Comments and forex-analytics from FBS Holdings Inc. brokerage company

[wynnasuju]

Why BoE may decide to wait with QE?
Friday, January 20, 2012 - 09:45

While the marker’s expecting to see more quantitative easing from the bank of England in February, Ben Broadbent, external member of the Bank of England’s Monetary Policy Committee (MPC), says that the central bank probably won’t be so quick to act.

The economist justifies this assumption be several points. To begin with, during the past half a year the downside risks for British economy have slightly subsided. The odds are that UK economic growth picks up in the second half of the year and the household income growth improves.

Moreover, UK will gain from the positive effects of loose ECB policy. Broadbent underlines that the quarterly pace of economic growth in 2012 is likely to be volatile. Such events as the Olympics in the third quarter will contribute to growth volatility.

“I would say very, very near term (output looks) slightly weaker. In the slightly less near term Q1 is marginally stronger. Over six months, the downside risks have been lessened slightly - partly because of what the ECB has done, partly because of QE itself and you can see that in risk asset markets - quite clearly”, claims the policymaker. Broadbent adds that the decline in headline CPI inflation from 4.8% in November to 4.2% in December should help to maintain inflation expectations.

The BoE meeting will take place on February 9.


Chart. Daily GBP/USD

http://www.fbs.com/analytics/2012-01...decide-wait-qe



Westpac recommends selling EUR/NZD
Friday, January 20, 2012 - 11:00

The single currency has managed to strengthen versus the greenback this week. Euro was supported by the successful bond auctions in Spain and France and positive US labor market data. The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008.

However, analysts at Westpac see the advance as EUR/USD only as the selling opportunity. In their view, liquidity in the market “is supporting risk seeking”, which should lead investors out of currencies like the euro and into things like commodity currencies.

As a result, the bank recommends going short on EUR/NZD around $1.6000 stopping at $1.6180 and targeting $1.5650.

Westpac notes that the Reserve bank of New Zealand is one of the few which is unlikely to cut borrowing costs. Low inflation data creates an attractive entry point for the trade: New Zealand’s CPI declined by 0.3% in the fourth quarter (q/q).

http://www.fbs.com/analytics/2012-01...selling-eurnzd



SocGen: buy CAD/JPY
Friday, January 20, 2012 - 11:45

Analysts at Societe Generale believe that US economy will keep outperforming the European one. Never the less, they think it would be wise to protect oneself from the deterioration of the risk sentiment. To do that the bank recommends buying Canadian dollar versus Japanese yen at 76.00 targeting 79.00 and stopping at 75.00.

The specialists have studied the dynamics of Canadian dollar and other more volatile currencies like Mexican peso and Australian dollar against key stock and volatility indexes and found out that the correlation with CAD/JPY is close to zero.

As a result, those who choose this pair will enjoy the profits of bullish trade on the positive economic data, while if the situation deteriorates the decline of CAD/JPY won’t be as strong as the drop of other risky crosses, so one will be able to minimize losses.

http://www.fbs.com/analytics/2012-01...gen-buy-cadjpy

[wynnasuju]

Commerzbank: comments on EUR/USD
Monday, January 23, 2012 - 09:00

The single currency opened earlier today, but then managed to reach Friday’s close rising to $1.2940.

Technical analysts at Commerzbank claim that the short-term outlook for EUR/USD is positive as long as it’s trading above $1.2800. In their view, euro may rise to resistance in the $1.3077/3145 area or even to $1.3245.

If the pair drops below $1.28, it will likely decline towards August 2010 minimum in the $1.2588/30 zone.

Later today:
• German and French debt auctions;
• Euro zone finance ministers meeting;
• EU foreign ministers also assemble, with possible further sanctions against Iran’s nuclear program on the agenda.


