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Deutsche Bank: SNB may intervene any day Friday, January 27, 2012 - 12:30 Analysts at Deutsche Bank claim that in the near term the Swiss National Bank may start aggressive sell-off of Swiss franc versus the single currency trying to protect the floor for EUR/CHF. The specialists warn that the SNB’s intervention may occur any day. In their view, if Swiss monetary authorities act aggressively, investors will seek to sell franc in anticipation of central bank intervention. The pair EUR/CHF is trading within a very narrow range just below 1.2100 down from December maximums in the 1.2445 zone. Chart. Daily EUR/CHF source: Deutsche Bank: SNB may intervene any day // FBS Markets Inc. Be successful with FBS

Kiwi keeps rising versus the greenback Friday, January 27, 2012 - 11:15 New Zealand’s dollar keeps rising versus its US counterpart continuing its 6-week advance: kiwi has already strengthened from December 15 minimum at $0.7460 to the levels above $0.8200. The Reserve bank of New Zealand decided this week to leave the rates unchanged at 2.50%, while the Federal Reserve pledged to keep borrowing costs at the record low between 0 and 0.25% until late 2014. New Zealand posted today its first trade surplus in 5 months: the nation’s exports exceeded imports by NZ$338 million ($278 million) in December, while the economists predicted a NZ$50 million deficit. Specialists at Commonwealth Bank of Australia underline that they are seeing ongoing offshore demand for kiwi dollars. In their opinion, New Zealand’s economy is going OK, and certainly some of the individual sectors of the country are doing quite well. Analysts at Westpac believe that NZD/USD may reach $0.8300 in the near term on positive global risk phase. However, the specialists underline that in the longer term they aren’t yet ready to abandon the view that NZD hits $0.7000’s this year. Strategists at Barclays Capital don’t see any signs of the top, so the pair, in their view, may retest $0.8345. According to the bank, support is situated at $0.8120. Never the less, it’s necessary to note that 14-day RSI is in the 76 zone, over the 70 level that signals an asset’s price may have risen too quickly. As a result, analysts at Standard Chartered think it’s natural to assume that there will be a period of consolidation. Strategists at Deutsche Bank also think that New Zealand’s dollar is now a bit overvalued and that its fair value lies at $0.7600. Specialists at Forecast Pte recommend selling Aussie and kiwi on the rallies reminding about the ongoing concerns over Greece. Chart. Daily NZD/USD source: http://www.fbs.com/analytics/2012-01-27/16491-kiwi-keeps-rising-versus-greenback Be successful with FBS

Westpac: market’s risk sentiment improved Friday, January 27, 2012 - 09:45 Analysts at Westpac Institutional Bank claim that as the Federal Reserve announced that it plans to keep interest rates at the record low minimum until the end of 2014, one may trade on the risk-on sentiment. In addition, the bank expects the ECB to cut rates at the beginning of February and then conduct 3-year liquidity option later that month. This would also contribute to the market’s risk appetite. Moreover, Westpac says that there is potential for more quantitative easing in the UK where GDP contracted in the fourth quarter more than expected. The specialists advise investors to focus on the commodity currencies. In particular, the bank recommends selling British pound versus New Zealand’s dollar in the 1.9200 area, looking forward to the pair’s decline to 1.8700 and stopping at 1.9400. source: Westpac: market Be successful with FBS

Bernanke sticks to loose monetary policy Thursday, January 26, 2012 - 13:15 The Federal Reserve predicted low interest rates until the end of 2014. The Federal Open Market Committee set formal inflation target at 2%. US central bank claimed that its growth estimate in the coming quarters worsened from “moderate” to “modest”. The Fed’s Chairman Ben Bernanke indicated that another round of quantitative easing remains as option saying that the Fed is “prepared to take further steps in that [easing] direction if we see that the recovery is faltering or if inflation is not moving toward target.” As inflation forecast for 2014 is at 1.6-2% – below the target – the FOMC can easily justify more easing. At the same time, it’s necessary to note that there are some deep divisions within the central bank: 3 out of 17 FOMC officials would like to raise rates this year, and 3 more in 2013, while 2 think the first rise should not come until 2016. Bernanke, however, tried to persuade investors that the date in the FOMC statement is more important and that the committee’s approach will prevail over individual forecasts. Deutsche Bank: “While the Fed’s characterization of the economy in the statement has not changed very much, the comment that conditions are likely to warrant exceptionally low levels for the funds rate ‘at least through late 2014’ is on the surface a major difference from the mid-2013 date given in the last statement.” Citigroup: “In the long and medium term this is all second order. But in the short term, it's more complicated. Investors will want to know what the meaning of "extended" is when Fed officials talk about keeping rates low for an extended period. If they conclude that means 2015 or 2016, it could hurt sentiment.” “Our positioning indicators show short euro position mainly against US dollar rather than on the crosses. That means the greenback is vulnerable. Also investors have discussed euro to death, but have been giving the greenback an easy ride. If they start to worry, American currency could be in for a rough ride in the immediate aftermath of FOMC, even if the long-term implications are limited.” Mizuho: “The Fed’s pledge for a prolonged easing of monetary policy boosted risk-on sentiment. Dollar selling is likely to continue across the board.” Chart. Daily EUR/USD source: Bernanke sticks to loose monetary policy // FBS Markets Inc. Be successful with FBS

