Comments and forex-analytics from FBS Brokerage Company - page 108
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USD/CAD: upwards or downwards?
At the end of last week the greenback hit the parity level versus its Canadian counterpart for the first time in 3 months.
Bearish view
Analysts at Morgan Stanley believe that USD/CAD will breach the 200-day MA in the 0.9955 area and become vulnerable for a decline to 0.9835.
Bullish view
Strategists at Brown Brothers Harriman, however, note that the pair has been declining for 3 consecutive weeks and say that technical indicators show that the downside momentum for the pair has started weakening. In their view, the pair will be able to bounce by 1% to 1.0135 and then probably to 1.0250/80.
J.P.Morgan: sell CAD/JPY
Amid all talks about the euro area, don’t forget that a piece of traditionally watched US data is due on Friday: Non-Farm Payrolls figures are released on February 3 at 1:30 p.m. GMT.
The consensus forecast is a 156K increase. Payrolls rose by 200K in December.
Economists at Deutsche Bank think that American economy has added 210K jobs in January. Analysts at J.P. Morgan are less optimistic. In their view, the reading will be equal to 150K.
However, J.P. Morgan thinks that even such number will be risk-on. In these circumstances the specialists recommend investors buying Canadian dollar versus Japanese yen at 75.00 stopping at 73.50 and targeting 79.50.
As the reasons for such trade the bank names interest rates differential and rising commodity prices supporting loonie, while Japan posted first annual trade deficit in 31 years.
Danske Bank: EUR/USD forecast revised upwards
Analysts at Danske Bank revised upwards their forecasts for the single currency versus the greenback.
The specialists think that the downside risks for EUR/USD have decreased due to the dovish Fed’s statement, the positive impact of ECB’s 3-tear LTRO and extensive short positions on euro.
According to the bank, the pair will trade at $1.30 in 3 months, $1.32 in 6 months and $1.36 in a year. At the same time, Danske urges investors to be cautious and hedge their long euro positions as downside risks to the global business cycle continue to translate into downside risks for euro.
Dollar may strengthen versus Japanese yen
Many experts began speaking about the reversal of US dollar’s downtrend against Japanese yen claiming that American currency may be supported by rising global equities, investment outflows from Japan, the Asian nation’s first in many years annual trade deficit as well as technical factors. More and more options traders start betting on dollar’s advance.
Analysts at Royal Bank of Scotland think that the greenback will be slowly but surely rising versus Japanese yen. In their view, USD/JPY will reach 80 yen by March.
Strategists at Bank of Tokyo-Mitsubishi UFJ note that as the risk sentiment revives investors will seek for profit going away from low-yielding Japanese currency.
Some experts make bolder judgments and foresee more cardinal changes. For example, currency strategists at Wakabayashi claim that the 40-year cycle of yen’s appreciation from 357.41 yen per dollar in August 1971 to the record maximum of 75.31 yen per dollar on October 31, 2012 has finished. Note that 4 years ago these specialists predicted that dollar bottom around 74 yen in February 2012 and then recover. In their view, USD/JPY will rise to 180 yen by 2025. Analysts at Citigroup say that a move toward 100 yen by the end 2013, to the levels last seen in 2009, “may not be as incredible as it sounds today.”
All in all, 40-year trend is a too strong tendency to analyze now. One may speak about a reversal like that only if USD/JPY gets above 88.70 yen. In the foreseeable future among the things to watch there is US economic momentum, Japanese investment flow trends and the nation’s trade balance.
The greenback’s appreciation will likely be gradual as the Federal Reserve aims to keep interest rates at the record minimum until the end of 2014.
RBC: good news are already priced in euro
The single currency has been strengthening so far even without the resolution of the Greece’s negotiations with its private creditors.
Analysts at RBC Capital Markets think that when Greek debt deal is reached, we won’t see much of euro’s advance as most of the good news for EUR is already priced in. In their view, austerity measures will cause severe slowdown of the region’s economy putting euro under negative pressure.
The specialists propose going short on EUR/GBP at 0.8450 stopping at 0.8625 and targeting 0.8100. According to RBC, British economic outlook seems better than the euro zone’s one as the economists expect UK GDP to gain 1% this year, while the European economy will likely stagnate.
Nomura: forecasts for euro, yen and Aussie
Analysts at Nomura claim that as the US and European macroeconomic data has so far improves reviving global market’s sentiment, negative risks for the euro area subsided. As a result, the bank revised up its currency forecasts.
The specialists expect EUR/USD to trade at $1.20 by the end of the second quarter, at $1.23 by the end of the third quarter and finish 2012 at $1.25.
In their view, the pair USD/JPY will end Q2 at 80 yen, Q3 as well at 80 yen and Q4 at 81 yen level.
