FBS.com - Daily/Weekly Analysis / Market News

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"Mizuho: euro will rise above $1.3472" (2010-12-14)

 

 

Technical analysts at Mizuho Corporate Bank note that the single currency’s going up today versus the greenback even despite the gloomy comment from the British ex-Prime Minister Gordon Brown who said that a failure of the Euro would be an economic and political disaster.

 

The pair EUR/USD bounced from the 9-day MA as the Chinkou Span was driven by November’s sharply rising daily Ichimoku Cloud. Today euro will try to overcome the 26-day MA at the 1.3472 level representing the bottom of the Cloud and 38% Fibonacci retracement resistance. In addition, more gains of the European currency will occur in case of more short coverings, believe the specialists.

 

According to Mizuho, it’s necessary to buy at 1.3400 adding to 1.3300 and stopping below 1.3150. The pair’s expected to rise to 1.3625 and then to 1.3800.

 

 

Chart. Daily EUR/USD

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"Analysts’ comments ahead of FOMC Statement" (2010-12-14)

 

The FOMC Statement and the Federal Funds Rate will be announced today at 8:15pm GMT. Below there are some analysts’ comments on the matter.

 

Analysts at Barclays Bank Plc note that the Federal Reserve may underline today that it’s going to continue the current quantitative easing justifying such policy by high unemployment rate and sluggish inflation. As a result, US mid- and long- term yields as well as dollar, especially the pair USD/JPY, may find themselves under pressure.

 

Currency strategists at Nomura believe that more time has to pass before investors will make out whether the US economic recovery is sustainable enough to drive up yields. As soon as American economy begins improving, the county’s investors will become more eager to take risks and go overseas looking for higher yields. As a result, the demand for the greenback will diminish and the currency will remain weak.

 

Specialists at UniCredit say that the single currency may keep trying to climb to the key resistance at 1.35. However, today’s data and event can create a threat for euro. Investors shouldn’t forget that the euro zone’s problems are far from being solved, claims UniCredit.

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" Mizuho: USD/JPY may decline" (2010-12-14)

 

 

Technical analysts at Mizuho Corporate Bank note that the pair USD/JPY looks instable as it’s trading in the range between the recent maximum at 84.41 and the top of the daily Ichimoku Cloud found slightly above 83.00.

 

The specialists expect that if the greenback closes the day below its 9-day MA at 83.36, momentum will become downward and the rate will slip to 83.15 and then to 82.35.

 

Mizuho recommends selling US currency on the growth to 83.75 stopping above 84.50.

 

 

Chart. H4 USD/JPY

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"BoA-Merrill Lynch: yuan’s undervalued only by 3-4%" (2010-12-14)

 

Economists at Bank of America-Merrill Lynch claim that Chinese yuan seems to be rather close to its fair value and is undervalued only by 3-4%. The specialists note that China’s currency appreciated in real terms since 2005, while the country’s current account surplus has significantly declined.

 

Merrill Lynch expects that in 2011 Asian currencies will keep advancing, but not very strongly as most of them are now fairly valued. Taking into account increasing inflationary pressure and monetary tightening, the bank advises to decrease investments in Chinese equities and not invest in Hong Kong

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"MIG Bank: EUR/USD may drop to 1.2588" (2010-12-15)

 

 

Technical analysts at MIG Bank believe that the pair EUR/USD has returned to the multi-month descending trend.

 

The specialists believe that the single currency will decline firstly to 1.3164, then to the last significant minimum at 1.2969 on its way to the August minimum at 1.2588.

 

According to the bank, euro’s prospects can become bullish only and it may get chance to rise to 1.4282 only if the pair EUR/USD closes the day above 1.3786.

 

 

Chart. H4 EUR/USD

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"National Bank of Canada: loonie may strengthen" (2010-12-15)

 

 

Canadian dollar is fluctuating today between 1.0058 and 1.0094 versus its US counterpart. Such dynamics can be explained by the fact that the Federal Reserve stayed loyal to its plan of purchasing $600 billion of Treasuries up to June, while the oil price was quite volatile.

 

The Bank of Canada Governor Mark Carney claimed yesterday that persistently strong loonie may harm the country’s economic growth, while the latest round of quantitative easing should have a positive but small impact on Canadian economic growth.

 

Currency strategists at National Bank of Canada note that it seems that the greenback will be declining that, in its turn, will give commodities some positive momentum supporting Canada’s currency.

 

Crude oil for January delivery traded at $88.26 a barrel in New York, down 0.4%, after gaining 0.4% and falling by 1%. The yield on Canadian 10-year government bonds reached 3.372, the maximal level since June 21.

