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CME Group: technical comments for EUR/USD
The single currency is trading versus the greenback around 2-month minimum in the $1.3160 area.
Technical analysts at CME Group claim that the pair EUR/USD will consolidate in the short term as it’s currently a bit oversold, while in the medium term the specialists are bearish on euro thinking that the crisis is far from being over. Such forecast is confirmed by the negative picture on the daily Ichimoku chart.
According to CME, support for euro is situated at $1.3142, $1.3070 and $1.2965, while resistance is found at $1.3215, $1.3280 and $1.3335.
JPMorgan Chase: euro may renew 2011 low
The single currency fell versus the greenback diving below October minimums to the levels in the $1.3010 area.
Technical analysts at JPMorgan Chase claim that EUR/USD breached important support at $1.3047 (61.8% Fibonacci retracement from a 4-year minimum reached in June 2010) and may retest 2011 low at $1.2873 hit on January 10.
In their view, the pair’s trading within downtrend and the outlook for euro will remain negative as long as it stays below $1.3145/3212.
Westpac: advices on trading euro
Analysts at Westpac believe that the single currency is on the way down to $1.2860. In their view, euro will weaken versus US dollar due to the risk that the rating agencies downgrade European nations and high probability of the region’s falling into recession.
At the same time, the specialists underline that there are now too many short positions on euro, so they don’t recommend selling euro at the current levels. According to the bank, it’s necessary to wait for a short squeeze back toward $1.3400 before going short on EUR/USD.
In addition, Westpac advised selling Australian dollar against its New Zealand’s counterpart as the Reserve Bank of Australia is more likely to reduce the interest rates.
BoA: sell Aussie versus loonie
Analysts at Bank of America Merrill Lynch advise traders to sell Australian dollar against its Canadian counterpart.
In their view, AUD will weaken as the prospects of Australian currency for the next few weeks seem rather dim:
- Shanghai Composite Index has breached important support levels (Aussie is extremely vulnerable to the deterioration of the economic situation in China as the latter is Australian key trading partner).
- Continuous Commodity Index has also dropped below key support (commodities represent the key part of the Australian economy, so AUD will likely suffer).
The specialists propose to sell Aussie versus loonie because though Canadian dollar is also a commodity currency, it’s not affected by the dynamic of commodity prices as Australian dollar is. Moreover, AUD/CAD is facing the long-term resistance level which has been in place since the 1980s.
According to the bank, it’s necessary to open shorts on the pair at 1.0440 stopping above 1.0660 and targeting 0.9840.
FOMC: results of the meeting and analysts' comments
FOMC (Federal Open Market Committee) repeated its pledge to keep the interest rates at the minimal level near zero at least until the middle of 2013 and maintained Operation Twist, the operation which allows the central bank to lengthen the maturity of Treasuries in its $400 billion portfolio. Note that Chicago Fed President Charles Evans once again called for additional easing.
The Fed’s Chairman Ben Bernanke claimed that the European debt crisis may affect US economy, so that further monetary stimulus measures will be needed.
Despite the fact that the unemployment level unexpectedly dropped in November to the minimal level since March 2009 of 8.6%, the FOMC said that this number is still “elevated” and that the jobless rate will decline “only gradually”. Although some recent data was quite positive (CB consumer confidence, ISM Manufacturing PMI), the Fed underlined that the pace of business fixed investment growth is still low and housing market “remains depressed”.
Analysts’ comments
Analysts at BNP Paribas expect that the central bank could unveil measures aimed to support growth and improve the public understanding of Fed’s policy already at the next meeting on January 25-26. In their view, the Federal Reserve will launch QE3 in the second quarter or even earlier, in January or March, in case economic conditions worsen. The specialists also expect the central bank to publish their forecasts for the federal funds rate and define the levels of economic growth and unemployment which would allow it to tighten monetary policy.
Strategists at ING also point out that due to the annual rotation the hawks – Federal Reserve presidents Charles Plosser of Philadelphia, Richard Fisher of Dallas, and Narayana Kocherlakota of Minneapolis – and their place will be taken by the doves – San Francisco Fed President John Williams, Atlanta Fed President Dennis Lockhart and Cleveland Fed President Sandra Pianalto.
Some analysts think that the Fed is already conducting QE (that explains low yields of the Treasuries) without announcing that officially. At the same time, economists at UBS, Barclays, Citigroup, Deutsche Bank и JP Morgan Chase believe that the central bank will be buying only mortgage bonds. Anyway the Fed’s decision will likely be based on the inflationary expectations and the fact that last month the inflation forecasts were lowered speaks in favor of the potential QE.
Pay attention to the fact that Bernanke will hold press conference on January 26 after the meeting, an event that occurs quite rarely.
Last News
2011-12-15 13:19 - Danske Bank: forecast for ECB and Fed’s rates
2011-12-15 12:47 - SNB meeting: results, comments, EUR/CHF
2011-12-15 11:17 - Nomura: EUR/USD is sliding to $1.20
2011-12-15 10:13 - Westpac, E&Y: Europe’s heading to recession
2011-12-15 07:39 - December 15: key economic events and data
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December 15: key economic events and data
Released data:
- Tankan survey: business sentiment deteriorated;
- China’s HSBC Flash Manufacturing PMI rose from 47.7 in November to 49.0 in December.