SocGen, ING, JP Morgan about USD/JPY Thursday, January 26, 2012 - 11:45 The greenback retreated versus Japanese yen from yesterday’s maximum in the 78.30 yen area to the levels around 77.50 yen after the dovish FOMC statement. Analysts at Societe Generale believe that support at 77.30 will help to contain the decline of USD/JPY. In their view, the pair will once again turn up from this point returning to 78.30 and then rising to October maximum at 79.55 yen. Strategists at ING, on the other hand, underline that if USD/JPY moves below 77.30/40 on sustained basis, the bullish momentum will be lost and the pair will slide to the previous range between 76.00 and 78.25 yen. Specialists at JP Morgan are bearish in the longer term. The bank claims that by the end of the year US dollar will likely fall to 70 yen level if American stocks keep rallying. JP Morgan says that the 5-year US real yields suggest USD/JPY should be around 75 yen. Chart. Daily USD/JPY SocGen, ING, JP Morgan about USD/JPY // FBS Markets Inc. Be successful with FBS Best Regards, wynnasuju

UK economy contracted in Q4 Wednesday, January 25, 2012 - 12:45 Data released today shows that British economy shrank in the fourth quarter by 0.2%, while the market was expecting only 0.1% contraction. The UK is now dangerously close to recession. The IMF reduced 2012 forecast for UK GDP growth from 1.6% to 0.6%. Britain’s economy is hit by the European debt crisis and austerity measures. Bank of England’s Governor Mervyn King claimed that the economy faced an “arduous, long and uneven” path to recovery but that once it does it will be on a “more sustainable footing than at any point in the past 15 years”. UK Prime Minister David Cameron claimed that “economy grew last year”. “More people in work today than at time of last election... Fall in GDP reflects higher food and fuel prices, euro zone crisis and debt overhang”. Billionaire investor George Soros said at the World Economic Forum which began today in Davos, Switzerland, that “to expect a rebound is unrealistic”. The specialist notes, however, that “Britain is benefitting from not being part of the euro. The outlook for the euro is truly dismal. The EU is undemocratic to the point where the electorate is disaffected and ungovernable”. Analysts at ING think that “UK economic activity is likely to get worse before it gets better, with a technical recession likely to be confirmed by first-quarter 2012 GDP numbers”. “Household spending is constrained by the fact that wages have failed to keep pace with the cost of living for four consecutive years while job insecurity is rising once again”. Economists at RBS note that “the primary source of negative news in Q4 was from the industrial sector where weakness in the UK’s key export markets is certain to have been a key factor, along with the unseasonably mild weather which depressed energy output.” Chart. Daily GBP/USD

HSBC: RBA will cut rate in February Wednesday, January 25, 2012 - 11:00 According to the data released today, Australian consumer prices were unchanged in the fourth quarter of 2011 from the previous 3 months, while the market was looking forward to 0.2% increase. Annualized headline CPI was equal to 3.1%, the lowest level in four quarters. Economists at JP Morgan say that the drop in consumer prices wasn’t surprising given that fact that food price dropped in the last 3 months of the year by 13.4%. Analysts at HSBC think that the Reserve bank of Australia will cut rates on February 7 for the third consecutive meeting due to the worsening labor market, the tense situation in Europe and the global economic slowdown. The specialists note that low inflation will allow the RBA to ease its monetary policy. At the same time, it’s necessary to note that the average of the trimmed mean and weighted median inflation rose in December to 2.6% versus the forecast of 2.4%. As the figure remains within the RBA’s target of 2-3%, it won’t be an obstacle to the rate cut. At the same time, some experts argue that such reading may make the central bank pause after lowering the borrowing costs the next month and take time to watch inflation trend. The pair AUD/USD is consolidating within a rising wedge. If Aussie breaks higher, it will get chance to retest October maximums in the $1.0750 area. At the same time, the likelihood of rate cuts will weigh on sentiment. On the downside the pair will be supported by the 20-day MA at $1.0340. It may be sensible to trade at the edges of this range avoiding the middle. Chart. Daily AUD/USD