Nomura thinks that AUD/USD will reach $1.05 by the end of Q2, $1.07 by the end of Q3 and finish 2012 at $1.08
Westpac: sell AUD/NZD
As Greece is trying to reach agreement with its private creditors, the market became worried about the situation in Portugal.
Analysts at Westpac don’t think that Portugal is an immediate concern, though they admit that one has to be cautious about that. In their view, by the middle of the year the discussion about whether this nation will need the second bailout like Greece will be heating up.
For now, the specialists say that it Greek deal is made and EUR/USD rises to $1.3400, one has to sell the single currency. At the same time, the bank underlines that the uncertainty surrounding the Greek negotiations and the prospect of the Fed’s Chairman Ben Bernanke’s testimony on Thursday makes it hard to trade EUR/USD, so one may better sell Australian dollar versus New Zealand’s dollar at 1.2930 stopping at 1.3115 and a targeting 1.2650.
Westpac expects the Reserve bank of Australia to cut interest rates new week. In addition, “there has been renewed interest over the weekend of sovereign wealth funds buying kiwi assets”, say the analysts.
AUD surges, Gillard’s comments
Australia's Prime Minister Julia Gillard claimed today that the rate of the national currency versus the greenback will likely remain relatively high during the next several years. In her view, European debt turmoil made investors regard Australian dollar as a global safe haven for the first time in its history. As the euro zone’s issues are far from over, one should expect Aussie to remain strong. The nation still has the best triple-A credit rating. Last year offshore holdings of Australian government bonds increased to 80%. The pair AUD/USD rose by around 80% since 2008.
The Prime Minister claimed that Australia’s economic outlook is positive and that the government is able to fulfill its pledge and deliver budget surplus in 2012-2013. Returning a budget surplus will ensure that the central bank has room to ease monetary policy if needed.
AUD/USD bounced today to $1.0700. Analysts at Westpac think that Aussie is overvalued above $1.6000. The specialists underline that AUD/USD traded above $1.05 only for 1.4% of days since the 1983. In their view, Aussie may retrace to $1.0300 in near term, though the possibility of the Fed’s QE3 and additional stimulus from the ECB has potential to push the pair above $1.0800. The majority of economists believe that the Reserve Bank of Australia will reduce interest rates on Tuesday, February 7, though Aussie may show little reaction.
Yen advances, talks about potential intervention
Japanese yen keeps strengthening versus the greenback for the 6th day in a row.
The market's speculating about potential Japan’s currency intervention and further monetary easing by Bank of Japan – this talk may provide USD/JPY some support keeping it from falling much below 76 yen.
BOJ Deputy Governor Hirohide Yamaguchi repeated today that Japanese central bank is ready to act as the European debt crisis still poses a high threat to the global markets and economy.
The nation’s Finance Minister Jun Azumi and Economy Minister Motohisa Furukawa spoke about the necessity to overcome deflation. Azumi underlined that “speculative moves are increasing in the market and we can’t overlook them” signaling that the Federal Reserve is partly to blame for yen’s recent advance.
Strategists at Bank of America Merrill Lynch think that Japanese monetary authorities may intervene if USD/JPY falls below 75 yen in order to save the national exporters. Last year Japan sold 14.3 trillion yen ($187 billion).
Never the less, analysts at JP Morgan believe that yen-selling intervention is highly unlikely even if the pair renews the record minimums as the United States strongly criticizes Japan's unilateral interventions.
At the same time, Nomura Research Institute argues that Japan has to abandon the intervention approach as stronger yen makes lower the cost of fuel imports – a very important expense item for Japan given its current nuclear capacity issues.
Get ready to sell euro
The negotiations between Greece and its private creditors are still going. On January 31 Greek Prime Minister Lucas Papademos claimed that the nation will try to make the agreement reached by the end of the week.
Bloomberg reports that there’s speculation that Athens managed to persuade bondholders agree to lower coupon on the new 30-year securities from 4.25% to 3.6%.
The hopes of soon Greek deal allowed the single currency to gain despite all the worries about the euro zone’s future. At the same time, many experts say that when the deal is actually reached, one should sell euro.
Analysts at BMO Capital claim that the Greek negotiations could continue into March, when Greece has a big bond payment due. The specialists are also deeply concerned about Portugal’s fate. The yield on the nation’s 10-year bonds is above 15% after Monday’s peak of 17.4%.
According to BMO, investors should sell EUR/USD at $1.3185 with stopping at $1.3285 and targeting $1.2885. Those investors who would rather wait for a potential rise on news of a Greek deal can just adjust the trade levels to reflect the same 3:1 ratio of target to stop, says the bank.
Analysts at TD Securities point out at the risk of euro’s decline. Bank of New York Mellon thinks the success of the Greek deal is already prices in euro’s rate and there won’t be much of an advance. Westpac keeps expecting move up to $1.3400 to sell there.