FBS.com - Daily/Weekly Analysis

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FBS Daily/Weekly Analysis

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"Westpac, HSBC on the outlook for kiwi"(2011-11-02)

New Zealand’s dollar weakened this week versus its US counterpart as investors’ risk sentiment was affected by the news about the referendum in Greece.

Currency strategists at Westpac believe that NZD/USD will keep declining during the next few weeks moving down to the levels in the $0.7000 area. In their view, support for the pair is situated at $0.7910, while resistance stays at $0.8050.

Analysts at HSBC, however, think that there won’t be any clear trend for kiwi until the FOMC and ECB meetings and US payrolls this week. It’s necessary to note that the specialists don’t expect the Fed to trigger the QE3 as there should be a deflationary environment for that.

Chart. Daily NZD/USD

Comment here http://www.fbs.com/analytics/news_markets/view/8994

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"J.P.Morgan: euro versus yen and US dollar"(2011-11-02)

Analysts at J.P. Morgan claim that in the situation of uncertainty caused by the announcement of the Greek referendum one should sell the single currency versus Japanese yen at 107.00 stopping at 109.25 and targeting 102.00. According to the economists, the unilateral intervention in Japan won’t be effective.

Chart. Daily EUR/JPY

As for EUR/USD, the specialists think that it will decline to $1.36. The bank underlines that the volatility index is high, about 20%, so in the short term the trade is going to be extremely choppy. The strategists advise investors who are trading the pair to pay great attention to today’s FOMC meeting results and US Non-Farm Payrolls data on Friday. In their view, euro will keep losing to the greenback during the coming months and quarters and may hit $1.30.

Chart. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/8996

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"Commerzbank: technical comments on EUR/USD"(2011-11-02)

Concerns about Greece’s future made euro test the levels below October minimums in the $1.3655/52 zone hitting the $1.3600 area yesterday.

Technical analysts at Commerzbank expect EUR/USD to through consolidation during the coming sessions. Resistance levels at $1.3855 and $1.3930 are going to limit euro’s advance today. Support is found at $1.3610 and $1.3550.

Then the pair will resume its down move. The specialists think that the European currency will slide to $1.3381/60 (late September minimums) and then to $1.3145 (October 4 minimum).

The bank advises investors to avoid trading the pair until the fate of the latest bailout package becomes clear.

Chart. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/8998

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"Agenda for the euro area in November"(2011-11-02)

– Wednesday, Nov. 2: French President Nicolas Sarkozy and German Chancellor Angela Merkel meet with Greek, IMF and EU officials in Cannes. Portuguese T-bill auction. Euro-zone manufacturing PMI data.

– Thursday, Nov. 3: ECB policy meeting. Mario Draghi’s first press conference as ECB President. Spanish and French bond auctions.

– Thursday, Nov. 3 – Friday, Nov. 4: G-20 leaders meet in Cannes.

– Friday, Nov. 4: Greek government confidence vote. Euro-zone services PMI data.

– Monday, Nov. 7: Eurogroup finance ministers meet.

– Tuesday, Nov. 8: EU finance ministers meet. Greek T-bill auction.

– Thursday, Nov. 10: Italian T-bill auction.

– Friday, Nov. 11: 2.0 billion euro of Greek T-bills mature.

– Monday, Nov. 14: Italian bond auction.

– Tuesday, Nov. 15: Greek T-bill auction.

– Wednesday, Nov. 16: Portuguese T-bill auction.

– Thursday, Nov. 17: Spanish and French bond auctions.

– Friday, Nov. 18: 1.3 billion euro of Greek T-bills mature.

– Sunday, Nov. 20: Spain holds general election.

– Thursday, Nov. 24: General strike in Portugal.

– Friday, Nov. 25: Italian T-bill/bond auction.

– Tuesday, Nov. 29: Italian bond auction. Final Portuguese budget vote.


Comment here http://www.fbs.com/analytics/news_markets/view/9001

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"Morgan Stanley: euro and political factors"(2011-11-02)

Analysts at Morgan Stanley look into political factors which will determine dynamics of the single currency versus the greenback.

Today German Chancellor Angela Merkel and French President Nicolas Sarkozy meet with the Greek government and the IMF officials ahead of 2-day G20 summit beginning tomorrow, but the specialists think that euro’s advance on this news won’t last long.

The strategists urge traders to pay attention to the confidence vote in Greek government that is taking place on Friday. In their view, the most bearish outcome for euro would be if the Prime Minister George Papandreou wins as that will lead to the referendum with potentially negative results. If Greek say “no” to the bailout package, Greece will be doomed to announce default.