Chart Daily EUR/USD

http://www.fbs.com/analytics/2012-01...omments-eurusd

[wynnasuju]

Euro has become a funding currency
Tuesday, January 24, 2012 - 10:45

Analysts at UBS claim that the European Central Bank will cut interest rates twice more by 25 bps each in March and April. As a result, the bank maintains bearish longer-term forecast on EUR/USD.

Economists at Citigroup think that the ECB will reduce the borrowing costs in the second quarter, while strategists at Bank of Nova Scotia say that the central bank will cut rates to 0.5% by the end of the first quarter.

Analysts at Morgan Stanley see a very clear breakdown in the correlation between the euro and risky assets. Euro is increasingly becoming a funding currency – one may significantly benefit from borrowing in euro and investing in Australia’s dollar, Brazil’s real, Mexico’s peso, South Africa’s rand and South Korea’s won.

Specialists at Australia & New Zealand Banking Group claim that other currencies which have effectively low or 0 rates, such as the dollar and yen, are facing a slightly better growth profile.

According to the World Bank, euro zone’s economy will contract by 0.3% in 2012, while the global economy will add 2.5%.

Chart. Daily EUR/USD

[wynnasuju]

Morgan Stanley: recommendations for USD/CHF
Tuesday, January 24, 2012 - 10:00

Strategists at Morgan Stanley recommend buying the greenback versus Swiss franc in the 0.9280 area stopping at 0.9180 and targeting 0.9770.

The specialists note that even after Philipp Hildebrand’s resignation the Swiss National bank will maintain the floor for EUR/CHF. In addition, Swiss franc will be used as a funding currency due to Switzerland’s unfavorable growth outlook and SNB’s policy.

Chart. Daily USD/CHF

[wynnasuju]

Commerzbank: negative longer-term outlook for euro
Tuesday, January 24, 2012 - 08:45

Technical analysts at Commerzbank claim that as the single currency managed to consolidate in the $1.3000 area, it may rise to $1.3077/3145 versus the greenback this week. In that area, however, EUR/USD will face strong resistance which will cap the pair’s rate.

The specialists note that euro is vulnerable to any unexpected shift in the talks between the IIF and Greece indicating a stall in the negotiations or disappointing data from the euro zone. In their view, the longer-term outlook for EUR/USD is bearish: the pair will decline to the downtrend line in the $1.2083 region.

Chart. Daily EUR/USD

[wynnasuju]

CFTC trader positioning data
Monday, February 13, 2012 - 09:15

The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that:

• Euro shorts declined for the second consecutive weak. Net shorts account for around 141K contracts, down from the previous week’s total of 158K.
• British pound shorts increased from 26K contracts on January 31 to 33K contracts on February 7 after 2 weeks of improvement.
• Japanese yen net longs declined from 57K contracts reported on January 31 to 55K as the data on February 7 showed. Yen speculative positions are still just below their maximum in over a year which was reached on January 10 when contracts surpassed the August 2 level of 59K.
• Swiss franc net shorts declined from 11K net short contracts on January 31 to 9.7K contracts on February 7. The shorts decrease for the third consecutive week.
• US dollar long positions were reduced from a total long position of $14.22 billion on January 31 to $10.63 billion on February 7.

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound.

http://www.fbs.com/analytics/2012-02...sitioning-data

[wynnasuju]

UBS: short-term outlook for USD/JPY
Monday, February 13, 2012 - 10:15

Analysts at UBS note that the greenback has posted its biggest weekly advance versus Japanese yen since the Bank of Japan’s record intervention at the end of October 2011.

USD/JPY rose from the 76.50 area on Monday to Friday’s peak at 77.80 yen. The pair went up due to the general strengthening of US dollar as well as on the speculation of potential intervention of Japan’s monetary authorities.

Never the less, the specialists claim that USD/JPY may find itself under pressure in the upcoming weeks. According to UBS, the outlook for the pair is mixed: on the one hand, the economists expect inflows into yen from semi-annual coupon payments of US T-bonds holders and some kind of repatriation due to the Japanese financial year-end; on the other, the Bank of Japan may further ease its monetary policy.