Japan posted trade deficit in 2011 Wednesday, January 25, 2012 - 09:30 US dollar strengthened versus Japanese yen as according to the data released today, Japan posted bigger than expected trade deficit in December: the trade shortfall accounted for 0.57 trillion versus the forecast of 0.36 trillion. As this was the third monthly deficit in a row, Japan got annual shortfall for the first time since 1980 equal to of 2.49 trillion yen ($32 billion). Such figures may be explained by the surge of Japan’s energy import after the March 11 earthquake and by a shift of manufacturing overseas, for example, to lower-cost Thailand. As a result, Japan may lose the status as the world’s largest creditor which makes it a safe haven for investment. Though yen will weaken in this case letting the nation’s exporters breathe, it would become much more difficult for Japanese authorities to manage the largest debt in the world. As Japan’s population shrinks, the county, which has been for a long time considered a refuge, may be forced to depend on foreign investors to buy its bonds with the yields rising on the fiscal concerns. Economists at JPMorgan Securities expect the deficit to increase in the coming years. Specialists at Merrill Lynch think that even if the economy picks up, the balance will never return to the days of a 6 or 7 trillion yen surplus. According to the bank, imports of liquid gas from the emerging countries will keep growing and the balance will hover near 0 in the next couple years. However, analysts at Goldman Sachs think that that the situation of deficit is only temporary and that Japan's trade balance will likely return to monthly surpluses in the second half of 2012. In their view, the impact of last year’s disaster will likely fade out gradually, while the global economic cycle is expected to slowly recover. The specialists also claim that strong yen doesn’t have extraordinary impact on the nation’s exports as the latter are not declining more than global economic momentum even with the yen's continued rise. Japan's decline in overall competitiveness will be gradual due to its high-tech firms. The pair USD/JPY went up from the levels in the 77 yen area where it began yesterday’s trade testing the levels in the 78 yen zone. Analysts at MIG Bank think that the greenback may rise to 78.40, 79.55, 82.00 and then 83.30 yen. Chart. Daily USD/JPY

Fed will release federal funds rate forecast Tuesday, January 24, 2012 - 15:15 Tomorrow the Federal Open Market Committee (FOMC) for the first time ever release its interest rate forecast extending to 2016 including individual rate expectations of the committee members'. The FOMC is trying to make its policy more transparent. In longer term, this new mechanism will provide the Fed with a potentially important tool to influence expectations, and therefore the course of the economy. Economists at Danske Bank think that the Fed might forecast its first hike at the end of 2013. Analysts at Nomura called the coming meeting “historic”. In their view, the market will get “an historic amount of new information to digest”. Although the recent economic data was positive and aroused investors’ optimism, US still faces serious challenges, such as high unemployment and the difficult situation at the housing market. The rate and the Fed’s statement will be published on Wednesday, January 25, at 7:15 p.m. GMT. The Fed’s chairman Ben Bernanke will hold press conference. The Fed funds rate is expected to stay between zero and 0.25% where it has been since December 2008. The majority of the experts don’t think that American central bank will launch another round of bond purchases, QE3.

BarCap: GBP/USD will reverse down Tuesday, January 24, 2012 - 13:00 Analysts at Barclays Capital note that the upward correction of British pound versus the greenback will likely be over within the next 24-48 hours. In their view, the end of the bullish squeeze will confirm if GBP/USD goes down below $1.5515. The specialists recommend selling sterling on any further advance stopping above $1.57. Chart. Daily GBP/USD

Spain: successful debt auction Tuesday, January 24, 2012 - 11:30 Spain conducted successful debt auction today. Madrid sold: • 3-month bills, 1.4 billion, yield 1.285% (versus 1.735% in December), cover ratio 4.3 (vs. 2.9); • 6-month bills, 1.11 billion, yield 1.847% (vs. 2.435%), cover ratio 6.9 (vs. 4.1). At the same time, it’s necessary to note that the market is starting to get used to good Spanish auction results and doesn't react. EUR/USD consolidated today in the $1.3000 area. Spanish bond yields have eased down so far as the nation’s debt-servicing program is supported by the flood of cheap ECB money along with the bank's regular purchases of Spanish bonds on the secondary market. Сhart. H4 EUR/US

