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"Morgan Stanley, UBS: sell EUR/USD"(2011-11-14)

 

 

 

 

 

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The political situation in the euro area has stabilized a bit: Greece and Italy got new governments. Never the less, there are still severe doubts that these nations will be able to resolve the debt issues.

 

Analysts at Morgan Stanley are bearish on the single currency versus the greenback. In their view, the pair EUR/USD will drop to $1.30 by the end of the year.

 

Currency strategists at ING and UBS advise to sell euro on its attempts to rise to $1.40.

 

UBS expects US economy add 2.3% in 2012, while the euro zone’s one is seen growing only by 0.2%. As a result, the bank thinks that the Federal Reserve is unlikely to engage in QE3, while the ECB will keep cutting interest rates.

 

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Chart. Daily EUR/USD

 

 

 

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"UBS lowered forecast for EUR/USD"(2011-11-15)

 

 

 

 

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Analysts at UBS reduced forecasts for the single currency versus the greenback due to the escalating crisis in the euro area.

 

Apart from deepening concerns that the European policymakers won’t be able to find the way out of the debt turmoil, euro will be affected by the region’s economic slowdown and ECB rate cuts. The strategists underline that even though the United States and Japan also have severe debt issues, the situation in the euro zone seems to be much worse, so the demand for dollar and yen will be higher.

 

The specialists expect EUR/USD to drop to $1.35 in a month, $1.30 in 3 months, $1.25 in a year. At the beginning of November the analysts thought that the pair will end the year at $1.40.

 

It’s also necessary to note that, according to the bank, the Swiss National Bank will lift the floor for EUR/CHF from 1.20 to 1.25 as it regards franc as still extremely overvalued.

 

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Chart. Daily EUR/USD

 

 

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    "ANZ: negative outlook for NZD/USD"(2011-11-15)


 

 

 

 

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Technical analysts at ANZ Bank claim that there us a “dead cross” on the NZD/USD chart formed in October by 50-day and the 100-day MAs – the former went below the latter – and that the figure is still in place.

 

The specialists underline that this is a bearish signal that means that kiwi may weaken to $0.7335, the level representing 38.2% Fibonacci retracement from the pair’s advance from March 2009 minimum to August 2011 maximum.

 

According to the bank, support levels for New Zealand’s currency are situated at $0.7550 and $0.7470 (October 4 minimum).

 

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Chart. Daily NZD/USD

 

 

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"Commerzbank: comments on EUR/USD"(2011-11-15)

 

 

 

 

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Technical analysts at Commerzbank keep regarding the outlook for the single currency versus the greenback as negative.

 

In their view, EUR/USD is likely to decline to $1.3380/60 (78.6% Fibonacci retracement of the October advance and September minimums) and then to $1.3145 (October 4 minimum). According to the bank, in the longer term the pair is poised down to $1.2000.

 

The specialists say that bearish pressure on euro will ease if it manages to rise above $1.3870/80. If euro succeeds, it will be able to return up to the 55- and 200-day MA at $1.4013/1.4104. The major resistance is set at $1.4250/55.

 

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График. Daily EUR/USD

 

 

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    "BarCap: trading in the situation of uncertainty"(2011-11-15)


 

 

 

 

 

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Risk aversion is expected to dominate the markets concerned about European debt crisis and weak economic data.

 

Currency strategists at Barclays Capital see several ways to secure oneself against the elevated uncertainty. One of the strategies preferred by the bank is buying the greenback versus Swiss franc.

 

According to BarCap, if the situation in the euro area deteriorates, the SNB will be forced to defend EUR/CHF floor selling franc. Such actions of the central bank will lift USD/CHF. In case of some positive surprises in Europe, demand for franc as a refuge will ease and USD/CHF will also rise.

 

So, the specialists advise traders to open longs at USD/CHF stopping below 0.8920 and targeting 0.9300.

 

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Chart. Daily USD/CHF

 

 

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    "Euro area: political situation"(2011-11-15)




 

 

 

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Italy

 

New Italian Prime Minister-designate Mario struggles to get political parties to agree to take part in his technocratic Cabinet as it would be hard for the government without political representation to pass unpopular laws through the government.

