Comments and Forex-analytics from FBS Brokerage Company

[wynnasuju 10]

Bernanke: US economy may need additional stimulus

2011-11-03 12:05

 

Federal Reserve Chairman Ben Bernanke claimed yesterday that additional monetary stimulus may be needed to reduce unemployment as US economic outlook seems to be rather pessimistic. Among the options of such stimulus Bernanke named the third round of quantitative easing, extending the period of record-low borrowing costs or estimating the conditions necessary for the rate hike.

 

The Chairman admits that the central bank has overestimated the pace of US economic recovery and expects American economic growth to be “frustratingly slow”, while FOMC statement states that even after relatively good figures in the third quarter there are “significant downside risks”. According to Bernanke, these risks include the effects of European fiscal and banking problems.

 

The Fed’s GDP growth projections for 2012 were lowered from 3.3-3.7% (June’s estimate) to 2.5-2.9%. The projected unemployment rate in the fourth quarter of the next year was raised from the previous forecast of 7.8-8.2% to 8.5-8.7%.

 

The Operation Twist or the lengthening of the Fed’s bond portfolio maturity is left in place. US monetary authorities also confirmed the plan to hold the Federal funds rate between 0% and 0.25% at least until the middle of 2013.

 

It’s clear now that the Fed’s policy has become more accommodative and the central bank is ready for aggressive actions.

 

Despite the increased possibility of QE3 that should have weakened US dollar the greenback strengthened against euro. Analysts at UBS think that this may be explained by the fact that some traders expected the Fed to take even more loose approach. In addition, one should remember that the pair EUR/USD is also weakened by the ongoing crisis in the euro area.

 

 

 

 

Greece’s membership in euro area depends on referendum results

2011-11-03 14:48

 

The Greek dilemma is finally put point-blank: German Chancellor Angela Merkel said that Greece’s referendum on a bailout deal will determine whether it will stay in the euro area.

 

French President Nicolas Sarkozy claimed that the indebted nation will receive any financing only if it holds to the terms of a rescue agreement designed last week.

 

This is the first time when European leaders raised the prospect of the euro zone splintering. The vote is scheduled on December 4 or 5.

 

Greek Prime Minister George Papandreou who has initiated the referendum thinks that there’s the necessity of “wider consensus” for the bailout terms expressing confidence that his nation will remain the member of the monetary union. Greek Finance Minister Evangelos Venizelos, on the other hand, argues that such question can’t be submitted to referendum.

 

The results of the polls show that although the majority of Greeks are against the austerity measures imposed on them by the bailout package they don’t want their country to leave the currency bloc.

 

It’s also necessary to note that the next 8-billion-euro tranche of the first bailout package will be delayed until the referendum results are announced.

 

 

 

Niesr analyses the odds of the UK recession

2011-11-03 16:28

 

National Institute for Economic and Social Research estimate the possibility of recession in the UK by 50%. If the European policymakers don’t find the solution of the region’s debt crisis, the odds of British economic contraction will equal to 70%.

 

The economists lowered their economic growth forecasts for 2012 from August estimate of 2% to 0.9%. In their view, UK GDP growth will keep stagnating in the first half of the next year as it was this year going through the slowest recovery since the end of the First World War.

 

Niesr has also revised down its forecast for the global economic growth from 4.5% to 4% in 2011 and 2012 noting that there are downside risks to this projection from the crisis in Greece.

 

 

 

 

UBS: what if Greece has to quit euro?

2011-11-03 16:50

 

Analysts at UBS tried to estimate the potential consequences Greece will face in case it has to leave the euro area.

 

On the one hand, the nation would regain control of exchange and interest rates. On the other hand, new currency would fall by about 60%. Greece’s borrowing costs would rise by at least 7 percentage points, so that position of banks and companies would seriously deteriorate. The country’s trade will drop by 50% even taking into account the competitive advantage exporters will gain from the devaluation.

 

All in all, according to UBS, quitting euro would cost each Greek 11,500 euro in the first year and 4,000 euro in following years.

 

 

 

ECB lowered the benchmark rate

2011-11-03 18:00

 

The European Central Bank decided to cut its benchmark interest rate at President Mario Draghi's first policy meeting in charge by 25 basis points to 1.25% after it had twice increased it – in April and July.

 

Such move was unexpected by the majority of the economists as inflation in the euro area showed the reading of 3.0% in October for the second month in a row, while the central bank’s target lies just below 2%.

 

According to Dragi, the main reason for the cut is the deterioration of the euro zone’s economic data. The ECB President underlined that growth slowdown will cool inflation perspectives. In his view, at the end of the year the monetary union will face mild recession.

 

Currency strategists at Bank of Tokyo Mitsubishi UFJ think that ECB’s decision to ease its monetary policy will increase the pressure on the single currency and the demand for euro will keep declining. In their view, European borrowing costs will be lowered to 1% during the next few months.

 

The pair EUR/USD traded today in quite volatile manner: by the middle of the day it reached high at $1.3834 and then returned to the day’s minimum in the $1.3660 area before another bounce to the day’s maximums.

 

[wynnasuju 10]

UBS: technical levels for the major pairs

2011-11-04 10:41

 

EUR/USD: the major support is found at $1.3567. If the single currency breaks below this level it will fall to $1.3406. Resistance is situated at $1.3871 and then at $1.4003.

 

GBP/USD: resistance lies at $1.6097. If the pair overcomes this level it will be poised up to $1.6167. Support is at $1.5825.

 

USD/JPY: resistance is seen at 78.42 and 78.98 yen and support – at 77.43 and 76.94 yen.

 

USD/CHF: support is situated at 0.8718 and 0.8568 (October 27 minimum). Resistance is found at 0.8960.

 

 

Chart. Daily EUR/USD

 

 

Chart. Daily USD/JPY

 

 

 

 

Greece: the referendum story

2011-11-04 11:58

 

Everything about the euro area and Greece in particular seems to change with great speed. At the beginning of the week the markets were shaken by Greek Prime Minister George Papandreou’s unexpected announcement of the referendum on the bailout package.

 

The EU policymakers’ reaction was abrupt as they froze credit payments to Greece and raised the question of the nation’s membership in the monetary union. Then Greek opposition expressed readiness to compromise, Papandreou backed away with the referendum idea and investors’ concerns ease. The head of Greek government has no intention to step down. Now Greek authorities discuss the prospects if setting up a transitional government with the participation of the opposition to make sure Greece will get aid payment.

 

The analysts in Deutsche Bank caught the point claiming that trading EUR/USD has become so volatile that it has become too risky to open significant positions for longer than 5 minutes.

 

The pair EUR/USD rose from 3-week minimum in the $1.3600 area to the levels above $1.3800. Strategists at Westpac say that the single currency has no strength for the sustainable rally but there is some relief as the threat of referendum that would very likely bring “no”-result has been removed.

 

 

 

 

 

NAB: market awaits NFP data

2011-11-04 12:27

 

The market’s looking forward to get another confirmation of the coming QE3: many traders expect that US jobs growth slowed in October, while the unemployment rate remained high at 9.1%. Economists surveyed by Bloomberg project Non-Farm Payrolls to increase last month by 95K after adding 103K in September.

 

Analysts at National Australia Bank claim that even if the NFP reading beats economists’ forecasts but the unemployment rate stays unchanged, traders will see this as a reason for additional monetary stimulus and this will weight on the greenback.

 

Analysts at Bank of Tokyo-Mitsubishi UFJ point out that for unemployment to decline by half a percentage point over a year US employers have to hire about 150K workers a month. According to the labor statistics, by the beginning of October American economy had recovered about 2.09 million of the 8.75 million jobs lost as a result of the 18-month recession that ended in June 2009.

 

The NFP figures and the jobless rate are released today at 12:30 GMT.

 

 

 

Commerzbank: comments on GBP/USD

2011-11-04 13:23

 

British pound consolidated versus the greenback at the levels around $1.6000.

 

Technical analysts at Commerzbank believe that as long as GBP/USD stays below the 200-day MA at $1.6140, the outlook for the pair will be negative.

 

The bearish pressure would ease only if British currency overcomes 61.8% Fibonacci retracement at $1.6185. In such case pound will be poised up to 78.6% retracement of the decline from May at $1.6430.

 

The specialists, however, think that sterling is more likely to break support at $1.5875 (55-day MA).

 

 

Chart. Daily GBP/USD

 

 

 

RBS: sell euro versus Canadian dollar

2011-11-04 13:39

 

Currency strategists at Royal Bank of Scotland see the trading opportunity on the current European mess.

 

The specialists note that the euro zone’s economic outlook is very dim, while the prospects of Canadian economy seem to be much more favorable. According to RBS, it would be beneficial to sell the single currency versus Canadian dollar in the longer term.

 

The analysts underline that trading EUR/CAD is a better idea then EUR/USD as the latter is strongly correlated with the S&P500 index that tends to jump on positive news from Europe, so this type of trade doesn’t suit here.

 

As a result, the bank’s recommendation is to open shorts on EUR/CAD in the $1.3925 area stopping above $1.4380 and targeting the levels just below $1.2800.

 

 

Chart. Daily EUR/CAD

[wynnasuju 10]

Ichimoku. Weekly forecast. GBP/USD

2011-11-07 13:02

 

Weekly GBP/USD

 

British currency still remains within Ichimoku Cloud: a week earlier the bulls had brought prices to the upper border of Kumo – Senkou Span A (4) – from which sterling has recoiled and reversed down.

 

It’s necessary to note that as the Turning line is directed down it’s possible to expect pound’s decline to continue (2). In addition, the bears seem to gain strength: bearish Cloud is widening.

