Comments and forex-analytics from FBS Brokerage Company - page 107
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Kiwi keeps rising versus the greenback
New Zealand’s dollar keeps rising versus its US counterpart continuing its 6-week advance: kiwi has already strengthened from December 15 minimum at $0.7460 to the levels above $0.8200.
The Reserve bank of New Zealand decided this week to leave the rates unchanged at 2.50%, while the Federal Reserve pledged to keep borrowing costs at the record low between 0 and 0.25% until late 2014.
New Zealand posted today its first trade surplus in 5 months: the nation’s exports exceeded imports by NZ$338 million ($278 million) in December, while the economists predicted a NZ$50 million deficit.
Specialists at Commonwealth Bank of Australia underline that they are seeing ongoing offshore demand for kiwi dollars. In their opinion, New Zealand’s economy is going OK, and certainly some of the individual sectors of the country are doing quite well.
Analysts at Westpac believe that NZD/USD may reach $0.8300 in the near term on positive global risk phase. However, the specialists underline that in the longer term they aren’t yet ready to abandon the view that NZD hits $0.7000’s this year.
Strategists at Barclays Capital don’t see any signs of the top, so the pair, in their view, may retest $0.8345. According to the bank, support is situated at $0.8120.
Never the less, it’s necessary to note that 14-day RSI is in the 76 zone, over the 70 level that signals an asset’s price may have risen too quickly. As a result, analysts at Standard Chartered think it’s natural to assume that there will be a period of consolidation. Strategists at Deutsche Bank also think that New Zealand’s dollar is now a bit overvalued and that its fair value lies at $0.7600.
Specialists at Forecast Pte recommend selling Aussie and kiwi on the rallies reminding about the ongoing concerns over Greece.
Deutsche Bank: SNB may intervene any day
Analysts at Deutsche Bank claim that in the near term the Swiss National Bank may start aggressive sell-off of Swiss franc versus the single currency trying to protect the floor for EUR/CHF.
The specialists warn that the SNB’s intervention may occur any day. In their view, if Swiss monetary authorities act aggressively, investors will seek to sell franc in anticipation of central bank intervention.
The pair EUR/CHF is trading within a very narrow range just below 1.2100 down from December maximums in the 1.2445 zone.
Euro’s rebound stalled
The EUR/USD is currently trading in the $1.3100 area, down from this year’s maximum at $1.3184.
The negotiations between Greece and its private creditors continue. The nation needs to make massive debt repayments in March, so it needs to make a deal soon. According to Olli Rehn, EU economic and monetary affairs commissioner, the deal will be likely at last reached at the weekend.
Today euro’s advance stalled on the concerns about another European economy – Portugal. The markets worry that the country may follow Greece and seek another bailout. Yields on Portuguese government bonds renewed historical maximums – the 10-year yield passed yesterday above 15% level (today the yield is just below this mark).
Analysts at ING warn that Portugal may trigger euro’s decline in February. The troika will be reviewing Portugal's adherence to its bailout package, while bond investors are already pricing in Portuguese debt’s restructuring. The specialists recommend selling euro at $1.3130/50 expecting it to break of channel support at $1.3020.
Another blow for single currency dropped after US advance GDP disappointed the market: American economy grew at a 2.8% annualized rate in the fourth quarter below the expectations of 3%-growth.
Deutsche Bank, Goldman, Nomura on euro
Analysts at Deutsche Bank think that the greenback will maintain its safe haven status, while the European currency will remain the “guiding light for the biggest risk swings”. In their view, the Fed’s actions will reinforce the risk-on sentiment and lead to the growth of stocks and higher-yielding currencies, while short positions on euro will squeeze. The bank claims that the fair value for EUR/USD after that squeeze will be at $1.3500. It will be possible to speak about some real recovery only if euro manages to rise above this level.
Economists at Goldman Sachs note that the Federal Reserve’s statement may provoke fresh reserve diversification from US dollar into other currencies making American currency decline. According to the bank, euro and yen are the most likely candidates to benefit from such flows.
At the same time, specialists at Nomura point at the fact that although some euro-zone asset markets appear to be recovering, euro-zone residents start to put capital to work in the US and elsewhere. In their view, this will put euro under the negative pressure versus mote counterparts and not just the greenback.
Euro’s on the downside ahead of EU summit
The single currency declined versus the greenback ahead of EU summit later today. The European leaders meet in Brussels to make the final amendments to the deficit-control treaty and endorse the statutes of a 500 billion-euro ($659 billion) rescue fund to be set up this year.
According to Financial Times, Greece’s finance minister Evangelos Venizelos rejected a German plan for the euro zone to impose to create a European Union “budget commissioner” with the power to veto Greek tax and spending decisions, saying it would improperly force his country to choose between “financial assistance” and “national dignity”.
At the same time, euro found some support on the speculation Greece and its private-sector creditors will reach an agreement on a debt-swap plan this week.
AUD/USD fell as Fitch Ratings placed Australia's four biggest banks on credit watch with negative outlook, though it’s necessary to note that the move only brought Fitch in-line with other major ratings agencies.
In addition, many experts expected the People’s Bank of China to reduce reserve requirement ratio this weekend at the end of the New Year holiday but Chinese monetary authorities didn’t loosen monetary policy. If the PBOC cut RRR, this would encourage spending and boost demand for commodities.
Important events today:
• EU Economic Summit;
• Italian will sell debt maturing in 2016, 2017, 2021 and 2022. On January 27 Fitch ratings lowered the ratings of Italy, Spain, Belgium, Slovenia and Cyprus, saying they lack financing flexibility in the face of the regional debt crisis.
BMO: buy US dollar versus Japanese yen
Currency strategists at BMO Capital think that though Japanese yen reached maximums in 2011, the things will be different this year.