 

Monti has to convince investors that the nation is able to reduce its 1.9 trillion debt ($2.6 trillion) and stimulate economic growth which was below euro area average during the last decade.

 

Greece

 

New Greek Prime Minister Lucas Papademos underlined that the country’s future is in the euro area. According to Papademos, the membership in the currency union guarantees Greece “monetary stability and creates the right conditions for sustainable growth”, reports Bloomberg.

 

The new government formed on November 11 has to implement budget measures necessary to obtain the second bailout package of 130 billion euro ($177 billion) adopted on October 26 and conduct a voluntary debt swap by the end of February.

 

For now the main goal is to secure the payment of an 8 billion-euro tranche of the first bailout program. In order to avoid default Greece needs this money before the middle of December.

 

The EU waits for all Greek parties to give written commitment to structural reforms and austerity measures. So far opposition leader Samaras has been declining to do that.

 

Germany

 

German Finance Minister Wolfgang Schaeuble said that Merkel’s government wants Greece to remain a member of the European Monetary Union. At the same time, Christian Democratic Union party led by the Chancellor voted to allow euro states to quit the currency area.

 

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Chart. Daily EUR/USD

 

 

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"Euro area: sovereign bond yields are surging"(2011-11-15)

 

 

 

 

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The single currency got today under negative pressure. The pair EUR/USD dropped from the levels in the $1.3800 area where it started the week to the $1.3500 zone. The pair EUR/JPY hit 1-month minimum at 100.93 yen.

 

European bond yields surged increasing concerns about the region’s debt crisis. Italy’s 10-year yield approached the critical level of 7%. The yield spreads between 10-year debt of Spain, France, Austria and Belgium and similar German bunds all widened to the maximal level since the euro was adopted in 1999.

 

The economic data were also discouraging: German ZEW Economic Sentiment index declined this month to the lowest since October 2008 of minus 55.2.

 

Strategists at Nordea warn that if euro falls below last week's minimum at $1.3480, the number of bears will sharply increase. Analysts at Bank of Tokyo Mitsubishi UFJ believe that the fate of the currency union is still vague as the European nations may move closer to fiscal integration or break apart. In their view, EUR/USD will drop to $1.25 during the next 6 months.

 

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Chart. Daily EUR/USD

 

 

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"On RBA rates and Aussie’s prospects"(2011-11-16)

 

 

 

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News about new technocratic governments in Italy and Greece brought only short-term relief to the market. Yesterday’s surge of euro zone bond yields threw investors into the risk-averse mode that affected such risk-sensitive pair as AUD/USD.

 

Analysts at RBC Capital Markets believe that Australian dollar’s dynamics versus the greenback will remain extremely volatile as Aussie is closely correlated with the equity markets which are seized by uncertainty. In their view, the risks for AUD/USD are to the downside.

 

Dow Jones reports that the interest rate swaps market is currently pricing in a 100% chance of a rate cut by the RBA in December, though the surveyed economists expect the RBA to keep the rates unchanged.

 

This month RBA lowered its benchmark rate by 25 basis points to 4.5% citing the projected slowing inflation and the risks posed by the euro zone debt crisis. The central bank gave no hints on further rate cuts in its meeting minutes released yesterday. According to the document, the policymakers have also discussed the possibility of staying on hold. The RBA underlined that the mining industry could become the driver of the nation’s economic growth that would require more tight monetary policy in the medium term.

 

Analysts at Westpac, however, claim that the mentioning of the risks connected with Europe means that the RBA left the door open for further easing, and look forward to 75 basis points of rate cuts starting in February.

 

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Chart. Daily AUD/USD

 

 

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"Wells Fargo: negative forecast for EUR/USD"(2011-11-16)

 

 

 

 

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Analysts at Wells Fargo are bearish on the prospects of the single currency versus the greenback during the next 12 months. The specialists believe that euro will be affected by the increasing borrowing costs for the peripheral euro area nations and the risk of recession in the region.

