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Wells Fargo: comments on AUD/USD 2011-10-13 14:26 Australia’s dollar finds itself under the impact of both positive and negative factors. On the one hand, the payrolls in Australia increased in September by 20,400 exceeding the median forecast by more than in 2 times. On the other hand, Chinese exports increased last month at the slowest pace in 7 months, while the trade surplus of Australia’s main trading partner declined from 17.8 billion yuan in August to 14.5 billion in September. Analysts at Wells Fargo see moderate strength for Aussie. In their view, the currency will be appreciating taking onto account accommodative policy of the Federal Reserve, but will underperform other commodity currencies as the rate hikes of the Reserve bank of Australia are unlikely, while rate cuts are possible. The pair AUD/USD rose from 1-year minimum in the 0.9390 area hit on October 4 to the levels above the parity. Resistance levels for Aussie are found at $1.0377 (200-day MA), $1.0398 (September 16 maximum), $1.0664 and $1.0767 (September maximums). Support levels are situated at $0.9866 and $0.9388 (October minimums). BarCap, RBC: China’s exports growth slows down 2011-10-13 15:23 Chinese exports increased last month at the slowest pace in 7 months adding only 17.1% in September from a year earlier, down from 24.5% rise in August, and below economists' median forecast of a 20.3% expansion. Exports slowed more than imports and the nation’s trade surplus declined from 17.8 billion yuan in August to 14.5 billion in September. Analysts at RBC Capital Markets think that the pace of China’s exports growth will keep declining in the coming months due to the weaker external demand. The specialists note, however, that the slump seen at the end of 2008 won’t repeat. Strategists at Barclays Capital keep the forecast for China’s exports growth in 2011 at 20%. The trade surplus, in their view, will be equal to $162 billion or 2.2% of GDP in 2011. In 2010 Chinese trade surplus accounted for 3.1% of GDP. Economists at ANZ believe that China's export and import growth may slow even more in the fourth quarter due to a high base last year, but the value of exports and imports remain at a relatively high level. The state of Chinese trade balance has a strong impact on investors’ risk sentiment and, consequently, on the higher-yielding commodity currencies. Society Generale: buy Aussie versus Swiss franc 2011-10-13 17:20 September was a hard month for risky assets. Never the less, analysts at Society Generale expect the market’s risk sentiment to improve. As a result, the specialists advise investors to return to the higher-yielding currencies. According to the bank, the good strategy is to buy AUD/CHF in the 0.9050 area stopping below 0.8850 and taking profit at 0.9600. Among the positive factors for Aussie the strategists cites Australia’s favorable economic data and the potential new policy initiatives in the euro area. Inflation will make ECB harder to cut rates 2011-10-13 17:39 German annual inflation rose from 2.5% in August to 2.9% in September exceeding the estimate of 2.8%. As a result, it would be hard for the European Central Bank to reduce its benchmark interest rate from the current 1.5% level to support the euro area’s economic growth hurt by the debt crisis. Last month the ECB revised down the region’s economic growth forecast from 1.9% to 1.6% to 2011 and from 1.7% to 1.3% in 2012. The central bank sees the average inflation at 2.6% this year and 1.7% the next.

Bank of Montreal: USD/CAD may fall to parity 2011-10-12 19:02 Canadian dollar strengthened versus the greenback making the biggest advance in 2 months as the markets seem to be optimistic on the plan of the European authorities to recapitalize banks. The pair USD/CAD declined from 1-year maximum at 1.0657 set on October 4 to the levels below 1.0200. Analysts at Bank of Montreal claim that loonie may reach parity versus its US counterpart. Wells Fargo: forecasts for EUR/USD 2011-10-13 11:07 Technical analysts at Wells Fargo are neutral/positive on the single currency in the short-term. In their view, among the positive factors there are significant short positions on euro and favorable readings of the technical indicators, such as the momentum ones. In the longer perspective, however, EUR/USD remains within downtrend due to the euro zone’s economic growth slowdown and potential ECB’s easing. The strategists expect the pair to drop to $1.3300 in 3 months, to $1.3000 in 6 months, to $1.2900 in 9 months and to hit the $1.2600 level in September 2012. According to the bank, resistance for the pair is situated at $1.3936 (September 15 maximum), $1.4061 (200-day MA) and $1.4247. Support levels are found at $1.3566, $1.3145 (October minimum) and $1.2874 (January minimum). BoA Merrill Lynch: forecast for euro 2011-10-13 11:40 The single currency has made a significant advance versus the greenback during the last several days. The pair EUR/USD climbed from the 8-month minimum at $1.3145 hit on October 4 to the levels in the $1.3800 area. Analysts at Bank of America Merrill Lynch explain euro’s gains by squaring of excessive short positions. In their view, the up move is a correction and the European currency won’t be able to grow on the sustainable basis. The specialists claim that EUR/USD may rise to $1.4000 in the next 1-2 weeks and then the bears will once again take the situation in their hands. So, investors are to look for the chance to resume selling the pair. The bank also points out that the dynamics of euro is strongly correlated with the oil prices: when the latter increases, oil exporters tend to convert their dollar earnings in euro to keep their assets balanced. As a result, it’s necessary to take into account that as long as China’s economy stays in a good shape and the demand for commodities is high, the single currency will be supported against its US counterpart. Minutes of FOMC September meeting 2011-10-13 13:08 Last month, the Federal Reserve decided to perform Operation Twist or, in other words, replace $400 billion of Treasuries in the central bank’s portfolio with longer-term debt to reduce borrowing costs. According to the minutes of the US Federal Open Market Committee’s last meeting that took place on September 20-21, the majority of FOMC members are in favor of unveiling more information about the Fed’s goals and how they influence the central bank’s decisions. In addition, many policymakers think that it’s necessary to establish specific levels of inflation and unemployment as conditions for keeping interest rates near zero. Some FOMC officials including Fed’s Chairman Ben Bernanke believe that asset purchases would be a more efficient tool than the Operation Twist and that QE should be retained as an option, while others warned that further expansion of the Fed’s balance sheet would more likely raise inflation and inflation expectations than stimulate economic activity. The Fed has also Fed bought $2.3 trillion in housing and government debt in two rounds of QE from December 2008 to June 2011. However, US economy still remains weak. The FOMC was also discussing the possibility of communicating its decisions through other way than the post-meeting statements. Analysts at Daiwa Capital Markets America believe that most FOMC members would like to save QE as the last measure in case the economy starts contracting and there is the risk of deflation. Commerzbank: technical comments on EUR/USD 2011-10-13 13:26 Technical analysts at Commerzbank expect the single currency to stay today below resistance in the $1.3838/48 area (July minimum/50% Fibonacci retracement of the decline from the August maximum) trading versus US dollar. If EUR/USD managed to overcome the mentioned levels, it would be able to rise to $1.3936 (September 15 maximum) and $1.4013 (61.8% Fibonacci retracement) before another move down.

Deutsche Bank about yen as a refuge 2011-10-12 15:19 Currency strategists at Deutsche Bank note that Japanese currency has depreciated during the last few weeks. The pair USD/JPY kept trading sideways, but it seems that investors are no longer tempted to leave everything for yen assets: there have been foreign equity outflows, and foreign bond buying by the Japanese which weren’t of much help to yen so far. The more important thing is that the declining current account surplus and low interest rates bring the situation in Japan closer to what’s seen in other developed nations. The bank points out that the number of short positions on yen has increased. In their view, that presents an opportunity to resume buying yen and selling US dollar. BNY Mellon: euro's prospects have improved 2011-10-12 16:07 The single currency rose to the 3-week maximums versus its US counterpart in the $1.3820 area. The markets are waiting for the European Commission President Jose Barroso to make proposals about the recapitalization of the regional banks, on Greece and the participation of private sector in the bailout and the EFSF. Barroso is expected to announce its plan speaking to the European Parliament at 3 p.m., as Bloomberg cites the information from the unnamed official. There was also some positive data released in the euro area: industrial production unexpectedly rose in August adding 1.2% from July level and showing the biggest increase since November 2010. In addition, the inspectors of Troika indicated yesterday that Greece will get an 8 billion-euro ($11 billion) loan at the beginning of November. More details here Troika authorized sixth bailout tranche for Greece. Analysts at Bank of New York Mellon note that the level of uncertainty has subsided. Even despite the internal political tensions – Slovakia failed to ratify the EFSF extension (see Slovakia didn) – the prospects of euro area have improved in comparison with what was seen a week ago. Greece: budget deficit in figures 2011-10-12 17:35 During the period from January to September Greece’s central government budget deficit (without local authorities and social security spending) increased by 15% in comparison with the first 9 months of last year rising from 16.65 to 19.16 billion euro. Greece’s debt load is expected to reach 173% of GDP in 2012 as its economy will shrink for the fifths year in a row. Greece’s Cabinet approved a 2012 draft budget on Sunday which sees the next a deficit of 6.8% of GDP (versus the previous estimate of 6.5% of GDO) and 8.5% shortfall this year (versus earlier projection of 7.6% of GDP). There are significant chances that the second bailout for Greece agreed on July 21 will be renegotiated. Greece is missing its budget deficit targets and the bigger the budget gap requires more financing, so the amount of loan (109 billion euro) has to be increased.

Slovakia didn’t ratify the EFSF 2011-10-12 12:41 Slovakia didn’t ratify the EFSF bill yesterday. The ruling coalition didn’t manage to gather enough votes from the Slovak parliament in favor of the measure: there were only 55 votes in favor, while the necessary majority is 76. The other 16 member nations have already approved the bill, while the EFSF expansion has to be ratified unanimously. Prime Minister Iveta Radicova was trying to persuade the lawmakers that the whole euro area is now in danger, so it’s necessary to unify efforts. As Radikova associated the EFSF vote with the vote of confidence to the government, the coalition collapsed. Still the Prime Minister who is leaving her post proposed a compromise that may allow the parties to reach agreement at the second vote that will take place in a few days. Richard Sulik, leader of the dissident Freedom and Solidarity party, said that it would be better to allow Greece default rather than waste enormous amounts of money for loans that may never pay back. Sulik said that Slovakia’s participation in the bailout deal isn’t in proportion with its small economy and showed his intention to fight for changing that. Never the less, some experts say that as the debt crisis is continuously deepening the plan might not offer enough support for indebted nations, especially taking into account the fact that the fate of such big economies as Spain and Italy may soon come at stake. Societe General: comments on EUR/USD 2011-10-12 13:14 Technical analysts at Societe General claim that despite the negative event background the single currency keeps gaining versus the greenback. In their view, the pair EUR/USD may rise to $1.3795 and even to $1.3850. The outlook for euro is positive as long as it’s trading above support at $1.3435. Senate rejected Obama’s job plan 2011-10-12 14:19 More news from the policymakers: US Senate blocked Barack Obama’s $447-billion plan aimed to promote jobs creation. 2 Democrats joined the Republican minority criticizing stimulus measures for being costly and inefficient and voted against the bill. The legislation includes the reduction of the payroll taxes for workers and employers and provides new funding for roads, bridges and other infrastructure. Parts of the plan may still be pushed through if Obama finds enough support for specific provisions. US political parties can’t agree on the measures that could have to decrease the unemployment that stays at 9.1%. Republicans are in favor of permanent tax cuts and deregulation, while the President and congressional Democrats propose more federal spending and short-term tax reductions. The inability of American lawmakers to reach agreement on the key economic and financial issues increased the uncertainty on the global financial markets making investors worry about the recovery prospects of the world’s biggest economy.

Mizuho: pound’s under pressure due to the weak data 2011-10-11 17:00 UK economic data surprised to the downside: manufacturing contracted in August for the third month in a row declining by 0.3% versus the expected contraction of 0.1% confirming that Britain’s economic recovery’s under threat. In the second quarter the nation’s GDP expended only by 0.1% (q/q). Last week the Bank of England raised the ceiling for bond purchases from 200 to 275 billion pounds billion pounds. According to the British Chambers of Commerce, additional monetary easing may not be enough to prevent recession, so there’s the need for more radical measures. The pair GBP/USD dropped from 1-week minimum at $1.5688 to the levels in the $1.5630 area. If pound closes below 1.5500, it will slide to the key support at $1.5330. Analysts at Mizuho Corporate Bank believe that by the end of 2011 sterling will fall below $1.50 versus the greenback and lower than 0.85 per euro. Troika authorized sixth bailout tranche for Greece 2011-10-11 17:52 The so-called Troika – the European Union, the International Monetary Fund and the European Central Bank – sanctioned providing Greece with the sixth tranche of the bailout package at the beginning of November. Now it depends on the approval of the Eurogroup and the IMF. According to Troika’s statement, the indebted nation keeps making progress in such areas as fiscal consolidation, privatization, the banking system and structural reforms. Never the less, Greek economic outlook is considered to be pessimistic: the recession will be deeper than it was seen in June and Greek economy will start recovering only in 2013. Greece won’t be able to meet its deficit target this year, partly because its GDP keeps contracting. Inspectors claim that the nation will probably have to conduct additional measures.

