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SNB and the market’s confidence Wednesday, April 11, 2012 - 14:00 The Swiss National bank had no problem in defending the EUR/CHF floor set in September for more than half a year. How the difficulties have finally appeared as last Thursday euro breached the minimal level due to the surge of demand for francs and the SNB had to step in selling about 1 billion euro (so the estimates say) to bring it back. Swiss monetary authorities repeated their pledges to constrain franc’s appreciation by the level mentioned above. So, if the market once again pushes euro below that point, the SNB will push it up again. The central bank didn’t eliminate the threat of euro’s plunging below 1.20. The core of the problem is that there are the banks trading EUR/CHF and the transactions of which the SNB can’t monitor in time as they don’t have credit lines with it. If such lines were established and the SNB all dealers on the ICAP-owned EBS system it would be able to prevent piercing of the EUR/CHF floor. In addition, the SNB could mandate some banks to help it defend the floor. However, the Swiss central bank already accepts more than 100 banks with more than 700 trading desks as counterparties and it’s hard to capture every single legitimate trading account on EBS at all times, so this probably wouldn’t work either. The fact is: almost a week passed since April 5, but the ‘breaking the floor’ story hasn’t repeated. It means that the market still has enough faith in the SNB. At the same time, new attempts of euro bears to test the central bank’s resolve are still quite likely as the policymakers delivered nothing new. Chart. H4 EUR/CHF SNB and the market Be successful with FBS

Euro area: debt auctions, EUR/USD Wednesday, April 11, 2012 - 12:15 Germany: sold 3.87 billion of 10-year benchmark bunds euro out of targeted 5 billion euro. Yield declined to 1.77% (from 1.83%). Italy: sold a total 11 billion of 3- and 12-month BOT’s: - 3 billion euro of 91-day bills, yield 1.249% (from 0.492%); - 8 billion euro of 361-day bills, yield 2.84% (from 1.405%). EUR/USD dip back briefly below $1.3100 on the news that German government failed to borrow as much as it has planned, but then recovered as periphery stocks extended their rallies and as periphery/German bond spreads kept narrowing. Resistance: $1.3136 (100-day MA), $1.3165 (April 5 maximum) and $1.3200. Support: $1.3033 (April 9 minimum), $1.3004 (March 15 minimum) and $1.2974 (February 16 minimum). Chart. Daily EUR/USD Euro area: debt auctions, EUR/USD // FBS Markets Inc. Be successful with FBS

Analysts: outlook for sterling Wednesday, April 11, 2012 - 12:15 Analysts at Morgan Stanley are bearish on the euro and the pound vs. the greenback. In their view, in a year the EUR/USD and the GBP/USD will weaken to $1.15 and $1.46 respectively. According to the specialists, there are signals that the market's optimism has started to fade as the European economies are still facing plenty of difficulties. Risk aversion and increased asset market volatility will hurt the pound. UniCredit currency strategists also don’t expect the cable to climb higher than $1.60 unless something extraordinary happens. However, Mizuho analysts believe the U.K. economy is gradually growing, and the sterling will gather momentum when the global markets stabilize. Moreover, the pound benefits from serving as a safe haven within Europe. Chart. Daily GBP/USD Analysts: outlook for sterling // FBS Markets Inc. Be successful with FBS

Westpac: trading EUR/CAD Wednesday, April 11, 2012 - 09:30 Strategists at Westpac Institutional Bank are bearish on euro vs Canadian dollar and advise to sell the EUR/CAD at $1.3080 level with a stop at $1.3170 and a target of $1.2770. In their view, Canada’s surprising job growth (82K in March versus 11K forecasted) and possible hawkish actions of the Bank of Canada (on a meeting 17-18 April key interest rate may be hiked from current 1%) will support the loonie. However, if the U.S. labor market data will remain negative, it may weigh on the Canadian currency. Chart. Daily EUR/CAD Westpac: trading EUR/CAD // FBS Markets Inc. Be successful with FBS

