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Analysts on the AUD/USD prospects
Analysts at NAB expect Australian dollar to trade versus the greenback between $0.95 and $1.03 in the near term. The risks for AUD/USD are to the downside as the market’s risk sentiment is affected by the euro zone’s debt crisis.
Economists at ANZ Bank believe that it’s becoming more and more likely that the Reserve Bank of Australia will cut interest rates in December. Strategists at JP Morgan, RBC, BNP Paribas and Citi are also almost sure in such outcome.
Analysts at Deutsche Bank, on the contrary, sound optimistic. In their view, earlier fall in oil prices and more stimulatory policy will lead to better growth and risk sentiment in the final quarter of the year. The specialists expect equities to gain reducing demand for the greenback. As a result, the economists believe AUD/USD will advance to $1.06 or even to $1.10.
EUR/USD is on its way down to October low
Currency strategists at Morgan Stanley and Commerzbank think that the single currency is moving down versus the greenback towards October 4 minimum at $1.3145.
Analysts at Societe Generale are very bearish on EUR/USD. In their view, after the pair hits $1.3145, the next downside target will lie at $1.1875 (June 2010 minimum). In their view, support levels are found at $1.3240 and then $1.2860 and $1.2590.
Concerns about euro zone’s future strengthen
The single currency hit 7-week minimum versus US dollar sliding to the levels in the $1.3250 area. The risk environment seems to be quite unfavorable.
Yesterday German Chancellor Angela Merkel spoke against the idea of joint euro bonds and the bigger role for the European Central Bank in solving the crisis.
Alarm signal came on Wednesday when German government was able to sell only 3.644 billion euro ($4.92 billion) in 10-year bunds of the planned amount of 6 billion euro for an average yield of 1.98%. After auction the yield rose to 2.09%.
Analysts at Commerzbank warn that if German bunds lose their safe haven status, this will be a very hard blow for euro. The specialists underline that even during the severe times of 2008 and 2009 these securities were trading stable enough.
The fears about the region’s future are mounting. Italy’s 2-year yield climbed to the record high testing the levels above 7.5%.
The majority of specialists are bearish on EUR/USD. Support for the pair now lies at $1.3145 (October 4 minimum) and $1.3045 (61.8% retracement of euro's advance in 2010-2011).
UBS, Deutsche Bank, Nomura on potential collapse of euro
Many experts from the major banks and ratings agencies agree that the euro area may break up unless the region’s policymakers find solution to the euro zone’s debt crisis.
Analysts at UBS underline that the currency market’s beginning to price in the collapse of the currency union. Strategists at Deutsche Bank and Nomura agree that the European debt turmoil has entered a very dangerous phase as investors started worrying about the euro zone’s core economies such as Germany.
Agency Moody’s Investors Service said today the “rapid escalation” of the crisis threatens all of the region’s sovereign ratings and that the risks will keep rising if no steps are taken to stabilize the situation.
Last week was full of negative events: Germen government failed to draw bids for 35% of 10-year bunds, while Spain decided not to sell 3-year bonds and Italian 2-year yields surged above the 10-year ones. In addition, Standard & Poor’s cut Belgium’s credit rating and Fitch Ratings lowered Portugal’s one to the junk grade. The IMF rejected the talks provoked by La Stampa that it’s preparing to lend Italy 600 billion euro.
Among the coming political news there are Ecofin meetings on Tuesday and Wednesday and EU leaders’ summit on December 9. I(t seems that the measures previously rejected by the region’s authorities such as the increase of the ECB bond buying and governments issuing common securities in a deeper fiscal union are now the only possible steps to save the monetary union.
Strategists at Morgan Stanley note that it’s possible that the European policymakers won’t be able to present credible solution at the summit. Analysts at UBS note that the surging bind yields will hit Germen and other euro zone’s banks which may require additional capital. According to Bank of America Merrill Lynch, if Germany left the bloc, the fair value of EUR/USD would drop by 2%, while if Italy quits it would increase by 3%.