 

 

Chart. H4 USD/CAD

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"CIBC: Treasuries yield will fall by the year-end" (2010-12-15)

 

Strategists at Canadian Imperial Bank of Commerce believe that 10-year Treasury yields may decrease to 3% by the end of 2010 as the technical analysis shows that US debt has been oversold.

 

Yesterday the rate climbed to 3.49% overcoming the 61.8% retracement of the decline from April maximum at 4% to 2.33% minimum hit on October 8. Then American yields may get back retesting 61.8% retracement to form a double-top.

 

The yield’s 14-day RSI (relative strength index) was at 73 that’s above the key 70 level regarded as the signal of trend’s reversal.

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"UBS: EUR/CHF may rebound to 1.30" (2010-12-16)

 

that Switzerland’s monetary authorities won’t raise the rates today even though the country’s economic data so far was really encouraging. The reason for the central bank to refrain from monetary tightening is strong national currency that renewed yesterday its record maximum versus euro at 1.2756. The SNB may marginally revise up its 2.5% GDP estimate for 2010, but is likely to announce forecast for 2011 growth below 2.0%, claims BNP.

 

Currency strategists at UBS AG note that, as they have predicted, the pair EUR/CHF hit their long-term downside target at 1.28. Franc appreciated because of the euro zone’s debt problems, lack of liquidity and investors expecting SNB to be more hawkish at today's quarterly meeting. The specialists warn that the single currency may rebound initially to 1.30. In their view, Swiss central bank will have to show some dovish intentions.

 

 

Chart. H4 EUR/CHF

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"Commerzbank recommend selling EUR/CHF on its advance" (2010-12-16)

 

 

Technical analysts at Commerzbank believe that the single currency will remain under pressure trading versus Swiss franc. According to them, as long as the pair EUR/CHF is trading below resistance area at 1.3020/70, it risks dropping to 1.2710 and 1.2657.

 

The specialists advise to sell euro if it advances to 1.2935 and 1.30 stopping at 1.3070 and taking profit at 1.2660.

 

 

Chart. H1 EUR/CHF

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"Barclays Capital: negative pressure on sterling’s increasing" (2010-12-16)

 

 

Currency strategists at Barclays Capital note that while investors are curtailing their activities ahead of the year-end, British currency looks extremely vulnerable.

 

The specialists claim that sterling seems to be under negative pressure in the majority of its crosses. The pair GBP/CHF slumped yesterday to the record minimum, GBP/AUD reached this year’s low and GBP/USD declined.

 

According to Barclays, if pound keeps losing its weakening will take form of the vast downtrend. In such case GBP/USD and EUR/GBP risk breaking support at 1.5485 and 0.8550 weighting on sterling even more.

 

 

Chart. H4 GBP/USD

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"Commerzbank: short term outlook for EUR/USD deteriorated" (2010-12-16)

 

 

The single currency dropped by almost 300 pips during the previous 2 days trading versus US dollar as the pair EUR/USD declined from 1.3500 to 1.3200. Technical analysts at Commerzbank note that such fall worsened the short term outlook for euro.

 

The specialists note that the pair tried to consolidate above 1.1.3470/75 resistance area, but the bulls didn’t prove to be strong enough. As a result, euro’s target moved down to 200-day MA at 1.3107 and the recent minimum at 1.2970.

 

If EUR/USD manages to overcome 1.3475/00, it will get a chance to rise to the 55-day MA at 1.3658.

 

 

Chart. H1 EUR/USD

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"Credit Suisse: US and Europe in 2011" (2010-12-17)

 

 

Analysts at Credit Suisse Asset Management gave their opinion about US quantitative easing and the outlook for European economies in 2011.

 

The specialists believe that American QE will last at least during the first quarter of 2011 and probably during the second quarter. As US economy starts to accelerate towards 3% growth then probably the Fed will start to reverse pond purchases and that, according to Credit Suisse, could be the major risk for markets next year.

 

As for the euro area, the strategists expect further credit downgrades of the indebted countries which find themselves under pressure. Credit Suisse also notes that the growth differential between Germany and the rest of Northern Europe and the stressed economies is going to remain very wide and deep. It’s quite difficult to see economies like Greece, Spain, Ireland and Portugal generate strong growth next year and that’s going to the one of the major problems in the region, claim in the bank pointing at the fact that Spanish and Italian markets underperform versus the German one this year by almost 30%. Such underperformance is thought to continue in the first half of 2011.

 

Credit Suisse underlines that there’s now a significant political shift going on in the interests of all governments: the risk of the sovereign debt is transferred of going to be transferred from taxpayers and governments to investors, therefore European bond markets are trading very differently today and this difference will continue at least for the next 2-3 years.