Large options expiring today Wednesday, April 11, 2012 - 09:00 Here are the options expiring today at 2 p.m. GMT. EUR/USD: 1.3025, 1.3080, 1.3100, 1.3145 and 1.3200; GBP/USD: 1.5800, 1.5900; USD/CHF: 0.9140; AUD/USD: 1.0250, 1.0300 and 1.0425 (large); EUR/GBP: 0.8260; AUD/JPY: 83.70; USD/JPY: 81.00 (large), 81.50, 81.65. Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. Large options expiring today // FBS Markets Inc. Be successful with FBS

Commerzbank: technical levels for EUR/USD Wednesday, April 11, 2012 - 08:45 Technical analysts at Commerzbank claim that support for EUR/USD lies at $1.3032. If the pair drops below this level, it will decline to $1.2974/54 (February minimum and 61.8% Fibonacci retracement of the single currency’s advance from January minimums to February maximums) and then to $1.2624. The specialists claim that resistance for euro is found at $1.3207 (55-day MA) and $1.3487 (February maximum). Chart. Daily EUR/USD Commerzbank: technical levels for EUR/USD // FBS Markets Inc. Be successful with FBS

SocGen: trading EUR/USD Wednesday, April 11, 2012 - 08:15 Strategists at Societe Generale advise to go short on the EUR/USD, entering the trade at 1.3100 with a stop at 1.3250 and a target of 1.2600. According to analysts, unsuccessful bond auctions in Europe and recent negative U.S. NFP data point to likelihood of another possible round of QE. Before the lackluster reports were out, investors believed QE3 may be beneficial for risky assets. However, now it became clear that the further monetary easing will point at grave problems in the global economy. The risk-off market mode and troubles in Spain and Italy will weigh on the common currency. Chart. Daily EUR/USD SocGen: trading EUR/USD // FBS Markets Inc. Be successful with FBS

USD/JPY: upward correction may be coming Wednesday, April 11, 2012 - 08:00 US dollar keeps trading within downtrend versus Japanese yen sliding from March maximums above 84 yen. USD/JPY has reached the lower line of the price channel and is now likely rebound targeting the upper line of the channel during the next several days. The greenback may get support from strong bids in the 80.50/55 area and October 2011 maximum in the 79.50/55 region. State Street Bank: “It’s a bit too early now for the market to trade on the Bank of Japan's meeting on April 27. But expectations of further easing mean the yen is unlikely to keep rising, beyond the 80 yen mark. But the market will probably start trading on it perhaps next week.” Longer-term outlook Warning from RBS: “There’s an unrealistic expectation of how early central banks will tighten in the world outside Japan. If the market moves to reflect that and we see 2-year yields in the US and the rest of the world come down back toward Japanese levels, the upward pressure on the yen will reemerge.” The 2-year yield spread between US and Japanese bonds widened to 0.20 from 0.08 percentage point in January. RBS thinks USD/JPY may decline to 73 yen by the end of 2012. Chart. H4 USD/JPY USD/JPY: upward correction may be coming // FBS Markets Inc. Be successful with FBS

JPMorgan: EUR/JPY’s facing resistance Wednesday, April 11, 2012 - 07:15 Technical analysts at JPMorgan Chase believe that EUR/JPY may decline to the minimal level since February of 104 yen. The specialists note that the pair has reached resistance in the 105.65/106.00 area (38.2% Fibo retracement of an advance from January minimum to March maximum, 200-day MA and March minimum). Japanese currency weakened versus the majority of its peers as the Bank of Japan has left yesterday its policy unchanged and the market’s now pricing in easing at the BOJ’s second meeting this month that will take place on April 27. Chart. Daily EUR/JPY JPMorgan: EUR/JPY Be successful with FBS

