Comments and forex-analytics from FBS Brokerage Company - page 141
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USD/CHF: technical comments
The currency pair USD/CHF is moving sideways since the beginning of January, creating a triangle. The cross is clamped between the 50- and 100-day MAs. Moreover, on a daily Ichimoku chart Kijun-sen and Tenkan-sen are lying horizontally in the Cloud, also pointing at a flat market. The trend may be breached both on the upside and on the downside. Breakthrough the levels 0.9330 and 0.8930 will confirm the reversal.
The pair USD/CHF climbed to 0.9197 today, finding the nearest resistance at 0.9229 (100-day MA), 0.9251 (high Apr.16) and 0.9254 (high Mar.16). Support lies at 0.9120 (21-day MA), 0.9092 (low Apr.13) and 0.9050 (hourly high Apr.3).
As for the news, Thomas Jordan was named as permanent president of the Swiss Central Bank today. He became interim SNB chairman on Jan. 9 when his predecessor Philipp Hildebrand resigned after a trading scandal involving his wife.
Swiss ZEW economic expectations index released today indicates optimism (2.1 in March vs. 0.0 in Feb.).
Yen down on BOJ comments
The yen weakened today against most of its peers on the back of the Bank of Japan’s officials “dovish” comments and the unexpectedly wide trade deficit.
On Wednesday the BOJ Governor Masaaki Shirakawa said in the central bank is “committed” to adding monetary stimulus. Deputy Governor Kiyohiko Nishimura confirmed that the bank is ready to implement additional easing if necessary. The next BOJ meeting will be held on April, 27.
Japan posted a trade deficit of 82.6 billion yen in March from a revised surplus of 29.4 billion yen in the previous month and forecasted 223.2 billion yen deficit.
Mitsubishi UFJ: Markets are pricing in additional easing by the BOJ. A trade deficit is a negative catalyst for the yen.
The USD/JPY is strengthening for the third consecutive day and climbed to 81.51 yen, after reaching 81.57 yesterday, the highest level since April 10. The EUR/JPY rose to 106.92 yen today.
Wells Fargo: bearish outlook on EUR/USD
According to analysts at Wells Fargo, the euro will reach 1.24 against the dollar by early 2013, and continue keep falling to 1.22 from there.
In their view, the debt problems are flourishing and economic activity in the region remains weak. Analysts expect the ECB to cut rates to stimulate the economy.
Moreover, Wells Fargo analysts note that the technical forecast on EUR/USD also remains bearish (20-day MA lies below the 50-day MA).
Commerzbank: trading EUR/GBP
Analysts at Commerzbank are bearish on EUR/GBP in the long term and recommend entering the trade at current levels with a stop at 0.8277 (April high) and targeting at 0.8067 (2010 low).
On Wednesday the cross closed the day below 0.8221 (Jan. 9 low), reaching a new 20-month low. According to analysts, the market is viewed as having recently broken down from a 3 month consolidation.
BMO: trading EUR/USD on Spain's woes
Spain issues as much as 2.5 billion euros in 2- and 10-year government bonds on Thursday, trying to cut budget deficit. The country struggles to prove its ability to finance itself without begging for external financial support.
On Wednesday Spanish 10-year yields were down 1.8 b.p. to 5.89%. However, the investors are getting nervous again ahead of the auction.
According to analysts at BMO Capital, the EUR/USD is creating lower highs and lower lows. If the euro becomes weaker against the greenback after the auction, strategists recommend entering the trade right around $1.3130 with a stop at $1.3230 and targeting at $1.2850 or $1.2830.
Key options expiring today
Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).
EUR/USD: $1.3025, $1.3070, $1.3100, $1.3210 (large);
EUR/JPY: 106.25;
USD/JPY: 81.00, 81.15, 81.25, 81.50;
GBP/USD: $1.5960, $1.5990, $1.6000;
EUR/GBP: 0.8175, 0.8200;
AUD/USD: $1.0300, $1.0415, $1.0435, $1.0450;
USD/CHF: 0.9150.
EUR/USD: economic news and comments
Spain and France conducted bond auctions today. Spain sold 2.54 billion euro in 2- and 10-year bonds slightly exceeding the planned volume. Borrowing costs rose as the nation’s struggling to meet deficit targets. France borrowed 8 billion euro ($10.5 billion).