EUR/USD: fundamental factors 2011-10-11 12:33 The single currency approached the 3-week maximum versus the greenback as it’s testing the levels in the $1.3700 area. It happened as the risk sentiment improved after Chinese state-run fund announced that it had started buying the shares of the nation’s biggest banks (Industrial & Commercial Bank of China (1398), China Construction Bank, Agricultural Bank of China and Bank of China). The fund intends to continue such practices without unveiling any details about the amount of investments. Analysts at Nomura note that Chinese government regards the equities of the domestic banks as cheap and its demand will encourage the entire Asian stock market. The specialists claim that the market in the risk-on mode, so one should stay away from the refuges such as US dollar and Japanese yen and move to the higher-yielding ones. The MSCI Asia Pacific index of shares added 2.1%. Yesterday the leaders of Germany and France pledged to come up with a plan to recapitalize the region’s banks by the G20 Meeting on November 3. At the same time, strategists at RBS doubt that European authorities manage to resolve all key issues by the end of the month. The negative factor is that Slovakia’s coalition hasn’t managed yet to come to agreement on the nation’s participation in EFSF. Slovakia is the only member of the currency union that hasn’t ratified the measure (Malta did so yesterday). Today the nation’s lawmakers vote again. Analysts at National Australia Bank warn that euro may slump in case Slovakia’s parliament votes against ratification. Analysts about EUR/USD future 2011-10-11 13:54 Many leading currency experts believe that the Federal Reserve will launch the third round of quantitative easing in order to encourage the national economy and that the greenback will stop strengthening. Analysts at JPMorgan Chase reduced their average forecasts for the greenback in the fourth quarter from $1.3387 to $1.34 per euro and from 77.06 to 76.6 yen. In their view, the Fed may begin discussing QE3 by the end of 2011 and begin asset purchases at the beginning of the next year. The specialists expect EUR/USD to end the year at $1.38 and the USD/JPY – at 75 yen. Strategists at Westpac think that the bears won’t be able to push EUR/USD below $1.30. In their view, the pair will trade at $1.31 at the year-end. All in all forecasters surveyed by Bloomberg project euro to appreciate to $1.40 by the end of 2012. Never the less, there still are those who prefer US currency. Economists at Credit Agricole think that the risk of recession is exaggerated. In their view, in the medium term the greenback would benefit from the fact that US economy is in the better condition than the other major economies. According to the bank, EUR/USD will end the year at $1.33 and then drop to $1.26 by the end of 2012. Analysts at Wells Fargo say dollar will end the year at $1.32 per euro pointing out that they are more optimistic on dollar’s future than on euro’s prospects. Trichet warns of systemic crisis 2011-10-11 16:16 European Central Bank President Jean-Claude Trichet claimed that the euro zone financial crisis has become systemic and called for decisive political action. «The high interconnectedness in the EU financial system has led to a rapidly rising risk of significant contagion. It threatens financial stability in the EU as a whole and adversely impacts the real economy in Europe and beyond,» claimed Trichet cited by Reuters.

Merkel and Sarkozy promised to recapitalize European banks 2011-10-10 13:45 German Chancellor Angela Merkel and French President Nicolas Sarkozy pledged to come up with a plan of recapitalizing European banks at the G20 summit that will take place on November 3. According to the IMF, the region’s banks need 200 billion euro of capital. It becomes more and more evident that the crisis reached the core euro zone nations: French-Belgian bank group Dexia fell victim of the liquidity squeeze. Belgian government announced that it would pay 4 billion euro ($5.4 billion) to take over the local consumer-lending unit, while the rest the group will be financed by the state guarantees worth 90 billion euro ($120 billion). As for Greece, Merkel and Sarkozy underlined that they are waiting for the verdict of Troika experts – the EU, the IMF and the ECB – to determine the next step to keep the indebted nation in the currency bloc. The single currency climbed today versus the greenback from the minimum at $1.3377 to the levels above $1.3550. Analysts at Commerzbank note that the market’s negative reaction on Spain’s and Italy’s downgrades by Fitch on Friday was exaggerated. In their view, that explains today’s strengthening of euro. Strategists at Citi think that EUR/USD won’t be able to sustain gains as the European authorities have actually done nothing new and investors will soon return to the gloomy mood due to the absence of the details of Merkel-Sarkozy’s plan. Societe Generale advises to sell EUR/CAD 2011-10-10 14:23 Analysts at Societe Generale note that better-than-expected US September Non-Farm Payrolls reading allows hoping for US economic recovery. According to the data released on Friday American employers added 103,000 jobs last month versus the forecast of 55,000, while Canada’s payrolls increased by 60,900 exceeding the projection of 15,200. The specialists believe that US economy is likely to get stronger in the final quarter of the year. In their view, to benefit from such expectations one should sell the single currency versus Canadian dollar. The United States is Canada’s main trading partner, so its growth will be positive for loonie, while euro will likely stay under pressure due to the looming debt problems. Societe Generale recommends opening shorts on EUR/CAD at 1.3900 stopping above 1.4100 and targeting 1.3100. Wells Fargo: loonie will rebound the next year 2011-10-10 14:50 Canadian dollar fell to the 1-year minimum this month – the pair USD/CAD reached on October 4 maximum at 1.0657. Loonie weakened on the concerns about the world’s economic slowdown. Analysts at Wells Fargo claim, however, that once global volatility subsides, Canada’s currency will have good chances for rebound. The Bank of Canada is still less likely to cut rates in the coming months than many other central banks. The BOC could even begin tightening policy by middle of 2012. As a result, though the near-term outlook for loonie is bearish, it’s likely to recover the next year. According to the bank, in 2012 the pair USD/CAD will return below the parity on a sustained basis.

Ichimoku. Weekly forecast. GBP/USD 2011-10-10 11:48 Weekly GBP/USD Last week the bears tested the levels below the Ichimoku Cloud, but then the bulls has managed to improve the situation and the pair ended up forming a bearish candle with long lower shadow. After declining a bit the Standard line (1) and the Turning line (2) went horizontally showing that the prices are likely to keep consolidating within Kumo. Pound is supported by Senkou Span B (3). Tenkan-sen (1) and the Kijun-sen as well as the upper border of the Ichimoku Cloud play the role of resistance for GBP/USD. The Cloud itself which has recently switched to the negative mode (4) remains very thin, so the bears still lack power. Daily GBP/USD On the daily chart sterling was trading around Tenkan-sen (1): at the beginning of the week the pair broke down support provided by the Turning line, but on Friday it once again managed to close higher. Now the horizontal conversion lone has retaken the supporting function. The descending Ichimoku Cloud (3, 4) keeps widening due to the declining Senkou Span S (3) showing that the bears are in change on this timeframe. The Standard line that’s moving down acts as resistance for the prices (2). The bulls may be able to push pound to its levels before British currency resumes its decline. Ichimoku. Weekly forecast. USD/JPY 2011-10-10 11:50 Weekly USD/JPY On the weekly chart the pair remains trapped in the range between 76 and 78 yen within which it has been trading since the beginning August. The declining Turning line (1) doesn’t let the prices move up pressing the greenback to the minimums. The Standard line has also gone sharply down (2). The bearish Ichimoku Cloud keep widening (3, 4). Tenkan-sen (1) and Kijun-sen (2) continue holding the strong “dead cross” in place providing resistance for the prices. Daily USD/JPY On the daily chart USD/JPY consolidated in the area of the Turning line (1). The longer-term Standard line (2) and Senkou Span B (4) are directed horizontally hinting at further sideways trend. Tenkan-sen (1) and Kijun-sen still hold the strong “dead cross” (5) formed below Kumo. The pair keeps being pressed by the wide descending Ichimoku Cloud (3, 4). Any attempts of the bulls to get higher will meet serious resistance. Ichimoku. Weekly forecast. USD/CHF 2011-10-10 11:52 Weekly USD/CHF On the weekly USD/CHF chart Kijun-sen (1) and Tenkan-sen (2), as it was expected, formed the “golden cross”. This is the bullish signal, though rather weak as the lines have intersected below Kumo (1). The Turning line (2) is moving up – the short-term trend is bullish, though the horizontal Standard line (1) means that the prices may consolidate for some time taking into account the fact how close they have come to the resistance provided by Senkou Span A (3). At the same time, the descending Ichimoku Cloud (4) has narrowed that means that the prices will likely enter Kumo. Daily USD/CHF The Turning line (1) still supports US currency. The next support is provided by the Standard line (2). The rising Ichimoku Cloud (3, 4) has become wide enough and keeps widening that means that the bulls finally managed to regain power. The general technical picture seems to be positive.

ECB announced the measures to support euro area banks 2011-10-07 12:17 The European Central Bank announced new liquidity measures yesterday – 12- and 13-month loans in October and December, giving banks access to unlimited cash through January 2013, and the resumption of 40-billion euro covered bonds purchases aimed to encourage lending. Strategists at UBS say that the measures should bolster the prospects of renewed net inflows to the euro zone. The specialists also point out that the ECB President Jean-Claude Trichet didn’t hint at a rate cut, so both the single currency and stocks will get support. In addition, the European Commission is pushing for a coordinated capital injection into banks, while German chancellor Angela Merkel claimed that Germany would not hesitate to recapitalize banks. On Sunday, October 9, Merkel is meeting French President Nicolas Sarkozy. The process of EFSF bill ratification is continuing: there are only 2 member nations left – Slovakia and Malta – who still haven’t made the decision. The pair EUR/USD rose from the 8-month minimum at $1.3145 hit on October 4 to the levels above $1.3400. Analysts at Brown Brothers Harriman believe that euro will be able to climb to $1.36/1.37, but then the demand for it weakens again and it will start falling again to end 2011 at $1.29. The market’s looking forward to NFP release 2011-10-07 13:16 The main piece of data for today is the US September Non-Farm Payrolls figure released at 12:30 GMT. Economists surveyed by Bloomberg News believe that the number of jobs increased last month by 55,000. The unemployment rate is expected to stay at 9.1% for the third month in a row. In August the number of employed remained unchanged versus the forecast of 68,000 increase. The current situation of uncertainly about the global economic prospects and the concerns about European and US debt ruins American consumer and business confidence that, in its turn, affects spending and hiring. Analysts at Goldman Sachs estimate the chance of recession in the United States during the next year by 40%. Specialists at TD Securities say that for the jobless rate to decline by 1 percentage point over a year payrolls should rise by 200,000 a month. During the 18-month recession that ended in June 2009 the nation’s economy lost 8.75 million jobs – only 1.9 million of them was recovered through August. US President Barack Obama proposed a $447-billion plan in September aimed to maintain growth and pushing down the unemployment rate next year. As the market thinks that the number of jobs added last month in the US won’t be enough to curb unemployment, the mood is far from optimistic that supports demand for the greenback as the safe haven. Reuters’ poll: GBP/JPY prospects 2011-10-07 13:47 British pound declined versus Japanese yen from 2011 maximums in the 140.00 area to the levels below 117.00. The survey conducted by Reuters among more than 60 banks and currency analysts shows that the specialists expect GBP/JPY to bottom out at the current levels and then start rising. According to their median estimate, the pair will be gradually moving up during the next 12 months to trade 118.60 in a month and then reach 123.20 in 6 months and 128.6 in September 2012. RBS: Aussie may return to the parity versus the greenback 2011-10-07 15:40 Currency strategists at RBS note that though commodity currencies have been weakening so far (Australian, New Zealand’s and Canadian dollars all lost 8-10% in the third quarter) the situation is likely to change. The specialists who have developed “economic surprise index” believe that the markets’ sentiment in the fourth quarter is going to improve as the flood of the negative news will abate, even though the Europe will keep facing serious debt issues. In their view, the worst for AUD, NZD and CAD might be over, though they don’t completely rule out the risk that these currencies retest their Q3 minimums. Aussie seems to be especially attractive as Australia has the biggest interest rates that lure investors with yield and if the Reserve Bank of Australia doesn’t cut the borrowing costs, the nation’s currency would get additional driver. According to RBS, the pair AUD/USD will return to the parity versus the greenback by the end of 2011. As for the single currency, the strategists see further depreciation, but don’t expect the currency union to collapse.