Euro area: auctions, yields and euro Wednesday, April 11, 2012 - 07:00 The market’s opened in the risk-off mode today: Asian shares dropped today after S&P 500 lost 1.7% yesterday and European stocks fell to 10-week minimum on Tuesday. Italian 10-year yields rose yesterday to 5.69%, the maximum since February, while Spanish ones reached the highest level since December of 5.99%. Note, however, that the picture for today isn’t entirely grim as Italian/German and Spanish/German 10-year yield though slightly, but narrowed. Investors are waiting for Italian debt auctions: the nation aims to sell 11 billion euro ($14.4 billion) of bills today (3 billion euro of 91-day bills and 8 billion euro of 361-day bills) and longer-term debt tomorrow (due in 2015, 2020 and 2023). Results are due around 10:10 GMT. In addition, Germany plans to sell up to 5 billion euro of 10-year bonds. Results are due after 09:30 GMT. Analysts at Mizuho see no reason to buy euro. Nomura adds that if EUR/USD closes below $1.3050, it will slide to $1.2600. Chart. Daily EUR/USD Euro area: auctions, yields and euro // FBS Markets Inc. Be successful with FBS

Mizuho: dollar may rise to 105 yen Wednesday, April 11, 2012 - 07:00 According to analysts at Mizuho Corporate Bank, the greenback may strengthen to 105 yen over the next couple of years (a highest level since October 2008). On a weekly Ichimoku chart, the USD/JPY rose above the Kumo (3), clamped between the Kijun (2) and Tenkan (1) lines. Mizuho specialists say this pattern means the dollar will strengthen further to 85 yen and then to 105 yen. On a monthly chart, analysts expect the pair to overcome the top of the cloud in two years. Chart. Weekly USD/JPY Mizuho: dollar may rise to 105 yen // FBS Markets Inc. Be successful with FBS

RBS: outlook for EUR/GBP Tuesday, April 10, 2012 - 14:00 According to RBS analysts, the Britain’s economy is moving in a positive direction. The outlook is still not clear-cut, but recent better-than-expected data show that in Q1 the economy of the region is growing. Specialists direct our attention to the bunch of positive PMI data (particularly, service and construction PMIs). Mixed household, public and financial sectors data don’t permit to make a completely favorable long-term forecast, but the GDP seems to have improved in Q1. Stronger growth will help the government to meet the deficit reduction plans. Specialists forecast the EUR/GBP to weaken to 0.8080 level. However, the 'doji' pattern on Friday and the upward movement at the beginning of the week promise a correction to 8280/8315 levels. Strategists recommend going short with a stop loss at 0.8352. The downside targets remain at 0.8223 and 0.8192 levels. Chart. Daily EUR/GBP RBS: outlook for EUR/GBP // FBS Markets Inc. Be successful with FBS

UBS: trading USD/JPY on the BOJ Tuesday, April 10, 2012 - 13:30 Analysts at UBS believe that the Bank of Japan will deliver the expected easing at its second meeting this month on April 27. The specialists underline that this way Japanese central bank will have time to adjust their policy to what the Federal Reserve comes up with on April 24-25 justifying the policy with an updated Outlook Report. In their view, the BOJ may: - Extend Asset Purchase program from the end of 2012 to June 2013 or longer; - Extend APP by at least another 5 trillion yen, concentrated in government bonds component; - Remove the limit of buying the JGBs via the APP of only those issues with 2 years left to maturity or less; - Raise inflation target from 1% to 2%. How to trade using such assumption: UBS expects USD/JPY to drift down to 80.00/50 and then start rebound after the BoJ meeting on April 27 aiming to 85.00 yen in 3 months (if the Fed’s approach remains unchanged). Chart. Daily USD/JPY UBS: trading USD/JPY on the BOJ // FBS Markets Inc. Be successful with FBS

RBS: trading GBP/USD Tuesday, April 10, 2012 - 12:45 Technical analysts at RBS recommend buying British pound versus the greenback at on the dips to $1.5810/35 stopping at $1.5750 and targeting $1.6072. The specialists note that GBP/USD will face strong resistance in the $1.6072/91 (“tweezer top” formed in November 2011). There’s also resistance at the recent highs of $1.5930 and $1.5987. If the forecast doesn’t realize, then the important downside levels lie at $1.5666 and $1.5585. Chart. Daily GBP/USD RBS: trading GBP/USD // FBS Markets Inc. Be successful with FBS

