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"Mizuho: yen will keep appreciating at the beginning of 2011" (2010-12-29)

 

 

Analysts at Mizuho Corporate Bank claim that the greenback risks failing to 78.00 yen by the end of March 2011.

 

In their view, bond yield spreads between the United States and Japan will keep being small as the Federal Reserve is quite unlikely to start trying to quit its quantitative easing program.

 

The specialists underline that the Fed’s objective is to minimize unemployment, while the Obama administration has pledged to double exports in 5 years and create 2 million jobs. At the same time Japanese investors are reducing demand for American securities as the country’s exporters have to repatriate profits.

 

As a result, summing up all these factors, the monetary flow will remain one way with yen being bought and no one to sell it except for the Japanese monetary authorities. Mizuho warns that the pair USD/JPY may test the record minimum at 79.75 in the middle term.

 

 

Chart. Daily USD/JPY

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"UBS: dollar will advance in January 2011" (2010-12-29)

 

 

Analysts at UBS note that since 1980 US dollar tended to show in January better performance trading versus other major currencies. The average January gain of American currency is estimated as 1.51%, so this month can be regarded as by far the best month historically.

 

The specialists point out that the prospects of US economy seem to be encouraging, while the other G10 countries are struggling with their own problems. As a result, UBS concludes that January 2011 won’t be an exception and that the greenback is going to outperform its counterparts again.

 

 

Chart. Daily EUR/USD

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"Analysts expect yen to weaken by the end of 2011" (2010-12-29)

 

 

According to the median estimate of Tokyo-based analysts, the pair USD/JPY may climb to 88 yen by the end of 2011 on the speculation the Federal Reserve will reduce monetary easing due to the recovery of American economy.

 

Strategists at Credit Suisse Group AG believe that the yield spread between Japanese and US bonds will widen supporting the greenback. In their view, the Fed’s $600 billion of government debt purchases will end as scheduled in June or even earlier and yen will weaken to 90 yen per dollar at the end of next year.

 

Among 11 specialists surveyed through December 20 by Bloomberg News 8 are looking forward to yen’s decline against its US counterpart from the end of March when fiscal year finishes in Japan to December 31, while no one shares opinion that Japanese currency may go down below 2010 minimum at 94.99 yen per dollar.

 

5 of the interviewed suppose that yen may temporarily strengthen past its postwar record maximum at 79.75 yen per dollar due to still strong concerns about euro zone’s debt crisis and China’s attempts to fight growing inflation.

 

Japan’s Finance Minister Yoshihiko Noda announced that he's ready to act decisively action if necessary. Currency strategists at Nomura Securities believe that Japanese monetary authorities will conduct currency intervention the yen overcomes the level of 80 yen per dollar or the record maximum.

 

 

Chart. Daily USD/JPY

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"ING: SNB won’t raise rates until July 2011" (2010-12-29)

 

Analysts at ING don’t think that the Swiss National Bank (SNB) will raise interest rates before July 2011. In their view, such assumption is confirmed by Switzerland's KOF Economic Barometer. The indicator decreased from 2.13 in November to 2.10 in December that may mean that the expansion of the country’s economy is going to slow down in coming quarters.

 

It’s necessary to note, though, that even if Switzerland’s economic performance will turn out to be a bit weaker in the final quarter of 2010, its GDP growth will overcome the central bank’s 2.5% annual GDP growth forecast. However, as the outlook for 2011 is not so bright as we’ve seen before, SNB rate hike is unlikely before the second half of next year, says ING.

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"EUR/USD: 2011 forecasts" (2010-12-29)

 

 

EUR/USD: 2011 forecasts

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"GBP/USD: 2011 forecasts" (2010-12-29)

 

 

GBP/USD: 2011 forecasts

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"USD/JPY: 2011 forecasts" (2010-12-29)

 

 

USD/JPY: 2011 forecasts

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"USD/CAD: 2011 forecasts" (2010-12-29)

 

 

USD/CAD: 2011 forecasts

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USD/CHF: 2011 forecasts

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EUR/JPY: 2011 forecasts

 

 

EUR/JPY: 2011 forecasts

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"Pimco: dollar will remain the world’s No1 reserve currency in 2011" (2010-12-30)

 

 

Analysts at Pacific Investment Management Co., the world’s biggest bond fund, claim that the greenback will remain the world’s main reserve currency the next year as China and Europe aren’t developed enough for their currencies to replace it.