Commerzbank: comments on EUR/USD 2011-10-06 11:55 The single currency rebounded from Tuesday’s minimum at $1.3145 versus the greenback to the levels above $1.3300. Technical analysts at Commerzbank note, however, that as long as EUR/USD is trading below the short-term resistance line at $1.3486, the outlook for the pair will remain negative. The specialists claim that if euro breaches support in the $1.3145/1.3063 area it will fall to 2011 minimum at $1.2860. According to the bank, the technical indicators on the daily chart remain negative. At the same time, the strategists say that there may be some consolidation after the abrupt slump seen so far. HSBC cut growth forecasts for Asian economies 2011-10-06 12:33 Analysts at HSBC reduced its 2011 and 2012 economic forecasts for the most of the Asian economies – Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. The specialists revised down their 2012 growth estimates for Japan and New Zealand. As the reasons for such revision the bank cited the potential decline in exports due to lower demand in indebted Europe and economically weak United States, as well as falling stocks and currencies. The predictions for China, India, Australia and the Philippines remained unchanged. Chinese GDP is seen adding 8.9% this year and 8.6% the next. According to HSBC, Chinese strength may help to ease pressure on other Asian economies. Specialists at Standard Chartered think that in case of another financial crisis Asian central banks will be able to save the region by monetary stimulus and get out of any deep recession. At the same time, the economists say that Asia along isn’t able to remove such threat of the whole world. BarCap: ECB will looosen its monetary policy 2011-10-06 14:20 Currency strategists at Barclays Capital believe that the European Central Bank will ease its monetary policy today through both conventional and unconventional steps. In their view, the ECB has several options, such as offering additional long-term refinancing operations, including 6 or 12 months' maturity, continuing of Italian and Spanish debt purchases, resume the covered bond purchase program, widening the interest rate corridor and reducing the benchmark interest rate. Barclays thinks that the central bank will employ all of the measures mentioned above. According to the specialists, the ECB will widen the interest rate corridor – the difference between deposit rate and refinancing rate – from 25 to 100 basis points and cut the borrowing costs from 1.50% to 1.25%. Reuters poll: expectations on USD/JPY 2011-10-06 14:38 The poll conducted by Reuters among more than 60 banks and currency analysts showed that the specialists expect the pair USD/JPY to stay in the 77.00 area during the next 3 months, then rise to 78.00 yen in 6 months and to 80.00 in September 2012. Sakakibara: yen will strengthen versus euro and US dollar 2011-10-06 16:08 The market thinks that Japan could intervene to boost EUR/JPY and support national exporters with Europe’s consent if it pledged to lend the amounts of euro bought in the process of intervention to the European Financial Stability Facility through buying EFSF bonds. Eisuke Sakakibara, the former Japanese vice finance minister known as “Mr. Yen” for his ability to influence yen’s rate through both verbal and actual market interventions, believes that the United States and the euro area want to have weaker currencies in order to stimulate their economies. Sakakibara says that Japanese economy undermined by the devastating earthquake in March is recovering while the American and European ones are under threat of recession. As a result, in his opinion, European authorities would criticize any Japanese currency-market intervention meant to encourage euro. Sakakibara points out that yen’s appreciation versus the single currency is based on the economic fundamentals, so any unilateral steps of Japanese monetary authorities will be useless as they change the situation only for a very short period of time. According to the economist, the pair EUR/JPY that hit on Tuesday 10-year minimum at 100.74 yen will move down to the levels between 90 and 100 yen. As for the pair USD/JPY, Sakakibara expects it to drop below 75 yen and then below 70 yen in the coming weeks. The BoE increased asset purchases. Analysts’ comments 2011-10-06 17:03 The Bank of England has surprisingly increased the amount of asset purchases by 75 billion to 275 billion pounds. The analysts burst out with comments on this point. BNP Paribas: there will be more QE in the coming months. Deutsche Bank: pound will drop to $1.50 and will stay under pressure until the Federal Reserve hints at QE3. Commerzbank: the size of QE2 shows that the BoE is really concerned with the nation’s economic situation. The specialists say that sterling’ slump won’t be as big as it was when the first round was introduced. The bank doesn’t see any inflationary risks. Commerzbank recommends being short on GBP/USD and expecting EUR/GBP to strengthen to 0.88. Morgan Stanley: bearish outlook for British currency as the market was expecting QE2 not earlier than in November. GBP/USD is on its way down to $1.5175/1.5125. Capital Economics: the threat of recession in Britain is bigger than the one of inflation. The analysts doubt that the measure will manage to improve economic outlook. Danske Bank: the increase in the amount of purchases it bigger that the bank projected. The pair EUR/GBP is on its way up to 0.8750. Commerzbank: franc’s strengthening versus the greenback 2011-10-06 17:57 Swiss franc is declining versus its American counterpart on the talk that the Swiss National Bank may conduct more measures aimed at depreciation of the national currency. The SNB reported that its currency reserves rose from 253.4 billion francs in August to 282.4 billion francs ($306 billion) at the end of September. Last month the central bank pegged franc to euro and pledged to buy unlimited amounts of foreign currencies in order to keep the pair EUR/CHF above $1.20. Many investors now think that the SNB may raise this threshold, notes Commerzbank. It’s necessary to note that the interventions increase the money supply strengthening inflation pressure. Switzerland’s consumer prices added 0.3% in September on the monthly basis after declining by 0.3% in August. The annual CPI growth was 0.5% versus the forecast of 0.3% and 0.2% advance in August. The pair USD/CHF rose from the record minimum at 0.7064 hit on August 9 to the levels above 0.9200. Resistance for the pair is situated at 0.9370 (March 2010 maximum) and 0.9400 (50% retracement of the decline from 2010 to 2011). Support levels are found at 0.9220 (daily minimum), 0.9185 (September 22 minimum) and 0.9145 (October 4 minimum).

BMO: recommendations ahead of BoE and ECB meetings 2011-10-05 22:42 There are 2 important central bank meetings on Thursday: the one of the Bank of England (with the rate and the amount of asset purchase facility released at 3:00 pm GMT+4) and the one of the European Central Bank (with the rate and the rate released at 3:45 pm GMT+4 and press conference at 4:30 GMT+4). Analysts at BMO Capital Market note that there may be 4 possible combinations of the central banks’ decisions. Here they are: - BoE does nothing, ECB does nothing; - BoE increases quantitative easing, ECB does nothing; - BoE does nothing, ECB cuts rates; - BoE increases quantitative easing, ECB cuts rates. According to the specialists, the last scenario represents the best trading opportunity. In such case the market may firstly react to the reduction of the interest rate differentials in favor of the UK and the single currency will decline versus British pound. However, investors will likely soon realize that the ECB’s action is meant to improve the situation in the euro area. As a result, the European bank equities and euro will advance. So, BMO recommends buying EUR/GBP on the dips, at 0.8550 stopping below 0.8500 and targeting 0.8700.

Forecast Pte: technical comments on EUR/JPY 2011-10-04 11:42 Technical analysts at Forecast Pte claim that he single currency may fall below 100 yen. The specialists point out that euro’s MACD (moving average convergence/divergence) is in the downtrend: the indicator was found today at minus 1.8267 that’s below the signal line of minus 1.6881. The pair EUR/JPY hit today the 100.74 level, the lowest since June 2001. According to the strategists, euro may slide to 96.84 yen, the level last visited on December 11, 2000. ANZ: the possibility of the RBA rate cut increased 2011-10-04 12:32 Australian dollar fell to 1-year minimum versus its US counterpart at $1.9413. It happened as the Reserve bank of Australia reported that the easing inflation pressure may allow it to reduce the borrowing costs in order to encourage economic growth. The central bank’s Governor Glenn Stevens said that inflation may now be more consistent with the 2-3% target in 2012 and 2013. The market now expects that the RBA will cut its benchmark interest rate from 4.75% to 4.25% be November and by 50 basis points more by the end of the year, claims ANZ. The specialists point out that it would be necessary to watch Q3 inflation reading as it would be the basis for November decision. Analysts at Commonwealth Bank of Australia believe that AUD/USD may drop below $0.9000. Technical analysts at Commerzbank think that as long as the pair stays below $0.9580 (23.6% retracement of the entire 2001 — 2011 move), it risks sliding to $0.9407/.9390 (late 2009 and early 2010 maximums). Deutsche Bank: GBP/USD forecast 2011-10-04 13:56 Analysts at Deutsche Bank think that sterling’s decline versus 2011 maximums versus the greenback in the $1.6740 area will continue. In their view, pound will stay under pressure due to high possibility of the second quantitative easing program in UK. According to the bank, pound will fall to $1.5100 in the fourth quarter of 2011 and then consolidate between $1.4800 and $1.4900 during major part of 2012 before jumping to $1.5600 at the end of next year. UBS: ECB will cut rates on Thursday 2011-10-04 14:32 Currency strategists at UBS believe that the European Central Bank will reduce its benchmark rate by 50 basis points to 1.0% on October 6. According to the specialists, the downside risks for EUR/USD in the near-term come from the potential ECB easing rather than from the possibility of Greece’s default. The bank underlines that the rates markets have priced in 25-basis-point cut, but the forex markets haven’t. If the ECB loosens its policy, long-term investors – central banks and sovereign wealth funds – will sell the single currency. As a result, UBS thinks that EUR/USD will move down to $1.20/1.30. Goldman Sachs cut forecasts for euro 2011-10-04 15:02 Analysts at Goldman Sachs reduced their 2012 global economic growth forecast from 4.3% to 3.5%. Japan’s growth outlook for the fiscal year beginning in April 2012 was decreased from 2.5% to 2.1%, while the estimate of the nation’s GDP growth this fiscal year was lowered from 0.2% to 0.1%. According to Goldman, the United States will come close to recession at the beginning of 2012 – its economy will add in the first quarter only 0.5%. The nation’s economic forecast for the next year was cut from 2.0% to 1.4%. The specialists think that during the next several quarters the euro zone’s core nations such as Germany and France will go through mild recession beginning in the fourth quarter, while the peripheral nations of the currency union will suffer much more. European GDP will add in 2012 only 0.1%. The bank also revised down 3-month forecast for EUR/USD from $1.40 to $1.38 and for EUR/JPY from 108 to 106 yen. UBS: bullish forecast for USD/CAD 2011-10-04 15:34 The greenback rose versus its Canadian counterpart from July minimums in the 0.9400 zone to the levels above 1.0500. Currency strategists at UBS are bullish on USD/CAD as the Canadian trade flows worsen and the interest rate support is fading. In their view, the treat for CAD is in the growing reliance on foreign buying of debt denominated in loonie and rising domestic leverage levels. According to the bank, the pair will reach 1.1000 by the end of the year. Mizuho, Nomura: euro remains under pressure 2011-10-04 16:20 Analysts at Mizuho Securities note that there isn’t much progress in containing the sovereign crisis. In their view, the euro area risks falling into recession. The specialists believe that in these circumstances the single currency will stay under pressure. According to the bank, euro seems oversold and may recover a bit, but this upward correction will be short-lived. Currency strategists at Nomura Securities think that the single currency may fall to the lowest levels since the beginning of the debt crisis in the $1.1800 area. European finance ministers considered “technical revisions” to the second bailout package adopted in July during their 2-day meeting. The deal foresaw investors contributing 50 billion euro ($66 billion) to a 159 billion-euro rescue. That “private sector involvement” includes debt swaps and rollovers. According to Luxembourg Prime Minister Jean-Claude Juncker, the revisions may be necessary as the situation has changed since July. The decision about granting Greece the next tranche of financial aid was postponed to the middle of October. Greek Finance Minister Evangelos Venizelos said that the nation will be able to repay its debts until the middle of November. Roubini: euro zone needs 2 trillion euro 2011-10-04 17:45 Nouriel Roubini, professor of economics at New York University famous for predicting 2008 global crisis, says that the European bailout fund have to be increased to 2 trillion-euro ($2.7 trillion) before it’s too late. According to the specialist, this is the matter of not months, but weeks. Roubini underlines that the main risks come from Italy and Spain as these nations are “too big to fail but also too big to save” – these nations have already lost the market’s confidence. The economist says that the ECB has to ease its policy and cut rates depreciating euro. In his view, it’s also necessary to recapitalize European banks and set an orderly process to allow Greece quit the euro area. Fiscal stimulus at the core members of the currency union is also needed to avoid a recession for all European countries. Roubini notes that the chance that all these measures will be conducted in a coherent way is low as there are serious political tensions. The specialist warns that the consequences of the European debt crisis will likely be worse than those of the Lehman Brothers collapse. Mizuho: forecasts for EUR/USD 2011-10-04 17:57 Analysts at Mizuho believe that the single currency will fall versus the greenback to $1.3100 in a month, then rebound to $1.3400 by the end of 2011 and reach maximum at $1.3600 in 6 months before resuming its decline. The specialists say that the pair EUR/USD will trade at $1.3000 in a year from now.