 

According to the bank, EUR/USD will fall to $1.3000 in 3 months, to $1.2800 in 6 months and to $1.2600 in 9 months and hit $1.2400 in November 2012.

 

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Chart. Daily EUR/USD

 

 

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"Japan: monetary policy, economy, yen’s rate"(2011-11-16)

 

 

 

 

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The Bank of Japan left its benchmark rate unchanged at the minimal levels of 0-0.1% and the asset-buying fund at 20 trillion yen ($260 billion) after increasing it by 5 trillion yen in October.

 

As Japan’s economy strongly depends on the external demand for Japanese goods, deepening European debt crisis, the flood in Thailand and the risk of global economic slowdown will have a serious negative impact on the nation’s growth prospects.

 

Analysts at Nomura claim that the central bank may augment monetary stimulus if the national currency which is regarded as a refuge keeps strengthening and once again approaches record maximums against its US counterpart.

 

According to Japan Automobile Manufacturers Association, in the first half of 2011yen’s appreciation slashed Japanese carmakers’ profit by 330 billion yen. Japanese GDP rose by 6% in the third quarter on the year-to-year basis as the nation’s economy recovered from the March earthquake. However, during the first 20 days of October exports slashed by 1.6%. Credit Suisse believe Japan’s economy is losing upside momentum since August and that the readings of its indicators will soon start to deteriorate.

 

As for Japan’s intervention policy, analysts at UBS don’t expect any changes. In their view, the nation’s monetary authorities will keep intervening only in case yen’s sharp bounces. As the European debt crisis escalates, Japanese investors trim their overseas assets – primarily euro zone sovereign debt holdings – and repatriate their money making demand for yen increase. That means that yen’s appreciation is caused not only by the speculative inflows, but also by the Japanese real money accounts. In such circumstances Japan will be forced to act, so USD/JPY’s decline will be likely limited.

 

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Chart. Daily USD/JPY

 

 

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"Feldstein: Greece will have to leave the euro zone"(2011-11-16)

 

 

 

 

 

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Martin Feldstein, professor at Harvard University, who has foreseen in 1998 that the euro zone will end up with the necessity of bailing out its members, claims now that the currency union will survive, even though Greece will leave the bloc within a year.

 

According to Feldstein, if Greece doesn’t default and devalue its currency, it will face constant economic slump. The specialists underline that even if the nation’s debt was wiped out Greece would have an unbearable a current-account imbalance which could be eliminated only by abandoning euro and devaluation.

 

According to the European Commission, Greece’s debt will reach 163% of GDP this year.

 

Feldstein claims that Italy is in better situation than Greece due to the stronger economy and budget and smaller current-account deficit.

 

It’s also necessary to note that the economist advises the European Central Bank to resist pressure and avoid increasing purchases of Italian bonds as this would distort financial markets and reduce the urgency for the government to restore fiscal order.

 

 

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"Societe Generale: comments on EUR/JPY"(2011-11-16)

 

 

 

 

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Analysts at Societe Generale warn that the single currency may keep declining versus Japanese yen and fall to October 4 minimum at 100.75 yen. The specialists underline that EUR/JPY has eroded support in the 104.90/104.75 zone.

 

According to the bank, bearish pressure will ease only if the pair returns above 104.75. In such case euro will get chance to rise to October 31 maximum at 111.60 yen.

 

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Chart. Daily EUR/JPY

 

 

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"HSBC, Rabobank on the factors influencing EUR/USD"(2011-11-16)

 

 

 

 

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Analysts at HSBC claim that the fair value of the European currency is in the $1.20/$1.30 area. However, even despite the escalating crisis euro keeps trading above these levels. The specialists see 2 reasons for that.

 

Firstly, euro is supported by monetary inflows even though some of them are the result of European banks bringing capital home in an effort to defend themselves against possible losses on their holdings of euro-zone bonds. The current account of the euro area as a whole is almost balanced and there are positive portfolio and merger and acquisition inflows.