 

The lines Kijun-sen (1) and Tenkan-sen (2) as well as Senkou Span B will act as support for pound.

 

Chart. Weekly GBP/USD

 

Daily GBP/USD

On the daily chart the bulls have managed to make good advance in the second half of October as they have found the narrow place in the Ichimoku Cloud and pushed the pair’s rate above it. At the moment pound is fluctuation around support provided by the Turning line (1). The next support for the British currency will be Senkou Span B (3).

 

At the same time, sterling’s appreciation may be only a correction: in the $1.6335 area the pair met resistance line connecting September and October maximums.

 

Although the Ichimoku Cloud has switched to the rising mode (4), it is still too tiny to speak about bulls’ strength.

 

Chart. Daily GBP/USD

 

 

Ichimoku. Weekly forecast. USD/JPY

2011-11-07 13:14

Weekly USD/JPY

 

The third intervention conducted this year in Japan lifted the pair USD/JPY from the record minimum at 75.56 yen hit on October 31 to the levels above the Turning line, slightly higher than 78 yen.

 

At the same time, Japan’s move didn’t much change the outlook at the weekly Ichimoku chart: the Turning line (1) and the Standard line (2) still hold the strong “dead cross” in place (5), the descending Cloud maintains its width together with Kijun-sen acting as resistance for the prices.

 

The Channel between Tenkan-sen (1) and Kijun-sen has narrowed. This week the greenback is likely to remain within it.

 

Despite the efforts of Japanese monetary authorities to curb the national currency investors’ demand for yen as a refuge is still high.

 

Chart. Weekly USD/JPY

 

Daily USD/JPY

 

After the intervention US dollar has been holding in the 78 yen area supported by Senkou Span B (2).

 

The market is in the state of uncertainty: the lines Tenkan-sen and Kijun-sen have merged in one moving horizontally (1). The same happened with the borders of the Cloud which has turned into a straight line (3).

 

Neither bulls, nor bears have courage to act. The pair is likely to consolidate at the current levels.

 

Chart. Daily USD/JPY

 

 

 

Ichimoku. Weekly forecast. USD/CHF

2011-11-07 13:16

 

Weekly USD/CHF

 

On the weekly chart the pair USD/CHF remains below the weekly Ichimoku Cloud, though the bulls aren’t going to give up the attempts to move the greenback up overcoming resistance provided by Kumo.

 

The Turning line which is supporting the prices is directed sharply up (1). Tenkan-sen (1) and Kijun-sen (2) hold weak but anyway “golden cross” on place (5). In addition, the descending Cloud has significantly narrowed – the bulls have all chances to make it switch up and reverse the general downtrend.

 

Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart the greenback is trading within Tenkan-Kijun channel: the Turning line acts as support (1), while the Standard line provides resistance (2).

 

The rising Ichimoku Cloud is still a good support for the prices.

 

It’s necessary to note that all lines of the chart are directed horizontally that points at the pair’s consolidation.

Chart. Daily USD/CHF

[wynnasuju 10]

Commerzbank: negative outlook for EUR/USD

2011-11-07 14:16

 

Technical analysts at Commerzbank claim that as long as the single currency is trading versus the greenback below resistance in the $1.3855/1.3930 area, the outlook for it will remain negative.

 

The specialists expect EUR/USD to decline to $1.3381/60 (September 26, October 7 minimums) and then to $1.3145 (October 4 minimum). According to the bank, in the longer term the pair will drop to $1.2000.

Chart. Daily EUR/USD

 

 

 

J.P. Morgan: trading in case of risk aversion

2011-11-07 16:46

 

Currency analysts at J.P. Morgan believe that in the long term the efforts of European authorities to solve the region’s debt crisis will be repaid.

 

At the same time, there are still plenty of risks, so the specialists advise traders to watch for the events this week. If the news turns out to be more negative, it will be necessary to sell Australian dollar versus its US counterpart.

 

As the reasons for choosing this type of trade in the risk-off situation the bank cites the fact that the Reserve Bank of Australia has so far started reducing its benchmark interest rate. In addition, there are some concerns about Australian economic growth and the currency is correlated with euro and its ability to reflect the risk sentiment and the state of the things in the euro area.

 

So, the recommendation is to open shorts at AUD/USD in the $1.0360 area stopping above $1.0500 and taking profit at $0.9950. The strategists also warn investors that the market seems to be extremely volatile and one should put place the stops close.

 

Chart. Daily AUD/USD

 

 

 

Morgan Stanley: comments on the European crisis

2011-11-07 17:31

 

Analysts at Morgan Stanley warn that as the European leaders have officially raised the possibility of Greece leaving the euro area, the consequences may be very dangerous (see the Greece: the referendum story).

 

The specialists underline that until last week such idea was a taboo but now it seems likely the currency union will use the threat of exclusion against its recalcitrant members.

 

In their view, the crisis may get much more severe, for example, there may be runs on sovereigns and banks in the indebted peripheral nations.

[wynnasuju 10]

Greece: Papandreou agreed to step down

2011-11-07 18:18

 

Greek Prime Minister George Papandreou agreed to step down for the new national unity government to be formed. Its creating was agreed after the negotiations of Papandreou, the head of socialist Pasok party, Antonis Samaras, the leader of the main opposition party and President Karolos Papoulias.

 

The main goal of this government is to assure that the nation gets bailout money and help the nation’s economy survive.

 

The elections will take place right after the decisions of European Council made on October 26 are implemented. According to finance ministry’s statement, the most suitable date is February 19.

 

Analysts at Standard Chartered Bank note that the markets have become a bit more confident about Greece and investors’ attention has moved to Italy where Prime Minister Berlusconi is under pressure to step down.

 

Chart. Daily EUR/USD

[wynnasuju 10]

Commerzbank: comments on USD/CHF

2011-11-08 12:37

 

Technical analysts at Commerzbank expect the greenback to rise to 0.9082 versus Swiss franc.

 

Then, if US currency manages to overcome this level, it will be poised up to 0.9317 (October maximum) and 0.9341/99 (April maximum and 50% Fibonacci retracement of the 2010/2011 decline).

 

Here the specialists look forward to some profit taking on USD/CHF.

 

Chart. Daily USD/CHF

 

 

 

BMO: sell pound versus franc

2011-11-08 13:32

 

Currency strategists at BMO Capital Markets advise investors to pay attention to the Bank of England’s meeting on Thursday as it, in their view, represents good trading opportunity.

 

The specialists distinguish 3 possible scenarios:

 

- BoE doesn’t act at all;

 

- BoE undertakes minor quantitative easing on the order of 25 billion pounds;

 

- BoE does more significant easing.

 

The analysts regard the third outcome as likely as British economy is in a very poor condition that together with the euro zone’s debt crisis will keep pound under pressure, while franc has upside potential as a safe haven. BMO thinks that the results of Swiss National Bank’s any intervention won’t last long. As a result, the bank recommends selling sterling versus Swiss franc.

 

Chart. Daily GBP/CHF

 

 

 

Westpac: market is focused on Italy

2011-11-08 14:35

 

Today the market’s attention is focused on the budget vote in Italy. The nation’s Prime Minister Silvio Berlusconi is under pressure to step down, so the vote will show whether the premier still has a majority in the 630-seat Chamber of Deputies.

 

Next week Berlusconi plans to hold the confidence vote a on implementation of measures pledged to the European Union that are designed to promote Italian economic growth and reduce its huge debt.

 

Analysts at Westpac Banking claim that it seems that the market will be satisfied only if Berlusconi resigns and technocratic government is formed. The specialists say that when it happens, risk sentiment increases and the euro increases. In their view, one should use the advance of EUR/USD to sell the single currency as the relief for euro won’t last long.

 

Analysts at Societe Generale are worried about high Italian borrowing costs as the 6.5% yields would be soon unbearable for the country with only 1.8% nominal GDP growth and the debt accounting for 120% of GDP. Another thing to watch will be the nation’s auction of fixed-rate bonds on November 14 that may cause euro’s sell-off if the borrowing costs increase once again.

 

Chart. Daily EUR/USD

 

 

BBH: euro will fall to $1.3145

2011-11-08 15:09

 

Technical analysts at Brown Brothers Harriman claim that the single currency has breached the support of its middle-term upside channel within which it was trading since September 2010.

 

So, at the end of the last month this line started to play the role of resistance in the $1.4200 area.

 

According to BBH, the pair EUR/USD is poised down to $1.3145 (October 4 minimum).

 

Chart. Daily EUR/USD

[wynnasuju 10]

Standard Chartered, BarCap: comments on EUR/CHF

2011-11-08 15:59

 

Swiss central bank Vice President Thomas Jordan claimed that Switzerland’s monetary authorities are closely monitoring franc’s rate and are ready to act if it’s necessary.

 

SNB President Philipp Hildebrand is speaking today at 17: 30 (GMT+4). In his last interview on November 6 Hildebrand warned that if franc remains strong the nation will face the risk of deflation or economic contraction.

 

Analysts at Standard Chartered Bank underline that Swiss monetary authorities do a lot of verbal interference in the currency market. So far this strategy has proved to be effective enough as the SNB manages to keep the pair EUR/CHF above the floor of 1.20 set on August 9 even though the worsening situation in the euro area urges investors to run to franc as a safe haven.

 

Strategists at Barclays Capital expect demand for Swiss currency to increase this week. In their view, the pair EUR/CHF is on its way down to $1.2245.

 

Specialists at ING don’t think that the SNB will raise floor for the pair as such actions may ruin the credibility of the threshold. On the upside the analysts see euro’s advance limited by $1.2500.