Wells Fargo: bearish EUR/USD forecast 2011-10-03 12:08 Analysts at Wells Fargo are bearish on the single currency in the medium term. In their view, the pair EUR/USD will drop to $1.3200 by the end of this year and may slide to $1.2500 by the end of 2012. The specialists believe that the weak economic outlook will hamper the results achieved due to the policymakers’ actions. In addition, the ECB’s approach has changed from the hawkish mode to the more dovish one. The central bank is likely to cut rates or conduct liquidity easing measures during the next few months. Deutsche Bank: EUR/USD is poised to decline 2011-10-03 12:11 Analysts at Deutsche Bank point out that the European currency has fallen versus the greenback from the May maximums in the $1.4940 area to the levels below $1.3400. In their view, euro’s decline is going to continue: the specialists expect EUR/USD to keep weakening during the next 12 months. According to the bank, the pair will fall to $1.3000 in 3 months, then slide to $1.2700 by the end of the first quarter of 2012 and then reach $1.2500 in 12 months time. The strategists think that euro’s dynamics will depend on the actions the euro zone’s policymakers will make to stem the crisis. Here it’s necessary to take the account the monetization risks and the downgrade risk of the member nations and the European Financial Stability Fund (EFSF) itself. Ichimoku. Weekly forecast. GBP/USD 2011-10-03 14:28 Weekly GBP/USD The prices remain within the Ichimoku Cloud. All lines of the indicator stay horizontal (1, 2, 4), so sterling is likely to consolidate within Kumo. The Turning line (1) and the Standard line (2) as well as the upper border of the Ichimoku Cloud act as resistance for GBP/USD. The Cloud has recently switched to the bearish mode. However, the negative Kumo is still very thin – the bears haven’t gained much power yet. As a result, the bulls may be able to strengthen their positions. It’s quite possible that the pound will manage to rebound from Senkou Span B (3). Daily GBP/USD On the daily pound managed last week to overcome resistance provided by Tenkan-sen (1) and consolidate above it. Never the less, at the beginning of this week the pair once again tested the levels below the Turning line (1). The descending Ichimoku Cloud (3, 4) keeps widening that means that the bears are dominating at the market. The Standard line (2) also acts as resistance. The previous minimums hit on September 22 and 23 play the role of support. At the moment all the lines of the indicator are directed horizontally (1, 2, 3, 4) that means that pound will likely remain within the current range moving sideways. Ichimoku. Weekly forecast. USD/JPY 2011-10-03 14:33 Weekly USD/JPY On the weekly chart the pair keeps trading between 76 and 78 yen as it has been doing since the beginning of August. High demand for yen is combined with risk of BoJ interventions. At the same time, it’s necessary to note that the Turning line went sharply down (1), while the Standard line also began deviating down (2). The bearish Ichimoku Cloud has also widened a bit (3, 4). Tenkan-sen (1) and Kijun-sen (2) still hold the strong “dead cross” in place (5) providing resistance for the prices. Daily USD/JPY On the daily USD/JPY chart the prices were moving gradually up during the last several days – the greenback has overcome the Turning line (1) and got support from it and even ested the Standard line (2). Tenkan-sen (1) and Kijun-sen (2) still hold in place the strong “dead cross” (5) formed below Kumo. As a result, all the signals mean that it would be very hard for the bulls to keep moving up – the pair still finds itself under pressure provided by the bearish Ichimoku Cloud (3, 4). Ichimoku. Weekly forecast. USD/CHF 2011-10-03 14:35 Weekly USD/CHF The greenback keeps gradually strengthening versus Swiss franc. Kijun-sen and Tenkan-sen are ready to form the “golden cross” (1). The Ichimoku Cloud is the only obstacle on the pair’s way up. Daily USD/CHF On the daily chart US currency continued consolidation above the Turning line (1) that is acting as support (1). The next support is the Standard line (2). The rising Ichimoku Cloud has already become wide enough that means that the bulls have finally managed to regain the lead. All lines of the indicator (1, 2, 3 and 4) have turned horizontal. The general technical picture is positive. Euro: this week’s events and analysts’ comments 2011-10-03 15:32 The single currency remains near the 8-month minimum versus the greenback at $1.3313 hit earlier today and close to the 10-year minimum against Japanese yen at 101.92 hit on September 26. The market is concerned about the possibility of Greece’s default and the health of the euro zone's banking sector. Coming events The focus this week will be on the monetary policy and growth. The European Central Bank meets on Thursday, October 6. Some investors are looking forward to a 25-basis-point rate cut even despite high September inflation data. The ECB President Jean-Claude Trichet speaks on Tuesday, October 4, at 1:00 pm GMT. It’s also necessary to note that today begins 2-day meeting of the European finance ministers. The Ecofin is expected to put pressure on Greece to implement agreed structural reforms and to discuss the ways of increasing the European Financial Stability Facility’s (EFSF) financial firepower. The decision about granting Greece the sixth tranche of the bailout – 8 billion-euro ($11 billion) – is postponed to the middle of October as the nation tries to reduce its huge budget shortfall. Bearish forecasts UBS: EUR/USD shorts will increase. ING: euro will fall to $1.30/1.31. Commerzbank: the pair will slide down to $1.2860 (2010 minimum) and $1.2000. Key resistance in the short term is seen at $1.3937 (September 15 maximum). BMO Capital: trading recommendations ahead of NFP 2011-10-03 18:55 US September Non-Farm Payrolls data is released on Friday, October 7, at 12:30 pm GMT. The figures will be watched more than ever after US jobs growth stagnated in August. Analysts at Bank of America Merrill Lynch expect to see the figure of 75,000, but warn that the risk is to the downside. Strategists at BMO Capital say that if the market expects NFP to be somewhere close to 50,000 and the indicator posts 70,000, one should sell USD/CAD. If the published NFP figure finds itself between 70,000 and 30,000, it would be better to refrain from actions. If the figure comes below under 30,000, the specialists recommend buying the greenback versus Swedish krona. According to BMO, the first scenario is the most likely. As a result, the specialists advise investors to sell US dollar versus its Canadian counterpart at 1.0400 stopping just above 1.0470 and targeting 1.0155. At the same time, economists at J.P. Morgan point out that investors need to be cautious with trade like this watching other data released on Friday – Canadian nonfarm payrolls and Ivey PMI survey.

Fitch and S&P downgraded New Zealand 2011-09-30 13:23 New Zealand’s dollar fell to the 6-month minimum versus the greenback at $0.7626 after Standard & Poor’s and Fitch Ratings downgraded the nation’s debt from AA+ to AA with stable outlook. The agencies explained their decision by New Zealand’s high external debt and its persistent current account deficit. Strategists at Citigroup underline that Fitch’s and S&P’s move seems surprising as everyone has been aware about these problems for a long time. It’s also necessary to note that the survey conducted by ANZ National Bank that was released today showed that New Zealand’s business sentiment has worsened: only 30.3% of companies expect the economy will improve during the next 12 months compared with 34.4% in August. In addition, China, New Zealand’s second-biggest export market, reported the longest contraction of the PMI (Purchasing Managers Index) in 2 years. Analysts at Westpac note that the global outlook remains rather discouraging, so commodity currencies like Aussie and kiwi will likely stay under pressure. In the view, New Zealand’s dollar may slide to $0.7500. The pair NZD/USD lost 10% in September, while AUD/USD dropped by 8.8%. Commerzbank: comments on GBP/USD 2011-09-30 14:11 Technical analysts at Commerzbank believe that British pound has finished its upward correction versus the greenback from 1-year minimum at $1.5325 hit on September 22 as it reached this week the levels in the $1.5700 area. The specialists think that GBP/USD will resume its decline. In their view, the sell-off of sterling will be triggered when it dips below $1.5500. According to the bank, support for the pair is found at $1.5297. In the longer term, British currency is poised down to the 2009-2011 uptrend line at $1.4973. Mizuho: USD/JPY will fall to 60 yen in 2013 2011-09-30 17:23 Currency analysts at Mizuho Corporate Bank say that the greenback may fall to 60 yen in 2013 basing their conclusions on USD/JPY dynamics during the past 40 years. The specialists note that US dollar has bottomed out around 30% below the preceding minimum on four occasions since 1971 experiencing slumps by 100, 80, 60 and 40 yen. US currency was at 360 yen until the gold standard was ended in 1971. Then it slid to 254.45 yen in 1973, 177.05 yen in 1978, 121.25 yen in 1987 and 79.75 yen in 1995. According to Mizuho, in 2 years this will happen for the fifth time: USD/JPY will fall by 20 yen from the previous minimum at 79.75 yen hit on August 19. MIG Bank: comments on USD/CHF 2011-09-30 17:51 The greenback’s decline from Monday’s maximum in the 0.9185 area was limited by the support in the 0.8915/25 zone. Technical analysts at MIG Bank are positive on the USD/CHF prospects. In their view, as US dollar has managed today to return above 0.9000, it will be able to return up to 0.9185. According to the bank, the bearish pressure on the pair will activate if it slips below 0.8880. The larger correcting will be triggered if American currency tests the levels below 0.8647. SNB pledged to keep franc from appreciation 2011-09-30 18:47 The Swiss National Bank’s President Philipp Hildebrand claimed yesterday that the central bank is firm in its decision to defend franc’s peg to euro. Hildebrand didn’t unveil the amount of foreign currency purchases the SNB has to make in order to keep EUR/CHF above 1.20 and prevent the national currency from excessive strengthening that affected the nation’s exporters and posed recession risks. According to him, this measure is “totally credible.” The single currency hit the record minimum versus franc of 1.0065 on August 9. The SNB announced the ceiling for franc on September 6. Next week the SNB will release currency holdings for September. At the end of August the central bank’s reserves accounted for 253.4 billion francs ($280 billion). Hildebrand said that though Swiss economic growth will weaken in the second half of the year, the cap will help to lower the threats of recession and deflation. In his view, franc is strongly overvalued.

