Comments and forex-analytics from FBS Brokerage Company - page 127
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UBS: comments on USD/JPY
Analysts at UBS claim that there are many reasons to be bearish on yen in the near term:
- late deficits in the Japanese trade balance despite February’s modest surplus;
- additional 10 trillion yen in the asset purchase program decided by the Bank of Japan in its last monetary policy meeting;
- the BOJ’s commitment to eradicate deflation by chasing a 1% inflation goal;
- rising US Treasury yields;
- the likelihood of private Japanese investors to seek higher returns in foreign assets.
The specialists keep advising to buy USD/JPY on the dips claiming that the pair may still reach 85.00 in the next few weeks.
Barclays Capital: major currencies outlook
JPY: Japanese currency is expected to weaken versus the USD, AUD and CNY on the back of the risk of a structural current account deficit. We recommend going long USD/JPY, because prospects for the greenback have significantly increased. The Bank of Japan aims for higher inflation, but it doesn’t seem to be a significant negative factor for yen, while the current account deficit is a real long-lasting threat, supported by fiscal problems and political instability.
EUR: the easy monetary policy and the efforts to resolve the debt crisis have decoupled the global risk appetite and the common currency prospects. A weak euro and buoyant equity market is a rare combination. According to the past experience, this environment is positive for the euro’s major counterparts (usually the liquid safe havens and oil-related currencies outperform).
AUD, NZD: in the medium term the outlook on commodity prices is bright, so the Aussie and the kiwi remain high-yielding currencies. If crude oil prices grow for reasons different from strong Asian growth, AUD and NZD may continue the recent depreciation since early March.
CAD: Canadian dollar still has the biggest growth potential among the major currencies (influenced by less stretched valuation, bright oil price prospects and U.S. economy growth).
Societe Generale: comments on Eurogroup meeting
Analysts at Societe Generale claim that the Eurogroup meeting on March 30 will be an important event for markets and the broader economy.
In their view, last week's movements on peripheral bond markets should have served as a reminder to euro area policymakers that the debt crisis is not over yet. Failure to increase the rescue mechanisms this Friday would be a significant negative.
The specialists say that despite the talk that German and Finnish politicians no longer oppose the temporary increase in the region’s bailout funds, much will depend on the will of the fiscally weaker member states to deliver on austerity and structural reform. While financial stress in the periphery may thus ease anew, austerity headwinds will continue to blow.
RBS: go long on GBP/USD
Analysts at RBS recommend buying British pound versus the greenback on the dips again below $1.5929. The bank is bullish on sterling as GBP/USD broke yesterday above the downtrend resistance line connecting the maximums of 2007, 2011 and 2012.
Target is at $1.6072 (the 38.2% Fibo retracement from the credit crunch sell-off), while stops are to set in the $1.5850 area.
The specialists warn of resistance in the $1.5992 zone (2012 maximum). Support lies at $1.5929 (February 8 maximum), $1.5850 (100-day MA) and $1.5767 (last week’s minimum).
SocGen: official China’s PMI may be better
Analysts at Societe Generale believe that China’s official PMI data won’t be as weak as HSBC flash PMI.
The specialists expect PMI to rise from 51 in February to 51.2 in March. According to the bank, March readings are typically more than 3 points above those of February even during the sharp deceleration of Chinese economy in 2009. “Stripping out this effect, our forecast for the March reading would actually signal contraction in China's manufacturing activity, and thus consistent with the HSBC PMI,” say the strategists.
The HSBC preliminary PMI fell to 48.1 in March, a 4-month minimum, compared with a final reading of 49.6 in February.
China’s March NBS PMI is due for release on April 1.
Deutsche Bank: seasonal pattern of U.S. data surprises
According to John Horner, strategist at Deutsche Bank, the greenback’s growth in recent months may be unstable and connected with a seasonality of the U.S. economic data.
