Comments and forex-analytics from FBS Brokerage Company - page 114
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More comments about euro’s outlook
ING: the Greek deal might have bought a couple of months' worth of stability to the euro-zone sovereign-debt markets. The pair EUR/USD may go up to test 2012 maximum at $1.3320 and rise to $1.3430/50.
Barclays Capital: the risk of Greece’s disorderly default reduced for at least a few quarters. Never the less, there still are the implementation risks. In addition, there are near-term risks associated with early elections and rise of political opposition.
Commerzbank: the skepticism about the euro is justified even after euro area’s finance ministers agreed to provide Greece with the second bailout. That isn’t positive for euro. The large majority of market players are finding it hard to believe that Greece will get through to 2020 without a further default.
BNP Paribas: Greek agreement won't support euro much. Many traders would like to sell euro on the rallies. All the same, if the agreement really does remove the risk of a Greek default markets will be looking to fund riskier bets with a suitable currency such as euro. As a result, the European currency is doomed to remain under pressure.
Deutsche Bank, UBS: forecasts for USD/JPY
Analysts at Deutsche Bank think that the greenback may resume its decline versus Japanese yen. In their view, the effects of the latest round of easing conducted by the Bank of Japan will fade. Last week the Bank of Japan added 10 trillion to it's now 65 trillion yen quantitative easing program leaving the benchmark interest rate at the record low of 0.1%.
The specialists claim that USD/JPY may decline from the current maximums in the above 79.50 back to 75 yen area. According to the bank, Japan’s external investment position is large and growing, so its current-account balance will support yen’s strength for some time. Currency effects from Japan's shifting trade dynamics are being overplayed and the country will probably return to a trade surplus this year. The only way to prevent such outcome is additional stimulus from Japan’s monetary authorities.
Analysts at UBS, however, don’t share the view of Deutsche Bank. The specialists reduced their 1- and 3-month forecasts for Japanese yen from 77 yen per dollar to 80 and 85 yen per dollar. As the reason for the downward revision the specialists cited easing conducted by the BOJ.
BoE minutes coming: watch the pound
Today the market’s looking forward to the release of the Bank of England’s February meeting minutes (9:30 a.m. GMT). The minutes will unveil how the central bank’s 9-member Monetary Policy Committee votes on the expansion of asset purchase program by 50 billion pounds ($79 billion) to 325 billion pounds this month.
The consensus forecast is that the decision was unanimous. The experts, however, don’t rule out the possibility of 1-2 dissenting votes from the hawks against more QE.
The BoE decided to conduct additional quantitative easing in order to help weak UK economy: Britain’s revived Q4 GDP figures which are released on Friday will likely confirm that the nation’s economy contracted by 0.2% in the final 3 months of 2012 (q/q).
BoE Deputy Governor Charlie Bean claimed that despite the news that Greece will get the second bailout, serious risks remain and the debt crisis won’t be over. Such situation will hurt Britain hitting its exports and finance and affecting its consumer and business confidence. The official was also worried about the fate of other peripheral European economies.
On the one hand, it’s necessary to note that some positive consumption and housing data have been released so far, so the BoE may improve its fundamental outlook for the UK economy. In this case pound will be poised to strengthen. On the other hand, cautious tone may signal that the door is open to expand the central bank’s asset purchase program beyond 325 billion pounds – such outcome would increase bearish pressure on sterling.
Since the beginning of the year the pair GBP/USD consolidated between $1.5680 and $1.5930. Analysts at Lloyds say that sterling won’t be able to rise above $1.6000 versus the greenback in the near term. Specialists at Commerzbank think that the pair may test 200-day MA and then slide back to $1.5645.
Nomura: USD/JPY forecast revised up
Analysts at Nomura revised up their forecast for USD/JPY from 75 to 79 yen by the end of the first quarter of 2012. The forecasts for the end of Q2 and the year-end were left unchanged at 80 and 81 yen consequently.
The specialists claim that odds that the greenback will resume its decline decreased due to the Bank of Japan’s additional quantitative easing, better US macroeconomic data and easing tensions in the euro area.
Nomura draws investors’ attention to the fact that Japanese central bank decided to increase investment in the government bonds with maturity of 1-2 years. This would cap the possibility of 2-year yield growth. As a result, the yield differential between 2-year US and Japanese securities will increase encouraging USD/JPY. In addition, internal capital flows also point at yen’s gradual depreciation.
Barclays Capital expects USD/JPY to consolidate
Analysts at Barclays Capital claim that the greenback will consolidate between 78.50 and 80.50 yen ahead of the US February jobs report which is released on March 9.
The specialists think that after the pair USD/JPY has made such an impressive progress this month rising from 76 to 80.50 yen it currently lacks strong indicators for further advance, so the market will likely stand still ahead of the labor market data. According to the bank, the risk of the Federal Reserve announcing another round of quantitative easing is low.
USD/JPY again renewed maximums
The greenback made a spike higher today spiking to almost 4-month maximum at 81.67 yen due to improved US economic data and the increased possibility that the crisis in the euro area will be contained. After reaching the new high dollar backed down correcting after a rapid advance.
Analysts at Ueda Harlow claim that investors aren’t afraid to sell yen anymore as they believe that the worst case scenario for global economy will be avoided. The G-20 is making efforts to solve the debt crisis, note the specialists.
Strategists at UBS think that the pair USD/JPY is now trending upwards. In their view, the Bank of Japan has finally shown its determination to use aggressive approach combating yen’s appreciation.
Analysts at Westpac claim that US currency is currently overbought and will return to 79 yen and then resume growth. According to the bank, USD/JPY will meet resistance at 82 yen. If the pair breaks above this level, it will be able to rise to 85.60 yen.
Commerzbank: comments on USD/CHF
Technical analysts at Commerzbank believe that the greenback may fall versus Swiss franc to 0.8788/71 (78.6% Fibonacci retracement and 200-day MA).
According to the bank, key support for USD/CHF is situated at 0.8568 (October minimum).
The specialists are bearish on US currency as it dropped below 0.8960 (61.8% Fibonacci retracement of the pair’s advance from October to January). In their view, the short-term outlook remains bearish as long as US dollar trades below resistance in the 0.9066/88 area.
In the medium term Commerzbank expects USD/CHF to return to the levels around 0.9595 (January maximum).
Banks' forecasts for FX majors
SocGen: EUR/USD will decline
Analysts at Societe Generale claim that the single currency may weaken by 6% versus the greenback sliding to $1.2590.
The specialists keep thinking that euro’s advance from this year’s minimum at $1.2624 hit on January 13 was only a correction within the middle-term downtrend. In their view, the resistance line of the descending channel at $1.3570 will likely cap euro on the upside.
According to the bank, EUR/USD will decline to $1.2590/$1.2620.
CFTC trader positioning data
The latest Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that:
• Euro shorts declined from the previous week’s total of 148.6K to 142.3K contracts.
• British pound shorts decreased from 40.6K contracts on February 14 to 31.3K contracts on February 21. Longs on sterling were cut by almost 8K contracts, while shorts were reduced by almost 11K contracts.
• Japanese yen net longs declined from 29.4K contracts reported on February 14 to 17.3K as the data on February 21 showed.
• Swiss franc net shorts extended from 15.9K net short contracts on February 14 to 19.8K contracts on February 21. Short positions increased surpassing small increase of longs.
• The value of US dollar's net long position rose to $17.25 billion in the week ended February 21 from $16.98 billion the previous week.
It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.