The banks recommend selling euro Tuesday, April 10, 2012 - 12:00 Danske Bank: sell EUR/USD at $1.3097, target $1.3004 and stop at $1.3169. Commerzbank: sell EUR/USD at $1.3350, target $1.3025 and lower stops from $1.3415 to $1.3355. The pair has been trading in a very volatile way today. Data from France and Germany wasn’t bad, but Sentix Investor Confidence was disappointing with -14.7 in April from -8.2 in March. Chart. Daily EUR/USD The banks recommend selling euro // FBS Markets Inc. Be successful with FBS

Commerzbank: comments on EUR/JPY Tuesday, April 10, 2012 - 11:30 Technical analysts at Commerzbank claim that the single currency may rebound versus Japanese yen from support in the 105.93/65 area (200-day MA, 38.2% Fibonacci retracement of EUR/JPY’s advance in 2012). There’s also an upper border of the Ichimoku Cloud at 106.15 yen. The specialists think that the pair may rise to resistance at 108.07/65 from where it will start suffering from negative pressure. In their view, euro’s sell off may begin at 111.13 (April 2 maximum) and the pair may decline to the lower border of the Cloud at 103.50. Chart. Daily EUR/JPY Commerzbank: comments on EUR/JPY // FBS Markets Inc. Be successful with FBS

Bank's forecasts for FX majors Tuesday, April 10, 2012 - 10:30 Data were submitted on April 5 Source: FX Week Bank's forecasts for FX majors // FBS Markets Inc. Be successful with FBS

U.S. companies earnings expected to drop in Q1 Tuesday, April 10, 2012 - 09:45 On Tuesday, April 10, U.S. companies start to announce their first-quarter earnings. According to FactSet analysts, earnings for S&P 500 companies are expected to decrease by 0.1% in the first quarter compared to a year ago. It may serve as a negative signal for the U.S. economy as a whole, because earnings had been rising for the previous nine quarters. Year-over-year earnings growth has been at least 10% for all but the last period, when it was 6%. Three months ago the forecast for the first quarter was 3% earnings growth. The slowdown may be caused by European debt crisis or by mathematical growth constraints. In any case, the unsteady growth shows the economy is still weak and vulnerable. Analysts at Barclays Capital believe the negative earnings results in the short term may weigh on risky currencies, for example, on the Aussie. Funding currencies like the Swiss franc and the yen will temporarily strengthen against the greenback. The first data release to watch is scheduled on Tuesday: the U.S. aluminum giant Alcoa will post its quarterly report. Earnings Calendars U.S. companies earnings expected to drop in Q1 // FBS Markets Inc. Be successful with FBS

The outlook for AUD/USD Tuesday, April 10, 2012 - 07:45 Today’s dynamics On the upside Australian dollar was helped by Bernanke’s comments that American economy is far from a complete recovery which was taken by the market as the sign of more easing coming, especially after payrolls increased less than expected in March. In addition, Chinese data released today has positively surprised the market: the nation posted $5.35-billion trade surplus last month vs. the forecast of $3.15-billion deficit (Bloomberg). There was also a private report which showed that business confidence in Australia rebounded. On the downside Aussie was discouraged (especially against yen) after the Bank of Japan kept the monetary policy unchanged, while the market has been pricing in more easing. Asian stocks fell and Australia’s bonds surged driving the yields to the lowest since February 7. Technical levels The pair AUD/USD keeps trading within downtrend channel aiming to $1.0145 (January 9 minimum). Resistance: $1.0355 (today’s maximum) and $1.0462 (April 3 maximum). Support: $1.0043 (December 29 minimum) and 0.9865 (December 15 minimum). Data to watch Barclays Capital: - Australian employment data (April 12): Barclays’ forecast is employment change of 0K and unemployment rate of 5.3%. Any sign of weakness in labor market would likely add to the concerns about domestic economy and additional AUD negative. - Australian CPI figures (April 23). The RBA opened the door for further easing at next meeting in May and the data releases mentioned above will determine the central bank’s decision. Chart. Daily AUD/USD The outlook for AUD/USD // FBS Markets Inc. Be successful with FBS