 

Pimco underlines that the United States still represents the world’s leading economic, political and military power. The specialists believe that even China rapidly gaining economic strength isn’t able yet to absorb global reserve assets that according to Bloomberg data on December 3, are equal to $9.05 trillion. As for the euro area, it can’t be even regarded as US competitor in this field as the region’s currently suffering from the debt crisis with Greece and Ireland having to ask for financial bailout.

 

By the estimate of the International Monetary Fund, 62.1% of investors’ reserves were denominated in US dollars. The second place is taken by the single currency with 26.5%. The greenback’s share went down from 72.7% in 2001.

 

The advance of the currency reserves to the record level this year held the increase in Treasury yields due to the high demand for American debt. US monetary authorities keep borrowing record amounts counting on foreign money managers to buy US bonds even despite lower rates of return than in other countries, especially than in the emerging ones.

 

 

Chart. Daily EUR/USD

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"UBS: dollar may fall sharply versus yen" (2010-12-30)

 

 

Analysts at UBS note that the greenback may survive sharp decline trading versus yen if Japanese retail investors quit their swelling short positions on yen that reached record levels Tuesday on the Tokyo Financial Exchange at 507 billion yen.

 

Selling yen is now the most popular strategy among Japanese retail investors as the national currency has appreciated to historically strong level and it’s quite possible that Japan’s monetary authorities will intervene if yen’s rate keeps rising. Never the less, this kind of trade wasn’t profitable so far as the pair USD/JPY dropped to the 81.50 area.

 

As a result, UBS specialists note that if during the holiday time when the trading volume is low stops are triggered with 50 times leverage yen will have all chances to surge. The strategists, however, repeated their 1-month and 3-month forecasts for the USD/JPY at 85.00.

 

 

Chart. H4 USD/JPY

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"Barclays: pound will outrun other major currencies in 2011" (2010-12-30)

 

 

Analysts at Barclays say that British pound will be the strongest major currency in 2011. Such forecast is based on the assumption that the fiscal situation in the UK will normalize and the expectations that stock markets will outperform government bonds and that the US economy will stage a stronger recovery than it has managed in 2010.

 

The specialists believe that sterling will end 2011 at $1.82 versus the greenback and 0.78 against euro. Main British stock index FTSE 100 will climb next year by about 18% and offer a 4% return in dividends. The bank hopes that the London market will depend more on the performance in the rest of the world rather than in the UK winning from the global demand.

 

 

Chart. Daily GBP/USD

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"High spending cuts are needed to save euro" (2010-12-30)

Specialists at British Centre for Economics and Business Research (CEBR) believe that euro’s survival will require greater cuts in the living standards in the weaker euro zone nations than the UK faced due to the Second World War.

 

The CEBR believe for the debts of Ireland, Greece, Spain, Portugal and Italy could become sustainable consumer spending has to fall by 15%. By comparison, British consumer spending declined during the Second World War by 14%. At the same time, government spending in the weaker countries should be reduced by 10% and all members must cede control over economic policy to the European Union. The CEBR also claimed a larger bailout package is needed than the existing €440-billion fund to deal with the risk of a Spanish or Italian rescue.

 

Analysts at Ernst & Young note that there is a 10% possibility that the euro area’s economy will decrease by more than 2% in 2011 and 3% in 2012. That means that the region’s GDP would still be around 3.5% below pre-crisis levels at the end of 2014 – 6 years after the start of the recession. E&Y warns that a new crisis in the continental Europe will certainly affect the UK by having negative influence on Britain’s exports.

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"Ichimoku. Weekly forecast. GBP/USD" (2011-01-03)

 

 

The pair GBP/USD didn’t manage to rebound by the New Year – during the last week of 2010 the bears were dominating the market testing September minimums.

