Comments and forex-analytics from FBS Brokerage Company - page 137
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UK trade deficit wider than expected
Britain’s trade deficit grew to £8.7 billion in February from revised £7.8 billion in January, despite the forecasted gap of £7.7 billion. The export slippage is caused mostly by decreasing trade volumes with non-EU countries (U.S., China and Russia).
According to recent surveys, Britain has just returned to a moderate economic growth after the threat of a recession blew over. However, a slowdown in Britain's main trading partner, the euro zone, could weigh on exporters' prospects.
The market, however, is reacting on the negative trade balance data oddly: cable climbed to a one-week high $1.5955.
Commerzbank: GBP/USD is rebounding near term from $1.5827 level (55-day MA). We expect the pair to find intraday resistance at $1.5935/65 and continue to view the market as having topped at $1.6062.
Resistance for the pair lies at $1.5937 (Apr. 11 maximum), $1.6062 (April maximim), and $1.6200 (psychological resistance), support – at $1.5850 (Apr. 11 minimum), $1.5724, and $5600 (lowest since March 12).
Euro zone: Italian auction, Greece, weak data
EUR/USD reiterated from today's highs at $1.3145 affected by the latest news’ releases.
Italian government sold BOT of 4.884 billion euro meeting the targeted amount, though the yields were higher – not an entirely positive picture. Here are the details:
- 2.884 billion euro of 2015 BTP yield 3.89 % (from 2.76%) out of a targeted 2-3 billion euro;
- 2 billion euro of three-off-the run issues due in 2015, 2020, 2023. The off-the-run sale had been announced for an overall amount of between 1.0 billion and 2 billion euro. The overall bid-to-cover was 2.20.
In addition, Greek unemployment rate rose from 21.0% in December to 21.8% in January. Moreover, euro zone’s industrial production declined by 1.8% (y/y) in February.
World Bank trimmed China’s growth forecast
The World Bank reduced forecast for China’s 2012 GBP growth from 8.4% to 8.2% (13-year minimum). According to the economists, there’s “potential for growth to be bumping along the bottom for longer”.
“We see cyclical weakness continuing, but that the prospects for a soft landing remain high,” said the specialists noting that Chinese authorities have enough resources to help bolster the economy if risks to the downside accelerate.
The main problems of Chinese economy are the decreased external demand for its goods and risks connected with the real estate market.
Note that the World Bank increased 2013 forecast for China from 8.3% to 8.6% expecting activity to rebound next year.
Official data on the nations Q1 economic growth is released on Friday, April 13. Consensus forecast is a gain of 8.4% down from 8.9% in the final 3 months of 2011.
RBS: trading AUD/USD
Analysts at RBS recommend buying the Aussie vs. the U.S. dollar at the current levels, with a stop at $1.0210 at targeting at $1.0612.
Strategists see support at $1.0320 (recent lows), $1.0240 (61.8% retracement from a Dec. 15 low) and $1.0201 levels, and resistance – at $1.0496 (recent support, now resistance) and $1.0612 (23.6% retracement from a Dec. 15 low).
According to RBS analysts, the Australian dollar will be the best performing currency in April due to seasonal patterns. Specialists also point that a lot of negative news were priced into the AUD/USD, that’s why they advise to play on the dips now.
Friday, April 13: economic news and outlook
China’s growth slowed down
The market has been expecting Chinese economy to slow down, but the actual data came even worse than the projections: the nation’s GDP added only 8.1% in Q1 vs. the forecast of 8.4% and down from 8.9% increase in the last 3 months of 2011. This is the slowest expansion in almost 3 years.
The data has naturally hit Australian dollar (remember Australia exports commodities to China?). Aussie weakened versus all of its major peers, the pair AUD/USD went down from this week’s maximum at $1.0451 reached today to the levels in the $1.0400 area.
Fed speakers
Fed Bank of New York President William C. Dudley claimed yesterday that it’s “too soon to conclude that we are out of the woods” and that the rates should be held at the minimal level until the end of 2014.
Ben Bernanke speaks later today amid the speculation that the Federal Reserve will conduct additional easing as the economic recovery isn’t going as smooth as the central bank thought it would.
American currency weakened versus the majority of its peers ahead of the CPI release later today: the pace of consumer prices growth is seen declining from 0.4% in February to 0.2% in March. Slowing inflation would give the Fed more room for another QE.
Preparing for additional stimulus from Japan
The greenback and the single currency are strengthening against Japanese yen for the third day as the market’s looking forward to more easing from the bank of Japan (though USD/JPY was affected by the weak Chinese data). Today the nation’s ministers will discuss the problem of deflation.
Asian stocks: Nikkei +1.2%; HK +1.6%; Shanghai +0.25%.
UBS lowered forecasts for USD/CAD
Analysts at UBS think that though the Federal Reserve will start normalizing its policy the next year, the Bank of Canada will start moving in this direction earlier (the reasons – recent strength in Canada’s employment data and the fears about the housing price bubble).
The specialists think that such expectations aren’t prices in the exchange rates and expect the greenback to get under pressure versus its Canadian counterpart, so they lowered forecasts for USD/CAD from 1.0100 to 0.9900 in a month and from 1.0300 to 0.9800 in 3 months.
Commerzbank: bearish view on euro
Technical analysts at Commerzbank stick to their bearish view on the prospects of the single currency versus the greenback.
The specialists underline that EUR/USD failed to break resistance at $1.3207 (the 55-day MA).
In their view, euro’s decline will resume if it breaks below support line at $1.3035. In this case euro will slide to $1.2974/54 (February minimum and 61.8%
Fibonacci retracement) and below that to $1.2624 (January minimum) and finally to $1.2000.
Standard Chartered: forecasts for majors
Analysts at Standard Chartered updated ctheir currency forecasts from Q2, 2012.
The specialists are bullish on the greenback and negative on the single currency as teh euro zone's facing the treat of recession and will likely keep suffering from fiscal issues.
Included in the note is their euro exchange rate forecast call.
RBS: trading updates for GBP/USD
Analysts at RBS remain long on British pound versus the greenback placing the target at $1.6033/72 (tweezer top formed in November) and stops at $1.5790. The strategy is to buy GBP/USD on the dips to $1.5850.
The specialists warn investors, however, that if sterling breaches support of $1.5790, they should switch to short positions citing a “head and shoulders” mode watching for $1.5666 and $1.5585.
Comments on EUR/USD
The single currency is trading today on the downside versus the greenback as it was unable to overcome resistance of 50-day MA.
The pair EUR/USD keeps trading in range between $1.30 and $1.35 within which it has been squeezed since January. Analysts at Commerzbank believe that euro will be able to break out of this range only in case something big happens such as QE3 or the escalation of the debt crisis in Europe.
The situation in the euro area’s still uncertain: while Italy survived this week’s debt auctions well enough, Spanish 10-year yields remain dangerously close to 6%. The reaction to the news that Spain banks borrowed 316.3 billion euro from ECB in March up from 169.8 billion euro in February was, however, rather muted as EUR/USD’s still above $1.3100.
The European currency was dragged lower mostly by the talk that the ECB may restart its government bond purchase program. On the one hand, such action would ease the stress at bond market; on the other, investors may take such news as a very bad sign.
All in all, from the fundamental point of view, the market’s attention which has returned to Europe in the recent weeks will be staying here for now.
EUR/USD is now trading between 50-day MA on the upside and 100-day MA on the downside.