Euro’s gaining ahead of German vote 2011-09-29 12:10 German parliament votes on the changes to the European Financial Stability Fund (EFSF) at 9:00 a.m. GMT. Euro is strengthening versus the majority of its counterparts as investors believe that German Chancellor Angela Merkel will get enough support for the ratification as main opposition Social Democrats and Greens have said they will vote with Merkel’s government. Analysts at Bank of Tokyo-Mitsubishi UFJ expect the outcome to be positive. In their view, the single currency is rebounding as traders cover shorts. At the same time, higher EUR/USD levels will likely be used as the selling opportunity. One should also be cautious ahead of Italian debt auction later today. The pair is up from today’s minimum in the $1.3500 area to the levels around $1.3660. Commerzbank, MIG Bank: euro’s decline will resume 2011-09-29 12:43 Euro rose from the 8-month minimum at $1.3362 hit on Monday to the levels around $1.3660. Technical analysts at Commerzbank claim that the single currency may rise to $1.3732 or even $1.3937 before returning down to $1.3515 and slumping to the recent minimums at $1.3428 and $1.3360. Strategists at MIG Bank are even more bearish. The specialists think that euro will resume its downtrend towards $1.3000 and $1.2800. The sell-off will occur if EUR/USD moves below $1.3362 (September 26 minimum). According to the bank, resistance for the pair is found at $1.3795 (September 21 maximum), $1.3937 (September 15 maximum) and $1.4000 (psychological level). Commerzbank: comments on AUD/USD 2011-09-29 13:29 Technical analysts at Commerzbank think that Aussie’s correction from the 10-month minimum at $0.9621 hit on September 26 reached its target at $0.9967. The specialists don’t rule out the possibility of some more retracement to $1.0180/1.0200, but expect AUD/USD to resume its downtrend. In their view, if the pair breaks below $0.9835, it will be poised down to the recent minimum at $0.9621 and $0.9407/0.9390 (late 2009 and early 2010 maximums). According to the bank, resistance for Australian dollar is provided by the downtrend line from $1.0503. Bernanke: unemployment may lead to the “national crisis” 2011-09-29 14:32 Federal Reserve Chairman Ben Bernanke warned yesterday that the United States finds itself under threat of a “national crisis”. Bernanke underlines that the situation at the labor market remains intense: the unemployment rate stays at or above 9% since April 2009 and almost 45% of the unemployed are jobless for already 6 months or more. The Fed’s head reiterated that monetary policy along can’t solve the country’s problems and spur its sluggish economic growth. In his view, it’s very important to breathe life in the housing markets. Bernanke also pointed out that the US should use the experience of many emerging market economies supporting strong economic growth through “disciplined fiscal policies”, “encouraging private capital formation and undertaking necessary public investments”, reports Bloomberg. Last week American central bank decided to lengthen long-term interest rates by replacing $400 billion of short-term debt in its portfolio with longer-term Treasuries. At the same time, 3 members of the FOMC opposed this decision and spoke against further monetary stimulus. Despite 2 rounds of quantitative easing, which cost the Fed $2.3 trillion, US growth has stalled. Deutsche Bank: recommendation for EUR/USD 2011-09-29 15:18 Analysts at Deutsche Bank note that there’s 84% correlation between the size of the Eurosystem's consolidated balance sheet and the dynamics of the single currency versus the greenback. So, when the balance sheet expands, EUR/USD weakens and vice versa. However, the specialists say that as the 2 rates are moving in tandem rather than one reacting to the other – that makes it difficult to use this relationship for trading strategies. There may be the case, though, when this information will be quite useful – if European debt crisis is solved by some kind of balance sheet expansion. The specialists think that the odds of such outcome are high. In their view, the euro area will either use the stabilization fund or the ECB will continue buying debt of the peripheral countries. As a result, most ways which don’t involve immediate sovereign ratings implications lead to a continuation of the ESCB’s balance sheet expansion and, consequently, to euro’s depreciation. Citigroup reduced global economic forecast 2011-09-29 16:29 Analysts at Citigroup revised down their global economic growth forecasts for the second time in less than a month. The specialists lowered 2011 growth estimate from 3.2% to 3.0% and the 2012 one – from 3.7% to only 2.9%. According to the classification of the IMF and the World Bank, 2% global growth means is considered as global recession. The bank cut China's 2012 GDP growth rate from 9% to 8.7%. The outlooks for the United States, Europe, Japan, Canada and the UK were also reduced. Citigroup expects a long period of negative real interest rates in the main advanced economies. The analysts think that the ECB is likely to cut the borrowing costs, while the Bank of England will start the second round of quantitative easing in the next 1-2 months. In their view, Moody's and Standard & Poor's will keep downgrading euro zone nations such as Italy, Spain, Greece, Portugal and Cyprus. All in all, the economists advise investors to be cautious, avoid risks and favor US dollar and Japanese yen. Germany gave green light for EFSF 2011-09-29 17:28 The single currency keeps trading on the upside as German parliament approved the expansion of the European Financial Stability Fund (EFSF) – there were 523 in favor of legislation versus 85 votes against it. Tomorrow there will be another vote in the upper house, or Bundesrat. The bill enables EFSF to buy the bonds of the indebted peripheral nations and offer emergency loans to governments. The fund is boosted from 440 to 780 billion euro, the amount guaranteed by Germany increased from 123 to 211 billion euro. The EFSF extension has been already ratified in Slovenia, Belgium, Greece, Ireland, Italy, Luxembourg, Spain, France, Portugal and Finland. Analysts at JPMorgan Chase expect euro to continue its “remarkable resilience” until the end of the year and end 2011 at $1.38. Strategists at Lloyds Bank say that the risk of the currency union’s disorderly breakup decreased. In their view, EUR/USD will finish 2011 at $1.40, though the specialists don’t rule out the possibility of euro’s slump to $1.32 before that.

Mizuho: demand for yen remains high 2011-09-28 12:04 Japanese yen is strengthening versus the greenback on investors’ demand for safe haven. Later in the day the market expects some discouraging data – orders for US durable goods are seen declined by 0.4% in August from July level. The figures are released at 12:30 p.m. GMT. In addition, there are talks that Japanese exporters are repatriating their overseas earnings before the end of the third quarter and the fiscal half-year end that comes on Friday. Analysts at Mizuho note that the markets are still dominated by uncertainty caused by the euro zone’s debt problems and concerns about the world’s economic slowdown. In their view, yen will continue being quite attractive for investors. Strategists at Citibank note that the US dollar still has downside potential. The specialists claim that today USD/JPY will remain trading between 76.30 and 77.30. The pair has been staying between 76 and 78 yen since the Bank of Japan’s intervention at the beginning of August. UBS, RBS: forecasts and comments on EUR/USD 2011-09-28 12:43 The single currency keeps crawling up versus the greenback from the 8-month minimum at $1.3362 hit on Monday. Technical analysts at UBS believe that the current upward correction can bring euro higher, but then it will resume its slump. The specialists kept 1-month target for EUR/USD at $1.30 and the 3-month estimate – at $1.20. As for the coming political decisions, the bank is rather optimistic saying that Greece will likely get the sixth tranche of the bailout and that the odds are that Germany will ratify the changes to the EFSF tomorrow. At the same time, the Royal Bank of Scotland cut EUR forecasts yesterday to $1.33 by the end of 2011 and $1.41 by the end of 2012. RBS underlined that there are strong chances that the ECB will lower the borrowing costs amid the rising risk of the region’s falling into recession the next year. Commerzbank: comments on EUR/USD 2011-09-28 13:05 The single currency went up versus the greenback from the 8-month minimum at $1.3362. Technical analysts at Commerzbank note that euro has reached the level of 23.6% Fibonacci retracement of the decline from August at $1.3640. In their view, EUR/USD upward correction is over at this point. It’s necessary to say, however, that the specialists don’t rule out the possibility of the pair’s advance to $1.3723 (23.6% retracement of the move down from May) and to $1.3815. According to the bank, resistance for the European currency is found at $1.3936 (September 15 maximum). If euro resumes moving down, it will drop to $1.3428/1.3360 and then to $1.2870 (2011 minimum). The bank’s long-term target for EUR/USD remains at $1.20. Goldman Sachs: euro and the situation in Italy 2011-09-28 14:16 Economists at Goldman Sachs claim that unstable political situation in Italy threatens the positive outlook for the single currency. In their view, in the worst case continued reluctance of the Italian authorities to fight the national economy’s structural weaknesses and the worsening public relations may keep affecting the market’s attitude to Italian bonds. Never the less, the analysts are hopeful. The bank believes that Italy will take a more pro-active approach to the structural reforms. According to Goldman, this will help bring the debt levels down into sustainable territory even if Italian economic growth continues to slow. . The bank sees euro at $1.40 in 3 months, $1.45 in 6 months and $1.50 in a year. The strategists warn, however, that any signs that the worst-case scenario begins to come true will affect the forecasts. Commerzbank: bullish outlook for USD/CAD 2011-09-28 15:32 Last week the greenback surged versus its Canadian counterpart from the levels in the 0.9800 zone to 1-year maximum at 1.0385 reached on September 26. Then USD/CAD faced resistance of October 2010 high and eased down to $1.0220. Technical analysts at Commerzbank claim that support for the pair is found at 1.0140/09 (August, May and June 2010 minimums) and 1.0058/00. In their view, US dollar will recoil up from these levels and resume growth. According to the bank, US currency will manage to strengthen to the 200-week MA at 1.0581.

UBS: bearish forecast for EUR/USD 2011-09-27 11:48 Currency strategists at UBS believe that the single currency will likely resume declining versus the greenback as investors tend to favor US dollar as a safe haven. According to the bank, EUR/USD is poised down to $1.20 during the next 3 months. The specialists believe that the pair is going to repeat its 2008 trend when it dropped from $1.60 to $1.23. Euro was seen going down during the past weeks on the concerns about the world’s economic slowdown and the euro area debt crisis. Commerzbank: bullish outlook for USD/CHF 2011-09-27 12:03 Last week the greenback’s advance versus Swiss franc was limited by the levels in the 0.9185 area, just below the 55-week MA. Technical analysts at Commerzbank believe that USD/CHF is now going through consolidation getting ready to head up for further growth towards 0.9340/0.9400 (March 2011 maximums and double Fibonacci retracement). In their view, the outlook for American currency remains positive as long as it’s trading above 0.8927. The specialists note that support for the pair is currently found at 0.8927 (September maximum) and 0.8646 (last week’s minimum). Greece: parliament votes on the property tax 2011-09-27 13:17 The single currency remains above the new 8-month minimum versus the greenback at $1.3662 hit yesterday. Analysts Daiwa Capital Markets speak about the temporary revival of the risk sentiment. Economists at Barclays Capital say that euro has chance to return to $1.39. Italy, Spain and the Netherlands are holding the debt auctions today, while Greek parliament is getting ready to vote on the property tax at 4:00p.m. GMT – that would be an important step towards the nation’s receiving the next tranche of financial aid. However, strategists at Morgan Stanley recommend selling EUR/USD in case Greek lawmakers don’t approve the unpopular law. BMO, Westpac: EFSF vote ahead 2011-09-27 14:05 On Thursday, September 29, German Bundestag will vote on the bill to reform the European Financial Stability Facility (EFSF). The day earlier, on September 28, similar vote is held in Finland. Analysts at BMO Capital and Westpac Institutional Bank expect the euro zone’s leading economy to pass the bailout package but warn that otherwise the market’s reaction is going to be extremely negative. If the worst comers true, the trading recommendations are to sell EUR/USD looking forward a decline to at least $1.32. Gaitame.com: technical comments on EUR/USD 2011-09-27 14:26 Technical analysts at Gaitame.com Research Institute note that EUR/USD has entered the weekly Ichimoku Cloud and will likely ease to its bottom at $1.3183. The specialists say that if the single currency goes below the 50% Fibonacci retracement of its advance from $1.1875 on June 7, 2010, to $1.4940 on May 4, 2011, it will drop to the 61.8% Fibonacci retracement at $1.3047. In their view, euro’s decline may lead the currency to this year’s minimum in the $1.2873 zone. Mizuho: comments on USD/JPY 2011-09-27 14:59 Technical analysts at Mizuho Corporate Bank claim that the greenback is consolidating within an irregular triangle versus Japanese yen. In their view, the outlook for USD/JPY remains negative as long as it’s trading below 78.00. The specialists think that the pair may decline to the psychological level of 75.00 and then to 74.30 and 72.00. Ichimoku. Weekly forecast. GBP/USD 2011-09-27 16:29 Weekly GBP/USD Last week British pound, as it was expected, dipped to the lower border of the Ichimoku Cloud (3) where the bulls managed to find support and return sterling higher, closer to the centre of Kumo. The prices advance since the beginning of this week manages to contain the decline of Tenkan-sen (1) and Kijun-sen (2) and bring them into the horizontal state. The Turning line together with the Standard line and the upper border of the Ichimoku Cloud is currently acting as resistance for GBP/USD. At the same time, it’s necessary to note that the weekly Cloud has switched to the negative mode: though it’s still quite narrow and the bears haven’t gained much power yet, this may be a signal that the growth seen now is nothing but a correction. Daily GBP/USD As it may be seen on the daily chart, that pound was gaining versus the greenback during the past 3 days as it strengthened and from the 1-year minimum hit last Thursday. The bulls are currently confronting the Turning line (1) which acts as resistance. If the prices manage to overcome this level, they will face another obstacle – the Standard line (2). All lines of the Indicator leveled up in the horizontal state (1, 2, 3 and 4). The descending Ichimoku Cloud (3, 4) shows that the bears still dominate the market. Ichimoku. Weekly forecast. USD/JPY 2011-09-27 16:32 Weekly USD/JPY Once again we have to say that the situation on the weekly USD/JPY chart remains unchanged. The prices keep consolidating between 76 and 78 yen. High demand for yen keeps contrasting with the risk of the Bank of Japan’s interventions. All lines of the Indicator are directed horizontally (1, 2, 3 and 4) signaling the sideways trend. At the same time, the risks for the pair seem to be to the downside: Tenkan-sen (1) and Kijun-sen (2) still hold the strong «bearish cross» in place (5) providing resistance for the prices, while the Ichimoku Cloud remains rising (3, 4). Daily USD/JPY On the daily USD/JPY chart the Turning line (1) and the Standard line (2) have formed the “dead cross” (5) – strong bearish signal as the lines have intersected below Kumo. Tenkan-sen and Kijun-sen still act as resistance – they didn’t let the bulls breathe freely and hold the pair close to the record minimums. All lines of the Indicator became horizontal (1, 2, 3 and 4) that means that the US currency will likely keep consolidating. Ichimoku. Weekly forecast. USD/CHF 2011-09-27 16:35 Weekly USD/CHF The greenback is gradually strengthening versus its Swiss counterpart. The lines Kijun-sen (1) and Tenkan-sen (2) are getting ready to form the “golden cross”. The sole obstacle on the upwards is the descending Ichimoku Cloud. Daily USD/CHF On the daily chart the greenback’s rate is consolidating within the uptrend. The Turning line (1) and the Standard line (2) act as support. The rising Ichimoku Cloud has become wide enough to show that the bulls managed to regain predominance. The general technical outlook remains positive. SocGen, Commerzbank: comments on GBP/USD 2011-09-27 17:00 Analysts at Societe Generale and Commerzbank are positive on British pound in the short term. In their view, GBP/USD is on its way up to resistance in the $1.5780/1.5820 area (July 12 minimum/38.2% Fibonacci retracement of the decline from $1.6617). The longer-term outlook for sterling, however, is negative. Commerzbank expects UK currency to decline to the 2009-2011 uptrend line at $1.4973. Support for the pair is found at $1.5347 (December 2010 minimum).