Commerzbank: comments on AUD/USD
Technical analysts at Commerzbank note that Australian dollar managed to find support versus its US counterpart in the $0.9660/70 (78.6% Fibonacci retracement) and open on Monday with a positive gap rising to the levels above $0.9900.
However, the specialists think that the current rebound is only a correction and that the outlook for AUD/USD will remain negative as long as it’s trading below resistance line at $0.9985.
According to the bank, if the pair gets below the previously mentioned support it will fall to October minimum at $0.9388. In the longer term Commerzbank expects Aussie to slide to $0.8545.
Citigroup: recommends selling EUR/CAD
The single currency managed to recover versus the greenback from more than 1-month minimum at $1.3211 to the levels above $1.3300 on the speculation about the new plan which implies stronger integration of the core economies.
Never the less, analysts at Citigroup are bearish on euro and recommend selling it on the rallies. In their view, such plan would be difficult to realize as it will likely meet opposition of different European nations. As a result, the hopes that the ECB will increase bond buying may be unjustified.
The specialists advise investors to open shorts on EUR/CAD. In their view, the outlook for Canadian dollar as more bullish as Canada has rather credible fundamentals, is closely connected with the United States which seem to be resilient enough despite the negative effects coming from Europe, and, finally, because loonie is able to gain from advance in commodity prices.
BBH: European policymakers meet this week
European finance ministers meet twice this week: today at the Eurogroup meeting and tomorrow at the Ecofin one.
Analysts at Brown Brothers Harriman believe that if the policymakers don’t come up with specific proposals of how to deal with the crisis, investors will resume selling euro and stocks.
As for the talk that the region’s leaders may be negotiating a new pact, the specialists note that earlier there were many times when the markets were lightened with hope but got disappointed as nothing happened.
According to the BBH, it’s also necessary to take into account surging bond yields in Europe and the warnings from the OECD and Moody's Investors Service that the way out of the escalation debt turmoil should be found urgently.
Societe Generale: forecast for QE3
Currency strategists at Societe Generale believe that the Federal Reserve will decide to conduct the third round of quantitative easing by March 2012.
As the reasons for such forecast the specialists cite the projected US weak economic growth in the first quarter of the next year and the slowing inflation in the country.
The specialists claim the Fed will buy mainly mortgage-backed securities and QE will be worth about $600 billion over 6-8 months. As a result, the central bank’s securities portfolio will increase by the end of 2012 from $2.65 to $3.25 trillion.
Commerzbank: comments on EUR/USD
The single currency managed to recover versus the greenback from more than 1-month minimum at $1.3211 to the levels above $1.3300.
Technical analysts at Commerzbank claim that EUR/USD is facing strong resistance at $1.3418 (resistance line) and $1.3457 (23.6% Fibonacci retracement of the recent decline). In their view, the pair won’t be able to get above $1.3615 (November 18 maximum) in the near future remaining in the $1.3457/3615 area.
According to the bank, if euro breaks below $1.3145 (October 4 minimum), it will be poised down to $1.2860 (2011 minimum). On the downside the longer term target lies at $1.20.
Euro area, China: economic outlook deteriorated
Analysts at UBS reduced China’s 2012 GDP forecast from 8.3% to 8%. The specialists expect exports growth to slow as the demand for Chinese products weakens due to the euro zone’s debt crisis. In their view, the nation’s exports will stagnate the next year, while earlier they expected 5.5% growth.
The outlook for European GDP growth was earlier cut from 0.7% to 0.2%. According to the bank, the currency union has chance to avoid collapse of euro and banking crisis. However, UBS points out that the region’s economy will nevertheless be in recession in 2012.
Strategists at Deutsche Bank cut projections for euro area’s economic growth from +0.4% to -0.5%. The specialists underline that as Europe’s economic prospects deteriorate, the European authorities will be more motivated to act.
The OECD also lowered 2012 forecast for euro zone’s economic growth from 2.0% to 0.2%.