The specialists underline that last year Japan had positive balance of payments amid low global interest rates. This month, however, the nation announced that it ran a trade deficit in 2011 due to the increased energy import. According to BMO, this will likely become a trend. Moreover, Japan's debt exceeds 200% of GDP and the Bank of Japan has signaled that it wants to invest overseas which means buying foreign currencies.
The bank recommends buying USD/JPY stopping at 74.90 and targeting 81.45. The specialists claim that this way one may both play the range and take advantage of the changing dynamics for 2012..
Canadian dollar: prospects and forecasts
Loonie and other commodity currencies
Many experts think that Canadian dollar will outperform Australian and New Zealand’s dollars against their American counterpart. The explanation of this assumption seems to be simple enough: economic growth of the United States, Canada’s main trading partner (about 75% of Canadian exports go to the US) is gaining pace, while the growth of Chinese economy, Australia’s main trading partner (about 25% of Canadian exports go to China) is slowing down.
According to Bloomberg’s purchasing power parity analysis, Australian currency is overvalued by 28.6% against USD, while Canada’s dollar is undervalued by 6.2%.
The correlation between the currencies which tend to trade in tandem with stocks and commodity prices is declining: CAD weakened by 2.3% in 2011, while Australian and New Zealand’s currencies finished the year almost unchanged.
Canada’s positive economic outlook
Canadian growth data seems optimistic enough: leading economic indicators gained in December for the sixth month in a row, while the nation’s GDP added 2.7% in October from a year earlier (US economy increased in the fourth quarter by 2.8% y/y). The odds that the Bank of Canada will loosen its monetary policy declined. In addition, Canada’s trade balance switched to surplus of C$1.07 billion in November due to the increased exports of energy and automobiles.
Data from Canadian Imperial Bank of Commerce shows that the demand for Canadian securities more than doubled last year from 2008’s record C$11 billion. Strategists at Nomura Securities have found out that for every C$10 billion of net investment into Canada’s bond market, loonie strengthens by 0.7% versus the greenback.
USD/CAD prospects
At the end of last week loonie reached the parity versus the greenback for the first time in almost 3 months. On January 26 the pair USD/CAD declined to 0.9980.
Analysts at RBS claim that US economic outlook looks reasonably good and that has not yet been reflected in Canadian dollar’s rate. In their view, the currency is attractive because it hasn’t run up as much as some of the other commodity currencies.
Economists at UBS are positive on loonie in the longer term. At the same time, the specialists warn that the problems in the euro area and Iran may worsen risk sentiment and make USD/CAD return to 1.04 before starting to decline.
However, not everyone believes in loonie’s appreciation. Canadian banks, for example, aren’t bullish on the national currency. Toronto-Dominion Bank, the most bearish, expects loonie to weaken to C$1.09 per US dollar, while Bank of Nova Scotia, the least bearish, thinks that Canadian currency will decline to C$1.02 per dollar.
UBS: US dollar won’t decline much
Analysts at UBS note that last week we saw an improvement of the market’s risk sentiment due to stronger-than-expected readings of some key euro zone’s indicators promises of the deal between Greece and the private creditors, successful bonds and T-bill auctions in peripheral euro zone debt markets (except worried about Portugal). In addition, the Fed decided to leave the interest rates at “exceptionally low” levels until late 2014 and indicated that further quantitative easing is possible if US economic fundamentals worsen.
All that had negative impact on the greenback. Analysts at UBS, however, claim that as US GBP gained 2.8% in the fourth quarter on the annual basis after adding 1.8% in the previous 3 months (revised down), QE3 seems unlikely. As a result, the specialists think that the dovish stance of the Fed may be already priced in the greenback’s rate, so one shouldn’t become bearish on American currency.
The specialists advise investors to pay attention to Ben Bernanke’s testimony to Congress on February 2.
EU summit: Europe’s stuck in tensions
European leaders met in Brussels on Monday to discuss the region’s debt crisis and other issues.
Analysts at UBS claim that the lack of positive surprises at yesterday’s EU summit may lead to further disappointment of the market. In their view, “the positive news flow markets have enjoyed since the beginning of the year is proving hard to sustain and there will be far bigger challenges up ahead”.
Euro zone’s future actually seems quite challenging: Britain’s Prime Minister David Cameron and French President Nicolas Sarkozy disagree on everything from the new treaty on tighter fiscal rules – which only Britain and the Czech Republic of the EU's 27 countries won't join – to a financial transactions tax, a single EU patent and industrial policy, reports Reuters.
Among other sources of tension – the dissatisfaction of Poland and other several east European countries which aren’t fully included in euro zone summits (Poland. Hungary, the Czech Republic and Slovakia aren’t the members of the currency union, but they don't want to see Europe divided and want to attend the meetings) and concerns of Spain and other peripherals on the negative effects of severe austerity measures they have to conduct (Spain is tasked with reducing its budget deficit from 8% of GDP to 4.4% – the target almost impossible to reach for the stumbling economy).
European finance ministers are meeting on February 12-13.
BNP Paribas: comments on EUR/USD
The single currency is trading today on the upside versus the greenback on the hopes for a Greek debt restructuring deal as the nation’s Prime Minister Lucas Papademos said that “significant progress” in talks had been made.
Resistance for EUR/USD lies at $1.3244 (38.2% Fibonacci retracement of the euro's decline from October to January). Analysts at BNP Paribas claim that if the pair manages to overcome this level, it will rise towards $1.3500 on the short-covering. The specialists note, however, that such outcome will be possible only if Greece reaches the ultimate agreement with its private creditors.
In addition, it’s the end of the month, so the managers may sell UD dollars to adjust their portfolios.
At the same time, bear in mind that the Greek debt talks have yet to be resolved and the market seems really worried about Portugal’s future.