Commerzbank: negative longer-term outlook for euro Tuesday, January 24, 2012 - 08:45 Technical analysts at Commerzbank claim that as the single currency managed to consolidate in the $1.3000 area, it may rise to $1.3077/3145 versus the greenback this week. In that area, however, EUR/USD will face strong resistance which will cap the pair’s rate. The specialists note that euro is vulnerable to any unexpected shift in the talks between the IIF and Greece indicating a stall in the negotiations or disappointing data from the euro zone. In their view, the longer-term outlook for EUR/USD is bearish: the pair will decline to the downtrend line in the $1.2083 region. Chart. Daily EUR/USD

Morgan Stanley: recommendations for USD/CHF Tuesday, January 24, 2012 - 10:00 Strategists at Morgan Stanley recommend buying the greenback versus Swiss franc in the 0.9280 area stopping at 0.9180 and targeting 0.9770. The specialists note that even after Philipp Hildebrand’s resignation the Swiss National bank will maintain the floor for EUR/CHF. In addition, Swiss franc will be used as a funding currency due to Switzerland’s unfavorable growth outlook and SNB’s policy. Chart. Daily USD/CHF

Euro has become a funding currency Tuesday, January 24, 2012 - 10:45 Analysts at UBS claim that the European Central Bank will cut interest rates twice more by 25 bps each in March and April. As a result, the bank maintains bearish longer-term forecast on EUR/USD. Economists at Citigroup think that the ECB will reduce the borrowing costs in the second quarter, while strategists at Bank of Nova Scotia say that the central bank will cut rates to 0.5% by the end of the first quarter. Analysts at Morgan Stanley see a very clear breakdown in the correlation between the euro and risky assets. Euro is increasingly becoming a funding currency – one may significantly benefit from borrowing in euro and investing in Australia’s dollar, Brazil’s real, Mexico’s peso, South Africa’s rand and South Korea’s won. Specialists at Australia & New Zealand Banking Group claim that other currencies which have effectively low or 0 rates, such as the dollar and yen, are facing a slightly better growth profile. According to the World Bank, euro zone’s economy will contract by 0.3% in 2012, while the global economy will add 2.5%. Chart. Daily EUR/USD

Commerzbank: comments on EUR/USD Monday, January 23, 2012 - 09:00 The single currency opened earlier today, but then managed to reach Friday’s close rising to $1.2940. Technical analysts at Commerzbank claim that the short-term outlook for EUR/USD is positive as long as it’s trading above $1.2800. In their view, euro may rise to resistance in the $1.3077/3145 area or even to $1.3245. If the pair drops below $1.28, it will likely decline towards August 2010 minimum in the $1.2588/30 zone. Later today: • German and French debt auctions; • Euro zone finance ministers meeting; • EU foreign ministers also assemble, with possible further sanctions against Iran’s nuclear program on the agenda. Chart Daily EUR/USD Commerzbank: comments on EUR/USD // FBS Markets Inc.

Why BoE may decide to wait with QE? Friday, January 20, 2012 - 09:45 While the marker’s expecting to see more quantitative easing from the bank of England in February, Ben Broadbent, external member of the Bank of England’s Monetary Policy Committee (MPC), says that the central bank probably won’t be so quick to act. The economist justifies this assumption be several points. To begin with, during the past half a year the downside risks for British economy have slightly subsided. The odds are that UK economic growth picks up in the second half of the year and the household income growth improves. Moreover, UK will gain from the positive effects of loose ECB policy. Broadbent underlines that the quarterly pace of economic growth in 2012 is likely to be volatile. Such events as the Olympics in the third quarter will contribute to growth volatility. “I would say very, very near term (output looks) slightly weaker. In the slightly less near term Q1 is marginally stronger. Over six months, the downside risks have been lessened slightly - partly because of what the ECB has done, partly because of QE itself and you can see that in risk asset markets - quite clearly”, claims the policymaker. Broadbent adds that the decline in headline CPI inflation from 4.8% in November to 4.2% in December should help to maintain inflation expectations. The BoE meeting will take place on February 9. Chart. Daily GBP/USD Why BoE may decide to wait with QE? // FBS Markets Inc. Westpac recommends selling EUR/NZD Friday, January 20, 2012 - 11:00 The single currency has managed to strengthen versus the greenback this week. Euro was supported by the successful bond auctions in Spain and France and positive US labor market data. The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008. However, analysts at Westpac see the advance as EUR/USD only as the selling opportunity. In their view, liquidity in the market “is supporting risk seeking”, which should lead investors out of currencies like the euro and into things like commodity currencies. As a result, the bank recommends going short on EUR/NZD around $1.6000 stopping at $1.6180 and targeting $1.5650. Westpac notes that the Reserve bank of New Zealand is one of the few which is unlikely to cut borrowing costs. Low inflation data creates an attractive entry point for the trade: New Zealand’s CPI declined by 0.3% in the fourth quarter (q/q). Westpac recommends selling EUR/NZD // FBS Markets Inc. SocGen: buy CAD/JPY Friday, January 20, 2012 - 11:45 Analysts at Societe Generale believe that US economy will keep outperforming the European one. Never the less, they think it would be wise to protect oneself from the deterioration of the risk sentiment. To do that the bank recommends buying Canadian dollar versus Japanese yen at 76.00 targeting 79.00 and stopping at 75.00. The specialists have studied the dynamics of Canadian dollar and other more volatile currencies like Mexican peso and Australian dollar against key stock and volatility indexes and found out that the correlation with CAD/JPY is close to zero. As a result, those who choose this pair will enjoy the profits of bullish trade on the positive economic data, while if the situation deteriorates the decline of CAD/JPY won’t be as strong as the drop of other risky crosses, so one will be able to minimize losses. SocGen: buy CAD/JPY // FBS Markets Inc.