 

Secondly, as the consequences of the currency union’s break up are expected to be terrible, investors are betting that the policy makers will find a way to save the bloc. In addition, there is also a chance that the member nations will move to closer fiscal coordination.

 

Analysts at Rabobank add that much may be explained by the weakness of US dollar which showed the worst performance among the other major this year but has regained some safe haven status because of the European turmoil. At the same time, there are pairs with much stronger downtrend for the common currency: EUR/JPY fell from April maximum at 123.32 yen to the levels in the 103 yen area.

 

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Chart. Daily EUR/JPY

 

 

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"Westpac: AUD/USD trading recommendations"(2011-11-18)

 

 

 

 

 

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Technical analysts at Westpac expect AUD/USD to bounce to $1.0200. The specialists recommend selling Aussie on the rallies expecting the pair to drop to $0.9700. In their view, support at $0.9910 won’t be able to hold the bears.

 

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Chart. Daily AUD/USD

 

 

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Euro area: comments from the policymakers"(2011-11-18)

 

 

 

 

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AAA-rated European nations are beginning to express openly that they are against expanding rescue measures for the most indebted members of the currency union.

 

Jyrki Katainen, Finnish Prime Minister thinks that the euro area is running out of options to solve the debt crisis. Italy and Greece should act on their own to convince the markets that they are able to reduce the debt burden. Katainen says that the second bailout deal for Greece adopted on October 26 didn’t manage to calm investors: since that time Italian 2-year bond yields surged by 150 basis points. Germany and Finland both oppose the creation of common euro bonds.

 

France has openly called for the ECB to get more involved by issuing the European Financial Stability Facility (EFSF) a banking license that would allow it to refinance itself with the ECB liquidity operations. German Chancellor Angela Merkel criticized the proposition that the ECB has to become a lender of last resort. Reuters cites European and IMF officials who claim that the authorities discuss the possibility of the ECB lending money to the IMF, rather than any euro zone government that would help to get round the government restrictions.

 

The IMF refused to release the next portion of its loan to Greece until the nation’s Prime Minister Lucas Papademos wins broad political support for austerity measures.

 

Mario Monti, Italian Prime Minister pledged additional cuts to those targeted by Silvio Berlusconi.

 

World Bank President Robert Zoellick claimed that the nations from China to the United Stets may be willing to support Europe through the IMF if the euro zone’s policy makers agree on a plan to stem their debt crisis.

 

 

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Chart. Daily EUR/USD

 

 

 

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"Options market expects euro’s slump"(2011-11-18)

 

 

 

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Wall Street Journal reports that 1-month risk-reversal indicator, which measures the weight of the bearish options bets on the single currency on the bullish ones, surged to 4 volatility points overcoming the level of 3.5 volatility points where it was seen at the peak of the financial crisis in 2008. That means that investors expect a sharp fall in EUR/USD during the next month.

 

Analysts at ING underline that rising yields on European bonds stirs up the market’s concerns. Specialists at Brown Brothers Harriman think that euro will react to the growing concerns about France, Belgium, Austria and other core countries that threaten to take the sovereign debt crisis to a new level.

 

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Chart. Daily EUR/USD

 

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"Commerzbank: euro’s recovery will soon be over"(2011-11-18)

 

 

 

 

 

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The single currency is recovering versus the greenback: EUR/USD has managed to rise from the 5-week minimums in the $1.3420 area to the levels above $1.3500.

 

Never the less, technical analysts at Commerzbank expect euro’s recovery to be short-lived. In their view, risk aversion will remain strong and the bears will use the opportunity to sell the European currency on its advance against its US counterpart.

 

As a result, the bank recommends selling the pair in the $1.3650 zone. According to the specialists, resistance in the $1.3870/1.3900 area will cap EUR/USD for a long time from now.

 

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Chart. Daily EUR/USD

 

 

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"Citigroup: scenarios for US dollar after the Supercommittee"(2011-11-18)

 

 

 

 

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Analysts at Citigroup believe that investors’ attention that so far has been focused on the situation in the euro zone will turn next week to the United States where the so-called Supercommittee which consists of Democrats and Republicans is trying to reach a deal on deficit reduction. The specialists note that according to the survey they have conducted among investors, fewer than 20% of the respondents expect the committee to reach agreement on how to proceed with the cuts. It will be recalled that if the parties fail to agree, the nation will face automatic cuts.