 

Chart. Daily EUR/CHF

 

 

 

Deutsche Bank on trading difficulties

2011-11-08 16:42

 

Analysts at Deutsche Bank note that forex trading on the macroeconomic trends is getting more and more difficult.

 

The specialists point out that Swiss franc – the strongest currency this year – added 6.5% versus the greenback in 2011, while Canadian dollar – the weakest 2011 currency – declined against its US counterpart by 1%. The deviation between franc and loonie is less than 8% and judging by the 30-year average is very small. According to the bank, that means that it has become very difficult to find profitable trades.

 

The economists think that in 2011 the situation won’t improve due to the extremely low short-term interest rates of the developed nations’ central banks. According to Deutsche Bank, the next year many traders will start seeking profits outside of G10 currencies. As for the major currencies the bank favors selling euro versus yen and US dollar.

 

 

 

Saxo Bank: forecast for EUR/USD

2011-11-08 17:41

 

Analysts at Saxo Bank believe that the decline of the single currency from the October maximums in the $1.4200 area will continue during the rest of this year and in 2012 when the greenback is expected to gain 25%. The specialists claim that EUR/USD will slide to $1.20/1.30 and then to $1.10/1.15. In their view, euro will be affected by lower ECB rates.

 

Chart. Weekly EUR/USD

[wynnasuju 10]

BNY Mellon: forecasts for the major pairs

2011-11-08 18:10

 

Forecasts from 10/26/2011

 

 

BNY Mellon: forecasts for the major pairs

 

 

BMO: loonie’s prospects in 2012

2011-11-08 18:52

 

Analysts at BMO Capital Markets claim that the dynamics of Canadian dollar has been so far determined by 2 factors: Bank of Canada’s monetary policy and the euro zone’s debt crisis.

 

The bank’s specialists think that Canada’ currency will lose to its US counterpart during the first half of the next year affected by the concerns about financial market.

 

In the second half of 2012 loonie will likely strengthen as the Bank of Canada will likely be the first central bank to start raising rates. According to BMO, be the end of the next year the pair USD/CAD will decline to parity.

 

Chart. Daily USD/CAD

 

BMO: loonie

 

 

Italy: Berlusconi agreed to step down

2011-11-09 11:53

 

Yesterday Italian controversial Prime Minister Silvio Berlusconi didn’t manage to obtain the absolute majority on the routine budget bill as he was supported only by 308 lawmakers out of 630.

 

As a result, Berlusconi, who seems to have lost political confidence, pledged to leave his post as soon as the nation’s parliament approves austerity measures promised to the EU. The whole matter should be over in the next few weeks.

 

The market’s reaction, as expected, was optimistic: investors hope that new authorities will be able to find way out of the crisis. Never the less, analysts at RBS warn traders that the relief won’t last long.

 

Italy now faces technocratic government – the government with limited term meant to carry out specific reforms. It’s likely to be chosen by political leaders and appointed by President Giorgio Napolitano and charged with implementing debt-reduction agenda until April 2013 when the elections are to be held. Conducting new elections on the spot as suggests Berlusconi would delay reforms. Most of the opposition parties have signaled they would support a broader coalition or a technical government.

 

However, one should realize that the country’s 1.9 trillion euro-debt is very difficult to control, so there are no guarantees that new authorities will do much better than Berlusconi.

 

Chart. Daily EUR/USD

 

Italy: Berlusconi agreed to step down

 

 

Commerzbank: comments on USD/JPY

2011-11-09 12:44

 

Japanese yen keeps gradually strengthening versus the greenback as the concerns about another potential intervention fade.

 

Technical analysts at Commerzbank believe that USD/JPY is poised down to the level of 50% Fibonacci retracement of the advance made after October 31 intervention at 77.40 yen.

 

The specialists claim that the outlook for the pair will remain bearish as long as it keeps trading below the 4-year downtrend line at 79.64 yen and 55-week MA at 80.52 yen. If US currency manages to overcome these levels, it will be able to rise to 2011 maximum at 85.53 yen.

 

According to the bank, support is found at 77.50/40. If dollar breached these levels, it will drop to 76.93 and 76.22/75.94.

 

Chart. Daily USD/JPY

 

Commerzbank: comments on USD/JPY

[wynnasuju 10]

MIG Bank: negative outlook for EUR/USD

2011-11-09 17:27

 

Currency strategists at MIG Bank note that the single currency is under pressure as Italian 10-year bond yields have surged to the record levels of 7.22% and S&P500 index is down from the recent maximums.

 

The specialists note that EUR/USD was rejected by 2-year trend-line and expect the pair to slide to $1.3140.

 

According to the bank, support is found at $1.3145 (October 4 minimum) and $1.3000 (psychological level).

 

Chart. Daily EUR/USD

 

MIG Bank: negative outlook for EUR/USD

 

 

UBS, Commerzbank: dollar will gain versus franc

2011-11-09 17:28

 

Analysts at UBS advise investors to buy the greenback versus Swiss franc.

 

The specialists underline that the European Central Bank and the Reserve bank of Australia are decreasing rates and the Bank of England is doing quantitative easing. The Bank of Japan is conducting actual interventions, while the Swiss National bank is doing the verbal ones pledging to act if necessary. Only the Federal Reserve keeps its monetary policy unchanged that makes UBS bullish on the greenback.

 

The economists don’t choose trading EUR/USD because of high volatility, GBP/USD has chances to gain as sterling may be used as an alternative for euro, and AUD/USD is still expensive for shorts due to the higher borrowing costs in Australia. That brings the bank to choose franc as the currency to sell against US dollar.

 

Analysts at Commerzbank believe that if USD/CHF overcomes 0.9082, the pair will be poised up to 0.9317 (October maximum) and 0.9341/99.

 

Chart. Daily USD/CHF

 

UBS, Commerzbank: dollar will gain versus franc

 

 

RBC on the policy of major central banks

2011-11-09 18:07

 

ECB: the central bank surprisingly cut interest rates by 25 basis points in November. The analysts expect to see the same reduction in December.

 

Bank of England: the MPC will likely announce another 50 billion pounds of asset purchases at its meeting on Thursday, November 10. The minutes from October Meeting showed that all members of the Committee agreed that further monetary stimulus is necessary.

 

Bank of Canada: the next time the interest rates will be changed to the upside, but this won’t happen until the second half of 2012.

 

Reserve bank of Australia: there will be another 25-basis-point rate cut in the first quarter of 2011.

 

RBC on the policy of major central banks

[wynnasuju 10]

Mizuho: US dollar may strengthen versus yen

2011-11-10 11:21

 

Technical analysts at Mizuho Corporate Bank believe that the greenback may rise to the 4-month maximum versus Japanese yen.

 

The specialists point out that USD/JPY has managed to break above the top of the Ichimoku Cloud. In their view, after Japan’s intervention on October 31 dollar’s baseline has lifted up to 77.44 yen. If the greenback keeps closing above this level until the end of November, bullish pressure on US currency will increase.

 

According to the bank, the pair may rise above August 4 maximum at 80.23 yen.

 

Chart. Daily USD/JPY

 

Mizuho: US dollar may strengthen versus yen

 

 

 

Commerzbank: negative outlook for EUR/USD

2011-11-10 11:51

 

The specialists think that if EUR/USD remains trading below $1.3565, it will be poised down to $1.3380/60 (78.6% retracement and September minimum). After that, the next downside target will be $1.3145 (October 4 minimum).

 

According to the bank, resistance levels are situated at $1.3685/90 and $1.3870.

 

Chart. Daily EUR/USD

 

Commerzbank: negative outlook for EUR/USD

 

 

SocGen: sell Aussie versus yen

2011-11-10 12:14

 

Currency strategists at Societe Generale advise traders to stay out of EUR/USD as there is severe event risk and the pair’s dynamics is extremely volatile.

 

The specialists propose investors to trade on the consequences of the euro area’s debt crisis or, in other words, on the economic growth slowdown and worsening risk sentiment.

 

So, according to the bank, a good trading strategy is selling Australian dollar versus Japanese yen. The analysts advise to open shorts on AUD/JPY in the 79.50 area stopping above 81.50 aiming at 74.00 yen.

 

Chart. Daily AUD/JPY

 

SocGen: sell Aussie versus yen

 

 

 

BBH is concerned about US debt issues

2011-11-10 15:03

 

So far the market’s attention has been focused on the euro zone’s debt problems, investors have almost forgotten that the US also has much to deal with.

 

The United States created special congressional committee – or supercommittee – in order to the debt-reduction measures. The deadline is on November 23. If the policymakers don’t come up with the plan how to decrease debt by $1.2 trillion before the time runs out, America’s spending will be automatically cut in 2013.

 

Analysts at Brown Brothers Harriman underline that there is a serious split in the opinions of the committee’s members. In their view, this is one of the factors why the single currency has been performing relatively well versus the greenback so far. By their estimates, traders are pricing in only a 7% probability that the supercommittee will reach a deal by the end of the month.

 

BBH specialists underline that in case of supercommittee’s failure fiscal tightening and sluggish economic growth could make Federal Reserve’s policy more accommodative. That, in its turn, will put the greenback under negative pressure.

 

BBH is concerned about US debt issues

[wynnasuju 10]

Merrill Lynch on US credit rating

2011-11-10 16:00

 

Analysts at Bank of America Merrill Lynch believe that other major rating agencies – Moody's or Fitch – will lower US top credit rating by the end of the year after Standard & Poor's downgraded the world’s leading economy in August.

