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"Commerzbank: EUR/CAD technical comments"(2012-02-15) Analysts at Commerzbank are bearish on the single currency versus Canadian dollar. The specialists note that EUR/CAD didn’t manage to overcome resistance provided by the 55-day MA at $1.3258 and is resuming decline. According to the bank, support levels are situated at $1.3000 (psychological level), $1.2876 (2012 minimum), $1.2777 (2011 minimum), $1.2765 (the 1985-2012 uptrend line) and $1.2613. Resistance levels are situated at $1.3253 (January maximum), $1.3258 (55-day MA) and $1.3398 (September minimum). Chart. Daily EUR/CAD Comment here http://www.fbs.com/analytics/2012-02-15/16671-commerzbank-eurcad-technical-comments

"China pledged to help the euro area"(2012-02-15) The single currency went up versus the greenback and reached 2-month maximums against Japanese yen as the People’s Bank of China announced that the nation will take part in resolving the euro zone’s debt crisis. The PBOC Governor Zhou Xiaochuan said that China can provide help through the central bank, China Investment Corp., the nation’s sovereign wealth fund, and banks including the China Development Bank, Export-Import Bank and other institutions. Analysts at Royal Bank of Canada claim that we’ll see some growth on the short covering, but the advance won’t be long. On the upside, euro’s moves are limited ahead of the European finance minister’s teleconference on the second bailout for Greece (the meeting initially scheduled for today was put off to Monday, February 20). European authorities are waiting for written commitments of Greek parties on the implementation of the austerity program. According to Greece’s government, the necessary assurances will be provided today. The pair EUR/USD rose from yesterday’s minimum at $1.3079 to the levels around $1.3180. There may be some further consolidation between 100- and 55-day MAs. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-15/16668-china-pledged-help-euro-area

"Bank of Japan increased asset purchases"(2012-02-14) Japanese yen declined against US dollar as the Bank of Japan increased its asset-purchase program by 10 trillion yen ($128 billion) to 65 trillion yen and set near-term inflation target at 1%. The move was generally unexpected. The BOJ left its benchmark rate at 0.1% (in line with forecasts). According to the BOJ statement, the central bank’s goals are to “clarify its monetary policy stance and to further enhance monetary easing” to “overcome deflation and achieve sustainable growth with price stability.” Some experts, however, criticize the BOJ for yielding to political pressure. The increase in the asset-purchase facility will be used to fund purchases of more government bonds. Japanese central bank decided to support national economy which contracted in the final quarter of 2011 by 2.3% (y/y), data released yesterday showed. The BOJ also signaled its resolve to take further action to beat deflation. Nationwide core CPI fell by 0.1% (y/y) in December, the third straight month of decline. Prices haven't risen by at least 1% for any year since 1997. It’s also necessary to point out that as US Federal Reserve last month set an inflation target and extended its commitment to near zero rates. As a result, pressure on the BOJ strengthened encouraging it to make a move. Analysts at Sumitomo Mitsui think that the impact on yen’s long-term uptrend will be limited. Specialists at Mitsubishi UFJ Morgan Stanley Securities claim that the BOJ still has further easing options left, such as increasing the amount of assets it buys and buying JGBs with longer maturities. Economists at Credit Agricole think that the BOJ's decision will help to keep JGB yields low and make yen weaken in the short term. However, the specialists aren’t sure that the impact will be sustained. There needs to be probably more to be done, the buying of JGBs would need to be more intense, says Credit Agricole. The pair USD/JPY rose above 78 yen mark. Resistance for the greenback lies at 78.29 yen (maximums of the late November and January 25). Above this level the upside momentum will increase. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/2012-02-14/16659-bank-japan-increased-asset-purchases