G20 spurred risk-on sentiment for some time 2011-09-23 11:28 The Group of 20 has managed to encourage the markets: the nations pledged “strong and coordinated” response to the problems of the global economy, among which G20 named such factors as “heightened downside risks from sovereign stresses, financial system fragility, market turbulence, weak economic growth and unacceptably high unemployment”, says the statement released in Washington. The comments of the world’s largest economies have improved investors’ confidence and risk sentiment. The single currency advanced from the 10-year minimum versus Japanese yen. Euro has also risen from the 8-month minimum versus the greenback on the rumors that Asian central banks bought EUR/USD. Australian and New Zealand dollars found support and rebounded encourages by rising Asian stocks. At the same time, analysts at Standard Chartered point out that no concrete steps were actually announced, so the market’s optimism might soon fade. In their view, there has to be some kind of mechanism that will allow European Financial Stability Facility (ESFS) to expand, which seems unlikely at the moment. Now it’s necessary to watch the IMF-World Bank Annual Meetings take place on September 23-23. BNY Mellon, RBS: ECB will soon cut rates 2011-09-23 12:02 The Federal Reserve has announced this week the Operation Twist – the measure aimed to lower long-term rates and spur US economy. Some analysts say that now it’s the turn of the European Central Bank to do something referring to the quantitative easing. Currency strategists at Bank of New York Mellon think that there are strong odds that the ECB cuts its benchmark interest rate again returning the borrowing costs to the 1% level where they were six months ago reversing April and June increases by 25 basis points each. Economists at the Royal Bank of Scotland are looking forward to 50-basis-point cut already at the next ECB meeting on October 6 and, if not, then by the central bank's November 3 meeting at the latest. BarCap: Canadian dollar is down versus the greenback 2011-09-23 13:50 Canadian dollar slumped yesterday to 11-month minimum versus its US counterpart – the pair USD/CAD got above the parity and surged to 1.0361. Loonie was affected by the discouraging US economic prospects and the sings of China’s and Germany’s slowdown. As a result, investors were actively using American debt and currency as a refuge. Canada’s economy has performed rather well in comparison with other developed nations, but it won’t be able to keep showing bright dynamics while the US economy, it biggest trading partner, is weakening. Technical analysts at Barclays Capital claim that the trend for the pair is ready to switch upwards. In their view, the greenback will be able to rise to 1.0675. Support for US dollar lies at 1.0140. If the pair falls below this level, the outlook will turn bearish. MIG Bank: EUR/USD will keep declining 2011-09-23 16:10 Technical analysts at MIG Bank claim that as the single currency went down below $1.3800 and then slid even lower getting under $1.3495, it will keep falling. In their view, EUR/USD is poised down to $1.2860. The specialists note that there’s large bearish flag on the daily chart. Credit Suisse about the possibility of euro collapse 2011-09-23 16:52 Analysts at Credit Suisse estimate the possibility of the euro area break up by only 10%. In their view, it would be much cheaper for the member nations to stay in the monetary union bailing out the indebted peripheral economies. If euro collapses and the euro area disintegrates, the peripheral currencies would fall by around 50% pushing net foreign liabilities to 200%-250% of GDP for the periphery ex Italy, resulting in a 40% default on both sovereign and private loans. The economies will contract by about 9%. The bank proposes to boost the EFSF for a TARP-like facility. According to them, the ECB has to keep purchasing peripheral bonds. In addition, Credit Suisse thinks that soft quantitative easing and weaker euro are also needed.

The Fed conducts Operation Twist 2011-09-22 12:45 The Federal Reserve announced yesterday that it will conduct an Operation Twist or, in other words, lengthen the average maturities of the Treasuries in its portfolio from 75 to 100 months (8 1/3 years) by the end of 2012 by buying $400 billion of long-term debt (with maturities of 6-30 years) through June, while selling an equal amount of shorter-term securities maturing in 3 years or less. In addition, the central bank will reinvest maturing mortgage debt into mortgage-backed securities instead of Treasuries in order to improve the situation in the mortgage market. The Fed’s goal is to lower longer-term borrowing costs making financial conditions more accommodative. The Federal Open Market Committee (FOMC) reiterated its pledge to keep the benchmark interest rate near zero until the middle of 2013 as the US suffers from high unemployment and the inflation outlook is subdued. At the same time, it’s necessary to note that the rates are already pretty low – the yields on 10-year Treasuries fell from 2011 maximum of 3.74% reached in February to 1.86%. Analysts at Barclays Capital regard Fed’s actions as a modest step. In their view, this may be only the beginning of easing and the central bank may become more aggressive if they don’t see the economic growth improving. However, Richard Fisher, Narayana Kocherlakota and Charles Plosser – the heads of the federal banks of Dallas, Minneapolis and Philadelphia – voted against the FOMC decision for the second time in a row as they are against of additional monetary stimulus. Barclays, Citi: comments on USD/JPY 2011-09-22 13:49 Yesterday the greenback tested the levels in the 76 yen area – the lowest since it hit the record minimum of 75.95 yen on August 19. Early today USD/JPY rose almost to 77 yen as the Federal Reserve announced the Operation Twist and not the quantitative easing. In addition, the market’s wary that the Bank of Japan’s may once again step in to weaken the national currency. Then the pair erased its advance returning down to 76.15/30. Resistance levels are situated at 77.00 (September 19 maximum/today’s maximum), 77.35 (September 15 spike high) and 77.85 (September 9 maximum). Analysts at Barclays note that investors become more risk-averse after the Fed’s statement as the central bank sounded pessimistic. According to FOMC, there are serious risks to the US economic prospects partly caused by the turmoil associated with the euro zone’s debt crisis. The specialists note that the talk about the possible BOJ intervention has set floor for USD/JPY. Japanese Finance Minister Jun Azumi reiterated yesterday that the nation’s closely watching markets and will act decisively if needed. At the same time, analysts at Citi don’t worry much about the potential Japan’s action noting that Japanese officials got used to treat the effects of strong yen through exports subsidies. In addition, the nation is unlikely to make too sharp moves ahead of G20 meetings on Thursday and Friday. AUD/USD fell below the parity level 2011-09-22 15:03 Australian dollar has slumped today below the parity versus the greenback for the first time in more than 6 weeks. Aussie was affected by HSBC Manufacturing PMI preliminary data that declined from 49.9 in August to 49.4 in September – a reading below 50 signals a contraction in the nation’s manufacturing. Australia & New Zealand Banking note that concerns about the global economic growth make serious negative pressure on AUD. The currency is especially vulnerable to lower Chinese figures as China is Australia’s largest trading partner, the main buyers of Australian commodities. The International Monetary Fund revised downwards its economic growth forecasts this week. In addition, analysts at Westpac claim that the Federal Reserve’s yesterday statement sounded pessimistic and the central bank didn’t surprise the market. The pair AUD/USD went down from Friday minimum at $1.0398 to the levels in the $0.9825 area. Greece keeps tightening belts 2011-09-22 16:23 Greece announced that it plans to accelerate budget cuts in order to obtain the next tranche of bailout. Additional austerity measures announced yesterday include a 20% cut in pensions of more than 1,200 euro ($1,627) a month and lower wages for 30,000 state employees. Greek government pledged yesterday to complete the 28-billion-euro cuts in June by 2014 instead of 2015. Talks on the Greek aid payments resumed after IMF and EU monitors suspended the negotiations earlier in September after the data showed that Greece’s budget deficit this year through August widened to 18.9 billion euro exceeding the 18.1-billion-euro target. Greece aims to cut its budget shortfall from 10.5% in 2010 to 7.5% in 2011. According to IMF forecast, Greek economy will contract by 5.5% this year and by 2.5% in 2012. Mizuho: pound renewed minimum versus yen 2011-09-22 18:06 British pound dropped versus Japanese yen and renewed the record minimum hitting 117.00. The previous all-time low of 118.78 was set in January 2009. Technical analyst at Mizuho Corporate Bank note that GBP/JPY is currently trading at two standard deviations below the average level of the past 10 years at 182.00, but above the 40-year mean regression at 107.00. According to the bank, sterling may lose more sliding to 115.00 and 110.00.

Commerzbank: USD/CHF is gaining on the SNB talk 2011-09-21 11:39 The greenback went up versus Swiss franc from the day’s minimum at 0.8692 getting above 0.8940 on the speculation that the Swiss National Bank has imposed a tighter peg for the national currency. There’s talk that the SNB has removed the EUR/CHF target up to 1.25 per euro. The central bank didn’t confirm the information, but franc is experiencing general weakness. Technical analysts at Commerzbank note that USD/CHF has broken up important resistance at 0.8850/0.8950 (double Fibonacci retracement, 200-day MA and May minimum). In their view, US dollar is on its way up to 0.9103 (55-week MA) and 0.9340/0.9400 (March maximums and double Fibonacci retracement). According to the bank, support for the pair is found at 0.8640/0.8462 (23.6%/38.2% retracement of dollar’s advance in September). BarCap: ECB will cut rates in October 2011-09-21 13:00 The International Monetary Fund claimed that the European Central Bank should lower its benchmark interest rate from the current 1.5% level if the euro zone’s economic growth remains at risk. Analysts at Barclays Capital expect the ECB to reduce the borrowing costs by 25 basis points the next month to 1.25% and to widen the interest rate “corridor” back to +/-100 basis points which would make the deposit facility decrease by 50 basis points to 0.25%. Taking into account the excess bank reserves, that would let the EONIA (overnight) rate to trade significantly lower. According to the bank, things remain like that until there’s need for policy normalization. The specialists believe that it may happen in the second half of 2013. Westpac: commodity currencies are seen declining 2011-09-21 13:19 Analysts at Westpac note that the ongoing euro zone’s debt crisis is seriously hurting investors’ risk sentiment bringing their attention to Greece and Italy. In their view, the risky currencies currently seem to be very vulnerable. The specialists recommend selling commodity currencies. In particular, the bank prefers shorts on Australian dollar versus its US counterpart targeting 1.0000 and stopping above 1.0335. Credit Agricole: pound’s declining after MPC minutes 2011-09-21 14:19 British pound fell to the 8-month minimum versus the greenback at $1.5612. It happened after the Bank of England’s Monetary Policy Committee’s September meeting minutes showed that the policymakers are regarding the possibility of embarking on additional monetary stimulus. The MPC members point out that UK GDP growth in the second half of 2011 may be significantly weaker than it was thought last month. Analysts at Commerzbank note that the central bank has made it clear that if the situation worsens, it’s going to ease it policy. In their view, Britain’s economic prospects are very uncertain and the nation is vulnerable to substantial downside risks. The officials voted 8-1 to maintain the current size of the asset purchase program and were unanimous in keeping the benchmark rate at the record minimum of 0.5%. Currency strategists at Credit Agricole claim that sterling will go down to test $1.55. In their view, the currency will remain under pressure during the next few weeks as the as market shifts expectations for a UK QE2 to the November meeting. Analysts at Morgan Stanley keep being bearish on GBP/USD expecting the pair to fall to $1.53 by the end of the year and to $1.51 at the beginning of the next year. IMF lowered economic forecasts 2011-09-21 15:09 The International Monetary Fund lowered US economic growth forecast for 2011 and 2012 from 2.5% and 2.7% (June’s estimate) to 1.5% and 1.8%. The outlook for the euro area was reduced from 2% this year and 1.7% the next to 1.6% and 1.1% respectively. The world’s GDP will increase by 4% as in 2011, as in 2012 versus 4.3% and 4.5% advance seen earlier. According to the organization, global economy is entering a “dangerous new phase” and the policymakers are to act decisively reducing deficits in order to improve prospects and reduce risks. Bank of Canada isn’t concerned about inflation 2011-09-21 18:21 According to the data released today, annual Canadian CPI growth speeded up from 2.7% in July to 3.1% in August, while the economists were looking forward to only 2.9% increase. Bank of Canada Governor Mark Carney said yesterday that the central bank may keep the borrowing costs low until full output is restored. According to Carney, Canada’s recovery will be affected by economic weakness of the United States, its biggest trade partner. The head of the central bank didn’t express any concerns about inflation. Analysts at TD Bank believe that August burst of inflation will prove to be only temporary. Canadian GDP contracted by 0.4% in the second quarter. The IMF lowered yesterday the nation’s 2011 economic growth forecast from 2.9%, according to June’s estimate, to 2.1%. Canadian dollar is weakening versus its American counterpart for the third day in a row on the declining oil price. The pair USD/CAD rose from Monday minimum at 0.9778 approaching the parity level. Commerzbank: technical comments on USD/CAD 2011-09-21 18:22 US dollar rebounded this week versus its Canadian counterpart using support provided by the 200-day MA at 0.9777 reaching the parity level. Technical analysts at Commerzbank note, however, that USD/CAD’s advance will be limited by resistance in the 1.0000/58 zone. According to the specialists, this area contains 50% retracement of the decline in 2010/2011 and January maximum. If the greenback eventually manages to overcome 1.0058 and close above this level in New York for 2 times, it will be able to rise to 1.0109/1.0139. The bank says that support for the pair is found at 0.9742/26 (55-day MA and late August minimum). UBS: bullish outlook for EUR/CHF 2011-09-21 18:35 Analysts at UBS are bullish on the single currency versus Swiss franc. In their view, the outlook for EUR/CHF has become positive as the pair broke yesterday above resistance at 1.2191. The specialists expect euro to rise to 1.2346 and then to 1.2469. Support for the European currency lies at 1.2051.