 

As the reason for such dim outlook the specialists cited concerns about the nation’s huge budget deficit and debt. In their view, the second downgrade will seriously hit weak American economy.

 

If the so-called supercommittee fails to reach a deal to reduce the US deficit by at least $1.2 trillion by November 23, the rating agencies will make their move at the end of November-beginning of December.

 

Merrill Lynch decreased US economic growth forecasts for 2012 and 2013 to 1.8% and 1.4% respectively.

 

At the same time, it’s necessary to note that the agencies don’t intend to hurry with their judgments. Moody's Investors Service plans to take into account such factors as the results of presidential elections and the expiration of the Bush-era tax cuts late in 2012, but not only the committee. Fitch Ratings still has a stable outlook on its AAA rating on the United States, so before any downgrades it will probably revise outlook to negative.

US dollar, euro and sterling will be competing in weakness, so US currency want lose much to the latter. Taking into account the euro area’s issues the bank still thinks that EUR/USD will fall to $1.29 by the end of the year. At the same time, other G10 currencies are quite likely to outperform dollar.

 

Merrill Lynch on US credit rating

 

 

 

Bank of England left policy unchanged

2011-11-10 17:09

 

The Bank of England’s meeting passed today in line with the forecasts: as it was expected, the Monetary Policy Committee left its benchmark rate at 0.5% keeping the ceiling for the asset purchases at 275 billion pounds ($437.3 billion). Minutes of the meeting will be released on November 23.

 

The BOE said it will take up to four months to make the additional quantitative easing of 75 billion pound sanctioned in October. The central bank aims to keep the scale of the program under review. Despite the fact that inflation reached 5.2% in September British monetary authorities will decline sharply the next year.

 

Analysts at Nomura International note that the MPC is extremely concerned by the debt crisis in the euro area and potential contagion. In their view, British central bank is very likely to announce more easing until the end of February.

 

According to the European Commission, UK economy risks contracting at least in one of the next few quarters affected by the government’s spending cuts.

 

The pair GBP/USD rose from the weekly minimums in the $1.5890 area to the levels in the $1.5970 zone.

Chart. Daily GBP/USD

 

Bank of England left policy unchanged

 

 

 

Euro area: economic and political news

2011-11-10 18:22

 

The single currency rose today versus the greenback helped by the high demand for Italian T-bills: the bids exceeded offer in about 2 times making the market’s concerns ease.

 

It’s necessary to say that there are enough reasons for concerns. Yesterday Italy’s 10-year yields rose above the critical 7% level – the point when Greece, Ireland and Portugal asked the EU for financial help. Today the yields retreated, but remained elevated.

 

In addition, there was a talk about the European Central Bank buying Italy’s government bonds. Ever the less, European Central Bank policymaker Juergen Stark warned European governments on Wednesday against asking the ECB for support in dealing with the region's sovereign debt crisis, saying this would put the central bank's independence at risk.

 

Analysts at JPMorgan Chase warn that Italian problems could make Japanese investors sell the nation’s bond. In such case EUR/JPY is poised to decline.

 

The European Commission warned of a “deep, prolonged recession” in the region reducing its euro zone economic growth forecast in 2012 from 1.8% to 0.5%.

 

Lucas Papademos, former vice president of the European Central Bank, was named new Greek prime minister. Elections are scheduled on February 19, 2012.

 

Chart. Daily EUR/USD

 

Euro area: economic and political news

[wynnasuju 10]

Goldman Sachs lifted forecast for NZD

2011-11-11 11:42

 

Analysts at Goldman Sachs increased forecasts for New Zealand’s dollar versus its US counterpart from 0.74 to 0.77 in 3 months, from 0.78 to 0.80 in 6 months and from 0.82 to 0.84 in a year.

 

The specialists point out that kiwi has managed to recover from October minimums in the 0.7470 area, though its dynamic was volatile. In their view, the currency is doing pretty well despite the looming concerns about global economic slowdown and New Zealand’s credit rating downgrade by Standard & Poor's and Fitch at the end of September. According to Goldman, the coming 12 months will be characterized by US dollar’s weakness.

 

Chart. Daily NZD/USD

 

Goldman Sachs lifted forecast for NZD

 

 

Wells Fargo about USD/JPY prospects

2011-11-11 12:14

 

Currency strategists at Wells Fargo note that the moves of the pair USD/JPY are no more strongly correlated with the dynamics of stock market. The specialists underline that the greenback is falling, while stocks in the US are rising.

 

In their view, the mentioned relationship had been growing less and less pronounced since 2009 and was finally broken in the past year due to continuous Japan’s interventions and contracting interest rates differential between the US and Japan.

 

As a result, the advance of the equity market won’t help to bring Japanese yen lower. According to the bank, the greenback will be trapped between 78 and 80 yen during the next 6-12 months. Any attempts to weaken yen won’t be effective in the longer term until US economic prospects remain dim and interest rates – extremely low.

 

Chart. Daily USD/JPY

 

Wells Fargo about USD/JPY prospects

 

 

Commerzbank still expects EUR/USD to decline

2011-11-11 12:51

 

Despite euro’s recovery from 1-month minimum at $1.3483 hit yesterday technical analysts at Commerzbank expect the single currency to fall versus the greenback to $1.3380/60 (78.6% Fibonacci retracement from its October advance and September minimum). The specialists see resistance at $1.3685 and $1.3870.

 

Chart. Daily EUR/USD

 

Commerzbank still expects EUR/USD to decline

 

 

BBH advises traders to sell EUR/USD

2011-11-11 13:43

 

Analysts at Brown Brothers Harriman note that although the European currency is trading with high volatility versus the greenback, it’s closely correlated with the dynamics of S&P500 index – the specialists estimated the correlation by 80%.

 

The bank claims that in the stock markets are likely to decline in the current state of uncertainty and recommends selling EUR/USD in the $1.3650 area stopping above $1.38, expecting the pair to fall to $1.30 by the end of the year.

 

Chart. Daily EUR/USD

 

BBH advises traders to sell EUR/USD

[wynnasuju 10]

The odds for euro area’s breakup increased

2011-11-11 15:45

 

Last week European leaders for the first time raised the possibility of Greece leaving the currency union if it keeps violating its commitments. That triggered the speculation that German policymakers are already preparing to exclude the peripheral nations out of the euro area.

 

Even though Germany and France denied the reports that they had discussed a possible breakup of the euro zone, the option has become real. As a result, it will likely become much harder for indebted members to convince investors in their ability to get their finances in order and for Merkel, Sarkozy and ECB President Mario Draghi to defend the single currency.

 

The questions concerning currency bloc’s future will be discussed at the EU summit on December 9. Some experts say that the European leaders will probably talk about introducing an exit clause.

 

Analysts at Brown Brothers Harriman still think that European authorities will do anything to save the monetary union. In particular the specialists see the way out in increasing integration.

 

Strategists at HSBC warn that the euro zone’s breakup would cause something similar to the Great Depression. The quitting country will face collapse of the banking system, capital outflow and the surge of inflation. Deutsche Bank says that if one nation exits, investors will expect other problem states to do the same.

 

The odds for euro area

 

 

BNP Paribas, ING: leave euro for pound

2011-11-11 16:39

 

British pound has strengthened this month versus the single currency by 3% since the end of October.

 

Sterling gained despite the release of weak economic data in the UK: the nation’s trade deficit widened from 8.6 billion pounds in August to 9.8 billion pounds in September. It’s also possible to say that the effect of additional quantitative easing wasn’t as great as it could be.

 

Strategists at ING believe that British currency is slowly moving to safe haven status as it is perceived as an alternative to more troublesome euro.

 

Analysts at BNP Paribas justify such assumption by the high demand for British debt. According to the Bank of England, net inflows into UK government bonds held by non-residents bounced in September when the fears about the euro zone’s future escalated to 12 billion pounds, the maximal level since June 2010.

 

Unlike Australian dollar which is declining against euro pound isn’t that affected by the commodities prices and investors’ risk sentiment. As a result, sterling may count as a refuge in times of high risk aversion, though it can’t compete with the greenback – at least now when the Federal Reserve remains on hold and doesn't do more easing.

 

Chart. Daily EUR/GBP

 

BNP Paribas, ING: leave euro for pound

 

 

 

BNY Mellon: US dollar is under pressure

2011-11-11 17:27

 

Analysts at Bank of New York Mellon point out that despite the ECB rate cut, the euro zone’s debt turmoil and unfavorable economic prospects, the single currency is still above October minimum at $1.3145 and 14% higher than June 2010 low at $1.1875.

 

The specialists explain relative strength of euro by the weakness of US dollar. In their view, American currency is losing the market’s confidence as a store of value.

 

According to the bank, as the political uncertainty in Greece and Italy fades, negative pressure on the greenback will build up. Never the less, the strategists don’t urge investors to buy EUR/USD as the euro zone’s politicians could bring negative surprises.

 

Chart. Daily EUR/USD

 

BNY Mellon: US dollar is under pressure

[wynnasuju 10]

Ichimoku. Weekly forecast. GBP/USD

2011-11-14 13:36

 

Weekly GBP/USD

 

British currency, as expected, consolidated in the upper part of the Ichimoku Cloud. The lines Kijun-sen (1) and Tenkan-sen (2) act as support as well as the lower border of Kumo – Senkou Span B, while resistance is provided by Senkou Span A (3).

 

The Standard line (1) and the Turning line (2) are horizontal that means that sideways trend is likely to continue on the weekly chart. The bearish Cloud indicates that bears are stronger than bulls.

