Comments and forex-analytics from FBS Brokerage Company

[FBS_official]

BNP Paribas: EUR, GBP, AUD and CAD will grow

Currency strategists at BNP Paribas note that Brent crude is positively correlated with the value of euro, British pound, Australian dollar and Canadian dollar.

As the technical outlook for Brent is bullish, the specialists believe that the pair EUR/USD may reach 1.3950/1.4000, the pair GBP/USD can go up towards 1.6460, the pair AUD/USD will come back to resistance in the 1.0200/55 area and the pair USD/CAD may retest strong support at 0.9820/00.

[FBS_official]

Commerzbank: short-term GBP outlook

The pair EUR/GBP managed to get above resistance in the zone between 0.8448 and 0.8482. Technical analysts at Commerzbank note that downside momentum for the single currency is decreasing. Euro’s trying to recover versus sterling and resistance is found at 0.8530 and 0.8588.

RBC: USD/CAD is trapped between 0.98 and 1.00

Currency strategists at RBC Capital Markets note that the pair USD/CAD had peaked on Wednesday just below 0.9960 before falling back to last week's minimums in the 0.9817 area. The specialists think the greenback will find firm support at these levels. According to RBC, the range between 0.98 and 1.00 within which US dollar is trading versus its Canadian counterpart this year seems hard to break.

MIG Bank: USD/CHF under bearish pressure below 0.9506

Technical analysts at MIG Bank note that as the greenback dropped below 0.9400 versus Swiss franc it lost the support of practically all positive technical factors. The specialists believe that only if the pair USD/CHF manages to rise above the week’s maximum at 0.9506, it will be able to experience some sort of rebound. According to the bank, as long as US currency’s trading below this level, it risks slumping to 0.9100 and 0.9000.

Mizuho: GBP/USD may rise to 1.6500

British pound went down from 1.6255 to the support at 1.6140 and then rose back to 1.6200. Technical analysts at Mizuho Corporate Bank note that sterling’s consolidating below November maximums at 1.6300.

The specialists claim that the pair GBP/USD will get support from the 9-day MA. According to Mizuho, pound’s rate will get higher before a significant short-covering occurs.

The bank advises investors to buy on the rate’s decline to 1.6160 stopping below 1.6100 and expecting pound to climb to 1.6260/1.6300 and then to 1.6500.

[FBS_official]

Citigroup: EUR/USD will rise to 1.4283

Technical analysts at Citigroup claim that the single currency may rise above 1.4000 versus the greenback after it formed the reverse “head-and-shoulders” pattern that consists of 3 bottoms with the deepest in the middle. The figure began on February 2.

According to Citigroup, the pair EUR/USD may climb to 1.4030 and 1.4283.

The specialists note that the expectations of the ECB’s rate hike made the market players reconsider their previous bearish sentiment of euro.

[FBS_official]

Morgan Stanley: upward revision of euro forecast

Analysts at Morgan Stanley increased their forecasts for the European currency versus US dollar and Japanese yen.

As the reason for the forecast revision the specialists named more hawkish comments that keep coming from the European central bank. The ECB officials have spoken so far about the necessity to tighten monetary policy in order to fight rising inflation. In addition, the bank underlines that the European authorities have shown more efforts to solve the euro area’s debt problems and managed to reduce the risk of the region’s contagion.

Morgan Stanley changed target for the pair EUR/USD from $1.25 to $1.32 by March 31 and raised euro forecast from $1.20 to $1.24 by the end of the year. The pair EUR/JPY will trade at 111 yen at the end of March, while the previous estimate was at 108 yen. The year-end target for euro against yen was switched from 112 to 115 yen.

It’s also important to note that the economists reduced their March-end prediction for the pair USD/JPY from 86 to 84 yen keeping the year-end forecast at 93 yen.

[FBS_official]

Sumitomo Mitsui: euro may climb to $1.4200

Currency strategists at Sumitomo Mitsui Banking Corporation believe that the single currency may keep gaining in the next few weeks.

The specialists expect that the oil prices will remain very strong due to the tensions in the Middle East driving euro’s rate up as inflation in the euro area will increase encouraging the expectations that the European Central Bank will lift up interest rates.

