Comments and forex-analytics from FBS Brokerage Company - page 93
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Fitch Ratings: negative outlook for US rating
Fitch Ratings changed the outlook for US top credit rating to negative. The agency doubts that American authorities are able to act in time in order to put the nation’s public finances in order. According to Fitch, the probability of a downgrade now exceeds 50%.
Last week the Congressional Supercommittee didn’t manage to reach agreement on the deficit cuts and the country now faces $1.2 trillion in automatic spending cuts. The failure of the committee will delay any major deficit- reduction agreement until after the next presidential election that will threaten US economy.
“The scale of any subsequent budget cuts are probably going to have to be larger than they otherwise would have been and certainly implemented in faster manner,” said Fitch. The economists underline that US needs more the reforms of entitlements and taxation than simply discretionary cuts.
The agency expects that American federal debt held by the public will get over 90% of GDP by the end of the decade, while interest on the debt will require more than 20% of the tax revenue.
EUR/USD: comments on trading day
The single currency has managed today to test the levels above $1.3400. The market’s sentiment improved as Italy was able to sell 7.5 billion euro in bonds meeting its target, even though the nation’s borrowing costs keep rising: the country paid almost 8% to sell 3-year bonds (critical level) and 7.56% for 10-year bonds (record maximum), but thankfully lower than the actual average yield levels were all lower than market levels.
However, the relief didn’t last long – the European currency erased its today’s advance easing down to $1.3300 as the ECB failed to attract enough deposits from banks required to offset its purchases of bonds from the indebted euro zone’s economies. The central bank attracted 194 billion euro in 7-day bank deposits versus 203 billion needed. This way it may be regarded as a form of quantitative easing as the supply of euro went up, though analysts at Credit Agricole that QE will occur in case the shortfall repeats and grows.
Analysts at Deutsche Bank remain bearish on euro claiming that the situation is still very serious. Strategists at Lloyds Bank expect EUR/USD to test this week the levels below $1.3150.
UBS: demand for Japanese debt will remain high
Japanese 10-year bond yield rose yesterday 3-month maximum at 1.055% from the record minimum of 0.94% hit last week. As a result, the pair USD/JPY tested levels above 78 yen.
Analysts at UBS think that the greenback will remain trading 75.00 and 80.00 yen unable to get higher as the demand for yen and Japan’s debt will remain high amid concerns about the euro area. The specialists point out that 95% of Japanese government bonds are held by domestic investors which prefer the home currency distrusting other major countries' sovereign debts.
Strategists at Societe Generale see only 2 risks to Japan’s safe haven status: either household and corporations will start to save less than what the government needs to borrow or the country would have to suffer a capital flight. In their view, for now both these outcomes aren’t likely.
Eurogroup agreed to boost capacity of EFSF
The European finance ministers agreed to extend the capacity of the European Financial Stability Facility.
The officials decided to guarantee 20-30% of new bond issues from the indebted nations and to develop investment vehicles that would give the EFSF more freedom to intervene in primary and secondary bond markets. The policymakers noted that both measures may run at the same time and could be launched in the beginning of 2012.
According to Luxembourg Prime Minister Jean-Claude Juncker, finance chiefs also about the possibility of increasing the International Monetary Fund’s resources through bilateral loans of the national central banks, though only as a last resort.
In addition, European authorities signed off on an 8-billion-euro aid payment to Greece which was delayed until Greece’s commitment to conduct structural reforms.
However, BNP Paribas points out that the market players remain rather skeptic recalling their previous disappointments. The sentiment was also affected by the news that S&P had downgraded 37 major global banks.
EUR/USD remains on the downside. Resistance for the pair is found at $1.3457 (23.6% Fibonacci retracement of the decline from October maximum at $1.4248 to last week's minimum at $1.3211). Euro has lost 3.9% versus the greenback and 4.2% against yen in November.
Today there’s a meeting of finance ministers of the whole European Union. The region’s prime ministers meet on December 9.