Lloyds expects EUR/CHF to rise Friday, January 20, 2012 - 08:30 Analysts at Lloyds advise investors to buy the single currency versus Swiss franc. The specialists think that the Swiss National Bank won’t let EUR/CHF to get below 1.20: the SNB has an unlimited supply of francs and serious intentions. The strategists think that the current situation will stay intact until the nation’s monetary authorities decide that franc’s peg to euro is economically unjustified. Swiss economic growth is slowing down, while inflation rate is negative. As a result, the nation’s central bank is unlikely to change its monetary policy in the short term, claims Lloyds. Chart. Daily EUR/CHF Lloyds expects EUR/CHF to rise // FBS Markets Inc. Gaitame.com: NZD will fall by 5% Friday, January 20, 2012 - 09:00 Technical analysts at to Gaitame.com Research Institute believe that New Zealand’s dollar may fall versus the greenback by almost 5%. The specialists note that NZD/USD didn’t manage to hold above 200-day MA and is now going to survive downward correction. In addition, the RSI (relative strength index) returned below 70 signaling that kiwi may reverse direction. According to the specialists, NZD/USD may go down to $0.7876 (20-day MA) in January and then probably to $0.7640. Analysts surveyed by Bloomberg News expect the pair to drop to 0.7500 by the end of March. Chart. Daily NZD/USD Gaitame.com: NZD will fall by 5% // FBS Markets Inc.

Commerzbank: bearish forecasts for GBP, AUD Thursday, January 19, 2012 - 09:45 GBP/USD Although British pound has strengthened this week rising versus the greenback from Friday’s minimum of $1.5233 to the levels around $1.5450, the longer-term outlook for GBP/USD remains negative. Sterling won’t be able to rise above $1.5633 (55-day MA) and $1.5672 (5-month resistance line) and will trade in the $1.4260/29 area in the longer term. Chart. Daily GBP/USD AUD/USD Australian dollar gained this week against its US counterpart trading within larger uptrend which started in December. However, AUD/USD hasn’t managed to break through the 5-month downtrend line yet. The decline will be confirmed if Aussies goes down below $1.01946 (6-week support line). That will make the pair drop to $1.0000 heading to $0.9818 and $0.9664/80. Chart. Daily AUD/USD Commerzbank: bearish forecasts for GBP, AUD // FBS Markets Inc.

EUR/USD on the upside, but outlook still bearish Thursday, January 19, 2012 - 09:00 The single currency keeps going up versus the greenback on the positive sentiment about US economic prospects. There’s a bunch of important data released today in the United States which is projected to be better than forecasts. US unemployment claims are thought to have declined in the week before January 14 from 399K to 387K. At the same time, demand for euro may be regarded as limited as the talks between Greece and its private creditors represented by the Institute of International Finance on a debt-swap plan continue for the second day. France will offer debt later today with maturities from 2014 to 2040. Spain will also sell notes and bonds maturing in 2016, 2019 and 2022 today. EUR/USD rose from Friday’s minimum of $1.2624 to the levels in $1.2860 area. Never the less, analysts at Citigroup and Nomura are bearish on the pair citing the euro zone’s weak economy and the poor state of the region’s finance. Chart. Daily EUR/USD EUR/USD on the upside, but outlook still bearish // FBS Markets Inc.

