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Ichimoku. Weekly forecast. USD/JPY Weekly USD/JPY It’s possible to see on the USD/JPY market that the pair realized the second scenario from our last review –Japanese currency began retreating and by the end of the week the bulls managed to rebound the rate to 83.50. It’s necessary to note that the weekly candle closed above the Standard line (4) that shows that the bullish players are really strong. As a result, it’s very likely that the rebound will continue during this week as well. Never the less, it’s necessary to remember that the general trend is descending and that Senkou Span B (2) keeps falling. Chart. Weekly USD/JPY Daily USD/JPY On the daily chart the pair USD/JPY has broken through all existing resistance levels and found itself above the Ichimoku Cloud. Neither the horizontal Kijun-sen, nor Senkou Span B managed to provide the sufficient resistance. As a result, Tenkan-sen has approached the Standard line and the “golden cross” may be formed anytime (3). In addition, Senkou Span A (1) is also heading up narrowing the range of the descending Cloud. If the sentiment this week remains bullish, the Cloud may switch upwards. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/news_markets/view/6146

Ichimoku. Weekly forecast. GBP/USD Weekly GBP/USD British currency eased last week versus the greenback: by the end of the week the bears lowered the rate to 1.6000. The uptrend, however, is still in place – the Ichimoku Cloud remained positive. In addition, Tenkan-sen crossed Kijun bottom-up forming the “golden cross”, though right after having crossed the lines went horizontally (3). It' s also necessary to note that Chinkou Span that finds itself in the positive area is ready to bounce anytime from the price chart. Chart. Weekly GBP/USD Daily GBP/USD On the daily chart, as it was expected, the pair GBP/USD fell to the horizontal Turning line. Then the bulls tried to rebound the market but bears turned out to be stronger and on Friday they pulled the prices down through Tenkan-sen (3) – the correction continued and may possibly extend down to the Standard line (4). There are, however, some hopes that the uptrend may resume in the longer run as the Ichimoku Cloud is still rising. The fact that Tenkan-sen (3) heads up may also have a positive impact on traders. Never the less, Chinkou Span is still in the overbought area. As a result, the decline is going to continue in the near term. Chart. Daily GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/6145

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Citigroup on pound and BoE rate Analysts at Citigroup Global Markets gave an interview to Bloomberg TV on Bank of England’s monetary policy and the outlook for pound. The specialists say that it’s a bit premature to say that the Bank of England lost credibility at this stage but such risk exists as inflation is high and there’s the evidence of the pickup in inflation expectations. The strategists believe that the BoE needs to lift up interest rates sooner than later to help to restore some credibility or protect their future credibility. Citigroup expects British central bank to hike in the second or third quarter. According to Citi, sterling seems to be well-positioned at this stage. In the broad prospect there are 2 factors supporting British currency: firstly, there was a relatively early move towards the fiscal consolidation in the UK that makes pound an attractive alternative to euro and, secondly, it’s necessary to mention the positive effect of interest rates expectations. So, the strategists advise investors being short on the pair EUR/GBP and watch the BoE inflation report due on February 16. Chart. Daily EUR/GBP Comment here http://www.fbs.com/analytics/news_markets/view/6138

Saxo bank: forex market outlook for 2011 Speaking about 2011 prospects, currency strategists at Saxo Bank say that carry trades phenomenon is here to stay and it will reassert itself this year. The specialists note that the greenback’s strengthening towards the end of 2010 was driven primarily by the increasing yields in the US and called this situation “irrational exuberance”. In their view, short-term interest rates increase in the US this year is unlikely and probably in 2012 either. As the pace of the global economic recovery is neither too high nor too low, the greenback’s going to weaken and traders will use it as funding currency for carry trades borrowing in dollars and investing in higher yielding assets. There will be 4 major economic events investors have to keep an eye on: 1. Do the credit markets become concerned about US credit standing? 2. Is the euro zone’s debt crisis going to intensify? 3. Trade wars: will trade tensions between US and China escalate (especially important ahead of US President elections in 2012)? Comment here http://www.fbs.com/analytics/news_markets/view/6136