Tomorrow Spain will try to sell 3.75 billion euro ($5 billion) of debt maturing in 2015, 2016 and 2017, while France will offer bonds maturing in 2017, 2021, 2026 and 2041.
UBS: comments and forecast for GBP/USD
Currency strategists at UBS note that British pound is trading within downtrend versus the greenback.
The specialists claim that support for the pair is situated at $1.5459. If sterling drops below this level, it will be poised down to $1.5422 (November 25 minimum). Resistance for GBP/USD lies at $1.5707.
The bank expects the pair to trade at $1.5500 in a month before declining to $1.5000 in 3 months.
Commerzbank: comments on USD/JPY
Technical analysts at Commerzbank think that the outlook for USD/JPY remains positive as the greenback was successfully supported yesterday at 77.60 yen and .
The specialists expect the pair to rise to the 4-year downtrend resistance line at 79.46 and then to the 55-week MA at 80.31. If US currency manages to overcome these levels, the longer term trend will reverse to the upside.
According to the bank, support for US dollar lies in the 76.80/60 area (Standard line on the daily Ichimoku chart).
RBS advised selling EUR/CAD
Analysts at Royal Bank of Scotland advise investors to sell the single currency versus Canadian dollar.
The specialists expect EUR/CAD to drop to this year’s minimum in the 1.2800 area. In their view, the market is very pessimistic about euro’s prospects. The bank says that the region is under threat of recession and easing of ECB monetary policy.
According to RBS, such trade will allow traders to benefit from improving environment in US and Canada and from deterioration of the euro zone’s conditions.
The European currency is strongly correlated with the S&P 500 index. The strategists think that Canadian dollar is correlated with equities too, but the cross rate of the two currencies is not, so the volatility connected with the changes in investors’ risk sentiment is excluded.
BOTMUFJ: US dollar may rise versus Japanese yen
Analysts at Bank of Tokyo-Mitsubishi think that the greenback may reverse upwards versus Japanese yen and advance to the 4-month maximum in the 81 yen zone by the end of 2011 or in the beginning of January 2012.
The specialists note that the Turning line (Conversion line) on the daily Ichimoku chart tends to cross the Standard line (Baseline) bottom-up, while the prices are above the Cloud – the bullish signal.
The bank underlines that 5-day MA on USD/JPY is rising above the 21-day one, while 65-day MA is getting above the 90-day line.
According to Bank of Tokyo-Mitsubishi, if US currency manages to hold above 78 yen, it will be eventually able to start climbing.
Scotia Capital: comments on AUD/USD
The single currency keeps performing rather well versus its US counterpart taking into account the fact that the market is worried about the possibility of the euro area’s breakup.
Analysts at Scotia Capital note that as the European authorities don’t deliver any fundamental changed, the prospects of the monetary union will remain very uncertain weighting on euro’s rate.
The specialists advise traders to turn to Australia as there are no doubts about its triple-A credit rating. In addition, the nation is reach with commodities and is closely connected with Asian economies. The economists underline that Australian dollar suffered this month, so it has where to rise back if the risk sentiment remains positive.
Scotia Capital suggests that AUD/USD may climb to $1.0400.
Central banks act to support financial sector
The single currency, British pound and commodity currencies bounced versus the greenback as the Federal Reserve, the Bank of England, the Bank of Canada, the Bank of Japan, the European Central Bank and the Swiss National Bank agreed to lower interest rates on dollar liquidity swap lines from 100 to 50 basis points from December 5. In other words, it’s now cheaper for the central banks to borrow dollar from the Fed.
The main goal is to help the central banks meet liquidity demands of the banking sector, households and businesses which have amid the euro zone’s debt crisis, ease tensions at financial markets and encourage economic activity.
Analysts at Bank of New York Mellon point out that such step was totally unexpected. Strategists at Rabobank think that the move of the central banks will help make dollar funding less expensive and help to keep the European debt crisis from spreading to other economies.
EUR/USD surged above $1.3480, while Australian dollar added more than 3 cents reaching 2-week maximum at $1.0335.