"Moody’s downgraded European nations"(2012-02-14) The single currency declined versus the greenback for the third day. Euro fell after Moody’s Investors Service downgraded several European nations. US dollar, on the other hand, strengthened versus all of its major counterparts as the market’s risk sentiment deteriorated. Moody’s cut Spain’s rating from A1 to A3, Italy’s – from A2 to A3 and Portugal’s one – from Ba2 to Ba3 with negative outlooks. The ratings of Slovakia, Slovenia and Malta were also lowered with negative outlooks. In addition, the agency said it may strip France, Austria and the UK of their top Aaa ratings. The rating of EFSF (European Financial Stability Facility) was retained with stable forecast. According to the Moody’s economists, the downgrade was motivated by the uncertainty over the euro area’s prospects for institutional reform of its fiscal and economic framework and the resources that will be made available to deal with the crisis. The euro zone’s finance ministers meet tomorrow to discuss a second 130 billion-euro ($171 billion) aid package for Greece which managed to reach parliamentary approval of austerity measures. Analysts at Mizuho claim that “the ratings agencies behind the curve as the risks have actually been falling in Europe. There may be worries that countries cutting fiscal spending may drag on their economic growth, but the concerns aren't new and the downgrade should have minimal impact on market sentiment.” Investors’ attention will be also focused on Italian bond auction today (bonds due in 2014, 2015 and 2017) and debt auctions of Spain, Belgium and Greece (bills) and the Netherlands (bonds maturing in 2017). The pair EUR/USD fell from last week’s maximums above $1.3300 to the levels in the $1.3135 area. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-14/16638-moodys-downgraded-european-nations

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"Aussie may be overvalued"(2012-02-09) Adrian Lee, chief investment officer at currency portfolio manager Adrian Lee & Partners, thinks that Australian dollar is overvalued versus the greenback. Mr. Lee is sure that Australia’s currency will remain strong due to high demand for commodities and growing emerging market economies. However, the specialist doesn’t recommend investors to buy Aussie at the current levels in the $1.0800 area. In his view, one should wait until AUD/USD weakens to $1.0500 and open longs there. Chart. Daily AUD/USD Comment here http://www.fbs.com/analytics/2012-02-09/16597-aussie-may-be-overvalued

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"Euro renewed 2-month highs, all eyes on Greece"(2012-02-09) The single currency rose to 2-month maximums versus the greenback testing the levels above $1.3300. The market keeps expecting Greek deal to come: to receive 130 billion-euro ($173 billion) second bailout from the Troika (the European Commission, the ECB and the IMF) the nation’s policymakers have to reach an agreement on spending cuts. According to an e-mailed statement from the office of Greek Prime Minister Lucas Papademos, the Prime Minister and the leaders of the three parties supporting the government “agreed on all the points of the program with the exception of one which requires further elaboration and discussion” with the lenders. The exception seems to be pension cuts. The ECB will announce today its interest rate decision (at 12:45 p.m. GMT). The consensus forecast shows that the central bank will keep the rates unchanged. After that euro-area finance ministers will meet in in Brussels. Analysts at BNP Paribas claim that the pair’s EUR/USD rate has already largely priced in an almost done agreement on an aid package for Greece. However, the specialists expect euro to make a knee-jerk bounce to $1.3500 or $1.3600 as more euro shorts are stopped out. At the same time, sells-off might soon begin as euro will find itself under pressure due to the region’s weak growth prospects and the ECB’s loose monetary policy. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-09/16594-euro-renewed-2-month-highs-all-eyes-greece

"Morgan Stanley: sell GBP/USD"(2012-02-08) Analysts at Morgan Stanley recommend investors selling British pound versus the greenback. The specialists advise to place stops for GBP/USD at $1.61 and look for the pair’s decline to $1.5460. According to the bank, sterling will be under pressure due to 2 factors: UK economic weakness and Bank of England’s quantitative easing – Morgan Stanley expects the BOE to announce tomorrow another 50 billion pounds of bond purchases. Chart. Daily GBP/USD Comment here http://www.fbs.com/analytics/2012-02-08/16591-morgan-stanley-sell-gbpusd