EUR/USD: economic news and technical levels Tuesday, April 10, 2012 - 07:30 The single currency rose to $1.3145 earlier today, but then slid to $1.3095 area. German trade balance in February was right as analysts expected with surplus of 13.6 billion euro. At least there’s no disappointment here. The nation’s exports added 1.6% surpassing the forecast of +0.4%. French industrial production rose in February slightly higher than expected (+0.3% vs. +0.2% forecast). Sentix investor confidence is another important release for today. Euro was helped by the speculation about more QE in the US after yesterday’s Bernanke speech (though the Fed’s Chairman only said that there’s no recovery yet without going into details and specking about monetary policy). More members of FOMC will speak this week and Bernanke will appear in public one more time on Friday. So, don’t miss the comments and consult our economic calendar for the exact schedule (Fisher, Lockhart and Kocherlakota are to speak today). EUR/USD’s upward correction looks shallow. There will be many shorts at $1.3165 (April 5 maximum). If the pair manages to overcome this resistance, it will be able to get to the top of the daily Ichimoku Cloud at $1.3263. Support lies at $1.3060, $1.3030, $1.3000 (March 15 minimum) and $1.2974 (February 16 minimum). Chart. H4 EUR/USD EUR/USD: economic news and technical levels // FBS Markets Inc. Be successful with FBS

EUR/USD: bears vs. bulls Tuesday, April 10, 2012 - 07:15 Bearish outlook The common currency grew 2.95% in the first quarter on the back of the approval of a second bailout package for Greece after a debt-swap with the country’s private-sector investors. The worries of the market participants about the new wave of the crisis declined due to the operation. In the second quarter, according to Westpac analysts, the austerity measures, deleveraging and poor growth are steadily driving the economy into a recession. “The ECB may need more QE and the Fed is basically on hold, and that should mean interest-rate differentials move in the dollar’s favor”, analysts say. BBH: Political risk ahead of the French and Greek upcoming elections and eventual weakening economic reports in the Euro zone should push the EUR/USD below the $1.297/1.300 range. Eyes will be on the Italian bond auction on April 12. Bullish outlook However, some analysts are positive on the prospects of the common currency. In their view, the EU policymakers possess enough financial mechanisms to help indebted countries to surpass the crisis. Spain and Italy are unlikely to require financial aid and the U.S. isn’t growing fast enough for the Fed to start raising interest rates. HSBC: EUR/USD is expected to trade in the range $1.30/35. There are no signs at the market that Spain alone can push the pair below $1.3000. However, if something extraordinary happens and the euro breaks this level, the next support line lies at $1.2600. Rabobank: euro may climb to $1.35 in 9 months and to $1.40 a year from now as the Fed keeps interest rates at a record low and the U.S. moves to cut its budget deficit after presidential elections in November. Chart. Daily EUR/USD EUR/USD: bears vs. bulls // FBS Markets Inc. Be successful with FBS

US and Asian sessions briefly Tuesday, April 10, 2012 - 06:30 US: The Fed’s Chairman Ben Bernanke didn’t mention monetary policy in his speech, though noted that American economy is far from a complete recovery which was taken by the market as an argument for further easing. As a result, the greenback weakened versus the majority of its counterparts. Speeches are also scheduled for Dallas Fed President Richard Fisher, Atlanta Fed President Dennis Lockhart and Minneapolis Fed President Narayana Kocherlakota. Asia: Bank of Japan’s meeting: rates unchanged at 0.1%, no new easing measures announced. Although such decision was in line with the forecasts, USD/JPY fell by about 25 pips after the announcement from Asian session high at 81.86 yen. Morgan Stanley MUFG Securities, Mizuho Securities and SMBC Nikko: the BOJ will expand asset purchases when it next meets on April 27. China: trade balance +$5.3 billion; imports +5.3% (y/y), exports +8.9% (y/y). Australia: NAB business confidence rose, job advertisements +1% (m/m). Stock markets show mixed performance. Chart. Daily USD/JPY US and Asian sessions briefly // FBS Markets Inc. Be successful with FBS