There seems to be a tendency for U.S. economic figures to overcome the expectations towards the end of a year and in the early part of the following year. However, since March, the situation is usually back to normal. The seasonal pattern is traced better if we exclude winter 2008-09 (peak of the financial crisis). John Horner believes the tendency existed long before the crisis; in the recent couple of years, however, it has become more evident.
In recent months the U.S. economic data has followed the usual positive scenario, and in March, as would be expected, is turning lower. According to Horner, the lackluster data will definitely mark the U.S. Treasury yields down, so the greenback will also be on the ebb in the forthcoming months.
The theory partly explains why USD/JPY tends to go down each year from early April.
Credit Agricole: USD/CHF forecast
Analysts at Credit Agricole draw investors’ attention to the bearish signals on the daily USD/CHF chart:
- Ichimoku: the prices are below the Cloud as well as under the lines Tenkan-sen and Kijun-sen;
- 50-day MA stays below the 200-day one;
- the linear regression indicator also gives negative hints.
As a result, the specialists expect US dollar to weaken in the medium term. According to the bank, the greenback will go down to February minimums in the 0.8930 area. Credit Agricole points out that in the short-term the pair may continue to trade within sideways trend as it did during the last 2 months.
J.P. Morgan: trading CAD/JPY
Strategists at J.P. Morgan Asset Management recommend buying CAD/JPY at the current levels (pair trades at 83.22 today) with a stop at 82.00 and a target of 88.00.
The Canadian dollar is going to benefit from the rebounding U.S. economy, while the Bank of Japan keeps on weakening the yen, seeking to reach a 1% inflation target. The loonie, therefore, is going to strengthen versus the yen.
Analysts believe the Fed Chairman Ben Bernanke's comments about easy monetary policy not only hurt the dollar but lifted hopes for the U.S. economic growth. According to J.P. Morgan, the fair value of USD/JPY is around 115 yen in a longer term.
Yen strengthened versus main peers
USD/JPY snapped 2 days of gains. Japanese yen rose versus all of its major peers as stocks dropped encouraging demand for yen as a refuge. The S&P 500 lost 0.3% yesterday, MSCI Asia Pacific Index declined today by 0.5%.
Mizuho: “The yen move is driven by supply and demand before the final exchange-rate fixing of the fiscal year. While there haven’t been a whole lot of orders from Japanese exporters to sell dollar into the end of March, we’ll start to see some rise in demand to buy yen. The Aussie dollar is being sold against yen.”
Standard Chartered: the greenback may see some pullbacks against the yen in the coming quarters if the market starts to doubt the feasibility of the BOJ's inflation goal – and it will, thinks the bank. “Most of this move higher in dollar/yen has already been seen,” says the bank.
At the same time, many investors regard USD/JPY’s decline as merely a correction saying that yen’s downtrend is still in place as the loose monetary policies of major central banks will likely support risk appetite.
The pair USD/JPY broke down below the key level of 83.00.
Support: 82.63 (March 27 minimum) and 82.38 (week’s opening, March 22 minimum).
Resistance: 83.20 (today’s maximums) and 83.38 (March 27 maximum).
Barclays Capital, UBS: AUD and NZD prospects
The Australian and New Zealand dollars tend to decrease against their major counterparts amid concerns Chinese manufacturing will slow, contracting the demand for resource exports.
On March 30 RBA is expected to release the private sector credit figures (forecasted 0.3% growth in Feb. versus 0.2% in Jan.). RBA officials say the slow credit growth could hinder the large banks’ profit growth. The retail, manufacturing, construction and tourism sectors suffer from low retail spending and high exchange rates.
Barclays Capital: If the U.S. is performing well, market is in a risk-on mode; in this environment AUD and NZD tend to perform well. AUD/USD will climb to $1.07 in a year, while NZD will reach $0.86.
UBS: AUD/USD may rise to 1.05 in the next month, but drop to 1.00 in the next 3 months. The strong Aussie affects manufacturing and retail sectors, but the RBA intervention is unlikely. The underlying trend is bearish; support lies at $1.0427 and $1.0336, resistance is at $1.0596.