Chart. Weekly GBP/USD

 

Daily GBP/USD

 

Last week pound was trading around the Turning line (1) sometimes getting lower, sometimes rising above it. Now Tenkan-sen (1) together with Senkou Span B (3) supports British currency.

 

The Ichimoku Cloud, which has so far turned upwards, widened (4) – bulls have become more confident. The Standard line (2) turned sharply higher that gives the bulls hope for breakthrough in the longer-term.

 

One shouldn’t forget, however, about resistance in the $1.6100 area – at the line connecting September and November maximums. At the same time, if GBP/USD overcomes this zone, the pair will be likely poised for growth.

 

Chart. Daily GBP/USD

 

Ichimoku. Weekly forecast. GBP/USD

 

 

 

Ichimoku. Weekly forecast. USD/JPY

2011-11-14 13:38

 

Weekly USD/JPY

 

As it was expected, Japan’s currency intervention at the last day of October, failed to improve the situation at USD/JPY market: yen continues slowly but surely appreciating as investors crave the refuge.

 

The pair USD/JPY lost support of the Turning line (1) which is now providing resistance for the prices as well as the Standard line (2). Tenkan-sen (1) and Kijun-sen (2) are directed horizontally, holding the strong “bearish cross” (5), while the descending Ichimoku Cloud keeps US currency under negative pressure.

 

Chart. Weekly USD/JPY

 

Daily USD/JPY

 

On the daily chart the prices entered the bearish Ichimoku Cloud and reached during the past week its lower border – Senkou Span A – breaching on their way support of the Standard line (1). The Turning line (2) separated from the Standard line trying to get higher but soon it reversed and went sharply down.

 

The market is still in the state of uncertainty: Kijun-sen, which characterizes the longer-term trend, remains horizontal, while the thin Cloud (3) shows that neither bulls, nor bears control the situation.

 

Chart. Daily USD/JPY

 

Ichimoku. Weekly forecast. USD/JPY

 

 

 

Ichimoku. Weekly forecast. USD/CHF

2011-11-14 13:39

 

Weekly USD/CHF

 

As it was expected, the bulls are very persistent in trying to move higher and overcome resistance of Kumo.

 

USD/CHF once again approached the Ichimoku Cloud. The Turning line supporting the prices goes sharply up (2), Tenkan-sen (2) and Kijun-sen (1) hold though weak, but still “golden cross” (3).

 

In addition, the descending Kumo (4) has become extremely narrow – the bulls have all chances to make it change direction and reverse the trend upwards.

 

Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart everything also goes quite well for the bulls.

 

The prices managed to overcome the Standard line (blue line on the chart). Tenkan-sen and Kijun-sen formed the “golden cross” (1) – strong signal as the lines intersected above Kumo. In addition, the rising Ichimoku Cloud once again began widening (2, 3).

 

It would be worth paying attention to the lagging Chinkou Span: if it manages to break above the price chart while the prices remain above the Cloud, this will be a good signal to buy US dollar.

 

Chart. Daily USD/CHF

 

Ichimoku. Weekly forecast. USD/CHF

 

 

 

Morgan Stanley, UBS: sell EUR/USD

2011-11-14 14:10

 

The political situation in the euro area has stabilized a bit: Greece and Italy got new governments. Never the less, there are still severe doubts that these nations will be able to resolve the debt issues.

 

Analysts at Morgan Stanley are bearish on the single currency versus the greenback. In their view, the pair EUR/USD will drop to $1.30 by the end of the year.

 

Currency strategists at ING and UBS advise to sell euro on its attempts to rise to $1.40.

 

UBS expects US economy add 2.3% in 2012, while the euro zone’s one is seen growing only by 0.2%. As a result, the bank thinks that the Federal Reserve is unlikely to engage in QE3, while the ECB will keep cutting interest rates.

 

Chart. Daily EUR/USD

 

Morgan Stanley, UBS: sell EUR/USD

[wynnasuju 10]

UBS lowered forecast for EUR/USD

2011-11-15 10:33

 

Analysts at UBS reduced forecasts for the single currency versus the greenback due to the escalating crisis in the euro area.

 

Apart from deepening concerns that the European policymakers won’t be able to find the way out of the debt turmoil, euro will be affected by the region’s economic slowdown and ECB rate cuts. The strategists underline that even though the United States and Japan also have severe debt issues, the situation in the euro zone seems to be much worse, so the demand for dollar and yen will be higher.

 

The specialists expect EUR/USD to drop to $1.35 in a month, $1.30 in 3 months, $1.25 in a year. At the beginning of November the analysts thought that the pair will end the year at $1.40.

 

It’s also necessary to note that, according to the bank, the Swiss National Bank will lift the floor for EUR/CHF from 1.20 to 1.25 as it regards franc as still extremely overvalued.

 

Chart. Daily EUR/USD

 

UBS lowered forecast for EUR/USD

 

 

 

ANZ: negative outlook for NZD/USD

2011-11-15 10:59

 

Technical analysts at ANZ Bank claim that there us a “dead cross” on the NZD/USD chart formed in October by 50-day and the 100-day MAs – the former went below the latter – and that the figure is still in place.

 

The specialists underline that this is a bearish signal that means that kiwi may weaken to $0.7335, the level representing 38.2% Fibonacci retracement from the pair’s advance from March 2009 minimum to August 2011 maximum.

 

According to the bank, support levels for New Zealand’s currency are situated at $0.7550 and $0.7470 (October 4 minimum).

 

 

Chart. Daily NZD/USD

 

ANZ: negative outlook for NZD/USD

 

 

BarCap: trading in the situation of uncertainty

2011-11-15 11:27

 

Risk aversion is expected to dominate the markets concerned about European debt crisis and weak economic data.

 

Currency strategists at Barclays Capital see several ways to secure oneself against the elevated uncertainty. One of the strategies preferred by the bank is buying the greenback versus Swiss franc.

 

According to BarCap, if the situation in the euro area deteriorates, the SNB will be forced to defend EUR/CHF floor selling franc. Such actions of the central bank will lift USD/CHF. In case of some positive surprises in Europe, demand for franc as a refuge will ease and USD/CHF will also rise.

 

So, the specialists advise traders to open longs at USD/CHF stopping below 0.8920 and targeting 0.9300.

 

Chart. Daily USD/CHF

 

BarCap: trading in the situation of uncertainty

[wynnasuju 10]

Commerzbank: comments on EUR/USD

2011-11-15 12:06

 

Technical analysts at Commerzbank keep regarding the outlook for the single currency versus the greenback as negative.

 

In their view, EUR/USD is likely to decline to $1.3380/60 (78.6% Fibonacci retracement of the October advance and September minimums) and then to $1.3145 (October 4 minimum). According to the bank, in the longer term the pair is poised down to $1.2000.

 

The specialists say that bearish pressure on euro will ease if it manages to rise above $1.3870/80. If euro succeeds, it will be able to return up to the 55- and 200-day MA at $1.4013/1.4104. The major resistance is set at $1.4250/55.

 

 

Chart. Daily EUR/USD

 

Commerzbank: comments on EUR/USD

 

 

Euro area: political situation

2011-11-15 17:37

 

Italy

 

New Italian Prime Minister-designate Mario struggles to get political parties to agree to take part in his technocratic Cabinet as it would be hard for the government without political representation to pass unpopular laws through the government.

 

Monti has to convince investors that the nation is able to reduce its 1.9 trillion debt ($2.6 trillion) and stimulate economic growth which was below euro area average during the last decade.

 

Greece

 

New Greek Prime Minister Lucas Papademos underlined that the country’s future is in the euro area. According to Papademos, the membership in the currency union guarantees Greece “monetary stability and creates the right conditions for sustainable growth”, reports Bloomberg.

 

The new government formed on November 11 has to implement budget measures necessary to obtain the second bailout package of 130 billion euro ($177 billion) adopted on October 26 and conduct a voluntary debt swap by the end of February.

 

For now the main goal is to secure the payment of an 8 billion-euro tranche of the first bailout program. In order to avoid default Greece needs this money before the middle of December.

 

The EU waits for all Greek parties to give written commitment to structural reforms and austerity measures. So far opposition leader Samaras has been declining to do that.

 

Germany

 

German Finance Minister Wolfgang Schaeuble said that Merkel’s government wants Greece to remain a member of the European Monetary Union. At the same time, Christian Democratic Union party led by the Chancellor voted to allow euro states to quit the currency area.

 

Chart. Daily EUR/USD

 

Euro area: political situation

 

 

Euro area: sovereign bond yields are surging

2011-11-15 18:22

 

The single currency got today under negative pressure. The pair EUR/USD dropped from the levels in the $1.3800 area where it started the week to the $1.3500 zone. The pair EUR/JPY hit 1-month minimum at 100.93 yen.

 

European bond yields surged increasing concerns about the region’s debt crisis. Italy’s 10-year yield approached the critical level of 7%. The yield spreads between 10-year debt of Spain, France, Austria and Belgium and similar German bunds all widened to the maximal level since the euro was adopted in 1999.

 

The economic data were also discouraging: German ZEW Economic Sentiment index declined this month to the lowest since October 2008 of minus 55.2.

 

Strategists at Nordea warn that if euro falls below last week's minimum at $1.3480, the number of bears will sharply increase. Analysts at Bank of Tokyo Mitsubishi UFJ believe that the fate of the currency union is still vague as the European nations may move closer to fiscal integration or break apart. In their view, EUR/USD will drop to $1.25 during the next 6 months.

 

Chart. Daily EUR/USD

 

Euro area: sovereign bond yields are surging

[wynnasuju 10]

On RBA rates and Aussie’s prospects

2011-11-16 12:44

 

News about new technocratic governments in Italy and Greece brought only short-term relief to the market. Yesterday’s surge of euro zone bond yields threw investors into the risk-averse mode that affected such risk-sensitive pair as AUD/USD.