 

Citigroup economists are more optimistic. In their view, approaching election will urge the lawmakers to compromise. If these projections come true, Australian dollar will be able to make significant advance. Talking into account the fact that trading volumes will likely be small ahead of the Thanksgiving holiday on November 24, the bank thinks that AUD/USD could add 2-3% on the positive outcome.

 

At the same time, the strategists warn that the odds are that the Supercommittee fails to come up with an agreement are rather high. In such case the greenback will get a 1-2% lift as a safe haven. The biggest gains of US currency will be seen versus euro and Canadian dollar. Specialists at RBC Capital Markets, however, don’t agree with the latter, they think that in the latter case US dollar will weaken as it did in July and August.

 

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Chart. Daily AUD/USD

 

 

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"Ichimoku. Weekly forecast. GBP/USD"(2011-11-21)

 

 

 

 

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Weekly GBP/USD

 

British currency keeps trading within the Ichimoku Cloud. The bears managed to lower pound to the Turning line (2) breaching the Standard line (1).

 

As a result, sterling is currently supported only by Tenkan-sen (2) and the lower border of Kumo – Senkou Span B (4), while resistance for pound is provided by Kijun-sen (1) and Senkou Span A (3).

 

The bearish Cloud retains its size (5). Kijun and Tenkan are horizontal.

 

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Chart. Weekly GBP/USD

 

Daily GBP/USD

 

As we’ve expected, last week the bulls gave up to resistance in the $1.6100 area. At first there was a sharp decline, but by Thursday the bulls managed to stop the decline and make the pair consolidate.

 

The prices went down breaking the Turning line and then the Standard line. Tenkan-sen and Kijun-sen approached each other preparing to form the “bearish cross” (1). The bullish Ichimoku Cloud (3) retained its size.

 

Pound is likely to dip this week at least to Senkou Span A (2).

 

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Chart. Daily GBP/USD

 

 

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"Ichimoku. Weekly forecast. USD/JPY"(2011-11-21)

 

 

 

 

 

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Weekly USD/JPY

 

Japanese currency keeps gradually appreciating versus its US counterpart because investors regard yen as a refuge. This week the confidence in US dollar will be especially weak as it’s expected that the Democrats and the Republicans in the Supercommittee will fail to reach a deal on reduction of US budget deficit by $1.2 trillion.

 

The pair USD/JPY doesn’t have any solid support except for the record minimums hit before the last intervention, while the resistance for prices is provided by the Turning line (1), the Standard line (2) and the descending Ichimoku Cloud (3, 4). In addition, Tenkan-sen (1) and Kijun-sen (2) still hold strong “dead cross” in place.

 

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Chart. Weekly USD/JPY

 

Daily USD/JPY

 

On the daily Ichimoku chart the pair’s condition keeps worsening: the bears are pulling the greenback systematically lower so that it got below Kumo (4).

 

The lines Tenkan and Kijun formed the “dead cross”. The lagging Chinkou Span crossed down the price chart while the prices themselves were on the lower edge of the Cloud. Resistance for the pair is provided by the Turning line (1), the Standard line (2) and Senkou Span A (4).

 

The market is still in the state of uncertainty: Kijun-sen, which characterizes the longer-term trend, remains horizontal, while the thin Cloud (3) shows that neither bulls, nor bears have any advantage.

 

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Chart. Daily USD/JPY

 

 

 

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"Ichimoku. Weekly forecast. USD/CHF"(2011-11-21)

 

 

 

 

 

 

 

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Weekly USD/CHF

 

The bullish attempts to enter the Ichimoku Cloud finally succeeded: the pair managed to overcome resistance of Senkou Span A (3) and got inside Kumo.

 

The descending Cloud (4) is very narrow – the bulls have all chances to make it change direction and reverse the trend upwards. The prices are supported by the Turning line (1). Tenkan-sen (1), Kijun-sen (2) hold though weak, but still “golden cross”.