 

Tenkan-sen and Kijun-sen kept coming closer to each other and soon they may form the “dead cross” (3, 4). The Preceding lines, however, point at the further sideways trend. As a result, at the beginning of January sideways trade will likely prevail, while later the downtrend’s expected to resume.

 

 

Chart. Weekly GBP/USD

 

Daily GBP/USD

 

On the daily chart, as it was expected, the prices tested the lowering Turning line (3). However, this happened not at the beginning of the week, but later when the bears renewed local minimums.

 

Never the less, the general downtrend at the market created due to the descending Cloud and the “dead cross” (5) let the price bounce off down from Tenkan-sen (3) continuing the downtrend.

 

This week the sellers may be very active as the Preceding lines hint nothing but the decline.

 

Chart. Daily GBP/USD

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"Ichimoku. Weekly forecast. USD/JPY" (2011-01-03)

 

 

Weekly USD/JPY

 

The pair USD/JPY broke down through support created by the weekly Turning line (3). More than that, Tenkan-sen was horizontal at that moment, so the level was serious enough.

 

This means that despite Japan’s policy of holding yen from excessive appreciation the currency keeps strengthening.

 

That’s why it’s possible to assume that the greenback will continue losing to yen on its way to November lows.

 

 

Chart. Weekly USD/JPY

 

Daily USD/JPY

 

On the daily chart the prices during the whole past week were found below the Ichimoku Cloud: the bears had the situation under control up to the end of the trading week. During this time Tenkan-sen and Kijun-sen formed the “dead cross” (5) and keep declining at the moment.

 

Senkou Span A (1) also get ready for going down and began narrowing the range of the Cloud. It’s likely to change direction in the near future.

 

On Friday “high wave” was formed on the candle chart that means that the market’s decided to take a rest. This candle may lead to the consolidation at the current levels. As a result, as soon as Chinkou Span will come to the area of maximal deviation from the price chart the market will correct upwards.

 

 

Chart. Daily USD/JPY

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"Ichimoku. Weekly forecast. USD/CHF" (2011-01-03)

 

Weekly USD/CHF

 

During the past week the bears renewed the historical minimums of USD/CHF. The pair’s rate dropped below 0.9400 and even got down to 0.9360.

 

The general downtrend strengthened due to the Preceding lines that turned down. Tenkan-sen and Kijun-sen also indicate that the descending trend will keep on. That means that in the near term the greenback may fall again.

 

Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart all lines of the Indicator continue declining (1, 2, 3 and 4) showing the direction of the next moves of USD/CHF.

 

Descending Ichimoku Cloud and the “dead cross” formed by Tenkan-sen and Kijun-sen will support the bears,

 

However, by the middle of the week Chinkou Span is going to enter the area of the maximal deviation. This may lead to the consolidation at 0.9300.

 

 

Chart. Daily USD/CHF

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"Commerzbank: franc's rate may correct" (2011-01-03)

 

 

Analysts at Commerzbank claim that the recent strength of the Swiss franc is stimulated on the one hand by high demand for it as a safe haven currency and, on the other, by Switzerland’s strong financial position. The specialists also believe that the appreciation of Swiss currency may be caused by the limited market liquidity.

 

As a result, Commerzbank notes that if trading returns to normal this week, franc will survive a correction. The negative pressure on it may, however, be limited on the fundamentals, especially if markets continue to focus on the euro area’s debt crisis.

 

The pair USD/CHF renewed today the record minimum at 0.9320.

 

 

Chart. H4 USD/CHF

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"BNP Paribas: EUR/USD will be declining in the first quarter" (2011-01-03)

 

 

The single currency weakened today versus the greenback hitting the 1.3250 level due to the concerns that the euro area’s debt crisis will prevent the region’s governments and banks to raise funds. Today France is going to sell 8.5 billion euro ($11.3 billion) of debt today on the auction.

 

Currency strategists at Credit Agricole CIB note that the debt problems in the peripheral European countries remain unsolved and suppose that euro will be affected by the negative pressure this week.