Of course the inflationary pressure in the United States will strengthen as well. The analysts, however, think that the Fed will fall behind the ECB in the monetary tightening as higher oil prices could have a very negative impact on the American economy and the US monetary authorities will remain keen on the stimulus policy to support the country’s economic rebound. In addition, there are the political concerns affecting the greenback: investors are worrying that the popular protests against pro-US governments in countries like Egypt and Saudi Arabia signal that US global power is waning.

According to Sumitomo Mitsui, the pair EUR/USD may climb above 1.4150 and, possibly, even above 1.4200.

[FBS_official]

Commerzbank: comments on EUR/GBP

The single currency rose from Friday’s minimum at 0.8360 to new month maximum at 0.8575 just below the resistance of the middle-term trend line connecting October 2010 to January 2011 maximums.

Technical analysts at Commerzbank believe that the pair EUR/GBP has already reached its peak. In their view, it will ease down to support at the levels between 0.8530 and 0.8490. Above these levels the near-term outlook for euro will be bullish.

[FBS_official]

Zuercher Kantonalbank: comments on EUR/CHF

The European currency went down this week from Monday’s maximum versus Swiss franc at 1.2975 to yesterday’s minimum at 1.2705.

Analysts at Zuercher Kantonalbank claim that in order to obtain a chance of recovery the pair EUR/CHF has to close this week above 1.2800. In such case euro will be able to rise to 1.2890.

On the contrary, if the pair ends today’s trade below 1.2730, next week it’ll be poised for declines.

[FBS_official]

Mizuho: euro will rise in case of weekly close above $1.38

The single currency rose versus US dollar from the 1.3430 zone in the middle of February to new 3-week maximums in the 1.3840 region today.

Technical analysts at Mizuho Corporate Bank note that the pair EUR/USD has closed on Wednesday and Thursday above 61% Fibonacci retracement resistance at 1.3740 and above the upper edge of the “flag” pattern that indicates continuation of the trend.

The specialists claim that momentum is bullish and euro may keep appreciating if it manages to close the week above 1.3800. In such case there will be the second round of short-covering.

[FBS_official]

HSBC: RBA rate forecast

Economists at HSBC believe that the Reserve Bank of Australia won’t raise the interest rates in March. However, the specialists note that the risks of inflation surge remain. In their view, in 2011 the RBA will increase its benchmark rate by 50 basis points from the current levels of 4.75%.

Although the markets are currently pricing in the rate hike in November, HSBC thinks that it will happen earlier. According to the analysts, Australian inflation has constrained by the strong national currency and low consumer demand. Now the situation’s changing and these factors won’t be holding down inflation anymore.

While the global inflation is going up, the country has an undersupply of housing and power stations that’s boosting rents and electricity prices. In addition, wages in Australia are also increasing.

Taking into account the current strength of the country’s economy, the central bank’s policy may be not tight enough. RBA is aware of these risks, HSBC. As a result, there a bunch of factors that that can justify the next rate hikes.

[FBS_official]

UBS: use yen and franc to fund carry trades

Analysts at UBS AG claim that it became profitable to use Japanese yen and Swiss franc as funding currencies for carry trades to invest in higher-yielding assets.

The specialists advise investors to borrow in yen and franc to buy Swedish krona, Norwegian krone, euro and Canadian dollar. Norwegian krone and euro are included in this list as because the potential move in yields is going to be bigger because they’re coming from a lower base.

As exchange rates volatility may derail benefits from carry trade, it’s necessary to wait until turmoil in the Middle East and North Africa fades before elaborating such strategy.

Borrowing in yen and selling it to buy SEK, NOK, CAD and EUR has returned 33% this year. The same trade, funded by the franc, has returned 17%. Last year carry traders lost 11% on yen and 7.6% on franc.

Economists surveyed by Bloomberg News expect the EBC to increase the rate by 25 basis points in the fourth quarter and Canada’s and Norway’s central banks to raise rates by the same amount in the second quarter. Sweden’s Riksbank that has already lifted up borrowing costs for 5 times since the beginning of July may hike by 25 bps 4 more times this year.

[FBS_official]

S&P: New Zealand’s rating won’t be lowered for now

New Zealand’s dollar gained versus its US counterpart for the second day in a row as the Standard & Poor’s claimed that in the near term at least the country’s credit rating isn’t affected by the earthquake that broke out on February 22.

The rating agency said that it’s too early to make judgments about the extent of damage to New Zealand’s economy. According to S&P specialists, New Zealand’s financial system remains operational and will support an inevitable period of increased activity associated with the extensive reconstruction and repair work.