 

 

Chart. Daily EUR/USD

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"RBS: drawbacks of Europe's monetary authorities" (2010-12-17)

 

Economists at Royal Bank of Scotland Group Plc believe that the lack of policy response to the critical situation in the region from the euro area’s monetary authorities makes investors lose confidence in the ability if European officials to handle the crisis. RBS strategists note that tools existing at the European level can be used only then the crisis has materialized. What is necessary, according to RBS, it’s the crisis prevention, not the crisis management.

 

As a result, the specialists expect confidence loss will be the main driver of the market in the short term. In their view, bailouts for Portugal and Spain are likely and the steps in this direction may be taken over the coming month. RBS estimates that the EU has enough funds at least to respond to the Spanish problem in the short term.

 

All in all, the analysts regard the ECB bond purchase program as the optimal sort of defense line claiming that it’s very important for the European Central bank to be forceful and confident in what it’s doing.

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"Commerzbank: EUR/GBP likely to gain" (2010-12-17)

 

 

Technical analysts at Commerzbank note that the single currency has overcome 200-day MA at 0.8516 trading versus the British pound and renewed 3-week maximum at 0.8552.

 

According to the specialists, if EUR/GBP closes the day above 0.8516 it will manage to climb above resistance in 0.8605/0.8640 area limited by the 55-day MA and 50% Fibonacci retracement.

 

 

Chart. H4 EUR/GBP

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"Mizuho: EUR/USD big move at the beginning of 2011" (2010-12-17)

 

 

Analysts at Mizuho Securities Co. believe that the single currency may undertake a big move at the beginning of the next year trading versus the greenback. The assumptions were made on the basis of Ichimoku analysis.

 

The specialists note that the lines Senkou Span A and Senkou Span B are converging, compressing the Cloud at $1.36 area on December 31. The big move tends to occur around a twist of an Ichimoku Cloud. Before such significant change of the rate the pair EUR/USD may trade in range between $1.30 and $1.34.

 

It can’t be said, however, which direction such a big move will take. The strategists suggest that easing of tensions relating to the European debt crisis may help the euro to strengthen.

 

 

Chart. H4 EUR/USD

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"MIG Bank: US dollar risks falling to 0.90 francs" (2010-12-17)

 

Currency strategists at MIG Bank claim that the pair USD/CHF finds itself under renewed pressure and their previous idea that the rate has set a base at 0.9462 doesn’t seem as certain as before.

 

According to the specialists, the greenback has to climb above 0.9738 and then 0.9851 or it could slump breaking the record minimum at 0.9462 hit on October 14 on its way down to 0.90.

 

USD/CHF renewed 6-week minimum at 0.9558 and is currently trading in area.

 

 

Chart. H4 USD/CHF

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"CredBMO: dollar will be trading at 83-86 yen in 2011" (2010-12-28)

 

 

 

Analysts at BMO Capital Markets believe that the pair USD/JPY will be trading in 2011 within a relatively narrow range between the year’s minimums at 83.00 and maximum at 86.00 that will be reached in the fourth quarter.

 

During the first half of the year the greenback is thought to remain in the 83.00 area. In the third quarter US currency is expected to rise to 84.00 before climbing to 85.00 by the end of the year.

 

 

Chart. Daily USD/JPY

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"Europeans gained on investing in the US" (2010-12-28)

 

 

Despite all the losses that threaten Europeans this year, euro zone’s investors who purchased American stocks are getting the best returns in the last 10 years as the single currency weakened.

 

According to data from Bloomberg, the Standard & Poor’s 500 Index that brought Americans 13% benefit translated to euro gained 23%. In addition, European investors who bought Nikkei 225 Stock Average in Tokyo made 20% profit, while yen holders lost 2.5%.

 

Debt crisis in the euro region made the European currency fall by 8.4% in 2010. Although US deficit advanced to the record maximum in February while the unemployment rose in November to the 7-month maximum at 9.8%, investments in the United States are regarded as one of the safest ones.

 

As a result, the profits of investors converting dollar-denominated investments back in euro have significantly surged. The analysts expect that the market’s concerns about the further problems in the euro zone and declines in euro will encourage more overseas investment in 2011.

 

The volume of US stocks purchases rose this year by $146 billion, that’s the biggest annual increase since 2007. In September Europeans bought a net $18.3 billion of US stocks, the most since May 2007 when credit markets started freezing.

 

 

Chart. Daily EUR/USD

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"Morgan Stanley: euro will fall to $1.18 in 2011" (2010-12-28)

 

 

Analysts at Morgan Stanley believe that the single currency may fall versus the greenback from $1.31 at the end of last week to $1.18 by the third quarter of 2011. The specialists think that the concerns about the worsening of euro zone’s debt crisis will continue to provoke the negative dynamics of euro.

 

Morgan Stanley advised investors to buy dollars and sell euro as the European governments, in their opinion, aren’t interested in the strong currency.