 

Analysts at RBC Capital Markets believe that Australian dollar’s dynamics versus the greenback will remain extremely volatile as Aussie is closely correlated with the equity markets which are seized by uncertainty. In their view, the risks for AUD/USD are to the downside.

 

Dow Jones reports that the interest rate swaps market is currently pricing in a 100% chance of a rate cut by the RBA in December, though the surveyed economists expect the RBA to keep the rates unchanged.

 

This month RBA lowered its benchmark rate by 25 basis points to 4.5% citing the projected slowing inflation and the risks posed by the euro zone debt crisis. The central bank gave no hints on further rate cuts in its meeting minutes released yesterday. According to the document, the policymakers have also discussed the possibility of staying on hold. The RBA underlined that the mining industry could become the driver of the nation’s economic growth that would require more tight monetary policy in the medium term.

 

Analysts at Westpac, however, claim that the mentioning of the risks connected with Europe means that the RBA left the door open for further easing, and look forward to 75 basis points of rate cuts starting in February.

 

Chart. Daily AUD/USD

 

On RBA rates and Aussie

 

 

 

Wells Fargo: negative forecast for EUR/USD

2011-11-16 13:03

 

Analysts at Wells Fargo are bearish on the prospects of the single currency versus the greenback during the next 12 months. The specialists believe that euro will be affected by the increasing borrowing costs for the peripheral euro area nations and the risk of recession in the region.

 

According to the bank, EUR/USD will fall to $1.3000 in 3 months, to $1.2800 in 6 months and to $1.2600 in 9 months and hit $1.2400 in November 2012.

 

Chart. Daily EUR/USD

 

Wells Fargo: negative forecast for EUR/USD

 

 

 

Japan: monetary policy, economy, yen’s rate

2011-11-16 14:01

 

The Bank of Japan left its benchmark rate unchanged at the minimal levels of 0-0.1% and the asset-buying fund at 20 trillion yen ($260 billion) after increasing it by 5 trillion yen in October.

 

As Japan’s economy strongly depends on the external demand for Japanese goods, deepening European debt crisis, the flood in Thailand and the risk of global economic slowdown will have a serious negative impact on the nation’s growth prospects.

 

Analysts at Nomura claim that the central bank may augment monetary stimulus if the national currency which is regarded as a refuge keeps strengthening and once again approaches record maximums against its US counterpart.

 

According to Japan Automobile Manufacturers Association, in the first half of 2011yen’s appreciation slashed Japanese carmakers’ profit by 330 billion yen. Japanese GDP rose by 6% in the third quarter on the year-to-year basis as the nation’s economy recovered from the March earthquake. However, during the first 20 days of October exports slashed by 1.6%. Credit Suisse believe Japan’s economy is losing upside momentum since August and that the readings of its indicators will soon start to deteriorate.

 

As for Japan’s intervention policy, analysts at UBS don’t expect any changes. In their view, the nation’s monetary authorities will keep intervening only in case yen’s sharp bounces. As the European debt crisis escalates, Japanese investors trim their overseas assets – primarily euro zone sovereign debt holdings – and repatriate their money making demand for yen increase. That means that yen’s appreciation is caused not only by the speculative inflows, but also by the Japanese real money accounts. In such circumstances Japan will be forced to act, so USD/JPY’s decline will be likely limited.

 

Chart. Daily USD/JPY

 

Japan: monetary policy, economy, yen

 

 

 

Feldstein: Greece will have to leave the euro zone

2011-11-16 14:58

 

Martin Feldstein, professor at Harvard University, who has foreseen in 1998 that the euro zone will end up with the necessity of bailing out its members, claims now that the currency union will survive, even though Greece will leave the bloc within a year.

 

According to Feldstein, if Greece doesn’t default and devalue its currency, it will face constant economic slump. The specialists underline that even if the nation’s debt was wiped out Greece would have an unbearable a current-account imbalance which could be eliminated only by abandoning euro and devaluation.

 

According to the European Commission, Greece’s debt will reach 163% of GDP this year.

 

Feldstein claims that Italy is in better situation than Greece due to the stronger economy and budget and smaller current-account deficit.

 

It’s also necessary to note that the economist advises the European Central Bank to resist pressure and avoid increasing purchases of Italian bonds as this would distort financial markets and reduce the urgency for the government to restore fiscal order.

 

Feldstein: Greece will have to leave the euro zone

[wynnasuju 10]

Societe Generale: comments on EUR/JPY

2011-11-16 15:26

 

Analysts at Societe Generale warn that the single currency may keep declining versus Japanese yen and fall to October 4 minimum at 100.75 yen. The specialists underline that EUR/JPY has eroded support in the 104.90/104.75 zone.

 

According to the bank, bearish pressure will ease only if the pair returns above 104.75. In such case euro will get chance to rise to October 31 maximum at 111.60 yen.

 

Chart. Daily EUR/JPY

 

Societe Generale: comments on EUR/JPY

 

 

 

HSBC, Rabobank on the factors influencing EUR/USD

2011-11-16 16:30

 

Analysts at HSBC claim that the fair value of the European currency is in the $1.20/$1.30 area. However, even despite the escalating crisis euro keeps trading above these levels. The specialists see 2 reasons for that.

 

Firstly, euro is supported by monetary inflows even though some of them are the result of European banks bringing capital home in an effort to defend themselves against possible losses on their holdings of euro-zone bonds. The current account of the euro area as a whole is almost balanced and there are positive portfolio and merger and acquisition inflows.

 

Secondly, as the consequences of the currency union’s break up are expected to be terrible, investors are betting that the policy makers will find a way to save the bloc. In addition, there is also a chance that the member nations will move to closer fiscal coordination.

 

Analysts at Rabobank add that much may be explained by the weakness of US dollar which showed the worst performance among the other major this year but has regained some safe haven status because of the European turmoil. At the same time, there are pairs with much stronger downtrend for the common currency: EUR/JPY fell from April maximum at 123.32 yen to the levels in the 103 yen area.

 

Chart. Daily EUR/JPY

 

HSBC, Rabobank on the factors influencing EUR/USD

[wynnasuju 10]

Commerzbank: comments on GBP/USD

2011-11-17 11:51

 

Technical analysts at Commerzbank believe that after British pound has broken support of the 55-day MA and 38.2% Fibonacci retracement at $1.5825 it’s poised versus the greenback down to $1.5632 (October 18 minimum) and then to $1.5271 (October 6 minimum).

 

In the longer term the specialists expect sterling to slide to the support line of the uptrend from 2009 to 2011 at $1.5050.

 

According to the bank, resistance for GBP/USD is found at $1.6060 (downtrend line) and $1.6136 (200-day MA). The outlook for the pair will remain negative as long as it’s trading below $1.6185, the 61.8% Fibonacci retracement of pound’s decline from August maximums.

 

Chart. Daily GBP/USD

 

Commerzbank: comments on GBP/USD

 

RBC: euro managed to recover a bit versus dollar

2011-11-17 12:54

 

The single currency has managed to recover a bit versus the greenback after it slumped earlier this week to the minimal level since October 10 in the $1.3420 area.

 

Analysts at RBC claim that euro got lift from short-covering and the advance of US stock futures. The specialists say that the further dynamics of EUR/USD today will depend on the results of Spanish and French bond auctions.

 

In addition, the pair’s rebound may be explained by the speculation that the Fed will do additional quantitative easing. It’s recommended to pay attention to the speech of New York FRB President William Dudley at 5:50 p.m. GMT.

 

The market is also looking to see the increase in US Jobless claims (1:30 p.m. GMT).

 

At the same time one should remember that the situation in the euro area remains very tense. Strategists at Brown Brothers Harriman warn traders that if euro breaks below $1.3400, it will slide to October minimum at $1.3145.

 

Chart. Daily EUR/USD

 

RBC: euro managed to recover a bit versus dollar

 

 

Danske Bank: yen will keep strengthening

2011-11-17 13:21

 

Analysts at Danske Bank expect Japanese yen to keep strengthening versus the greenback due to its safe haven status and Japan’s current account surplus.

 

The specialists expect USD/JPY to renew the record minimum sliding to 75 yen in 3 months and to 74 yen in 6 months.

 

In their view, loose monetary policy of the Federal Reserve is going to be more aggressive than the one of the Bank of Japan. As a result, yen’s appreciation will be interrupted only by the occasional interventions, but their effect will be short-lived.

 

Chart. Daily USD/JPY

 

Danske Bank: yen will keep strengthening

 

 

BoA Merrill Lynch: sell GBP/USD

2011-11-17 14:01

 

Currency strategists at Bank of America Merrill Lynch note that the euro zone’s debt turmoil that threatens recession has a negative impact on the situation in UK as about 30% of the nation’s exports go to Europe and only 10% to the United States.

 

As a result, the specialists expect sterling to stay under pressure versus the greenback. The bank advises traders to sell GBP/USD in the $1.5800 area stopping above $1.6100. According to Merrill Lynch, in the near term the pair will slide to $1.54, while in the medium term it will be poised to hit $1.50.

 

The analysts note that the chances that British pound will be a safe haven from the European crisis are low.

 

Chart. Daily GBP/USD

 

BoA Merrill Lynch: sell GBP/USD

[wynnasuju 10]

UBS about Spain-related risks

2011-11-17 15:28

 

Economists at UBS give 3 reasons to be concerned about Spain’s economic prospects: firstly, the high possibility that the country misses its deficit-reduction target, secondly, the risk of Spain’s falling into recession the next year and, thirdly, the precarious position of Spanish banks which will likely need more state money.