The pair NZD/USD went up from Wednesday’s minimum in the 0.7430 area rising above 0.7500. Strategists at ANZ National Bank expect that kiwi’s rate will get support from the coming short-covering.

Never the less, the bank says that the county’s GDP will lose minimum 0.5 percentage points because of the earthquake. The analysts at CMC Markets note that from growth and interest-rate point of view, New Zealand’s will likely remain under pressure. 4 out of 8 economists surveyed by Bloomberg News predict that the Reserve Bank of New Zealand will cut its 3% benchmark rate by at least 25 points. A central bank spokesman yesterday refused to comment on speculation about the unscheduled meeting that may be held to consider potential rate change.

[FBS_official]

Ichimoku. Weekly forecast. GBP/USD


Weekly USD/CHF
British currency didn’t manage to renew maximums during the past week. On the other hand, the GBP/USD retreated to 1.6100.

The general uptrend, however, remained: the Ichimoku Cloud is rising, while Tenkan-sen and Kijun-sen still hold the “golden cross” in place (3) though the pattern isn’t as powerful as it used to be. Never the less, all lines remain horizontal that points at the continuous sideways trade.



Daily USD/CHF
On the daily chart the Ichimoku indicator began pointing at the total reversal of the trend and the end of the middle term sideways trade.

That means that Tenkan-sen and Kijun-sen formed the “dead cross” (2) and headed down. In addition, the Preceding lines (1) are also directed downwards and have almost equal values.

All mentioned means that the market’s sentiment is very negative and that the downtrend may resume after a small consolidation at the current levels.

[FBS_official]

Ichimoku. Weekly forecast. USD/JPY

Weekly USD/JPY
The pair USD/JPY doesn’t want to rebound. After the bulls didn’t manage to keep the lead the week before last and, consequently, the prices failed above the Standard line (4), the past week turned out to be much more negative. As a result, the rate fell below Tenkan-sen (3).

Senkou Span A (1) continued widening down the Cloud’s range increasing the bearish sentiment at the market.

It’s clear that the local and, possibly, even historic minimums will be breached in the next few weeks.



Daily USD/JPY
The daily outlook brings nothing optimistic for the bulls as well. The Ichimoku Cloud here switched downwards as the prices were falling during the entire week. The rate didn’t get support from the horizontal Kijun (4) and Senkou Span B. Taking into account this fact, it’s possible to conclude that the bears are very strong and plan to continue the downtrend.

In addition, Сhinkоu Span broke down the price chart that confirms the market’s bearish sentiment.

Tenkan-sen and Kijun-sen (3, 4), however, didn’t manage to form the “dead cross”. So, in the near time the market may return to the lower border of the Ichimoku Cloud and go further down.

[FBS_official]

Ichimoku. Weekly forecast. USD/CHF

Weekly USD/CHF
The bearish sentiment that spread over the market last week let the rate renew historic minimums. By the end of the week USD/CHF fell to 0.9230, but then the bulls regained 50 points.

As a result of this slump, all lines of the Indicator kept declining (1, 2, 3 and 4). Even the Senkou Span В (2) that was trading sideways since the beginning of the year went down.

So, the downtrend for the greenback is very likely to continue.



Daily USD/CHF
On the daily chart the Ichimoku indicator began pointing at the total reversal of the trend and the end of the middle term sideways trade.

That means that Tenkan-sen and Kijun-sen formed the “dead cross” (2) and headed down. In addition, the Preceding lines (1) are also directed downwards and have almost equal values.

All mentioned means that the market’s sentiment is very negative and that the downtrend may resume after a small consolidation at the current levels.

[FBS_official]

Commerzbank: USD/CHF under bearish pressure

Swiss National Bank President Philipp Hildebrand claimed yesterday in an interview to the newspaper Der Sonntag that in his view Swiss economic growth may positively surprise the market. The policymaker added that he doesn’t think that rising commodity prices will affect price stability in the short term. According to Hildebrand, there’s nothing new in the moves of the currency market as investors as usual increase demand for franc due to high uncertainty. It’s important how long this is going to last, said the SNB head.

Analysts at Commerzbank believe such comments from Switzerland’s central bank mean that the country’s monetary authorities seem to be comfortable with the current situation. As the Hildebrand expects to see strong economic growth this means that the impact of franc’s appreciation on the real economy is limited. Consequently, the SNB may not regard franc as the most important factor formulating its further monetary policy, note the specialists.

