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EUR/USD on the upside, but outlook still bearish
The single currency keeps going up versus the greenback on the positive sentiment about US economic prospects.
There’s a bunch of important data released today in the United States which is projected to be better than forecasts. US unemployment claims are thought to have declined in the week before January 14 from 399K to 387K.
At the same time, demand for euro may be regarded as limited as the talks between Greece and its private creditors represented by the Institute of International Finance on a debt-swap plan continue for the second day.
France will offer debt later today with maturities from 2014 to 2040. Spain will also sell notes and bonds maturing in 2016, 2019 and 2022 today.
EUR/USD rose from Friday’s minimum of $1.2624 to the levels in $1.2860 area. Never the less, analysts at Citigroup and Nomura are bearish on the pair citing the euro zone’s weak economy and the poor state of the region’s finance.
Commerzbank: bearish forecasts for GBP, AUD
GBP/USD
Although British pound has strengthened this week rising versus the greenback from Friday’s minimum of $1.5233 to the levels around $1.5450, the longer-term outlook for GBP/USD remains negative.
Sterling won’t be able to rise above $1.5633 (55-day MA) and $1.5672 (5-month resistance line) and will trade in the $1.4260/29 area in the longer term.
AUD/USD
Australian dollar gained this week against its US counterpart trading within larger uptrend which started in December. However, AUD/USD hasn’t managed to break through the 5-month downtrend line yet. The decline will be confirmed if Aussies goes down below $1.01946 (6-week support line). That will make the pair drop to $1.0000 heading to $0.9818 and $0.9664/80.
Lloyds expects EUR/CHF to rise
Analysts at Lloyds advise investors to buy the single currency versus Swiss franc.
The specialists think that the Swiss National Bank won’t let EUR/CHF to get below 1.20: the SNB has an unlimited supply of francs and serious intentions. The strategists think that the current situation will stay intact until the nation’s monetary authorities decide that franc’s peg to euro is economically unjustified.
Swiss economic growth is slowing down, while inflation rate is negative. As a result, the nation’s central bank is unlikely to change its monetary policy in the short term, claims Lloyds.
Gaitame.com: NZD will fall by 5%
Technical analysts at to Gaitame.com Research Institute believe that New Zealand’s dollar may fall versus the greenback by almost 5%.
The specialists note that NZD/USD didn’t manage to hold above 200-day MA and is now going to survive downward correction. In addition, the RSI (relative strength index) returned below 70 signaling that kiwi may reverse direction.
According to the specialists, NZD/USD may go down to $0.7876 (20-day MA) in January and then probably to $0.7640. Analysts surveyed by Bloomberg News expect the pair to drop to 0.7500 by the end of March.
Why BoE may decide to wait with QE?
While the marker’s expecting to see more quantitative easing from the bank of England in February, Ben Broadbent, external member of the Bank of England’s Monetary Policy Committee (MPC), says that the central bank probably won’t be so quick to act.
The economist justifies this assumption be several points. To begin with, during the past half a year the downside risks for British economy have slightly subsided. The odds are that UK economic growth picks up in the second half of the year and the household income growth improves.
Moreover, UK will gain from the positive effects of loose ECB policy. Broadbent underlines that the quarterly pace of economic growth in 2012 is likely to be volatile. Such events as the Olympics in the third quarter will contribute to growth volatility.
“I would say very, very near term (output looks) slightly weaker. In the slightly less near term Q1 is marginally stronger. Over six months, the downside risks have been lessened slightly - partly because of what the ECB has done, partly because of QE itself and you can see that in risk asset markets - quite clearly”, claims the policymaker. Broadbent adds that the decline in headline CPI inflation from 4.8% in November to 4.2% in December should help to maintain inflation expectations.
The BoE meeting will take place on February 9.
Westpac recommends selling EUR/NZD
The single currency has managed to strengthen versus the greenback this week. Euro was supported by the successful bond auctions in Spain and France and positive US labor market data. The number of people seeking unemployment benefits plummeted last week to 352,000, the fewest since April 2008.
However, analysts at Westpac see the advance as EUR/USD only as the selling opportunity. In their view, liquidity in the market “is supporting risk seeking”, which should lead investors out of currencies like the euro and into things like commodity currencies.
As a result, the bank recommends going short on EUR/NZD around $1.6000 stopping at $1.6180 and targeting $1.5650.
Westpac notes that the Reserve bank of New Zealand is one of the few which is unlikely to cut borrowing costs. Low inflation data creates an attractive entry point for the trade: New Zealand’s CPI declined by 0.3% in the fourth quarter (q/q).
SocGen: buy CAD/JPY
Analysts at Societe Generale believe that US economy will keep outperforming the European one. Never the less, they think it would be wise to protect oneself from the deterioration of the risk sentiment. To do that the bank recommends buying Canadian dollar versus Japanese yen at 76.00 targeting 79.00 and stopping at 75.00.
The specialists have studied the dynamics of Canadian dollar and other more volatile currencies like Mexican peso and Australian dollar against key stock and volatility indexes and found out that the correlation with CAD/JPY is close to zero.
As a result, those who choose this pair will enjoy the profits of bullish trade on the positive economic data, while if the situation deteriorates the decline of CAD/JPY won’t be as strong as the drop of other risky crosses, so one will be able to minimize losses.
Commerzbank: comments on EUR/USD
The single currency opened earlier today, but then managed to reach Friday’s close rising to $1.2940.
Technical analysts at Commerzbank claim that the short-term outlook for EUR/USD is positive as long as it’s trading above $1.2800. In their view, euro may rise to resistance in the $1.3077/3145 area or even to $1.3245.
If the pair drops below $1.28, it will likely decline towards August 2010 minimum in the $1.2588/30 zone.
Later today:
• German and French debt auctions;
• Euro zone finance ministers meeting;
• EU foreign ministers also assemble, with possible further sanctions against Iran’s nuclear program on the agenda.
Commerzbank: negative longer-term outlook for euro
Technical analysts at Commerzbank claim that as the single currency managed to consolidate in the $1.3000 area, it may rise to $1.3077/3145 versus the greenback this week. In that area, however, EUR/USD will face strong resistance which will cap the pair’s rate.
The specialists note that euro is vulnerable to any unexpected shift in the talks between the IIF and Greece indicating a stall in the negotiations or disappointing data from the euro zone. In their view, the longer-term outlook for EUR/USD is bearish: the pair will decline to the downtrend line in the $1.2083 region.
Morgan Stanley: recommendations for USD/CHF
Strategists at Morgan Stanley recommend buying the greenback versus Swiss franc in the 0.9280 area stopping at 0.9180 and targeting 0.9770.
The specialists note that even after Philipp Hildebrand’s resignation the Swiss National bank will maintain the floor for EUR/CHF. In addition, Swiss franc will be used as a funding currency due to Switzerland’s unfavorable growth outlook and SNB’s policy.