 

At the same time, Tenkan and Kijun are horizontal that may hold the pair from growth.

 

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Chart. Weekly USD/CHF

 

Daily USD/CHF

 

On the daily chart Tenkan-sen and Kijun-sen, which have so far formed the “golden cross” – the strong bullish signal as the lines intersected above Kumo, are directed horizontally supporting the greenback.

 

The lagging Chinkou Span broke above the price chart while the prices remained above the Cloud, so the outlook is bullish.

 

However, the bullish Ichimoku Cloud has become very thin (3). The bulls will have to make another effort getting above October maximum to in order to turn the overall neutral trend to the positive one.

 

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Chart. Daily USD/CHF

 

 

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"Commerzbank: comments on EUR/USD"(2011-11-21)

 

 

 

 

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Technical analysts at Commerzbank note that euro’s decline versus the greenback paused ahead of support provided by the level of 78.6% Fibonacci retracement in the $1.3380/60 area.

 

The specialists think that EUR/USD will correct upwards rising to $1.3835/80. Then the bank expects the pair to resume decline moving down to $1.3270 (support line) and $1.3145 (October 4 minimum).

 

Resistance is seen in the $1.4250/85 zone. The long-term target remains at $1.20.

 

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Chart. Daily EUR/USD

 

 

 

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"J.P.Morgan: comments on GBP/USD"(2011-11-21)

 

 

 

 

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The Bank of England’s November meeting minutes are released on Wednesday, November 23 at 9:30 a.m. GMT.

 

Analysts at J.P. Morgan believe that British Monetary Policy Committee will sound extremely dovish. The specialists also think that US Congressional deficit supercommittee won’t come up with the debt reduction steps. As a result, the market’s risk aversion, in their view, will remain very strong. Negative risk sentiment, in its turn, will make sterling decline versus the greenback.

 

According to the bank, it’s necessary to sell GBP/USD in the $1.5785 zone stopping above $1.6000 and expecting the pair to drop to $1.5385.

 

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Chart. Daily GBP/USD

 

 

 

Comment here http://www.fbs.com/analytics/news_markets/view/11190

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"J.P. Morgan: buy Aussie versus US dollar"(2011-11-21)

 

 

 

 

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Analysts at J.P. Morgan claim that as the situation in the euro area is worsening and the risks of contagion are mounting the possibility that the European Central Bank will have to step in increases.

 

The specialists underline that if the ECB acts, the easing will most likely be conducted in the form of the rate cuts. In such case the yield for the euro gets less attractive. If the central bank decides to undertake bond buying, this will make investors concerned about inflation and weight on the single currency. At the same time, if ECB succeeded, this would be positive for euro.

 

So, the economists expect the risk sentiment to keep deteriorating to the critical point where the ECB will be forced to save the currency union and then revive.

 

The bank thinks that one shouldn’t lose trading opportunity here. According to J.P. Morgan, it’s necessary to open longs on AUD/USD in the $0.9500 area stopping below $0.9100. The economists expect the pair to rebound to $1.0500.

 

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Chart. Daily AUD/USD

 

 

Comment here http://www.fbs.com/analytics/news_markets/view/11192

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"BMO: trading ahead of Supercommittee"(2011-11-22)

 

 

 

 

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Here is another trading strategy on the approaching deadline for US Congressional deficit Supercommittee.

 

Analysts at BMO Capital are pessimistic about the committee’s ability to come up with the budget solution.

 

The specialists note that there are 3 possible outcomes: Democrats and Republicans will reach a deal on reducing shortfall by more than $2 trillion, by just the required amount of $1.2 trillion or they’ll fail to find a compromise and the nation will face automatic cuts. In their view, the latter variant is the most likely one.

 

BMO advises traders to sell NZD/USD at current levels stopping above $0.7650 and targeting $0.7175.

 

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Chart. Daily NZD/USD

 

 

 

Comment here http://www.fbs.com/analytics/news_markets/view/11202

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