Commerzbank: GBP/USD will fall to 1.5810 Technical analysts at Commerzbank claim that British pound destroyed 6-week uptrend trading versus the greenback and the downside pressure on sterling is rising. The specialists expect the pair GBP/USD fall to the late January minimums at 1.5810. In their view, it’s necessary to take shorts place stopping above 1.63. Chart. Daily GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/6134

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Commerzbank: comments on GBP/USD Technical analysts at Commerzbank note that the pound’s recent advance versus the greenback made it more likely that the British currency will rise to the 3-month resistance line at 1.6025 and probably to the 1.6095/1.6109 area. In their view, the bulls will be active as long as the pair GBP/USD is trading above this week’s minimum at 1.5750. If sterling breaks the 1.5750 level down it will be poised to fall below the 55-day MA and the 50% Fibonacci retracement at 1.5716/03 on its way down to 1.5500 and the 200-day MA at 1.5452. Chart. H4 GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/5890

Lloyds Bank: all attention to US GDP Analysts at Lloyds Bank Corporate Markets underline that investors’ attention is focused today on the release of US fourth quarter GDP figures. The specialists believe that the greenback’s rate will likely be affected if the data will be at or a bit below the expected level. If the number is strong enough to push American yields higher it will support dollars rate. So, any growth within 3-3.5% range will weaken dollar within its current bearish trend. The analysts expect US GDP to gain 3.5% in the last quarter of 2010. The data is released at 1330 GMT. Chart. H4 EUR/USD Comment here http://www.fbs.com/analytics/news_markets/view/5888

Analysts on EUR/USD prospects Commerzbank analysts think that as euro didn’t manage to break up through resistance at 1.3739 and 1.3789 there will be some profit-taking and the pair EUR/USD may fall to support at 1.35 and 1.3317. At these levels the single currency can one more time try to get higher. Specialists at Barclays Capital point out that the pace of euro's advance is slowing. Daily Ichimoku Cloud support at 1.3625, however, seems to be rather firm. According to Barclays, it’s necessary to buy on dips looking forward to EUR/USD rising to the retracement target at 1.3810 and then to 1.3980. If the support at 1.3625 is broken that, in the view of Barclays, is unlikely, the European currency may fall to 1.35 before the demand for it increases again. Morgan Stanley strategists believe that the pressure on euro will strengthen again due to risk events like the Irish elections and the ongoing possibility of a failed debt auction. According to the bank, it's only a matter of time before market participants refocus on the long-term debt situation, which, coupled with a weaker growth outlook, could push back rate hike expectations. Chart. H4 EUR/USD Comment here http://www.fbs.com/analytics/news_markets/view/5886

Mizuho: comments on EUR/USD The single currency was rising yesterday versus the greenback or the eight day in a row and set maximum at the 1.3750 level representing 61% Fibonacci retracement resistance. Analysts at Mizuho Corporate Bank note that if the pair EUR/USD manages to close the week above these levels, momentum will become evidently bullish. If euro closes the month above 1.3700, the powerful «hammer» candle will appear on the monthly chart. According to Mizuho, EUR/USD is likely to test spike high at 1.3786. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/news_markets/view/5884

Mizuho: dollar will be falling versus yen Technical analysts at Mizuho Corporate Bank claim that even though the greenback formed yesterday spike high versus Japanese yen the pair USD/JPY closed within its large Ichimoku Cloud. In their view, weekly chart analysis shows that the pair’s going to resume moving down. The specialists advise to open small shorts stopping above 83.25 with downside targets at 82.00 and 81.00. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/news_markets/view/5882