EUR/USD: prospects remain unclear Monday, April 9, 2012 - 14:15 On Monday, April 9, activity on the European markets remains weak due to Easter holidays in Germany, France, Switzerland, Italy and Great Britain. Given the rising Spanish bonds yield and increasing uncertainty about the country’s prospects, the future of the euro doesn't look bright. On the other hand, data on U.S. labor market, released on Friday, also seems to be negative (non-farm payrolls rose by 120K versus the expected 207K). However, most analysts believe the U.S. labor market data won’t have a significant effect on the market. BNP Paribas: The NFP data are quite comforting, since the cuts that occurred in March are very likely to be reversed afterwards. SunbirdFX: The euro may strengthen from the $1.300 strong support level to $1.315 or break the Head & Shoulders pattern lying above the support and slide to $1.280. Chart. Daily EUR/USD EUR/USD: prospects remain unclear // FBS Markets Inc. Be successful with FBS

US yields’ advance is likely to slow down Monday, April 9, 2012 - 13:00 So far there was a lot of talk about rising US Treasury yields which helped to push USD/JPY up and breach its long-term downtrend. Is this really a reversal of the 30-year bullish market characterized by increasing bond prices and declining yields and the demand for treasuries will start declining? Not likely. Reasons of high demand for Treasuries: 1) Reduction of supply: data from CRT Capital Group LLC shows that the net amount of Treasuries available will decline by 30% once proceeds from maturing securities are reinvested and fall by an average of $99.4 billion of investable cash a month. Average maturity of government debt has risen from 49.4 months in last quarter of 2008 to 62.8 months with the help of Operation Twist (shorter maturities in the Fed’s holdings are replaced with longer-term debt to cap longer-term rates), while the amount of American debt increased by $4 trillion. 2) Treasuries remain the safe haven #1 with few alternatives as the global economic prospects remain uncertain and there are severe problems looming over particular regions, such as the euro area. Investors see the improvement of US economy, but the majority agrees that it’s too early to be entirely optimistic. 3) The banks need to add safe assets to meet new reserve rules under the Dodd-Frank financial-overhaul law and Basel III regulations. US commercial lenders have already bought the same amount of Treasuries as in the while 2011. 4) Corporations have record cash on hand which they put in Treasuries seeking fixed income as they fear that the market may get shaken once more. High demand means lower yields. Although 10-year US yields rose from 1.88% at the end of 2011 to about 2.4% in March, consensus forecast didn’t chance since January – it still shows the yields will finish 2012 at 2.49%. This means that investors aren’t ready to trim their Treasury holdings. Buyers bid $3.19 for each dollar of the $538 billion in notes and bonds sold this year – the highest demand since 1992 when such data became available. The only obstacle which may slow the rate of Treasuries purchases is rising inflation. Photo by Reuters US yields Be successful with FBS

Ichimoku. Weekly forecast. GBP/USD Monday, April 9, 2012 - 09:15 Weekly GBP/USD British pound tested the levels above the Ichimoku Cloud last week, but then drifted lower and closed below Kumo. At the same time, the pair managed to find support at Tenkan-sen (1), so the bulls haven’t lost all chances to turn the situation in the short term to their benefit. The pair also has some support of the uptrend line connecting January and March minimums. However, the Turning line stopped moving up and switched to the horizontal mode following Kijun-sen (2) and pointing at sideways trend. Kumo isn’t wide, but still bearish (3). We are looking forward to consolidation in the coming weeks. The ability of the bulls to bring the prices above the Cloud will be decisive for the future dynamics of GBP/USD. Chart. Weekly GBP/USD Daily GBP/USD On the daily chart the prices breached the Turning line (1), but were supported by the Standard line (2) and the upper border of the rising Ichimoku Cloud. On the one hand, the situation looks stable: Tenkan and Kijun have so far formed “golden cross” which should be strong enough as the lines intersected above Kumo. On the other hand, Tenkan-sen and Kijun-sen became horizontal and the Cloud has dangerously narrowed. On the downside, if GBP/USD breaches support of the Kijun and enters the Cloud, it will likely slide to the bottom of Kumo. On the upside, if after a few days of consolidation sterling manages to rise above Tenkan, it will get chance to strengthen to the maximums of the early April. Chart. Daily GBP/USD Ichimoku. Weekly forecast. GBP/USD // FBS Markets Inc. Be successful with FBS