January 17: data and comments Tuesday, January 17, 2012 - 08:30 Yesterday Standard & Poor’s reduced the rating of the EFSF, the euro area’s 440-billion-euro bailout fund, from AAA to AA+ after earlier downgrades of France and Austria as the fund’s obligations are no longer fully supported either by guarantees from EFSF members rated AAA by S&P, or by AAA rated securities. The downgrade of the EFSF was no big surprise after Friday's mass downgrade of nine euro-zone countries. Klaus Regling, chief executive officer of the facility, claimed that “EFSF has sufficient means to fulfill its commitments” until the launch of permanent ESM (European Stability Mechanism) in 2012. According to the data released today, China’s GDP added 8.9% y/y in the fourth quarter versus 8.7% expected. As a result, EUR/USD managed to rise to $1.2750 on the short squeeze. Even EUR/CHF backed away from the 1.20 danger zone. Asian equity markets added 1.5% on average; gold and oil also rise 1.5% to $1663/oz and $100.30/bbl respectively. Later today: • British CPI (9:30 a.m. GMT); • BOE Gov King Speaks (9:45 a.m. GMT); • German ZEW Economic Sentiment (10:00 a.m. GMT); • Bank of Canada’s meeting: overnight rate release (2:00 p.m. GMT); • EFSF, Greece, Spain: debt auctions. Chart. Daily EUR/USD January 17: data and comments // FBS Markets Inc. Merrill Lynch: forecasts for euro and pound Tuesday, January 17, 2012 - 09:15 Analysts at Bank of America Merrill Lynch think that the single currency may drop to $1.2510 versus the greenback in the near term. In the medium term the specialists see EUR/USD falling to $1.12 and even $1.08 due to both fundamental issues and technical patterns. Chart. Weekly EUR/USD According to the bank, euro zone’s problems are also weighing on the British pound. Merrill Lynch claims that the pair GBP/USD will ultimately slide to $1.38. The specialists recommend selling sterling at $1.5300 stopping at $1.5425 and targeting $1.4250. Chart. Weekly GBP/USD Merrill Lynch: forecasts for euro and pound // FBS Markets Inc. UBS: how SBN will possibly act Tuesday, January 17, 2012 - 10:15 The single currency declined versus Swiss franc from December 7 maximum in the 1.2445 area. At the beginning of this year euro’s decline accelerated after the resignation of the SNB’s president Philipp Hildebrand, who promoted EUR/CHF peg. On Friday the pair EUR/CHF hit 1.2061. Analysts at UBS claim that if the Swiss National Bank holds EUR/CHF at 1.20, deflation pressure in 2012 will strengthen due to strong franc and recession in the euro area. As a result, Switzerland’s monetary authorities will eventually have to raise EUR/CHF minimal level to 1.30 during 2012 in order to offset falling consumer prices. At the same time, the specialists really think that Hildebrand’s departure will make the central bank less willing to increase EUR/CHF floor. So, the bank expects SNB to keep the floor at 1.20 during the next few months before lifting it higher as the nation’s economy won’t be able to deal with franc’s strength on its own. Chart. Daily EUR/CHF UBS: how SBN will possibly act // FBS Markets Inc.

Westpac: recommendations for EUR/USD Monday, January 16, 2012 - 12:45 Analysts at Westpac recommend selling EUR/USD at $1.2650 stopping at $1.2800 and expecting the pair to fall to $1.2350. The specialists don’t expect much of an upward correction amid sovereign downgrades and a breakdown in talks over the Greek debt restructuring. In their view, it seems that the single currency has shifted into a clear downtrend regardless of more supportive signals from stocks and euro basis swap. In addition, the specialists underline that euro’s current decline doesn’t seem excessive as during the past 20 years EUR/USD survived at least 8 sustained, multi-week large slumps when it fell by about 20% peak to trough, while euro has lost only 11% dropping from October 2011 maximum at $1.4250. According to Westpac, from the fundamental point of view, there are only 2 main factors which may reverse euro’s downtrend: another round of QE by the Fed and/or aggressive steps by EU policymakers to bring more definitive coherence to EU finances. Never the less, neither of these outcomes is likely to realize in the short term. Chart. Daily EUR/USD Westpac: recommendations for EUR/USD // FBS Markets Inc. UBS: recommendations for EUR/USD Monday, January 16, 2012 - 14:00 Analysts at UBS recommend selling euro at $1.2755 stopping at $1.3050 and targeting $1.2250. The specialists remind that the European Central Bank is expected to cut 2 more times rates in the next few months from1.00% to 0.50%. In their view, Greece may suffer a disorderly default in March. According to the bank, downgrades of European economies by S&P will have a greater impact on the euro than just one day's price action would suggest – the strategists think that the downgrades still aren’t fully priced in yet. UBS claims that euro’s fair value is in the $1.15/$1.20. Chart. Daily EUR/USD UBS: recommendations for EUR/USD // FBS Markets Inc. HSBC: Germany is vulnerable to crisis Monday, January 16, 2012 - 15:00 Analysts at HSBC note that that fact that S&P downgraded European economies on Friday wasn’t unexpected as in December the ratings agency warned the region’s policymakers. The specialists claim that the euro zone’s officials are guilty of 3 sins: optimism, inaction and omission. Firstly, too many countries are too optimistic about recovery when all the evidence is now pointing towards recession in both the periphery and the core. Secondly, inaction is inevitable for politicians faced with a difficult trade-off between political expediency and fiscal reality. Thirdly, the idea of a fiscal pact doesn’t deal with the shortfall of income which led to today’s crisis. According to HSBC, euro zone’s difficulties in the coming months will likely strengthen. The economists think that Germany will get under pressure as its exports to other nations of the currency union will shrink, while its financial institutions are exposed to the region’s debt. As a result, the leading European economy will be forced into recession. HSBC expects that the ECB will have to step in and start quantitative easing. That would make the crisis easier to solve, though the ultimate way out may be provided only by the political action. HSBC: Germany is vulnerable to crisis // FBS Markets Inc.

