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ANZ: the prospects of RBNZ rate hike Analysts at ANZ Bank still think that the Reserve Bank of New Zealand will lift up the Official Cash Rate in December from the record low 2.5% level even despite the series of new earthquakes (magnitude 5.2 and 6) tremors in New Zealand's second largest city of Christchurch that took place on Monday and Tuesday. In their view, investors are currently pricing in 14 basis points of rate hikes by December compared with 22 points before the latest tremors. According to the specialists the market’s reaction is caused more by the inconvenience created by quakes than by a material threat to the reconstruction and economic recovery. The bank advises to watch New Zealand’s first quarter retail sales figures that will be released on Wednesday. One more important thing is the extent of increase in consumer spending after last year's weakness. The RBNZ will pay much attention to these key indicators. However, not all economists seem to be so optimistic. Strategists at TD Securities claim that the cataclysms may slow down the recovery and the cautious central bank may delay the hiking process.

Ichimoku. Weekly forecast. USD/JPY Weekly USD/JPY Last week the greenback has slightly advanced. There was a small “hammer” formed on the weekly chart that may mean that the rebound of US currency may continue. Never the less, the general outlook still isn’t in favor of bulls. The priced remained below the horizontal Standard line that will create rather strong resistance. The Turning line went rapidly down as well as the lines limiting Kumo – Senkou Span A and B., In addition, yen is still under pressure of the bearish Ichimoku Cloud. All this leads to the conclusion that the bulls lack powers for powerful jerk up. Daily USD/JPY On the daily chart Tenkan-sen and Kijun-sen formed the “dead cross” below Kumo – the strong bearish signal. Despite the fact that on Thursday the prices managed to rebound significantly, they will face strong resistance created by the Standard and the Turning lines . It’s also necessary to note that the Ichimoku Cloud shows that compared with last week the powers of bears have increased. At the same time Friday’s trade resulted in the red candle with long lower shadow, so at the beginning of the week the bulls will probably move a little bit up. However, taking into account the general negative picture the advance is likely to be short-lived.

Westpac and Morgan Stanley about Aussie’s dynamics Australian dollar went down versus the greenback as the country’s government released draft legislation on the controversial mining tax. Analysts at Westpac note that Aussie is also under pressure due to the decline of the regional equities and the deteriorated investors’ risk sentiment. According to the specialists, support for AUD/USD is situated at 1.0441. The strategists think that traders plan to buy Australian currency on the dips. Analysts at Morgan Stanley regard Aussie as the most vulnerable among G10 currencies. In their view, the factors that are traditionally encouraging the pair AUD/USD to grow such as global liquidity, commodity prices, China’s economic growth and interest rate differentials will become less supportive.

Analysts about the prospects of EUR/JPY and USD/JPY Technical analysts at Commerzbank claim that the single currency may fall versus Japanese yen as it didn’t manage to break through the key resistance at 117.85 (55-day MA). The specialists claim that if EUR/JPY goes below the uptrend line from March to June at 115.91, it will be poised to the 50% Fibonacci retracement of the advance from March to April at 114.91. Barclays Capital thinks that yen will strengthen if EUR/JPY falls below 115.50. Analysts at Deutsche Bank also claim that it’s necessary to sell euro versus yen as Japanese currency will show good results only if the Federal Reserve remains keen on the extremely loose monetary policy, but also if the risk environment deteriorates. As for the European currency, there are still severe risks associated with Greece and the ECB seems less hawkish than expected.

Citibank: EUR/USD will fall to $1.42 Currency strategists at Citibank note that the ECB's stance regarding inflation and interest rate rises is not as strong as it was thought that made investors sell the single currency. The specialists expect the central bank to raise rates next month, but they aren’t sure about the future. In their view, the pair EUR/USD will slide in the near term to $1.43/$1.42. There’s a rather strong support at $1.4419 (38.25 Fibonacci retracement of the advance from May 23 to June 7). On the upside, resistance for euro will be found at $1.46. Analysts at BNY Mellon underline that the market keeps being seized by the concerns about disagreements among euro zone’s authorities.

UBS: comments on USD/CHF US dollar went up from the record minimums versus Swiss franc in the 0.8325 area hit at the beginning of the week getting above 0.8400. Technical analysts at UBS note that USD/CHF upward move was caused by general strengthening of the greenback. In their view, however, the near-term outlook remains bearish as long as US currency is trading below 0.8500. According to the bank, key support levels are found at 0.8327 and 0.8300.

