheral nations will get under threat and there will be the risk of multiple defaults and possible rejection of the single currency.

[FBS_Official 10]

MIG Bank: bullish outlook for EUR/USD

 

Technical analysts at MIG Bank claim that the single currency has resumed its attempts to break above the multi-month “rising wedge” pattern.

 

The specialists are bullish on the pair EUR/USD. In their view, the major uptrend from June 2010 is likely to extend and euro may advance to 1.4579 (2010 maximum), 1.4710 and 1.5000 (psychological level).

 

Support levels are situated at 1.4418, 1.4249 (March 22 maximum) and 1.4000 (psychological level). If the pair falls below this level, it will be poised to fall to the previous reaction minimums at 1.3867 and 1.3752.

 

According to the bank, it’s necessary to buy euro at 1.4430 stopping below 1.4240 and taking profit at 1.4540/1.4710/1.5000.

[FBS_Official 10]

Commerzbank: decline of USD/JPY is a correction

 

Technical analysts at Commerzbank note that the recovery of the pair USD/JPY has stalled ahead of the resistance in the 85.62/64 area. In their view, support for the greenback is now found at 82.74 and 82.00 (55-day MA). The specialists think that US currency will finally manage to overcome 87.55 and 94.50.

 

Strategists at Mizuho Corporate Bank don’t believe that USD/JPY will stay below 83.50 for a long time. According to them, the trading range for today is the same as yesterday – between 83.50 and 85.50. The economists recommend buying dollars stopping below 83.20 and taking profit at 84.50 and 84.75.