Comments and forex-analytics from FBS Brokerage Company - page 149
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Euro slides on political uncertainty
The common currency fell to a three-month low after France and Greece voted against pro-austerity politicians on Sunday.
As expected, Francois Hollande got 51.7% of the vote in the French presidential election held on Sunday against about 48.3% given for incumbent Nicolas Sarkozy. According to analysts, his victory may be interpreted more as an outcry against the austerity policy, pursued by Sarkozy, than the support of Hollande's own program.
Societe Generale: Mr. Hollande’s victory was largely expected, but it does act as a trigger to increase demand for the dollar.
Parliamentary elections in Greece increase bearish pressure on the euro: the debt crisis shaved the popularity of two main parties, attempting to eliminate budget deficit and to collaborate with EU. Centre-right New Democracy led with 19%, down from 33.5% in 2009. Left-wing coalition Syriza came surprisingly in second place with 16.7%, while centre-left PASOK stood in third place with 13.3%, down from 43.9% in the last elections.
UBS: If Greece chooses to resolve the crisis on its own, the EU may refuse credence and financial aid.
FX Prime: There are major concerns about the euro. What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.
EUR/USD dropped to $1.2954 early Sunday, but then bounced back to $1.3010. However, the key $1.3000 support, the lower bound of a side channel (exists since January), was broken.
Analysts at Nomura Holdings expect the pair to consolidate in the $1.26-1.28 area within a few weeks.
JP Morgan: trading EUR/JPY
Analysts at J.P. Morgan Asset Management recommend selling EUR/JPY at current levels, setting a stop at 106.00 and a target of 102.50.
According to specialists, the Hollande’s victory was already priced in, while Greece will weigh on the euro. They underline that the market is unstable: any comments from Hollande after the election or something later in the week may influence the pair.
Analysts: outlook for AUD/USD
The Australian dollar opened the week on a downside amid concern election results in France and Greece will deepen the euro zone’s crisis. However, throughout the day positive news from Australia improved the market sentiment.
FX Prime: There are major concerns about the euro. What’s common to both Greek and French voting is that people aren’t feeling good about austerity measures, which are the crux to a resolution of Europe’s debt problems.
Europe’s economic and political mayhem is may influence the economies, regarded as safe havens: policymakers may cut interest rates to weaken the currencies.
Societe Generale: In a weakening global environment, countries that can cut rates will do so and their currencies can fall. Europe is an economy with a currency that isn’t expensive, with not much scope or appetite for cuts.
Westpac Banking: We’ve got what may well prove to be the next wave of instability from Europe. There’s a clear voter rejection of austerity evident. We’d expect the Aussie and the kiwi to remain under pressure.
Australia’s retail sales grew by 0.9% in March after a revised 0.3% gain in February. Number of new building approvals increased by 7.4% after an 8.8% decline in February, pointing that the housing market improved in March.
Standard Chartered: The data was actually very strong, so it’s more like it’s putting a floor on the Aussie weakness that we’re seeing. It’s difficult to see the Aussie bouncing in this environment where risk sentiment is pretty weak.
The AUD/USD pair is currently trading in the 1.0180 area. Analysts at ANZ expect the Aussie to trade at $1.07 by December versus the greenback. According to Bloomberg forecast, the currency will end 2012 at $1.04.
GBP/USD: is the demand back?
Demand for sterling grows regardless of the increased risk aversion on the currency markets: GBP/USD strengthens on Monday after declining last week for five consecutive days.
The cross has already overcome its Friday’s closing price and reached $1.6172 level. However, only a strong break above $1.6200 resistance will reverse the bearish trend.
On Tuesday watch out for UK retail sales and housing prices data releases.
UBS: outlook for the US dollar
Last week the US Dollar Index increased from 78.60 on Monday to 79.60 on Friday. According to analysts at UBS, the greenback was supported by the worrisome data coming from Europe and by the low likeliness of new round of QE in US. According to analysts, poor Friday’s NFP were offset by an improvement in other key indicators.
Specialists at UBS continue to believe in the greenback as they do not expect the US economy to slow down sufficiently to allow the Fed’s doves to push for additional asset purchases.
Chart. US Dollar Index
Source: Bloomberg
CharmerCharts: trading GBP/USD
The sterling continued weakening against the greenback on Tuesday after yesterday's growth. Bank holiday in UK on Monday hindered the reaction of the pound on the results of French and Greek elections.
Analysts at CharmerCharts see the target dor the cable at 1.6110/085 levels. They believe the break below 1.6065 may cause another wave of selling pressure which should drive the price lower for 1.6005 to 1.5990.
Resistance for GBP/USD lies at 1.6180, 1.6200 and 1.6245. On the downside, supports might act at 1.6135 and 1.6115.
BBH: outlook for AUD/USD
The Aussie weakens against the greenback on Tusday after weak trade data report.
Trade deficit in March reached 1.59B vs.1.38B deficit forecasted and 0.75B deficit in February. The Australian Government, however, remains forecasting a return to surplus by 2012/13, as promised last year.
According to analysts, tight fiscal policy and eased monetary policy will continue pushing the AUD/USD pair down. Strong resistance for the pair lies at 1.0220 level. In a longer-term analysts expect the pair to fall to 0.9860.
Taylor: Greece will abandon euro in June
The resent changes on European political landscape made some analysts come up with more radical forecasts of euro’s future than they used to have before. For example, John Taylor, the head of the world’s largest currency hedge fund FX Concepts, now thinks that Greece may leave the euro area already in June.
The specialist warns that the nation’s government will soon have no more cash, while European institutions won’t be able to give it more money due to the emerging political split between France and Germany. Greece itself is in the situation of uncertainty: if the policymakers fail to form a governing coalition, there will be other Parliament elections in the middle of the next month.
“I think that people are feeling the implications of a Greek exit aren’t so bad. If Greece leaves the euro, Europeans will turn around and huddle together and say, ‘how do I help Portugal and Spain?” Taylor says.
Deutsche Bank: outlook for USD/JPY
The yen strengthens against the greenback this week as the Japanese currency benefits from its “safe haven” status.
Analysts at Deutsche Bank, however, recently revised their forecast for USD/JPY to bullish after being bearish since 2008. They now expect the pair to rise to 82 yen by the end of 2012, compared with previous forecast 75 yen.
In their view, USD/JPY may strengthen in a short term, but the trend is descending.
Key options expiring today
Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).
Here are the key options expiring today:
EUR/USD: 1.2700 (large), 1.3000, 1.3050, 1.3065,1.3075 1.3095, 1.3105, 1.3210;
USD/JPY: 79.65, 76.75, 75.80, 80.25, 82.50;
GBP/USD: 1.6100, 1.6125, 1.6295, 1.6300;
AUD/USD: 1.0200, 1.0230, 1.0275, 1.0300;
AUD/JPY: 83.65;
USD/CHF 0.9100, 0.9250.
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