Mizuho: comments on USD/JPY US dollar tried to recover versus Japanese yen on Wednesday from the minimum at 79.79, but failed at 80.45. The pair USD/JPY returned to the 80.00 area. Technical analysts at Mizuho Corporate Bank note that the crossing MAs give the selling signal. There’s also the potential inverted “flag” and the pressing daily Ichimoku Cloud. The specialists note that the trade volume in summer is low. In their view, taking into account the current conditions it’s possible to assume that the greenback will drop. According to Mizuho, it’s necessary to sell at 80.15 stopping above 81.15 and taking profit at 79.75 and 79.15.

Commerzbank: comments on EUR/USD The single currency’s 2-week advance versus the greenback stumbled this week at 1.4700, close to the 78.6% Fibonacci retracement of May's decline. Technical analysts at Commerzbank note that the short-term outlook for the pair EUR/USD has switched to the downside. In their view, euro is now poised down to the Ichimoku Cloud support at 1.4295 and then to the recent minimum and the 200-week MA at 1.4007/1.3968.

The single currency’s down after ECB press conference The single currency declined versus the greenback as the European Central Bank is regarded now as less likely to accelerate the interest rate increases this year and the markets expect ECB to hold the borrowing costs after July increase. In addition, Jean-Claude Trichet rejected the idea of the central bank’s any direct participation in a second bailout for Greece at the press-conference yesterday. The ECB’s head said that it could accept a plan in which investors voluntarily agree to buy Greek bonds to replace maturing debt, but has no intention of rolling over its own Greek holdings. Analysts at Daiwa Securities claim that euro has the potential to fall. The specialists say that Trichet won’t compromise now as the ECB has already taken the main burden of the crisis. The ECB began buying bonds of the indebted nations in May last year. According to Barclays Capital, the central bank has so far purchased 75 billion euro worth of assets in the secondary market under its Securities Market Program, which, according to the euro area’s monetary authorities, is temporary and not designed to finance governments. As a result, the European politicians may have no choice but to ask their taxpayers to finance Greek budget shortfall that may reach 90 billion euro ($130 billion) in 2014. Analysts at Deutsche Bank claim that although the ECB can’t buy bonds on the primary market, it is able to convince private bondholders to roll over by re-launching its SMP program on the secondary market. In their view, Trichet’s comments indicate that the Europeans are still far from a fully fledged solution. On June 23-24 there will be EU summit aimed to decide on a new aid package for Greece. According to the information from 2 unnamed officials cited by Bloomberg, the new bailout plan implies that the European governments and the IMF would provide the nation with 45 billion euro more.

Pimco’s reducing investment in Treasuries Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that foreigners are questioning US dollar’s role as the world’s reserve currency because of US extremely loose monetary policy as low borrowing rates reduce the nation’s debt burden. The strategists have once again advised investors to keep away from Treasuries as these securities don’t compensate inflation – the difference between yields on 10-year Treasuries and the year-over-year CPI or the real yield was at minus 0.103% today, close to the minimal level since November 2008. Pimco notes that the size of marketable debt outstanding has more than doubled since the beginning of financial crisis to $9.7 trillion. The company reduced the share of US government debt in its assets by 3% in March and by 4% in April. According to Pimco, it’s much better to hold debt of such nations as Canada, Germany and Mexico which have better fiscal and monetary policies.

Capital Economics: QE3 is unlikely this year Analysts at Capital Economics name 3 reasons why they think the Federal Reserve won’t launch the third round of quantitative easing this year. Firstly, the slowdown of US economy may be caused by the temporary factors such as the surge of commodity prices and the supply disruptions after Japanese earthquake. The specialists underline that Bernanke still expects US growth to pick up. The Fed’s chief gave no hint of more quantitative easing and even admitted that “monetary policy cannot be a panacea”. Secondly, Capital Economics notes that after the Fed’s bond purchasing program the risk of inflation is larger than the deflation one that was taken into account when QE2 was planned last year. Finally, according to the economists the longer-term costs of QE2 could now be seen as greater than its benefits. The analysts say that easing didn’t do much to decrease the long-term interest rates. Moreover, it may have encouraged the growth of commodity prices. As a result, Capital Economics thinks that there’s a little chance of an additional program of QE in the next few months. However, the specialists don’t entirely rule out such possibility in a longer time period as next year there may be a necessity to offset the effects of fiscal consolidation.

Commerzbank: AUD/USD will fall to 1.0441 Technical analysts at Commerzbank claim that Australian dollar must have reached maximum at 1.1010 versus the greenback at the beginning of May. In their view, the pair AUD/USD may weaken in the near-term. The bank’s assumption is found on Aussie’s trade-weighted index that is likely to correct downwards by 3%. Australia’s currency didn’t manage to overcome the 1.0794 level representing 61.8% Fibonacci retracement of May's decline. The specialists believe that the pair is now poised to test May 25 minimum of 1.0441. According to the bank, AUD/USD risks to drop to December maximum at 1.0224.