France will offer bills amid the downgrade Monday, January 16, 2012 - 09:00 The weekend was marked by the dim news for the euro area: Standard & Poor’s downgraded France and Austria by one level from top AAA rating to AA+ with “negative” outlooks. The agency also reduced credit ratings of Italy, Portugal, Spain and Cyprus by 2 steps and cut Malta, Slovakia and Slovenia by one notch. The ratings of Germany, Belgium and the Netherlands were affirmed. In this light one has to watch French debt auction the result of which will be due around 13:55 GMT. The nation plans to sell 8.7 billion euro ($11 billion) in bills. The yield on France’s 10-year bonds rose by 3 basis points to 3.055%. The yield spread between French and German 10-year bonds increased from less than 50 points a year ago to about 130 basis points. France’s finance minister Francois Baroin claimed that “it’s not a catastrophe” and “it’s still an excellent grade.” Never the less, the downgrade will likely have a dreadful impact on the image of French president Nicolas Sarkozy. According to the polls conducted last week, Sarkozy, the leader of the ruling UMP party, has the backing of 23.5% of voters versus 21.5% who support anti-euro candidate Marine Le Pen, the leader of the nationalist National Front, while Socialist Party candidate François Hollande leads with 27%. Coming auctions Tuesday, January 17: EFSF, Greece, Spain Wednesday, January 18: Portugal Thursday, January 19: Spain Chart. Daily EUR/USD France will offer bills amid the downgrade // FBS Markets Inc. J.P.Morgan: sell GBP/USD Monday, January 16, 2012 - 10:45 Analysts at J.P. Morgan recommend selling British pound versus the greenback at $1.5295 stopping at $1.5530 and targeting $1.4800. The specialists remind that the European crisis has strong negative impact on British economy as about 40% of UK exports go to the euro area and a large percentage of the nation’s banks have claims on the euro zone. Chart. Daily GBP/USD J.P.Morgan: sell GBP/USD // FBS Markets Inc. Barclays Capital: comments on British pound Monday, January 16, 2012 - 11:15 Analysts at Barclays Capital claim that as British pound may be able to hold at current levels for a while as so far it has managed to close above $1.5270 – the neckline of a multi-week pattern. If GBP/USD closes below this level, it will fall to $1.5150 and $1.4950 later in January. The fact that sterling spiked below this mark on Friday means that the bears will ultimately pull the rate lower. According to the bank, the outlook for pound will remain negative as long as it’s trading below $1.5410.Barclays Capital: comments on British pound. Chart. Weekly GBP/USD Barclays Capital: comments on British pound // FBS Markets Inc.

Italy: mixed results of the debt auction Friday, January 13, 2012 - 12:45 Italy managed to raise 4.75 billion euro meeting the target level. The nation sold 3-year notes at an average yield of 4.83% down from 5.62% at a prior auction in December. The single currency declined versus US dollar and Japanese yen as the demand wasn’t as high as the market’s expected: investors bid for 1.2 times the amount allotted, down from 1.36 last month. Italy will soon face a more serious challenge – 10-year bond auction which is set to take place in 2 weeks. In the first quarter the country will have to pay off more than 100 billion euro. Analysts at Morgan Stanley claim that any rebound of EUR/USD is going to remain limited and the medium-term outlook for the pair is limited. Chart. Daily EUR/USD Italy: mixed results of the debt auction // FBS Markets Inc. Rabobank: comments on EUR/GBP Friday, January 13, 2012 - 13:45 Analysts at Rabobank believe that the single currency will decline to 0.82 versus British pound in 3 months. The specialists say that though UK monetary authorities will likely do more quantitative easing in February, in the coming months the pair EUR/GBP will be driven by the euro zone’s fundamentals which seem to be in poor condition. Chart. Daily GBP/USD Rabobank: comments on EUR/GBP // FBS Markets Inc.