Market’s talk:
- Investors are speculating about potential downgrade of France’s credit rating. All euro zone’s nations are exposed so such outcome after the warnings of S&P and Moody’s, but France is considered to be especially vulnerable. French Foreign Minister Alain Juppe claimed today that for France to lose its triple-A debt rating would be bad news but “not a cataclysm”. Be cautious during today’s US session.
To watch today:
- The SNB’s 3-month Libor rate and press conference at 8:30 GMT. According to Goldman Sachs, the central bank could lift EUR/CHF floor from 1.20 to 1.30 due to deflationary risks, though not at today’s meeting. The analysts say SNB’s statement “will leave the door open for such a move at a later stage during the first quarter of next year”. One can’t rule out the possibility of surprises;
- European flash PMIs;
- British retail sales (9:30 a.m. GMT);
- US data (1:30 p.m. GMT);
- Spanish bond auction;
- 11:00 GMT — ECB President Mario Draghi speaks in Berlin on «Last Resort ECB? Monetary Policy Leeway In The Social Market Economy».
Westpac, E&Y: Europe’s heading to recession
The majority of experts sound pessimistic on the prospects of the euro area's economic growth. Analysts at Westpac claim that the austerity measures will lead the region into a “fully blown recession”.
Economists at Ernst & Young also believe that European economy’s going to contract and add that the actions of the EU authorities haven’t completely eliminated the risk of the euro area’s breakup.
In their view, the currency union’s GDP will drop in the current and next quarters and the rebound will begin only by the end of the next year, while the 2012 growth won’t exceed 0.1% (in 2013 the situation might improve – the analysts project 1.5-2% growth). The unemployment level is seen above 10% until 2015.
E&Y reminds that the next year the large amounts of sovereign debt will require refinancing. As a result, the debt turmoil is likely to continue and the ECB will likely have to consider acting as a lender of last resort and keep buying government bonds.
Nomura: EUR/USD is sliding to $1.20
Analysts at Nomura who have been bearish on euro this year still think that the single currency is going to weaken versus its US counterpart.
The specialists note that if in the longer term it’s possible to see some light ahead, the short-term picture looks rather dim.
According to the bank, EUR/USD will hit $1.20 by the end of the first quarter of 2012. Nomura says that the pace of euro’s decline will depend primarily on the results of the upcoming bond auctions in Europe and the 3-year ECB money tender which is launch on December 21.
In addition, the strategists claim that one shouldn’t rule out the possibility of the pair’s drop to the parity level the next year.
SNB meeting: results, comments, EUR/CHF
Swiss National Bank left today the left the floor for EUR/CHF at 1.20 and repeated to defend it will all efforts amid the pressure from the Swiss exporters to lift up this level (franc has been pegged to euro during already 3 months). The SNB has also left its key interest rate at 0%.
The SNB’s President Philipp Hildebrand claimed that the central bank is ready to act in case deflation risks emerge, though today deflation isn’t yet a danger for the Swiss economy. According to the SNB’s forecast, consumer prices will fall by 0.3% the next year, but we won’t see sustained decline in the general price level. Swiss central bank expects the nation’s GDP growth to slow from 1.5-2% this year to 0.5% in 2012.
Analysts’ comments
Credit Agricole: the SNB is going to stay on hold watching the dynamic of the economic indicators. In other words, the central bank won’t raise the limit for franc preferring verbal interventions. The pressure on Swiss exporters has eased a bit as franc has so far weakened versus US dollar.
Swissquote Bank, Capital Economics: as the situation in the euro area may deteriorate, the upward pressure on franc risks strengthening.
Goldman Sachs: the SNB is in a very difficult position due to the low inflation and poor economic growth.
Rabobank: the central bank is still likely to increase EUR/CHF floor. Swiss economy is affected by slowing economic growth of the euro area. Franc is overvalued and the deflation is at the door. The analysts advise buying euro on the dips.
UniCredit: SNB's growth and inflation forecasts don’t change much. If the central bank lifts the EUR/CHF floor to 1.25, that won’t be enough to help the exporters. If the SNB raises the limit to 1.30, it will face strong market’s pressure as well as the accusations of currency manipulation. As a result, the analysts expect the floor to stay at the current level. Swiss franc is seen slowly depreciating in 2012.
EUR/CHF
Bloomberg survey: EUR/CHF will trade in the 1.23 area in the first quarter of 2012 and then rise to 1.26 in the last 3 months of the next year.
Bayern LB: euro has upward potential against franc. If EUR/CHF manages to get above 1.2475, it will be able to climb to 1.26 even without any actions on the part of the SNB.
Danske Bank: forecast for ECB and Fed’s rates
Analysts at Danske Bank think that at its next meeting in January the European Central Bank will reduce its benchmark rate by 25 basis points to 0.75%.
The specialists note that the euro area risks falling into recession during the next few months, the European policymakers still haven’t solved the crisis and the periphery bond yields remain high while the ECB is reluctant to extend its purchases of the European debt.
Danske claims that the outlook for US economy seems to be much better and expect American GDP to show decent growth in the coming quarters. As a result, the Federal Reserve is seen keeping the rates unchanged with the prospect of increase as the economic conditions improve.
So, make your conclusions.