"Euro’s in the positive zone, markets await Greece"(2012-02-08) The single currency is little changed to the upside versus the greenback on the speculation that Greek officials and creditors worked on the final draft of an agreement on budget and structural measures needed to free up a second aid package. Bloomberg reports that Charles Dallara, managing director of the International Institute of Finance, Deutsche Bank AG Chairman Josef Ackermann and Jean Lemierre, a senior adviser to the chairman of BNP Paribas SA, had “constructive” talks with Greek Premier Papademos and Finance Minister Evangelos Venizelos. A government spokeswoman said a meeting between Papademos and the leaders of the three parties supporting his government was postponed to tomorrow morning. Analysts at Mizuho claim that “Greece is a big part of Europe’s debt crisis, so a step forward to its resolution is seen favorably in the near term, which is spurring the unwinding of short positions on the euro.” The specialists think that euro may rise to $1.34. Economists at Credit Agricole, however, warn about the possibility of “buy on rumors, sell on facts” outcome. Specialists at Commerzbank think that the key resistance level for the pair EUR/USD lies at $1.3280. If euro manages to break above this point above this point, it will get chance to strengthen to $1.3436 and $1.3627 (50% and 61.8% Fibonacci retracement targets of the pair’s decline from October maximum to January minimum). Next resistance will be found at $1.3334 (100-day MA). Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-08/16588-euros-positive-zone-markets-await-greece

"The “art” of forecasting and Aussie’s prospects"(2012-02-08) 24 out of 27 economists surveyed by Bloomberg News expected the Reserve bank of Australia to cut interest rates. The media widely spread these expectations, so the cut was widely seen as a sure thing and the central bank’s staying on hold was surprising for the market. One has to understand that the analysts’ forecasts are no more than best guesses given available information. The predictability of future in such complicated environment as the modern globalizing world is a tricky and highly disputable thing. It’s necessary to remember about uncertainty. Don’t rush to comfort yourself with estimates and figures. Surely you have to take the figures into account, but don’t be fooled by the data stream. Already much was said about the human nature of the forecasters: once an economist has made an assumption, he or she is tempted to interpret all new data in the way which would justify his already existing forecast. Yesterday’s situation is a good example: some of the market strategists were pessimistic about Australia’s labor market as payrolls contracted; others ignored this piece of information focusing on steady unemployment rate. That’s how 2 different points of view derive from the single data set. The conclusion is simple enough: analyze all available data before drawing any forecasts and be flexible in your forecasting. Anyway, let’s back to Australia. Now that the RBA has avoided easing, it’s time to elaborate a trading strategy which would suit the moment. Analysts at BMO Capital are bullish on Aussie thinking that RBA’s staying on hold provides enough reason to expect AUD/USD to keep growing. The specialists also think that China may reduce reserve requirements encouraging risk appetite. In addition, the Fed plans to keep rates low until the end of 2014. As a result, BMO expects Aussie to rise to $1.0925. Chart. Daily AUD/USD Comment here http://www.fbs.com/analytics/2012-02-08/16586-art-forecasting-and-aussies-prospects

"Greek deal speculation encourages euro"(2012-02-07) The single currency surged versus the greenback setting new daily maximum at $1.3197 after Reuters reported that “Greek government is drafting agreement on bailout deal to be put to political leaders for approval later today” citing the words of the unnamed government official. Analysts at BNP Paribas claimed that “the whole focus on austerity measures is that it’s the prerequisite for the second bailout package. It would be a step closer to everything fitting in to place. The market has reacted very positively.” Resistance for EUR/USD if found at $1.3200 and $1.3225 (January 30 maximum). Chart. H1 EUR/USD Comment here http://www.fbs.com/analytics/2012-02-07/16583-greek-deal-speculation-encourages-euro

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"Will the ECB lower rates?"(2012-02-07) The European Central Bank meets this Thursday. The majority of the economists expect the ECB to keep the borrowing costs unchanged. Some specialists, however, think that the central bank may cut its benchmark rate from the current level of 1%. The arguments for the ECB’s staying on hold: better-than-expected key economic indicators released so far in the euro zone, successful bond and T-bill auctions in Germany and peripheral nations, positive impact of ECB’s LTRO which helped to increase liquidity. The arguments for the ECB’s rate cut: austerity measures affecting the European economy and creating the threat of the region’s recession, the expansion of the central bank’s balance sheet as a result of the LTROs, unresolved negotiations in Greece. Analysts at UBS think that the ECB will reduce interest rates. In their view, EUR/USD will stay under pressure ending 2012 at $1.1500. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-07/16580-will-ecb-lower-rates