The yields were higher due to the risks associated with approaching French presidential election.
The 10-year spread between Spanish, French, Italian bonds and German ones widened as the effects of the LTRO conducted by the ECB is fading.
In the US jobless claims also posted the reading higher than expected: 386K vs. the forecast of 370K for the week to April 14. Earnings reports were more optimistic: Bank of America reported first-quarter earnings that beat expectations as well as Travelers and Verizon Communications.
EUR/USD keeps trading in range between $1.3030 and $1.3210, within which it settled after the slide from $1.3380/3250 in early April.
Analysts at UBS are bearish on the single currency. In their view, support for the pair lies in the $1.2974/54 zone (below these levels bearish momentum will increase), while resistance is situated at $1.3213.
Standard Chartered: on ECB and the Fed’s rates
The baseline scenario of analysts at Standard Chartered is that the European Central Bank will remain on hold until the first quarter of 2014. The specialists say that if the ECB does decide to cut one more time, it will reduce borrowing costs by 25 bps by the end of June and then remain on hold for the rest of this year and in 2013.
As for the United States, the bank expects disappointing data. “Weak income growth in Q1 should result in disappointing consumer spending data in Q2 which will weigh on growth. Real earnings were up just 0.2% m/m in January and February, and the increase seen in total earnings growth has been as a result of an increase in the number of people working and hours worked, rather than actual wages. There is little evidence of consumer spending being fuelled by credit growth. The decline in core durable goods reinforces the idea that the business community is reluctant to make additional capital investment.” Economists think that the Fed to announce further QE by the end of the second quarter.
Danske Bank, MIG Bank: buy GBP/JPY
Analysts at Danske Bank recommend buying British pound versus Japanese yen as the British and Japanese central banks have 2 different approaches to monetary policy: while the Bank of Japan keeps trying to weaken the national currency, the latest minutes of the Bank of England suggest that the policymakers are moving away from further easing as UK economy is performing better than expected.
In addition, there are many comments from the BOJ official which are weighting yen. One should also mention that Japan posted a trade deficit of 82.6 billion yen in March from a revised surplus of 29.4 billion yen in the previous month and forecasted deficit of 223.2 billion yen.
The technical picture for GBP/JPY is also optimistic enough. The pair bounced up from bullish Ichimoku Cloud and the 38.2% Fibonacci retracement from this year’s advance aiming at resistance around 133.30 yen (maximums of April 2, March 27 and 22).
Analysts at MIG Bank say that if sterling gets above 133.49 yen, it will be able to follow an uptrend to 160.00 yen. The specialists say that on the downside, below 126.55, GBP/JPY will risk declining to 121.69 and 120 yen (psychological level).
Economic events to watch today
Data to watch today:
• Europe: April German Ifo Business Climate index is forecasted to decrease to 109.6 from 109.8 in March.
In addition, there will be the annual spring meeting of the International Monetary Fund/World Bank (through April 22) and the extended deadline for some Greek foreign-law bond holdouts (to tender their bonds and for second leg of debt-restructuring accord).
The pair EUR/USD remains in range between $1.3050 and $1.3200. There are stops below and above these levels.
• Britain: March retail sales data is expected to show an appreciable 0.4% growth after suffering a sharp decline in February. Retail sales volumes fell 0.8% in February after rising 0.3% in January and 0.7% in December. “If March retail sales do see significant growth, it will significantly boost the likelihood that overall consumer spending was positive in the first quarter and helped the overall economy return to growth after GDP contracted by 0.3% quarter-on-quarter in the fourth quarter of 2011”, analysts at IHS Global Insight say.
The pair GBP/USD is rising for the fifths day in a row. Yesterday sterling reached the maximal level since November 2011 at $1.6078.
• Canada: the growth pace of Core CPI may decline from 0.4% in February to 0.3% in March. The nation’s annualized headline inflation rate is expected to drop to 2.0% in March from 2.6% in February. The data will provide more information about inflationary pressures in the country's economy, and could help justify the recent hawkish tone from the Bank of Canada.
The pair USD/CAD keeps trading between 0.9845 and 1.0050 within staying in this range since the end of January.