Japanese economy may advance in the first quarter Consumer prices excluding fresh food survived the smallest decline since 2009 losing only 0.4% on the annual basis and the unemployment rate surprisingly dropped from 5.1% to 4.9% sliding for the first time since September. The Japanese data beat the median analysts’ forecasts for a 0.5% percent decline in consumer prices and an unemployment rate staying unchanged. Specialists at Daiwa Asset Management say that Japanese economy has almost passed its temporary slump. According to the minutes of the BOJ board’s December 20-21 meeting published today, the central bank will watch the long-term interest rates as rate swings affect funding costs of companies and households and profits of financial institutions. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/news_markets/view/5880

Daiwa SB Investments: profit taking on EUR/USD The specialists claim that the market’s worried about the potential China rate hikes ahead of Lunar New Year on February 3, so the demand for higher-yielding currencies weakened. In addition, the majority of the regional stock markets posted losses and investors’ risk appetite fell affecting the European currency. According to Daiwa, support for EUR/USD will lie near 1.3700. If euro breaks down through this level the next support will be at 1.3650. Chart. H1 EUR/USD Comment here http://www.fbs.com/analytics/news_markets/view/5878

Commerzbank: comments on EUR/USD Technical analysts at Commerzbank note that the single currency was advancing versus the greenback during 2-weeks in a row and is currently trading only slightly below the 1.3739 level representing the 61.8% Fibonacci retracement of the downtrend from November to January. The specialists are now looking forward to some profit-taking and correction to 1.3500/1.3346 (December maximum and the 20-day MA) ahead of 1.3739 and November 22 maximum at 1.3789. If the pair EUR/USD gets above 1.3789 it’ll be able to rise to 1.3978/1.4000 (78.6% retracement of the decline from the November’s maximum). Chart. H4 EUR/USD Comment here http://www.fbs.com/analytics/news_markets/view/5867

Schneider: Bank of England did wrong Analysts at Schneider Foreign Exchange accuse the Bank of England’s Monetary Policy Committee of its reluctance to let sterling strengthen as, in their view, it resulted in volatile inflation. The specialists don’t believe that moderate pound’s appreciation would strongly harm UK economic growth. Yesterday the Governor of Britain’s central bank Mervyn King tried to reassure investors saying that current inflation rally is temporary and prices’ advance will slow down next year. In December UK’s consumer price index added 3.7% on the annual basis and 1% compared with November’s level. Comment here http://www.fbs.com/analytics/news_markets/view/5865

US external debt’s approaching the cell Yesterday US Republicans made attempt to tackle the country’s huge budget deficit by introducing legislation that would oblige the government pay the interest on its external debt if the nation reaches the $14.3 trillion ceiling before allowing other federal spending. According to the forecasts, US budget deficit will reach $1.5 trillion this year. The Obama administration projects that the debt limit will be reached by the end of March – the middle of May. The initiative was presented both in the House of Representatives and in the Senate. It’s likely to be supported in the first but will face resistance from Democrats who have the majority in the second. Republican David Schweikert claimed that the United States has to keep to the obligation to pay off its debt, protect taxpayers, ensure economic growth and stop the out-of-control spending that got the country to the current state. Moderate Democrat Kent Conrad, chairman of the Senate Budget Committee, disapproved the bill saying that the government shouldn’t pay to China when Americans themselves are in need. Comment here http://www.fbs.com/analytics/news_markets/view/5863

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Barclays Capital: comment on EUR/CHF Currency strategists at Barclays Capital claim that bearish pressure on the pair EUR/CHF will remain as long as the single currency is trading below 1.2990. The specialists believe that euro is likely to weaken to 1.2775/00. Chart. H1 EUR/CHF Comment here http://www.fbs.com/analytics/news_markets/view/5842

Commerzbank: GBP/USD will consolidate and decline Currency strategists at Commerzbank claim that the pair GBP/USD hit the target of its decline in the 1.5719/03 area representing 55-day MA and 50% Fibonacci retracement. In their view, pound’s likely to consolidate versus the greenback. Then sterling will face resistance at 1.5850/1.5915 and 1.6090/95 and the downtrend will resume, claims the bank. The specialists expect the British currency to fall to 1.5500 and then to the 200-day MA at 1.5447. Chart. H4 GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/5840