Commerzbank: bearish EUR/USD forecast 2011-09-20 12:04 Technical analysts at Commerzbank note that the single currency found itself under severe negative pressure versus the greenback yesterday. The specialists underline that EUR/USD has so far closed below the major support represented by the 2010-2011 uptrend, the 55-week MA, the July minimum, the 200-week MA and the 200-day MA. In their view, the pair is poised down to $1.3428/10 (February minimum and 50% retracement of the advance made in 2010-2011) and then to $1.2860 (2010 minimum). As for the longer term, the bank keeps its target at $1.2000. Forecast Pte expects GBP/USD to decline 2011-09-20 12:36 Technical analysts at Forecast Pte claim that British pound may fall versus the greenback to more than 8-month minimum at $1.5489, last seen on January 10. This level represents 50% Fibonacci retracement of sterling’s advance from May 20, 2010, minimum at $1.4231 to the maximum of April 28, 2011, at $1.6747. The specialists are bearish on GBP/USD as the pair has breached its 200-day MA. The MACD (moving average convergence/divergence) is still negative (at -0.0158, below the signal line at -0.012) that’s also a bearish signal. According to the strategists, resistance is found at September 13 maximum of $1.5870. In their view, the downtrend is strong and any attempts of the bulls to push pound higher would result in nothing more than a correction. S&P cut Italian credit rating 2011-09-20 13:53 The concerns about the euro zone’s future have strengthened as Standard & Poor’s lowered Italy’s credit rating from A+ to A. The agency said that the nation having the second biggest debt burden in Europe after Greece will face a lot of obstacles in trying to reduce it. Among these difficulties the agency cited weakening economic growth, precarious position of Italian government and rising borrowing costs. S&P lowered Italian average annual economic growth forecast for 2011-2014 from 1.3% to 0.7%. This month Silvio Berlusconi’s government has passed a 54 billion-euro ($74 billion) austerity package aiming to balance the budget in 2013. That allowed the ECB to buy Italian debt easing down the pressure on the nation. The yield on Italy’s 10-year bonds rose to 5.619% that is 385 basis points more than similar German debt. Rising borrowing costs make it extremely hard for the country to sell more debt – Italy needs to sell more than 50 billion euro of bonds this year. There are 3 auctions set for next week starting on September 27. Another major rating firm, Moody’s Investors Service, will decide next month whether to cut ratings on Italy and Spain. BoA, Citigroup: Fed's decisions won’t affect the greenback 2011-09-20 14:25 The Federal Reserve’s 2-day meeting begins today. Tomorrow at 10:15 pm (GMT+4) the FOMC releases its statement and the Federal Funds Rate. Investors expect American monetary authorities to announce Operation Twist – increasing the duration of the central bank’s bond portfolio in order to lower the long-term interest rates. Analysts at Bank of America Merrill Lynch think that the news won’t make any significant impact on the greenback’s rate as they are already largely priced in by the market. The specialists underline that since such option as Operation Twist was mentioned in August the dollar index has added 4.2%, so its implementation will lead to neutral effect. Currency strategists at Citigroup share this opinion. The bank leaves room for some short-term effects, but thinks that the market’s attention will be focused on the euro zone’s debt crisis and even on the concerns about Asian economic growth. Barclays Capital: survey on euro’s prospects 2011-09-20 15:04 Analysts at Barclays Capital conducted survey among more than 500 institutional investors on the prospects of the single currency. The majority of respondents (56%) believe that the European Central Bank will undertake large-scale buying of sovereign debt from troubled countries like Italy and Spain. Some of the interviewed think that the currency bloc will ultimately turn into the fiscal union. Barclays note that many investors think that some form of quantitative easing is likely in Europe. However, almost 25% of the surveyed expect the euro area to break up. In the bank's second-quarter survey, only 1% expected sovereign-debt restructuring in many countries, leading to a euro-zone breakup in 2012. The number of respondents expecting some adverse spillover onto emerging markets almost doubled to 30% compared with the previous quarter. Nearly 70% of foreign-exchange investors surveyed think that the markets will be focused on euro zone's issues in the next 3 months. 60% of equities investors regard the European banking crisis as the biggest risk to global stock markets. The pair EUR/USD is now seen trading below $1.35 during the next half a year. MIG Bank: bearish view on USD/CHF 2011-09-20 15:30 The greenback rose versus Swiss franc from last week’s minimum at 0.8645 hit on September 15 but its advance was limited by the resistance around 0.8875. Technical analysts at MIG Bank think that USD/CHF may return down to 0.8645 and then drop to 0.8400 and 0.8250. In their view, the pair remains vulnerable to the potential declines as long as it’s trading below 0.8929. Switzerland: GDP forecast’s reduced 2011-09-20 16:53 Switzerland’s government lowered its economic-growth forecasts for 2011 and 2012 from 2.1% and 1.5% to 1.9% and 0.9% respectively. Export growth estimate was trimmed from 4.6% this year and 3% the next to 3.2% and 0.7% respectively. The reason for this downward revision is the fact Swiss franc’s rate is still excessively strong even after the Swiss National Bank has set the ceiling for the nation currency’s rate versus euro. According to the data released today, the nation’s exports fell in August by 7%. The nation’s authorities say that isolated quarters of economic contraction are possible, though deep recession seems to be unlikely.

European policymakers offered no plan 2011-09-19 11:12 The single currency opened with a bearish gap versus the greenback as the debt situation in the euro area remains very tough. The markets are extremely disappointed as the European finance ministers didn’t offer any solution of the debt crisis during the Ecofin summit in Poland. US Treasury Secretary Timothy Geithner who attended the meeting proposed to increase the size of The European Financial Stability facility (EFSF) with the ECB funds, but German Finance Minister Wolfgang Schaeuble and Bundesbank President Jens Weidmann rejected this suggestion. Today Greek Finance Minister Evangelos Venizelos meets the EU and the IMF officials to decide whether the nation can meet the conditions of the rescue loans and is eligible for the next tranche of the bailout payment in October and for a second rescue package. It’s also necessary to note that Angela Merkel’s Christian Democrats were only second in Berlin state election – the sign that Merkel’s intention to save euro at any cost providing financial help for the troubled periphery nations is becoming more and more unpopular. The pair EUR/USD lost 1% sliding from Friday’s close at $1.3795 to the levels below $1.3700. Ichimoku. Weekly forecast. GBP/USD 2011-09-19 13:41 Weekly GBP/USD Last week the bears have won once again: pound declined approaching the middle of the Ichimoku Cloud. The lines Tenkan-sen (1) and Kijun-sen (2) have quitted neutral state deviating down. That means that the prices are likely to aim to the lower border of Kumo. The bullish Cloud (3) itself is narrowing – the bulls keep losing powers. Daily GBP/USD On the daily chart the picture seems to be more bearish. All attempts of the bulls to push sterling higher were in vain. The Turning line (1), the Standard line (2) and Kumo are providing solid resistance for the pair GBP/USD. All lines of the Indicator are directed down (1, 2, 3 and 4). The descending Ichimoku Cloud is widening as Senkou Span A (3) is moving only downwards. As a result, technical analysis points out that the pound may keep depreciating. Ichimoku. Weekly forecast. USD/JPY 2011-09-19 13:43 Weekly USD/JPY The situation on the weekly USD/JPY chart remains almost the same. The prices keep consolidating between 76 and 78 yen. High demand for yen keeps contrasting with the risk of the Bank of Japan’s interventions. The greenback still lacks support, while resistance is provided by the declining Tenkan-sen (1) and the horizontal Kijun-sen (2) as well as by the descending Ichimoku Cloud (3, 4). The Turning line (1) and the Standard line (2) keep the strong “dead cross” in place (5). Daily USD/JPY Last week the prices have once again dropped below the Standard line (1) and the Turning line (2) which now act as support for the greenback. Kijun-sen (1) and Tenkan-sen (2) formed the “golden cross” (5), though the signal was rather weak as the intersection took place below the Ichimoku Cloud (3, 4). At the same time, all lines of the Indicator turned horizontal (1, 2, 3 and 4) pointing at the continuing consolidation. US dollar may be able to rebound a bit, though it won’t manage to rise above Tenkan-sen (2). Ichimoku. Weekly forecast. USD/CHF 2011-09-19 13:45 Weekly USD/CHF On the weekly chart USD/CHF will keep consolidating in the 0.8700/0.8900 area after the powerful advance made after Switzerland’s central bank had pegged the national currency to euro the weak earlier. Tenkan-sen (1) and Kijun-sen (2) have leveled up in the horizontal state providing support for the greenback. Resistance is generated only by Kumo (3, 4). The Ichimoku Cloud is narrowing – Senkou Span A (3) is directed sideways, while Senkou Span B is moving down (3) to meet it. Daily USD/CHF The pair keeps moving within the uptrend. Tenkan-sen (2) and Kijun-sen (1) have gone sharply up supporting the prices. The bullish Ichimoku Cloud is rapidly widening as Senkou Span A (4) has jerked up, while Senkou Span B remains in the horizontal mode (3). The rate’s consolidation seen last week may take some more time, but the general technical picture is positive. Jyske Bank: sell GBP/USD 2011-09-19 17:06 British pound declined from last week’s maximum at $1.5870/85 to the 8-month minimums in the $1.5685 area. Currency strategists at Jyske Bank are bearish on GBP/USD. The specialists advise investors to sell sterling taking profit at $1.5415 and placing stops at $1.6012. According to the bank, pound is vulnerable due to the speculation that British budget deficit increased to 12 billion pounds in August after July’s almost 2-billion surplus. In such case, the UK will likely lose its credit rating. The data on Public Sector Net Borrowing are published on Friday at 12:30 pm (GMT+4). UBS, Nomura: dollar’s gaining ahead of the Fed 2011-09-19 18:10 US dollar strengthened versus euro, pound and commodity currencies ahead of the Federal Open Market Committee’s 2-day meeting that begins tomorrow. Analysts at Wells Fargo, Barclays Capital and Goldman Sachs think that the FOMC may decide to replace some of the short-term Treasury securities in the Fed’s $1.65 trillion portfolio with the long-term debt in order to lower the nation’s rates. Such options in referred to among traders as «Operation Twist». The dollar-positive factor is that the market doesn’t expect more quantitative easing. Other drivers of the greenback are renewed demand for safe havens and the elevated stock market volatility. Analysts at UBS are positive on US currency in the medium term. Analysts at Nomura claim that the US monetary authorities are fulfilling their pledges and supporting the markets. In their view, the greenback will be more attractive than the single currency due to the continuing euro zone’s debt crisis. However, though QE is unlikely, there’s some risk that the Fed expand its balance sheet on the negative economic data. According to the data from the Commodity Futures Trading Commission (CFTC), the number of net short positions in euro has risen to 54,459 contracts during the week that ended on September 13. UBS: technical comments on USD/CHF 2011-09-19 18:15 Technical analysts at UBS note that the greenback has risen from last week’s minimum at 0.8645 hit on September 15 to the levels above 0.8854. In their view, the pair USD/CHF can now climb to September 12 maximum at 0.8928 and then to April 20 maximum at 0.9012. The specialists claim that support in the near term is found at 0.8645.