 

Spanish Finance Ministry announced that the nation’s GDP will add 0.8% in 2011 failing to meet the 1.3% growth target. Spain’s economy stagnated in the third quarter. The country’s jobless rate is close to 23%.

 

It’s too early to make predictions whether the deficit goal of 6% of GDP will be attained this year as the regions’ third-quarter budget data aren’t available yet. In 2010 Spain’s shortfall was equal to 9.3% of GDP.

 

Spain faces general elections on Sunday, November 20. The ruling Socialist Party is likely to lose to the opposition People’s Party which pledges to meet the deficit goal of 4.4% of GDP in 2012.

 

The 10-year Spanish bond yield rose to 6.4% for the first time since August. The specialists warn that the market’s rather optimistic attitude to Spain in comparison with Italy may change in the coming months or even weeks.

 

UBS about Spain-related risks

 

 

Capital Economics: the BoE will increase QE

2011-11-17 16:35

 

The Bank of England reduced its forecast for UK economic growth in 2012 from 2% to 1% claiming that British economy will suffer from the euro zone’s debt crisis. The central bank also slashed outlook for CPI growth rate claiming that by the end of the next year inflation will fall from the current 5% level below the 2% target.

 

Economists say that although the BoE didn’t signal further easing the market now expects it to expand its QE program in 2011 by at least 50 billion from the current 275 billion pounds.

 

Analysts at Capital Economics think that the central bank’s inflation report suggests that rates will stay on the minimal levels for the foreseeable future and that British economy will likely need even more loose monetary policy.

 

The specialists think that even the revised forecast of the central bank seems to be too optimistic. In their view, Britain’s economy will stagnate in 2012.

 

Capital Economics projects the 75 billion pounds of additional asset purchases in February but adds that if the economic data remains weak during the next 2 weeks, the BoE will have to announce extra support already in December.

Chart. Daily EUR/USD

 

Capital Economics: the BoE will increase QE

 

Analysts are still negative on euro

2011-11-17 17:29

 

Spain’s borrowing costs rose to the maximal level since 1997 – the nation’s 10-year bond auction today has fueled concerns about the spreading of the European crisis to France and other core euro zone economies, such as the Netherlands and Finland.

 

Short-term forecasts

 

Morgan Stanley: negative outlook for the single currency. The specialists advise to sell euro targeting $1.31 lowering stops to $1.3580.

 

UBS: if EUR/USD breaks below support at $1.3406, it will begin declining to $1.3346.

 

Middle-term forecasts

 

Nomura: euro will slip to $1.30 by the end of the year, so it’s recommended to sell EUR/SUD.

 

Brown Brothers Harriman: the pair will finish 2011 at $1.29.

 

Mizuho Corporate Bank: euro will fall to $1.30 by the year-end, trading will be very volatile.

 

Citigroup: EUR/USD will decline to $1.31 by the end of 2011 and to $1.25 in the first half of 2012.

 

Chart. Daily EUR/USD

Analysts are still negative on euro

 

 

Merkel proposed to change EU’s treaties

2011-11-17 17:45

 

German Chancellor Angela Merkel proposed today to change the EU's treaties making the European institutions able to intervene in national budgets in case deficit rules were breached. In her view, complaints should be brought to the European Court. Merkel thinks that the European Union needs greater integration.

 

Here are some of Merkel’s comments (from Reuters):

 

“I am convinced that only political solutions can resolve the situation… A breakthrough to a new Europe can only happen if we are ready to change our treaties.”

 

“This can be limited to euro states, it can be done in the form of a protocol ... it would be a very limited change to the treaty”.

 

“But national governments must be prepared to tie themselves to the community in a binding way.”

 

“There are ... many good political and economic reasons to further integrate the 27-member EU, as opposed to the 17-member euro zone”.

 

Merkel proposed to change EU

[wynnasuju 10]

Westpac: AUD/USD trading recommendations

2011-11-18 12:12

 

Technical analysts at Westpac expect AUD/USD to bounce to $1.0200. The specialists recommend selling Aussie on the rallies expecting the pair to drop to $0.9700. In their view, support at $0.9910 won’t be able to hold the bears.

 

Chart. Daily AUD/USD

 

Westpac: AUD/USD trading recommendations

 

 

Euro area: comments from the policymakers

2011-11-18 12:59

 

AAA-rated European nations are beginning to express openly that they are against expanding rescue measures for the most indebted members of the currency union.

 

Jyrki Katainen, Finnish Prime Minister thinks that the euro area is running out of options to solve the debt crisis. Italy and Greece should act on their own to convince the markets that they are able to reduce the debt burden. Katainen says that the second bailout deal for Greece adopted on October 26 didn’t manage to calm investors: since that time Italian 2-year bond yields surged by 150 basis points. Germany and Finland both oppose the creation of common euro bonds.

 

France has openly called for the ECB to get more involved by issuing the European Financial Stability Facility (EFSF) a banking license that would allow it to refinance itself with the ECB liquidity operations. German Chancellor Angela Merkel criticized the proposition that the ECB has to become a lender of last resort. Reuters cites European and IMF officials who claim that the authorities discuss the possibility of the ECB lending money to the IMF, rather than any euro zone government that would help to get round the government restrictions.

 

The IMF refused to release the next portion of its loan to Greece until the nation’s Prime Minister Lucas Papademos wins broad political support for austerity measures.

 

Mario Monti, Italian Prime Minister pledged additional cuts to those targeted by Silvio Berlusconi.

 

World Bank President Robert Zoellick claimed that the nations from China to the United Stets may be willing to support Europe through the IMF if the euro zone’s policy makers agree on a plan to stem their debt crisis.

 

Daily EUR/USD

 

Euro area: comments from the policymakers

 

Options market expects euro’s slump

2011-11-18 13:49

 

Wall Street Journal reports that 1-month risk-reversal indicator, which measures the weight of the bearish options bets on the single currency on the bullish ones, surged to 4 volatility points overcoming the level of 3.5 volatility points where it was seen at the peak of the financial crisis in 2008. That means that investors expect a sharp fall in EUR/USD during the next month.

 

Analysts at ING underline that rising yields on European bonds stirs up the market’s concerns. Specialists at Brown Brothers Harriman think that euro will react to the growing concerns about France, Belgium, Austria and other core countries that threaten to take the sovereign debt crisis to a new level.

 

Chart. Daily EUR/USD

 

Options market expects euro

 

 

Commerzbank: euro’s recovery will soon be over

2011-11-18 14:18

 

The single currency is recovering versus the greenback: EUR/USD has managed to rise from the 5-week minimums in the $1.3420 area to the levels above $1.3500.

 

Never the less, technical analysts at Commerzbank expect euro’s recovery to be short-lived. In their view, risk aversion will remain strong and the bears will use the opportunity to sell the European currency on its advance against its US counterpart.

 

As a result, the bank recommends selling the pair in the $1.3650 zone. According to the specialists, resistance in the $1.3870/1.3900 area will cap EUR/USD for a long time from now.

 

Chart. Daily EUR/USD

 

Commerzbank: euro

 

 

Citigroup: scenarios for US dollar after the Supercommittee

2011-11-18 16:34

 

Analysts at Citigroup believe that investors’ attention that so far has been focused on the situation in the euro zone will turn next week to the United States where the so-called Supercommittee which consists of Democrats and Republicans is trying to reach a deal on deficit reduction. The specialists note that according to the survey they have conducted among investors, fewer than 20% of the respondents expect the committee to reach agreement on how to proceed with the cuts. It will be recalled that if the parties fail to agree, the nation will face automatic cuts.

 

Citigroup economists are more optimistic. In their view, approaching election will urge the lawmakers to compromise. If these projections come true, Australian dollar will be able to make significant advance. Talking into account the fact that trading volumes will likely be small ahead of the Thanksgiving holiday on November 24, the bank thinks that AUD/USD could add 2-3% on the positive outcome.

 

At the same time, the strategists warn that the odds are that the Supercommittee fails to come up with an agreement are rather high. In such case the greenback will get a 1-2% lift as a safe haven. The biggest gains of US currency will be seen versus euro and Canadian dollar. Specialists at RBC Capital Markets, however, don’t agree with the latter, they think that in the latter case US dollar will weaken as it did in July and August.

 

Chart. Daily AUD/USD

 

Citigroup: scenarios for US dollar after the Supercommittee

[wynnasuju 10]

Ichimoku. Weekly forecast. GBP/USD

2011-11-21 14:06

 

Weekly GBP/USD

 

British currency keeps trading within the Ichimoku Cloud. The bears managed to lower pound to the Turning line (2) breaching the Standard line (1).

 

As a result, sterling is currently supported only by Tenkan-sen (2) and the lower border of Kumo – Senkou Span B (4), while resistance for pound is provided by Kijun-sen (1) and Senkou Span A (3).

 

The bearish Cloud retains its size (5). Kijun and Tenkan are horizontal.

 

Chart. Weekly GBP/USD

 

Daily GBP/USD

 

As we’ve expected, last week the bulls gave up to resistance in the $1.6100 area. At first there was a sharp decline, but by Thursday the bulls managed to stop the decline and make the pair consolidate.

 

The prices went down breaking the Turning line and then the Standard line. Tenkan-sen and Kijun-sen approached each other preparing to form the “bearish cross” (1). The bullish Ichimoku Cloud (3) retained its size.

 

Pound is likely to dip this week at least to Senkou Span A (2).