Mizuho: comments on USD/JPY Technical analysts at Mizuho Corporate Bank note that the pair USD/JPY closed below the daily Ichimoku Cloud approaching last week’s minimum at 81.85. The specialists underline that the momentum has become bearish and advise to look forward to more cautious moves today and during the most part of the first quarter as the greenback will be fluctuating above the record minimums. According to Mizuho, it’s necessary to attempt small shorts at 82.25, adding to 82.55 and stopping above 83.00. First target 81.85 and then 81.00. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/news_markets/view/5838

MIG Bank: comments on GBP/USD Technical analysts at MIG Bank claim that if British pound fails to close the week above the 1.5911/1.6030 resistance area, the downtrend from November maximum at 1.6299 will be confirmed. In such case the pair GBP/USD will start moving down to 1.5665 and 1.5345 on its way to the psychological level of 1.5000. If sterling manages to close above 1.5911/1.6013, it will mean that 1.4230/1.6299 correction ended at 1.5345 and the bulls will drive the pair’s rate up to 1.6299 and then to 1.6878/1.7043. Chart. H4 GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/5836

Schneider: pound may fall to $1.40 by the end of June Analysts at Schneider Foreign Exchange claim that the British currency may lose to the greenback as its rate depends on a very dangerous mix of the fundamentals. The specialists expect pound to fall to $1.55 by the end of the first quarter and hit $1.40 by the end of June. According to Schneider, the Bank of England will make a lot of efforts trying to stem the medium-term inflation pressures and support weaker-than-expected growth. Real interest rates in the UK are going to be low or even negative so there will be little yield support for sterling. The strategists say that their forecast’s going to confirm unless British economy shows strong performance in the first quarter. Chart. Daily GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/5834

RBC: comments on NZD/USD Currency strategists at RBC Capital Markets note that although New Zealand’s dollar rose today versus the greenback, it’s stuck within its range ahead of the Reserve Bank of New Zealand’s rate statement. The specialists underline that the general opinion of the market is that the country’s central bank won’t change the key interest rate, so it’s necessary to scan the accompanying statement looking for the clues that the RBNZ wants to push back the timing of the next rate hike. According to RBC, the market is currently trying to analyze the Obama State of the Union speech. The FOMC meeting later today will also be closely watched as its members changed due to the annual rotation and so it’ll probably take on a more hawkish approach. Support for the pair NZD/USD is found at 0.7580, while resistance lies at 0.7700. Chart. H4 NZD/USD Comment here http://www.fbs.com/analytics/news_markets/view/5832

UK fourth quarter GDP dropped by 0.5% According to the data released today, UK economy contracted in the final quarter of 2010 by 0.5%. British GDP fell for the first time in 5 quarters. This happened due to the slump in the leading industries – construction and service sector. The coldest December in a century played some negative role as well. Analysts' consensus forecast was for growth only to slow to 0.5% from 0.7% in the third quarter, though uncertainty over the impact of December's snow disruption meant the range of forecasts ranged from 0.1 to 0.6%. Daiwa economists regard such poor performance as “an absolute disaster for the economy”. The situation in the country is difficult as UK inflation at 3.7% is almost 2 times higher than the Bank of England's target. It’s also necessary to take into account that Britain's economy got in trouble even before the government starts to cut public spending in earnest in 2011. Finance Minister George Osborne claimed that the shrinking economy was no reason to cancel public spending cut blaming solely the cold month for the bad results. Gilt prices and short sterling futures jumped as investors dampened expectations that the Bank of England would opt for an early rise in interest rates to stem inflation. Economists at HSBC claim that they been of the opinion that the Bank of England should not raise interest rates until the first quarter of next year and the data really confirms the idea that, given the headwind the economy is facing, that this monetary stimulus is still required. Chart. H4 GBP/USD Comment here http://www.fbs.com/analytics/news_markets/view/5823