BBH expect no currency intervention in Japan Japanese yen has once again strengthened to the key levels versus US dollar: the pair USD/JPY is trading in the 80 yen area. As a result, investors are speculating about the possibility of currency intervention. The IMF's acting head, John Lipsky, claimed that the G-7 countries are prepared to intervene again if it's necessary. However, analysts at Brown Brothers Harriman claim that the key conditions for the intervention that existed before the most recent intervention are not present right now. According to the specialists, the volatility is much lower now than it was in March. In addition, the difference in yield between 2-year Treasuries and 2-year Japanese government bonds is about 22 basis points, while 2 months ago it was 3 times bigger. Moreover, the USD/JPY decline may be the result of dollar’s weakness and not yen’s strength. So, taking into account all these factors BBH regards intervention as very unlikely.

BMO: recommendations on trading EUR/USD Specialists at BMO Capital Markets advice investors to act the following way: wait until Trichet speaks about the “strong vigilance” and euro’s arte bounces and then sell the single currency ahead of the comments on Greece’s crisis. As a result, the analysts recommend selling EUR/USD at 1.4650 stopping at 1.4750 and taking profit at 1.4450.

Commerzbank: comments on EUR/USD The single currency is trading sideways versus the greenback since late Monday. The pair EUR/USD stays above the 61.8% Fibonacci retracement of May's decline at 1.4569 and below the 78.6% Fibonacci retracement at 1.4732, the last defense for May maximum of 1.4940. Technical analysts at Commerzbank claim that euro won’t be able to rise above resistance at 1.4732. In their view, the pair’s going to fail and ease down to 1.4569 and 1.4384/40 (the 55-day MA and 38.2% retracement). As long as the European currency is above these levels, the general outlook for EUR/USD will remain bullish.

RBS: RBNZ will have to raise rates in prospect As it was expected, the Reserve Bank of New Zealand left the official cash rate at 2.5%. According to the central bank, one of the reasons to keep the borrowing costs unchanged was the strength of New Zealand’s dollar during the past 2 months that was acting to tighten monetary conditions lowering the cost of imports and offsetting some of the strength in export demand. In addition, the country’s monetary authorities underlined that the national economy remained weak. At the same time, the RBNZ said that as the signs of recovery seen in March continued it’s going to keep a close eye on the economy to ensure that the pace and timing of increases will be guided by the speed of recovery. The bulls took such comments with optimism. The pair NZD/USD bounced to 0.8244 before returning to trade in the 0.8190 area. Analysts at ANZ claim that support for kiwi lies at 0.8145 and 0.8110. Resistance levels are found at 0.8212 (June 8 maximum), 0.8230 (June 7 maximum) and 0.8258 (June 1 maximum). Economists at RBS note that once New Zealand will get over the earthquake consequences the RBNZ will have to tighten quite aggressively. Currency strategists at ICAP expect the central bank to raise rates by 50 basis points in the fourth quarter as the economic growth accelerates but not earlier.

UBS: forecast for NZD/USD Currency strategists at UBS advise selling New Zealand’s dollar versus its US counterpart ahead of the Reserve bank of New Zealand’s meeting. The RBNZ rate announcement is due at 21:00 GMT. The consensus is that the central bank will leave the rate at the current level of 2.5%. According to UBS, kiwi latest appreciation is largely unjustified. The economists believe that taking into account the recent economic data that wasn’t quite favorable the RBNZ will try to cool the market’s optimism. In their view, the pair NZD/USD will ease down to 0.78 in a month and to 0.70 in 3 months.

Sterling: Moody’s warning, MPC meeting tomorrow British pound declined today versus the greenback and the single currency as Moody’s Investors Service warned UK authorities that the country could lose its top AAA credit rating if its economic growth remained weak and the government failed to meet its budget deficit reduction targets. The Bank of England will announce tomorrow its interest rate decision. Taking into account the discouraging data seen so far in Britain, the central bank’s most likely to keep the rates unchanged at the record minimum of 0.5% even though inflation is at 4.5% that’s well above the target and may go even higher. It’s also necessary to note that the hawks Martin Weale and Spencer Dale who called for the rate hike have revised their views due to recent weak UK data. The ECB, on the contrary, is expected to increase the borrowing costs next month. The prospects of widening rate differential between the euro area and the UK will make investors increase demand for EUR/GBP. The single currency climbed today to 1-month maximum versus sterling at 0.8974. Later, however, euro’s advance was erased due to the concerns about the European debt crisis and signs of stagnating global growth.