From the technical point of view, the pair USD/CHF finds itself near the record minimum at 0.9233 hit on February 24. The greenback is under bearish pressure. The only remaining target is 0.9120 and, possibly, the psychological support at 0.9000, claims Commerzbank.

[FBS_official]

Commerzbank: comments on EUR/USD

Technical analysts at Commerzbank say that the European currency opened the week in a bullish mood trading versus the greenback.

In their view, the pair EUR/USD is heading up to the key resistance at February maximum of 1.3862 and further towards the 1.3950/1.4000 area representing 78.6% Fibonacci retracement of the decline from November maximums and the 200-day MA. The specialists expect that when euro reaches the target zone, it will fail.

On the downside, the single currency will find support in the near term at 1.3705/45 and then at 2-month support line at 1.3635/11

[FBS_official]

UBS: EUR/CHF will rise to 1.3500 in 3 months

Analysts at UBS recommend buying the single currency versus Swiss franc at 1.2800 with 3-month target at 1.3500.

The specialists believe that the interest-rate gap between Switzerland and the EU may widen as the Swiss National Bank’s official keep giving dovish comments while the European Central Bank’s authorities seem to be rather hawkish so far.

Franc was boosted by risk aversion over the past few days. According to UBS, however, unless the political tensions spread to some of the larger countries in the Middle East, market may calm down and demand for Swiss currency will decrease.

[FBS_official]

Emerging markets' currencies will keep outperforming

Analysts at Morgan Stanley believe that the emerging markets’ currencies will keep outperforming the currencies of the developed nations. It will happen as food prices have soared to the record maximums, while oil is trading high, at $100 a barrel. According to Barclays Capital, in emerging economies inflation is accelerating at a 6% rate, while in the developed nations this figure is equal only to 2%.

As a result, inflationary pressure in the developing countries increases and their authorities have to raise interest rates – in February rates were lifted up in Peru, China, Colombia, Indonesia and Russia. So, Morgan Stanley favors Russian ruble, Mexican peso and Malaysian ringgit.

Specialists at Nomura Holdings say that the quickest way to stem inflation is to strengthen national currency. If the country’s officials have to make a choice facing such issues as weak economic growth and high inflation, they will have to deal firstly with the latter and here comes monetary tightening.

Strategists at Citigroup believe that the first to hike will be developing countries most reliant on imported oil – fuel and mining products account for about 36% of South Korea’s imports, 25% in China, 27% for Turkey and 24% for Indonesia. These nations can’t afford to keep pursuing loose monetary policy and exchange-rate depreciation.

[FBS_official]

Mizuho: USD/JPY will drop to 80.21

The greenback went down versus Japanese yen from maximum of the middle of February at 83.95 to the 3-week minimums in the 81.60 area. Technical analysts at Mizuho Corporate Bank claim that all technical indicators signal that the pair USD/JPY will keep declining. Such situation continues since July. In their view, US currency will inevitably go down to retest multi-year minimum at 80.21.

The specialists note that US dollar is trading at the lower part of a triangle and is likely to breach the pattern. According to Mizuho, the next question is how the market will react at the all time low of 79.75 hit in 1995.

[FBS_official]

China: annual GDP growth target for the next 5 years is at 7%

Chinese premier Wen Jiabao announced that the economic-growth targets for the next 5 years are lower than the previous ones. China’s annual economic expansion target is set at 7% for the period from 2011 to 2015. From 2006 through 2010 the target was at 7.5%, with actual growth surpassing that each year and equal on average to 11.1%.

According to Wen, the main reason why China will target slower economic growth is its efforts to improve the quality of the growth and reduce inflationary pressures.

Analysts at Royal Bank of Canada note that it’s necessary to regard the new target as a signal of Beijing’s intentions over the medium term. In their view, during the past several years Chinese officials have underlined the need to move China away from a reliance on low-value-added and heavy-polluting export industries and to promote greater domestic consumption.

Wen also said that stronger yuan is in the interest of the country’s economy and people. However, yuan’s appreciation must be gradual because sharp gains of the currency would provoke bankruptcy of a number of Chinese enterprises. RBC economists note that although the comments on the currency revaluation were just a reiteration of what has been said before about gradual strengthening, Wen also made it clear that he sees the currency moving in only one direction.