The ECB will provide euro zone banks will dollar liquidity 2011-09-16 11:34 The single currency rose this week versus the greenback after the European Central Bank announced that it will lend US dollars to euro-zone banks in a series of three-month loans. The ECB is going to join efforts with the Federal Reserve and other central banks to conduct three separate dollar liquidity operations on October 12, November 9 and December 7 to ensure lenders have enough of the currency through the end of the year. This would add to the central bank’s regular 7-day dollar offerings and will be fixed-rate tenders with full allotment. Analysts at Australia & New Zealand Banking Group think that European banks are lacking liquidity because people don’t trust the economic policy structure in Europe. In their view, the dollar-swap will help to improve the situation, but still won’t be enough. Today is the meeting of the EU finance ministers in Poland. US Treasury Secretary Timothy Geithner will also be attending the event. The ECB President Jean-Claude Trichet urged euro-area governments to act to stop the crisis. The pair EUR/USD rose from 7-month minimum at $1.3495 hit on September 12 to the levels above $1.3800. At the same time many experts say that it would be hard for euro to get back to $1.40. Commerzbank: comments on EUR/USD 2011-09-16 11:54 Technical analysts at Commerzbank note that euro’s upward correction versus the greenback from $1.3595 was greater when they have expected. In their view, EUR/USD faces resistance ahead of $1.4022/35 (the 200-week and the 200-day MAs) and won’t be able to overcome it. The specialists reiterate that the longer-term outlook for the single currency is negative: the pair is seen falling to $1.3428/10 (February minimum and 50% retracement of the advance from 2010 to 2011) and then $1.20. Credit Agricole reduced USD/JPY forecast 2011-09-16 12:50 Analysts at Credit Agricole lowered their forecast for the greenback versus Japanese yen by the end of the year from 90 to 80 yen and from 102 to 85 yen by the end of 2012. The specialists note that there are 2 factors strengthening yen: firstly, its status of the safe haven and, secondly, US yield advantage over Japan has narrowed during the recent months. Credit Agricole underlines that the Swiss National Bank’s decision to peg franc to euro increases the attractiveness of Japanese currency. According to the bank, there is little chance that significant easing in risk aversion and/or better US economic data. The pair USD/JPY keeps trading in the narrow range between 76 and 77.85 yen staying close to the record minimum at 75.94 yen. FX Concepts about the situation in the euro area 2011-09-16 13:25 John Taylor, the head of the world’s largest currency hedge fund FX Concepts, believes that the single currency has to be restructured as the euro zone nations seem unable to coordinate their policy, while the continuous coherent action is what is needed to overcome the region’s debt crisis. In his view, the ECB liquidity plan won’t solve any of the European major problems. Taylor claims that there’s a mixture of a very unpleasant things in the euro area – a “horrific cocktail” – that consists of monetary restraint, tightness and fiscal austerity. The specialist says that Greece ought not to leave the monetary union. In his opinion the nation is getting pushed out of the currency bloc but the policymakers do nothing to stop that process. RBC: forecasts for USD/CAD 2011-09-16 14:08 Currency strategists at RBC Capital Markets believe that the greenback’s upward potential versus its Canadian counterpart in the medium term is limited as there’s no great demand for US currency. The specialists note that loonie seem to be attractive for investors on the back of European debt crisis and easing policies conducted by the most of the developed nations’ central banks. In their view, in the current circumstances Canadian dollar is perceived as the hard currency that is widely traded all over the world and may serve as a good store of value. The bank underlines that loonie was one of the worst performers June 2010 showing better results only against US dollar, so this may eventually help CAD strengthen versus other G10 currencies. According to the bank, the pair will finish 2011 at 1.01, the first quarter of the next year at 1.00 and end 2012 at 0.98. Credit Agricole corrected EUR/USD forecasts 2011-09-16 14:35 Analysts at Credit Agricole continue being bearish on the prospects of the single currency versus the greenback. Never the less, the specialists revised their forecast for EUR/USD by the end of the year a bit higher from $1.3000 to $1.3700. Such change of the outlook reflects the expectations that the period of US economic weakness will last longer than it was thought before and that the Federal Reserve will further loosen its policy, though not in the form of the third round of quantitative easing. The bank has cut 2012 euro zone’s growth forecast as well from 1.6% to 1.1%, while the growth in the second half of this year is seen as minimal. The ECB is likely pause its tightening cycle. Nomura: euro will rise to $1.40 2011-09-16 14:59 Despite the deepening crisis in the euro area strategists at Nomura Securities see some light for the single currency. In their view, in the short term euro may strengthen versus the greenback. The specialists underline that the central banks will likely buy euro to rebalance their portfolios for the end of the quarter. Nomura says that Greece may soon receive financial aid. In addition, the Federal Reserve is expected to sound dovish on its meeting that is taking place next week on September 20-21 – dollar-negative factor. According to Nomura, EUR/USD will reach $1.40 in the near term. However, the analysts are still bearish on the pair in the medium term – in the fourth quarter they see it drop to $1.30. As a result, the economists advise traders to use euro’s advance to sell it.

UBS: AUD/USD will fall to $1.0111 2011-09-14 12:20 Technical analysts at UBS note that Australian dollar fell versus the greenback from the recent maximums in the $1.0700 area and breached 61.8% Fibonacci retracement of the advance from August 8 to September 1 at $1.0250. The specialists believe that the pair AUD/USD is on its way down to $1.0111. Credit Suisse, BarCap: the SNB's peg will spur inflation 2011-09-14 13:19 Analysts at Credit Suisse and Barclays Capital warn that Swiss National Bank’s decision to peg franc to euro threats to flood the nation’s financial system with cash spurring inflation. As a result, the central bank won’t fulfill its goal of price stability. The SNB has also resorted to such policy in the 1978 when it set the ceiling for franc versus Deutsche mark. That led to a decade of surging inflation – annual price growth jumped from 1% that year to 7.5% by the middle of 1981. In addition, there was a real-estate bubble in the 1980s – in 4 years after the peg was announced the costs of rental apartments bounced by 52%. Economists at the University of Zurich expect inflation to break above the SNB’s 2% limit during the next 3 years even if Swiss economic growth stumbles. In August Switzerland’s CPI added 0.2% from the levels of the previous year. By the end of August SNB’s foreign-currency holdings reached the record maximum of 253.4 billion francs ($305.1 billion) that’s about a half of the nation’s GDP. The SNB is now focusing on the exchange rate than on inflation. As the central bank’s head Philipp Hildebrand said, Swiss policy makers have started “a challenging journey” with possible “very high” costs. Commerzbank: comments on USD/CAD 2011-09-14 15:48 Technical analysts at Commerzbank note that the greenback’s decline versus its Canadian counterpart from the parity levels was contained by the 55- and 200-day MAs in the 0.9783/21 region. The specialists believe that the fact that US dollar managed to find support at those levels means that the minimums in the 0.9400 zone hit at the end of July will remain the long-term lows. According to the bank, resistance levels for USD/CAD are situated at 1.0042 and 1.0058 (January 31 maximum). If the pair overcomes the latter level and closes above it fir 2 times in New York, it will be poised up to 1.0109/1.0139.

Deutsche Bank: ECB rate forecast 2011-09-13 13:02 Analysts at Deutsche Bank believe that the European Central Bank will leave its benchmark rate at 1% until the end of the year. Then they expect the ECB to cut the borrowing costs in December by 50 basis points in line with lowered growth and inflation forecasts. The specialists note that there will be a lot of political pressure in November as Mario Draghi takes office as the ECB President after Jean-Claude Trichet. In their view, the ECB will take a long pause after reducing rates in December. At the same time, the bank warns that one shouldn’t entirely rule out the possibility of October rate cut. UBS: bullish outlook for US dollar 2011-09-13 13:25 Analysts at UBS note that despite US credit downgrade, the greenback has become the ultimate safe haven as other traditional refuges – Japanese yen and Swiss franc – are undermined by the efforts of Japan and Switzerland to weaken their national currencies. The specialists underline that the European Central Bank and the Bank of England are seen easing their monetary policies. As a result, UBS claims that unless the Federal Reserve starts the third round of quantitative easing US dollar will keep strengthening against euro and pound. Major banks’ forecasts for euro 2011-09-13 14:33 Some major banks are revising downwards their forecasts for the single currency versus the greenback as the euro zone’s debt crisis deepens and the pair EUR/USD hit yesterday 7-month minimum in the $1.3500 area. For example, UBS is reviewing its current estimate of euro’s rate by the end of the year at $1.35 and J.P. Morgan – the one at $1.36. However, other banks think that it’s still too early to make significant changes to the outlook. Deutsche Bank is already quite bearish on the European currency expecting it to fall to $1.30 by the end of 2011. Barclays Capital keeps its $1.46 year-end view, though its representatives claim that the bank is always considering revisions. HSBC is looking forward to $1.44 by the end of the year and points out that from the fundamental point of view nothing has changed as the market is perfectly aware of the seriousness of European debt issues. The most bullish view on euro’s prospects has Goldman Sachs which reiterated EUR/USD forecast at $1.50 by the end of March. Bank of America-Merrill Lynch names $1.45 as the target for the end of 2011, Credit Suisse sticks to $1.40 in 3 months, though conceding the possibility of the lower levels in the near term. Danske Bank: trading recommendations on USD/CHF 2011-09-13 14:58 Technical analysts at Danske Bank claim that though the greenback is showing sharp rebound versus Swiss franc it remains within the longer-term bearish channel. The specialists note that USD/CHF is facing resistance at 0.8848 (38.2% Fibonacci retracement of the decline from 2010 maximum of 1.1730 to the all-time low of 0.7067), 0.8947 (May 13 maximum) and 0.9370/0.9399 (May 7 maximum and 50% Fibonacci retracement). In their view, the pair may dip to 0.7711 (September 2 minimum) and retest the record minimum at 0.7067. According to the bank, it’s necessary to sell dollars versus francs at 0.9370/0.9399 stopping above 0.9784 or 1.0067. J.P. Morgan, UniCredit warn about pound’s weakness 2011-09-13 16:09 Currency strategists at J.P. Morgan note that investors are generally negative on sterling. It’s possible to give several reasons for that: - UK weak economic outlook (although annual inflation rose from 4.4% in July to 4.5% in August, the risk of double-dip recession isn’t ruled out; the housing market remains in trouble); - The looming possibility of more quantitative easing by the Bank of England (finance minister George Osborne claimed that he object’t against additional bond purchases); - The risk of UK financial institutions’ credit rating downgrade (British banks are exposed to Greece and the euro-zone banking community). The nation’s banks are on review of Moody's Investors Service since May. As a result, sterling is seen falling like euro has been doing so far rather than getting support as a safe haven like the greenback. Strategists at UniCredit expect GBP/USD to slide to $1.55. Standard Bank: sell EUR/JPY 2011-09-13 16:21 Currency strategists at Standard Bank advise investors to sell the single currency versus Japanese yen at 104.90 targeting 103.50 and 100.40. The specialists recommend placing stops at 108.10. The pair EUR/JPY lost 9.2% during the past 3 months hitting yesterday 10-year minimum at 103.88.