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Standard Chartered, BarCap: comments on EUR/CHF
Swiss central bank Vice President Thomas Jordan claimed that Switzerland’s monetary authorities are closely monitoring franc’s rate and are ready to act if it’s necessary.
SNB President Philipp Hildebrand is speaking today at 17: 30 (GMT+4). In his last interview on November 6 Hildebrand warned that if franc remains strong the nation will face the risk of deflation or economic contraction.
Analysts at Standard Chartered Bank underline that Swiss monetary authorities do a lot of verbal interference in the currency market. So far this strategy has proved to be effective enough as the SNB manages to keep the pair EUR/CHF above the floor of 1.20 set on August 9 even though the worsening situation in the euro area urges investors to run to franc as a safe haven.
Strategists at Barclays Capital expect demand for Swiss currency to increase this week. In their view, the pair EUR/CHF is on its way down to $1.2245.
Specialists at ING don’t think that the SNB will raise floor for the pair as such actions may ruin the credibility of the threshold. On the upside the analysts see euro’s advance limited by $1.2500.
Deutsche Bank on trading difficulties
Analysts at Deutsche Bank note that forex trading on the macroeconomic trends is getting more and more difficult.
The specialists point out that Swiss franc – the strongest currency this year – added 6.5% versus the greenback in 2011, while Canadian dollar – the weakest 2011 currency – declined against its US counterpart by 1%. The deviation between franc and loonie is less than 8% and judging by the 30-year average is very small. According to the bank, that means that it has become very difficult to find profitable trades.
The economists think that in 2011 the situation won’t improve due to the extremely low short-term interest rates of the developed nations’ central banks. According to Deutsche Bank, the next year many traders will start seeking profits outside of G10 currencies. As for the major currencies the bank favors selling euro versus yen and US dollar.
Saxo Bank: forecast for EUR/USD
Analysts at Saxo Bank believe that the decline of the single currency from the October maximums in the $1.4200 area will continue during the rest of this year and in 2012 when the greenback is expected to gain 25%. The specialists claim that EUR/USD will slide to $1.20/1.30 and then to $1.10/1.15. In their view, euro will be affected by lower ECB rates.
BNY Mellon: forecasts for the major pairs
Forecasts from 10/26/2011
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BMO: loonie’s prospects in 2012
Analysts at BMO Capital Markets claim that the dynamics of Canadian dollar has been so far determined by 2 factors: Bank of Canada’s monetary policy and the euro zone’s debt crisis.
The bank’s specialists think that Canada’ currency will lose to its US counterpart during the first half of the next year affected by the concerns about financial market.
In the second half of 2012 loonie will likely strengthen as the Bank of Canada will likely be the first central bank to start raising rates. According to BMO, be the end of the next year the pair USD/CAD will decline to parity.
Italy: Berlusconi agreed to step down
Yesterday Italian controversial Prime Minister Silvio Berlusconi didn’t manage to obtain the absolute majority on the routine budget bill as he was supported only by 308 lawmakers out of 630.
As a result, Berlusconi, who seems to have lost political confidence, pledged to leave his post as soon as the nation’s parliament approves austerity measures promised to the EU. The whole matter should be over in the next few weeks.
The market’s reaction, as expected, was optimistic: investors hope that new authorities will be able to find way out of the crisis. Never the less, analysts at RBS warn traders that the relief won’t last long.
Italy now faces technocratic government – the government with limited term meant to carry out specific reforms. It’s likely to be chosen by political leaders and appointed by President Giorgio Napolitano and charged with implementing debt-reduction agenda until April 2013 when the elections are to be held. Conducting new elections on the spot as suggests Berlusconi would delay reforms. Most of the opposition parties have signaled they would support a broader coalition or a technical government.
However, one should realize that the country’s 1.9 trillion euro-debt is very difficult to control, so there are no guarantees that new authorities will do much better than Berlusconi.
Commerzbank: comments on USD/JPY
Japanese yen keeps gradually strengthening versus the greenback as the concerns about another potential intervention fade.
Technical analysts at Commerzbank believe that USD/JPY is poised down to the level of 50% Fibonacci retracement of the advance made after October 31 intervention at 77.40 yen.
The specialists claim that the outlook for the pair will remain bearish as long as it keeps trading below the 4-year downtrend line at 79.64 yen and 55-week MA at 80.52 yen. If US currency manages to overcome these levels, it will be able to rise to 2011 maximum at 85.53 yen.
According to the bank, support is found at 77.50/40. If dollar breached these levels, it will drop to 76.93 and 76.22/75.94.
RBC: sell Swiss franc versus Japanese yen
Analysts at RBC Capital Markets believe that the single currency will stay in a tight range for some time.
Instead, the specialists advise traders to turn to yen and franc as the Swiss National Bank’s and the Bank of Japan’s intervention approaches are different.
The SNB is concerned about deflation risk, so it set specific target for franc in order to reverse its advance versus euro and is successfully defending it. The BOJ has also attempted to stop the appreciation of the national currency, but failed to keep yen from strengthening. So, the latter, according to the bank, lacks determination and the use of specific targets of the former.
As a result, RBC recommends opening shorts on CHF/JPY in the 87.25 area stopping above 89.30 and targeting 83.00 yen.
MIG Bank: negative outlook for EUR/USD
Currency strategists at MIG Bank note that the single currency is under pressure as Italian 10-year bond yields have surged to the record levels of 7.22% and S&P500 index is down from the recent maximums.
The specialists note that EUR/USD was rejected by 2-year trend-line and expect the pair to slide to $1.3140.
According to the bank, support is found at $1.3145 (October 4 minimum) and $1.3000 (psychological level).
UBS, Commerzbank: dollar will gain versus franc
Analysts at UBS advise investors to buy the greenback versus Swiss franc.
The specialists underline that the European Central Bank and the Reserve bank of Australia are decreasing rates and the Bank of England is doing quantitative easing. The Bank of Japan is conducting actual interventions, while the Swiss National bank is doing the verbal ones pledging to act if necessary. Only the Federal Reserve keeps its monetary policy unchanged that makes UBS bullish on the greenback.
The economists don’t choose trading EUR/USD because of high volatility, GBP/USD has chances to gain as sterling may be used as an alternative for euro, and AUD/USD is still expensive for shorts due to the higher borrowing costs in Australia. That brings the bank to choose franc as the currency to sell against US dollar.
Analysts at Commerzbank believe that if USD/CHF overcomes 0.9082, the pair will be poised up to 0.9317 (October maximum) and 0.9341/99.