 

Specialists in BNP Paribas SA believe that the pair EUR/USD will be declining in the first quarter of the year. In their view, European monetary authorities showed their inability to take enough action to combat the crisis.

 

European currency's 2010 decline against its US counterpart was the biggest in 5 years. It’s also necessary to mention that since January 1 Estonia became the 17th member of the currency union.

 

 

Chart. H4 EUR/USD

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"Analysts about potential Japan’s intervention" (2011-01-03)

 

 

As yen keeps strengthening versus US dollar, the analysts speculate whether Japan intervenes at the currency market to stop its further appreciation like it did in September and at what level.

 

Strategists at BNP Paribas note that the policymakers will become extremely anxious if the pair USD/JPY falls below 79.75 yen and the intervention will occur before it hits 75 yen.

 

Commerzbank specialists believe that Japanese monetary authorities will act if the rate approaches the 80 yen mark.

 

Chart. H4 USD/JPY

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"Estonia entered the euro zone" (2011-01-03)

 

In the situation when the euro zone's suffering from the debt crisis and Portugal and Spain risk following the pattern of Greece and Ireland asking for financial bailout the currency union enlarges comprising Estonia – its newly-made 17th member.

 

Estonia became the member of the European Union in 2004 after it left Soviet Union in 1991. In 2010 the country’s unemployment rate swelled to 20% as Estonia was trying to recover from a recession – in 2009 its GDP contracted by 14%. According to Estonia's central bank, in 2010 Estonian GDP expanded by 2.5% and in 2011 it will add 4.2%.

 

Entering the euro zone has for a long time been the goal of the country. Prime Minister Andrus Ansip claimed that Estonia is the poorest country in the euro zone, so it has a lot of things to do also now after this goal is accomplished. Estonian policymakers are convinced that the adoption of euro will encourage investors and stimulate businesses as 80% of Estonia's trade is within the EU.

 

However, many analysts believe that the timing for entering the block is far from good as the euro area has a bunch of internal issues. A recent opinion poll conducted in Germany showed that 49% of respondents want to leave euro and return to the deutschmark.

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"UBS: it’s necessary to diversify currency assets" (2011-01-03)

 

 

Analysts at UBS note that the traditional “Big Four” currencies – US dollar, euro, pound and yen – will be challenged in 2011. As a result, the specialists advise investors to diversify their assets with the currencies of commodity producers and emerging markets.

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"The greenback will find support in 2011" (2011-01-04)

 

Many currency strategists believe that the greenback’s likely to remain supported in 2011 taking into account continuing concerns about the European sovereign debt crisis and the fact that it’s still the preferred reserve currency of the emerging countries.

 

On December 30, the International Monetary Fund released a report showing that the dollar share of developing countries’ new official reserves rose in the third quarter.

 

Analysts at Barclays Capital note that there are serious dollar-negative factors such as the coming of further easing measures, concerns about the US fiscal situation and media speculation of currency wars, dollar devaluation and even dollar debasement. However, none of these factors overcame the need to rebuild dollar stocks depleted during the crisis, the need to slow local currency appreciation against the dollar, and the general tendency to buy more dollars when it cheapens.

 

 

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"Barclays Capital: Aussie will lose versus commodity currencies" (2011-01-04)

 

Analysts at Barclays Capital claim that massive flooding in Australia and the impact of China rate hikes will make Australian dollar lose versus other commodity currencies, especially versus its Canadian counterpart.

 

The specialists say that the floods will negatively affect coal and wheat exports from Australia reducing economic activity and possibly even the RBA's tightening bias.

 

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"Commerzbank: euro’s rising versus Swiss franc" (2011-01-04)

 

 

The single currency surged versus Swiss franc from the day’s minimum at 1.2454 to 1.2590. Such advance may have been triggered by the stops.

 

Technical analysts at Commerzbank note that as the pair EUR/CHF lost downside momentum and there’s a large divergence on the daily RSI euro may survive a corrective rebound in the near term.

 

The specialists advise investors to buy the European currency in case of any decline of the rate to 1.2440/00 area stopping at 1.2375 aiming to take profit at 1.27.

 

 

Chart. H1 EUR/CHF

 

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