The bank thinks that USD/JPY isn’t likely to rise above 80 yen unless US Treasury yields can break significantly higher.


Chart. Daily USD/JPY

http://www.fbs.com/analytics/2012-02...outlook-usdjpy

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[wynnasuju]

UK economic forecasts: update
Monday, February 13, 2012 - 11:15

The Confederation of British Industry (CBI) lowered its 2012 forecast for the UK economy from the 1.2% (November 2011 estimate) to 0.9%.

Although Britain’s GDP contracted by 0.2% in the final 3 months of last year, the specialists think that the nation will manage to avoid technical recession or, in other words, 2 consecutive quarters of negative growth.

According to the CBI, British growth will accelerate to 2.0% in 2013. The economists say that in the quarterly basis growth will remain fragile in the first two quarters of this year (0.2%, 0.2%), improving modestly in the second half of the year (0.6%, 0.5%), as inflationary pressures ease.

The latest forecasts show inflation falling back towards target levels (2.2%) in the fourth quarter of 2012 and then remaining close to the BOE’s 2.0% target throughout 2013. The growth will be driven by trade and business investment. Household consumption, however, will be under pressure from modest wage growth and continuing high unemployment.

Later this week in the UK

On Wednesday the Bank of England will publish its latest quarterly Inflation Report with update forecasts for growth and inflation. The BoE Governor Mervyn King will give press conference the same morning. As the Monetary Policy Committee (MPC) increased asset purchases by 50 billion pounds to 325 billion pounds on Thursday, the forecasts might continue showing lower inflation in the medium term.

On Tuesday the Office for national Statistics will release January inflation data. The CPI growth is expected to slow from 4.2% (y/y) to 3.6%. King will have to write a letter to the Chancellor, explaining why inflation is more than one percentage point above the 2% target.


Chart. Daily GBP/USD

http://www.fbs.com/analytics/2012-02...recasts-update

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[wynnasuju]

Watch Fed’s meeting minutes on Wednesday
Monday, February 13, 2012 - 12:00

To get insight about the Federal Reserve’s stance toward further quantitative easing one has to watch the Fed's January meeting minutes released on Wednesday.

The minutes will show how the opinions of the central bank’s officials are divided: some FOMC members may have seen the need for additional monetary easing.

This time the central bank for the first time will provide "qualitative" details on officials' views on the Fed's near-record $2.9 trillion balance sheet.

Last month the Fed revealed its intentions of keeping the rates near zero until the end of 2014 but gave no details on how it should handle its asset holdings.

The argument against QE3 is improved labor market situation (in January unemployment rate declined to 8.3%). However, some experts think that US economy won’t gain enough growth pace to satisfy the Fed.

http://www.fbs.com/analytics/2012-02...utes-wednesday

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[wynnasuju]

Different comments on Greece and euro
Monday, February 13, 2012 - 12:15

UniCredit: if Greece leaves the euro area, it would be a disaster for Greek society, while for the rest of Europe it won’t matter much in the longer term. However, the majority underestimates the risks of Greek default to the global financial markets in general and other European nations in particular.

Bank of Nova Scotia: as Greek parliament approved austerity measures the pressure on euro may ease in the short term.

Societe Generale: speculative positioning data shows that short euro positions are being reduced, but not enough to spark a substantial risk rally. EUR/USD will struggle to break last week's maximum at $1.3330.

Morgan Stanley: EUR/USD correlation with the market’s risk sentiment will break down this year. The single currency will remain under pressure with the ECB’s accommodative increase of euro’s supply, recessionary growth and political uncertainty. Sell euro at $1.3250, stopping at $1.3300 and targeting $1.2390.

Credit Agricole: so much good news is already reflected in the value of the single currency, so even if there is some form of debt deal and second bailout package for Greece EUR/USD’s advance will be limited.


Chart. Daily EUR/USD

http://www.fbs.com/analytics/2012-02...reece-and-euro

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