"Jordan: SNB won’t allow franc to strengthen"(2012-02-07) The Swiss National Bank’s interim president Tomas Jordan said today that the central bank will not tolerate a breakdown of the CHF 1.20 threshold. According to Jordan, the SNB is more than ever “committed to defending the cap” and can’t allow further appreciation of the national currency as strong franc affects Switzerland’s economy. To do that the central bank is ready to buy unlimited amounts of foreign currencies. The main risks come from further escalations of the euro zone’s debt crisis. The pair EUR/CHF is trading in the positive zone, right below the daily peak at 1.2087. Resistance for euro is found at 1.2109 (January 25 maximum) and 1.2128 (January 13 maximum). Support for the pair lies at 1.2053 (200-day MA) and 1.2028 (February 1 minimum). Chart. H1 EUR/CHF Comment here http://www.fbs.com/analytics/2012-02-07/16578-jordan-snb-wont-allow-franc-strengthen

"Japan conducted stealth intervention in November"(2012-02-07) Japanese yen declined versus US dollar and the single currency as the government data showed that Japan conducted stealth intervention in November in order to weaken the national currency. Stealth intervention is carried out without any official announcement from the finance ministry. Japan’s Ministry of Finance reported today that the nation sold 1.02 trillion yen ($13.6 billion) against the dollar in markets on the first four days of November in addition to an 8.07 trillion-yen sale on October 31. Finance Minister Jun Azumi said he won’t rule out any options to curb the currency’s appreciation. Analysts at Bank of Tokyo-Mitsubishi UFJ claim that yen’s drop reflects the increasing risks that the Japanese authorities may intervene again to make yen depreciate. Specialists at Commerzbank think, however, that interventions won’t reverse major USD/JPY downtrend as their effect seems to be short-lived. Chart. Daily USD/JPY Comment here http://www.fbs.com/analytics/2012-02-07/16576-japan-conducted-stealth-intervention-november

"UBS on SNB’s policy options"(2012-02-07) There are 2 things to note about Swiss franc: 1) Hopes that that Swiss National Bank lifts up the floor for EUR/CHF from 1.2000 to 1.25/3000 in order to fight deflation crushed on December 15, when the SNB left the peg unchanged. 2) The market started worrying about the sustainability of the peg after former central bank’s President Hildebrand resigned. Strategists at UBS claim that although the SNB interim president Tomas Jordan pledged to defend EUR/CHF minimum, the central bank is under pressure due to a lot of stops placed below the threshold: if franc strengthens, it may be very difficult for the SNB to act against the market. However, the central bank will try to do its best as its credibility is at stake, thinks UBS. The specialists think that the SNB will lift up the floor in the second half of 2012 to 1.3000. The bank recommends watching Switzerland’s CPI figures due on Monday. Chart. Daily EUR/CHF Comment here http://www.fbs.com/analytics/2012-02-07/16574-ubs-snbs-policy-options

"Greece: negotiations seem endless"(2012-02-07) The single currency is under pressure versus the greenback, unable to resume recovery from January minimum at $1.2625. The pair EUR/USD has so far been consolidating in the $1.3035/1.3225 area. The bias is still bullish. On the upside, if euro rises above $1.3233, it may get to $1.3375 (December 12, 2011, maximum). On the downside, below support at $1.3075, the pair may drift to $1.2856/75 (December 29, 2011, minimum/January 2011 minimum). Investors are worried that the Greece’s policymakers may fail to reach an agreement on terms for a second aid package, which is a condition for the second bailout. Today Greek Prime Minister Lucas Papademos will resume talks with the heads of 3 political parties in his interim coalition government. In addition, Papademos begins today a second round of negotiations with the Troika – the European Commission, the ECB and the IMF. Analysts at Westpac think that there will be a lot of problems and shocks before the Greek situation is resolved, so they are bearish in euro. The single currency lost 4.5% during the last 3 months. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-07/16572-greece-negotiations-seem-endless