Commerzbank on trading EUR/USD Friday, January 13, 2012 - 10:00 Technical analysts at Commerzbank claim that resistance for the pair EUR/USD lies at $1.2860 and $1.2933. While the single currency holds below the latter, the outlook for it will be negative. The specialists recommend going short on euro at $1.2760 stopping at $1.2935 targeting $1.2588. Chart. H4 EUR/USD Commerzbank on trading EUR/USD // FBS Markets Inc. ING, Lloyds: EUR bearish trend will stay intact Friday, January 13, 2012 - 11:30 The single currency has been trading within downtrend since November, when the possibility of Greece exiting the euro zone was mentioned officially for the first time. Analysts at ING claim that no matter whether the European policymakers including the ECB reach agreement to stabilize the government debt crisis or not, the single currency will fall. In their view, the Europe’s credit crunch is a reality, and the euro zone requires softer monetary conditions, including a weaker euro. At the same time, the specialists underline that euro’s shorts are too large now, so if the currency is to fall further from here, a “different community of sellers” – corporations, institutional investors and FX reserve managers – must emerge. According to ING, US dollar, demand for which will be supported by the euro zone’s debt problems, will keep strengthening versus commodity and emerging market currencies. The recovery of American currency will go on for 3-6 months, says the bank. Strategists at Lloyds Bank claim that though excessive euro shorts may allow the European currency to experience short-term runs, euro's reaction to the improved global data will be limited as the markets realize that European economy is severely weakened by the austerity measures and it would take a long time for the region’s growth to become strong enough so that the ECB would be able to tighten its monetary policy. ING, Lloyds: EUR bearish trend will stay intact // FBS Markets Inc.

ECB: rates unchanged, analysts’ comments Friday, January 13, 2012 - 08:15 As it was expected, yesterday the European Central Bank left its benchmark rate unchanged at 1%. Here are the main points of the euro zone’s monetary authorities: - There are “tentative signs of stabilization” in the European economy, yields at Spanish and Italian bond auctions decline. - Still euro zone’s economic outlook in 2012 seems alarming, the region’s financial market is in the state of “high uncertainty and substantial downside risks”. - During the next few months euro area inflation will remain at 2% before declining. - European leaders have to encourage job creation without slippage in austerity measures and reforms. - The new European fiscal compact, which is currently under negotiation, must be characterized by “unambiguous and effective wording”. - The central bank’s decision to provide 489.2 billion euro in low-cost 3-year loans to the European banks has prevented a credit contraction. - The ECB was pleased that euro zone leaders had confirmed that the involvement of private creditors in the second Greek bailout was “unique and exceptional.” The ECB has persistently argued against private sector involvement warning that it would increase contagion risks. Analysts’ comments Nomura underlines that the central bank wants to assess the latest data in order to judge the magnitude and depth of the recession in the region. Societe Generale claims that further rate cuts will only be forthcoming in case of the signs of an outright credit crunch. The single currency picked up versus the greenback returning above $1.28. Never the less, UBS thinks that the overall negative outlook for euro didn’t improve after the ECB meeting. The specialists lowered forecasts for the pair EUR/USD from $1.25 to $1.15 by the end of this year and from $1.20 to $1.10 by the end of 2013. Chart. Daily EUR/USD ECB: rates unchanged, analysts Morgan Stanley: sell EUR/CAD and EUR/AUD Friday, January 13, 2012 - 09:30 Analysts at Morgan Stanley recommend selling the single currency versus Australian and Canadian dollars. In their view, traders will be using euro as funding currency investing money in higher-yielding currencies such as Aussie and loonie. Such move of the market may be explained by high risk aversion in the euro area, low yield especially in key European economies and the risk of ECB’s easing policy, says the bank. According to Morgan Stanley, one should open shorts on EUR/CAD at 1.3150 stopping at 1.3260 and targeting 1.2740 and on EUR/AUD at1.2660 targeting 1.1925 and stopping in the 1.2860/2905 area. Chart. Daily EUR/CAD Morgan Stanley: sell EUR/CAD and EUR/AUD // FBS Markets Inc.