 

According to 46 analysts surveyed by Bloomberg, euro will finish 2011 little changed from the last week’s level. Currency strategists at Nordea note that the European currency may find support if the region’s governments present a “sensible” strategy of their budget deficits reduction.

 

 

Chart. H4 EUR/USD

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"Mizuho: EUR/USD will be trading neutrally" (2010-12-28)

 

 

Technical analysts at Mizuho Corporate Bank note that the single currency remains steady above the 50% Fibonacci retracement support level. According to them, if the pair EUR/USD closes the month between 1.2600 and 1.3600, the outlook won’t change and the single currency will continue to trade neutrally.

 

The specialists underline that futures volume in 2010 got higher in 8 times in comparison with the levels before May 2003 (record month with trade volume almost ten times above the 2000-2003 average).

 

 

Chart. H4 EUR/USD

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"US home prices are expected to decline" (2010-12-28)

 

 

According to the S&P/Case-Shiller index and the National Association of Realtors US home prices capped last year. S&P/Case-Shiller index shows that home prices in 20 American cities lost almost 32% from their 2006 peak before reaching minimum in May 2009. Economists surveyed by Bloomberg believe that the September indicator that will be released today at 3:00 p.m. GMT will turn out to be negative for the first time since January.

 

Economists at Zillow Inc. expect US home prices to fall 5-7% more before reaching a bottom at the end of the next year. The specialists underline that the inventory of properties for sale is increasing as the backlog of homes in foreclosure is swelling. The property supply will enlarge more as there are more properties to be foreclosed. As a result, the buyers are unwilling to enter the market as they are afraid that prices will fall further.

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"Commodities will gain in 2011" (2010-12-28)

 

 

Commodities have beaten stocks and bonds for the second year in a row. The benchmark Standard & Poor’s GSCI gauge gained 20% outperforming the 9.1% advance of the MSCI World Index of stocks and 5.3% return on a Bank of America Merrill Lynch index of Treasuries. Last year S&P GSCI Index added 50%, MSCI World Index rose by 27%, while US Treasuries declined by 3.7%.

 

The survey of more than 100 analysts, traders and investors conducted by Bloomberg shows that silver, that has a wide industrial implication, will lead the gains in commodities jumping by 37% next year. Zinc, this year’s worst-performing metal, is expected to appreciate by 21%.

 

According to Bloomberg data, global stocks are still about $11 trillion below the record $62.6 trillion of market capitalization reached in October 2007. Over the same period, commodity assets under management gained about 80% to $354 billion. Barclays’ strategists expect that these assets will attract a total of $60 billion in new money this year, the second most after 2009.

 

Specialists at Goldman Sachs Group Inc. suppose that commodities which China lacks will gain the most – that are oil, copper, cotton, soybeans and platinum. On December 13 the bank forecasted 18% advance in raw materials in a year, led by a 28% gain in precious metals.

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"UBS: dollar renewed minimum versus franc" (2010-12-29)

 

 

 

Analysts at UBS note that the greenback fell sharply versus Swiss franc and renewed the record minimum at 0.9434. The previous one at 0.9463 was hit on October 14.

 

The specialists note that risk aversion strengthened after weaker than expected US data released yesterday. S&P Case-Shiller HPI 20 dropped in October by 0.8% from last year’s level. CB Consumer Confidence decreased from 54.3 in November to 52.5 in December, while the economists were looking forward to the advance to 56.2.

 

As a result, investors increased demand for franc as a safer currency. According to UBS, resistance for the pair USD/CHF is found at 0.9734.

 

 

Chart. Daily USD/CHF

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"CIBC: pound will rise to $1.6000 be the end of 2011" (2010-12-29)

 

 

Analysts at CIBC World Markets expect that in 2011 British pound will be trading versus US dollar within a relatively narrow range between 1.5300 and 1.6000.

 

The specialists believe that sterling will hit the year minimum in the 1.5300 area during the first quarter of 2011 and then start gradually rising. By June pound’s rate may rise to 1.5500 increasing to 1.5800 during the third quarter to end the 12-mont period at 1.6000.

 

According to CIBC, the uptrend will continue in 2012. The pair GBP/USD may advance to 1.6200 in the first quarter of 2012 and then appreciate to 1.6800 by middle of the year.

 

Chart. Daily GBP/USD

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"BNP Paribas: sell euro and pounds" (2010-12-29)

 

Currency strategists at BNP Paribas advise investors to sell the European currency and British pounds versus Japanese yen, Australian dollars, Swiss francs and Asian currencies at the end of the year.

 

The specialists point out that’s the currency rates will be likely affected by the window-dressing performed by portfolio managers. The latter are going to increase the weighting of the assets that showed the best results in 2010 and decrease consequently the share of the underperformers such as euro and sterling, lowering the demand for these currencies.