 

Chart. Daily GBP/USD

 

Ichimoku. Weekly forecast. GBP/USD

 

 

 

Ichimoku. Weekly forecast. USD/JPY

2011-11-21 14:08

Weekly USD/JPY

 

Japanese currency keeps gradually appreciating versus its US counterpart because investors regard yen as a refuge. This week the confidence in US dollar will be especially weak as it’s expected that the Democrats and the Republicans in the Supercommittee will fail to reach a deal on reduction of US budget deficit by $1.2 trillion.

 

The pair USD/JPY doesn’t have any solid support except for the record minimums hit before the last intervention, while the resistance for prices is provided by the Turning line (1), the Standard line (2) and the descending Ichimoku Cloud (3, 4). In addition, Tenkan-sen (1) and Kijun-sen (2) still hold strong “dead cross” in place.

 

Chart. Weekly USD/JPY

 

Daily USD/JPY

 

On the daily Ichimoku chart the pair’s condition keeps worsening: the bears are pulling the greenback systematically lower so that it got below Kumo (4).

 

The lines Tenkan and Kijun formed the “dead cross”. The lagging Chinkou Span crossed down the price chart while the prices themselves were on the lower edge of the Cloud. Resistance for the pair is provided by the Turning line (1), the Standard line (2) and Senkou Span A (4).

 

The market is still in the state of uncertainty: Kijun-sen, which characterizes the longer-term trend, remains horizontal, while the thin Cloud (3) shows that neither bulls, nor bears have any advantage.

 

Chart. Daily USD/JPY

 

Ichimoku. Weekly forecast. USD/JPY

 

 

 

Ichimoku. Weekly forecast. USD/CHF

2011-11-21 14:10

 

Weekly USD/CHF

 

The bullish attempts to enter the Ichimoku Cloud finally succeeded: the pair managed to overcome resistance of Senkou Span A (3) and got inside Kumo.

 

The descending Cloud (4) is very narrow – the bulls have all chances to make it change direction and reverse the trend upwards. The prices are supported by the Turning line (1). Tenkan-sen (1), Kijun-sen (2) hold though weak, but still “golden cross”.

 

At the same time, Tenkan and Kijun are horizontal that may hold the pair from growth.

 

Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart Tenkan-sen and Kijun-sen, which have so far formed the “golden cross” – the strong bullish signal as the lines intersected above Kumo, are directed horizontally supporting the greenback.

 

The lagging Chinkou Span broke above the price chart while the prices remained above the Cloud, so the outlook is bullish.

 

However, the bullish Ichimoku Cloud has become very thin (3). The bulls will have to make another effort getting above October maximum to in order to turn the overall neutral trend to the positive one.

 

Chart. Daily USD/CHF

 

Ichimoku. Weekly forecast. USD/CHF

[lollabun 10]

Commerzbank: comments on EUR/USD

 

Technical analysts at Commerzbank note that euro’s decline versus the greenback paused ahead of support provided by the level of 78.6% Fibonacci retracement in the $1.3380/60 area.

 

The specialists think that EUR/USD will correct upwards rising to $1.3835/80. Then the bank expects the pair to resume decline moving down to $1.3270 (support line) and $1.3145 (October 4 minimum).

 

Resistance is seen in the $1.4250/85 zone. The long-term target remains at $1.20.

 

 

Source: Commerzbank: comments on EUR/USD

 

J.P.Morgan: comments on GBP/USD

 

The Bank of England’s November meeting minutes are released on Wednesday, November 23 at 9:30 a.m. GMT.

 

Analysts at J.P. Morgan believe that British Monetary Policy Committee will sound extremely dovish. The specialists also think that US Congressional deficit supercommittee won’t come up with the debt reduction steps. As a result, the market’s risk aversion, in their view, will remain very strong. Negative risk sentiment, in its turn, will make sterling decline versus the greenback.

 

According to the bank, it’s necessary to sell GBP/USD in the $1.5785 zone stopping above $1.6000 and expecting the pair to drop to $1.5385.

 

 

Source: J.P.Morgan: comments on GBP/USD

[wynnasuju 10]

Commerzbank: comments on EUR/USD

2011-11-21 15:01

 

Technical analysts at Commerzbank note that euro’s decline versus the greenback paused ahead of support provided by the level of 78.6% Fibonacci retracement in the $1.3380/60 area.

 

The specialists think that EUR/USD will correct upwards rising to $1.3835/80. Then the bank expects the pair to resume decline moving down to $1.3270 (support line) and $1.3145 (October 4 minimum).

 

Resistance is seen in the $1.4250/85 zone. The long-term target remains at $1.20.

 

Chart. Daily EUR/USD

 

Commerzbank: comments on EUR/USD

 

 

 

J.P.Morgan: comments on GBP/USD

2011-11-21 15:02

 

The Bank of England’s November meeting minutes are released on Wednesday, November 23 at 9:30 a.m. GMT.

 

Analysts at J.P. Morgan believe that British Monetary Policy Committee will sound extremely dovish. The specialists also think that US Congressional deficit supercommittee won’t come up with the debt reduction steps. As a result, the market’s risk aversion, in their view, will remain very strong. Negative risk sentiment, in its turn, will make sterling decline versus the greenback.

 

According to the bank, it’s necessary to sell GBP/USD in the $1.5785 zone stopping above $1.6000 and expecting the pair to drop to $1.5385.

 

Chart. Daily GBP/USD

 

J.P.Morgan: comments on GBP/USD

 

 

 

J.P. Morgan: buy Aussie versus US dollar

2011-11-21 16:14

 

Analysts at J.P. Morgan claim that as the situation in the euro area is worsening and the risks of contagion are mounting the possibility that the European Central Bank will have to step in increases.

 

The specialists underline that if the ECB acts, the easing will most likely be conducted in the form of the rate cuts. In such case the yield for the euro gets less attractive. If the central bank decides to undertake bond buying, this will make investors concerned about inflation and weight on the single currency. At the same time, if ECB succeeded, this would be positive for euro.

 

So, the economists expect the risk sentiment to keep deteriorating to the critical point where the ECB will be forced to save the currency union and then revive.

 

The bank thinks that one shouldn’t lose trading opportunity here. According to J.P. Morgan, it’s necessary to open longs on AUD/USD in the $0.9500 area stopping below $0.9100. The economists expect the pair to rebound to $1.0500.

 

Chart. Daily AUD/USD

 

J.P. Morgan: buy Aussie versus US dollar

[wynnasuju 10]

Nomura: EUR/USD will fall by the year-end

2011-11-22 10:27

 

Analysts at Nomura expect the single currency to drop versus the greenback by the end of the year.

 

In their view, as the euro zone’s debt crisis escalates, European investors will likely stop repatriating their assets. That will be another blow for euro.

 

According to the data from the ECB, the region’s investors brought home 65.9 billion euro ($89 billion) in August and 11.6 billion euro in September – these figures significantly exceed 12-month average inflow of 629 million euro.

 

Such demand made EUR/USD trade in November in the $1.3871/1.3422 area which is at least 12% above its lifetime average of $1.2042. Nomura believes that the pair will end 2011 at $1.30.

 

Chart. Daily EUR/USD

 

Nomura: EUR/USD will fall by the year-end

 

 

 

BMO: trading ahead of Supercommittee

2011-11-22 10:34

 

Here is another trading strategy on the approaching deadline for US Congressional deficit Supercommittee.

 

Analysts at BMO Capital are pessimistic about the committee’s ability to come up with the budget solution.

 

The specialists note that there are 3 possible outcomes: Democrats and Republicans will reach a deal on reducing shortfall by more than $2 trillion, by just the required amount of $1.2 trillion or they’ll fail to find a compromise and the nation will face automatic cuts. In their view, the latter variant is the most likely one.

 

BMO advises traders to sell NZD/USD at current levels stopping above $0.7650 and targeting $0.7175.

 

Chart. Daily NZD/USD

 

BMO: trading ahead of Supercommittee

 

 

 

Moody's: France’s rating outlook may deteriorate

2011-11-22 11:29

 

Moody's Investors Service repeated its October warning announcing that the outlook for France’s AAA may be changed to negative. The risks to the nation’s rating come from the sustained rise in its debt yields combined with weakening economic growth.

 

According to Agence France Tresor, France's average medium- and long-term financing costs for the first 11 months of the year accounted only for 2.78% – the second lowest level since the creation of the single currency. However, last week the nation’s 10-year bond yields surged to 3.7% and the spread over German bunds exceeded 200 basis points rising too the maximal level since France adopted euro.

 

Moody's warned that if the increase in yields by 100 basis points means the increase of funding costs by 3 billion euro a year. Taking into account the fact that French government projects 1% GDP growth in 2012, higher interest burden will make achieving targeted fiscal deficit reduction more difficult.

 

Many analysts believe that the only way to save the region from escalating borrowing costs and the potential recession is the bond buying at the secondary market by the ECB or the EFSF.

 

Moody's: France

 

 

 

UBS: forecasts for British pound

2011-11-22 11:52

 

In the short term the specialists see British pound under pressure versus the greenback as the Bank of England went through additional QE last month.

 

In the medium term, however, UBS expects demand for sterling increase as the UK will act to reduce its budget shortfall and the declining inflation will make the real rates in Britain higher.

 

The bank lifted up its 3- and 6-month forecasts for GBP/USD from $1.48 to $1.52 and from $1.62 to $1.65 respectively. The estimates of EUR/GBP future rate were lowered from 0.88 to 0.85 in 3 months and from 0.83 to 0.81 in half a year.

 

Chart. Daily GBP/USD

 

UBS: forecasts for British pound