"RBA left the rates unchanged"(2012-02-07) Australian dollar surged to the 6-month maximum versus the greenback at $1.0809 as the Reserve bank of Australia surprisingly decided to keep the rates unchanged at 4.25%, while the market was looking forward to a cut. For now the pair AUD/USD has returned back to the levels in the $1.0780 area. The RBA Governor Glenn Stevens noted that “with growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy was appropriate for the moment.” Analysts at RBC claim that the central bank “has left the door open for a rate cut going forward, but the onus is going to be on the data.” Economists at ANZ think that the RBA is showing no signs of any immediate policy easing. According to the specialists, the policy statement was neutral, while the RBA made little mention of bank funding costs and won't incline to easing unless the global outlook seriously changes. The RBA lowered costs both in November and December by 25 basis points. The majority of the economists expected the central bank to lower the borrowing costs. Chart. Daily AUD/USD Comment here http://www.fbs.com/analytics/2012-02-07/16570-rba-left-rates-unchanged

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"The odds of QE3 in the US declined?"(2012-02-06) US positive labor data released on Friday triggered speculation that the Federal Reserve may avoid further monetary stimulus. Analysts at Brown Brothers Harriman are sure that the possibility of additional QE declined. Strategists at UBS note that if US employment data remain this strong going forward, the likelihood of further Fed easing will be lower than what the market priced in after the FOMC January 25 meeting. As a result, the greenback now may be under less pressure than it was expected earlier. Consequently, UBS thinks that the risky currencies, such as Australian and New Zealand’s dollar will be capped and won’t be able to reach 2011 maximums. Euro, Swiss franc and Japanese yen which are the candidates for the role of the funding currency will fall against US dollar. The specialists underline that the single currency will become less and less correlated with the risk-on mode of the market. In the short term analysts at J.P. Morgan recommend selling euro versus US and Canadian dollars. The economists say that euro may gain this week if the ECB doesn’t cut rates, so they advise to watch and see if EUR/USD manages to get to $1.3200 and then go short there stopping at $1.3600 and target $1.2800. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-06/16555-odds-qe3-us-declined

The Asian session was marked by the weak Australian data: retail sales declined by 0.1% in December (m/m). This increases the possibility of the Reserve bank of Australia’s rate cut tomorrow (consensus opinion). The RBA reduced borrowing costs by 25 bps both in November and December. In January the central bank didn’t meet. It’s necessary to note, though, that some economists think that the RBA may stay on hold expecting the retail banks to follow up their warnings on funding costs and not pass on the easing. Another point in favor of keeping the rates unchanged – good US labor market data released on Friday (unemployment fell to 8.3%). The weekend came and went, but Greek negotiations aren’t over yet. Greece’s Prime Minister Lucas Papademos will once again meet private creditors today as yesterday the talks finished with several points still under discussion. Papademos said the leaders of Greek political parties had agreed on a series of primary issues, such as additional new spending cuts equal to 1.5% of GDP in 2012. Never the less, the Prime Minister’s statement does not mention anything on the proposals causing the most friction, which include a further reduction of minimum wage, elimination of the 13th and 14th months of salary, and massive lay-offs in the public sector. The Troika – the European Commission, the IMF and the ECB – is currently in Athens to examine the country’s finance, it progress on promised reforms, and to estimate its funding needs. Jean-Claude Juncker, the Eurogroup president and Prime Minister of Luxembourg, claimed that Greek default remains a possibility. There will be labor union strikes in Greece on Tuesday. The market’s risk sentiment is affected by the tensions in the Middle East, particularly in Syria and Iran. EUR/USD went down below $1.3100. USD/JPY kept its advance rising above 76.50 yen. To watch today: • France's debt auction (plans to sell 8.5 billion euro ($11 billion) of bills. • St. Louis Federal Reserve President James Bullard and President of the FRB of Dallas Richard Fisher speak amid the speculation that the Fed may avoid further monetary easing. Chart. Daily EUR/USD Comment here http://www.fbs.com/analytics/2012-02-06/16549-february-6-market-situation-coming-events