Commerzbank: SNB will raise rates only in September Currency strategists at Commerzbank think that the Swiss National Bank won’t raise interest rates at its meeting next Thursday (June 16). In their view, the SNB will begin the hike cycle in September. The specialists justify their assumptions by the fact that Switzerland’s economic growth remains lower than expected and there’s currently no risk of neither deflation nor inflation. Swiss GDP growth rate went down from 0.8% in the final quarter of 2010 to 0.3% in the first 3 months of this year. The annual growth rate decreased from 3.1% in Q4 2010 to 2.4% in Q1 2011.

Reuters poll on USD/JPY According to the monthly survey of 60 banks and analysts conducted by Reuters, the greenback will recover to 82.00 during the next month. The pair USD/JPY is expected to reach 83.00 in the third quarter and then climb to 85.30 by the end of the year. The median forecast for the greenback in the first half of 2012 is also positive. Surveyed economists think that US currency will cost 90.00 yen in a year.

RBC Capital Markets: advised on how to trade EUR/USD Currency strategists at RBC Capital Markets note that while trading euro it’s very important to choose right time frame. According to RBC, if the agreement on Greece’s bail out is reached the concerns about the restructuring of the nation’s debt in the short-term will be eliminated and the pair EUR/USD may bounce by 300 pips. As a result, there will be a buying opportunity for short-term investors. However, many analysts regard some kind of debt restructuring for Greece as inevitable claiming that this will eventually hit euro. So, for longer term investors RBC recommends using euro’s rally as an opportunity to set up longer term EUR shorts. In addition, as the pair EUR/USD is strongly by the overall shifts in risk sentiment, the analysts say it would be better to trade euro versus a currency such as New Zealand’s dollar that tends to perform similarly in similar risk environments.

UBS: positive outlook for GBP/USD Technical analysts at UBS claim that the outlook for British pound versus the greenback is positive. In their view, the pair GBP/USD is poised up to resistance in the 1.6418 area. If sterling manages to rise above these levels, it will get chance to advance to 1.6495. According to the bank, key support for the pair is situated at 1.6302 – while pound’s trading higher UBS stick to the optimistic view on UK currency.

Westpac: New Zealand’s dollar may renew maximums Currency strategists at Westpac think that New Zealand’s dollar may renew maximal levels versus the greenback in the next few weeks. The pair NZD/USD hit post-float high of 0.8262 on May 31. The specialists note that New Zealand’s strong economic data keeps showing that the nation’s economy’s recovering. In their view, the only possible negative factor for kiwi in the near term may be a negative shock to global risk appetite caused by the problems in other regions of the world. According to the bank, any RBNZ intervention is unlikely in the current situation as the trade weighted index of the NZD is still below 2007-2008 intervention levels and it seems useless trying to fight against the greenback’s general weakness. Westpac says that support for NZD/USD is situated at 0.8120 and that in the short term downward corrections of kiwi’s rate will be limited by this level.

Commerzbank: Swiss franc crosses today EUR/CHF: the analysts note that the pair has found interim tehnical support in the 1.2050 area and may advance to resistance at 1.2320 (March minimums). The key resistance for euro is situated at 1.2404 – while it’s trading below this level, the outlook for the pair will remain negative.

Well Fargo: US dollar may resume growth versus euro Strategists at Wells Fargo compare the situation in Greece in May of 2011 with what was a year ago. In their view, there are both common points and differences. As for the similarities, the source of investors’ fears remains the same, the Fed’s quantitative easing program is approaching its end and there are a lot of short USD positions. As a result, it’s possible to expect that the greenback’s weakness will be limited and that US currency will once again start strengthening in the coming weeks and months. Though last summer the Fed began signaling the second round of quantitative easing, the specialists don’t think there will be QE3 this year, so the chance of dollar’s fall as in the second half of 2010 is also lower. According to Wells Fargo, the most likely outcome in Europe is that Greece will keep conducting austerity measures in exchange for further financial aid. The analysts say that though this would harm euro less than debt restructuring, European authorities may be accused of avoiding more decisive and fundamental steps in resolving the crisis. However, the economists admit that the US is also facing important risks such as weak economic data and the debate on raising the debt ceiling. Never the less, taking into account short US dollar positions, the impending end of Fed easing and European woes the analysts still think that the greenback may resume advance. Well Fargo kept the 3-month forecast for the EUR/USD at 1.4200 and the 12-month at 1.3400.