If Papandreou loses, the government will fall and the new elections will be very likely. In such case the new budget reform measures and potentially delay the next round of bailout funds from the EU will be delayed. This scenario, however, would be more positive for euro as this way there will be no referendum.

Anyway, the medium term outlook for euro, according to Morgan Stanley, is negative.

According to the bank, EUR/USD has broken through the major support levels and is now poised down to $1.3365 and $1.3145 (October 4 minimum). Morgan Stanley expects the pair to end 2011 at $1.30 and then drop to $1.25 in the first quarter of the next year.

Chart. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/9003

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"CIBC: 12-month forecast for EUR/USD"(2011-11-02)

Analysts at CIBC World Markets expect the single currency to trade between $1.3400 and $1.3800 during the next 12 months.

According to the specialists, in December EUR/USD will consolidate in the $1.3800 area. Then it will fall to $1.3400 in March next year and rebound to $1.3500 in June and to 1.3600 in September to return back to $1.3800 in December 2012.

График. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/9006

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"Bernanke: US economy may need additional stimulus"(2011-11-03)

Federal Reserve Chairman Ben Bernanke claimed yesterday that additional monetary stimulus may be needed to reduce unemployment as US economic outlook seems to be rather pessimistic. Among the options of such stimulus Bernanke named the third round of quantitative easing, extending the period of record-low borrowing costs or estimating the conditions necessary for the rate hike.

The Chairman admits that the central bank has overestimated the pace of US economic recovery and expects American economic growth to be “frustratingly slow”, while FOMC statement states that even after relatively good figures in the third quarter there are “significant downside risks”. According to Bernanke, these risks include the effects of European fiscal and banking problems.

The Fed’s GDP growth projections for 2012 were lowered from 3.3-3.7% (June’s estimate) to 2.5-2.9%. The projected unemployment rate in the fourth quarter of the next year was raised from the previous forecast of 7.8-8.2% to 8.5-8.7%.

The Operation Twist or the lengthening of the Fed’s bond portfolio maturity is left in place. US monetary authorities also confirmed the plan to hold the Federal funds rate between 0% and 0.25% at least until the middle of 2013.

It’s clear now that the Fed’s policy has become more accommodative and the central bank is ready for aggressive actions.

Despite the increased possibility of QE3 that should have weakened US dollar the greenback strengthened against euro. Analysts at UBS think that this may be explained by the fact that some traders expected the Fed to take even more loose approach. In addition, one should remember that the pair EUR/USD is also weakened by the ongoing crisis in the euro area.

Chart. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/9010

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"Bernanke: US economy may need additional stimulus"(2011-11-03)

Federal Reserve Chairman Ben Bernanke claimed yesterday that additional monetary stimulus may be needed to reduce unemployment as US economic outlook seems to be rather pessimistic. Among the options of such stimulus Bernanke named the third round of quantitative easing, extending the period of record-low borrowing costs or estimating the conditions necessary for the rate hike.

The Chairman admits that the central bank has overestimated the pace of US economic recovery and expects American economic growth to be “frustratingly slow”, while FOMC statement states that even after relatively good figures in the third quarter there are “significant downside risks”. According to Bernanke, these risks include the effects of European fiscal and banking problems.

The Fed’s GDP growth projections for 2012 were lowered from 3.3-3.7% (June’s estimate) to 2.5-2.9%. The projected unemployment rate in the fourth quarter of the next year was raised from the previous forecast of 7.8-8.2% to 8.5-8.7%.

The Operation Twist or the lengthening of the Fed’s bond portfolio maturity is left in place. US monetary authorities also confirmed the plan to hold the Federal funds rate between 0% and 0.25% at least until the middle of 2013.

It’s clear now that the Fed’s policy has become more accommodative and the central bank is ready for aggressive actions.

Despite the increased possibility of QE3 that should have weakened US dollar the greenback strengthened against euro. Analysts at UBS think that this may be explained by the fact that some traders expected the Fed to take even more loose approach. In addition, one should remember that the pair EUR/USD is also weakened by the ongoing crisis in the euro area.

Chart. Daily EUR/USD

Comment here http://www.fbs.com/analytics/news_markets/view/9010

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"Greece’s membership in euro area depends on referendum results"(2011-11-03)

The Greek dilemma is finally put point-blank: German Chancellor Angela Merkel said that Greece’s referendum on a bailout deal will determine whether it will stay in the euro area.

French President Nicolas Sarkozy claimed that the indebted nation will receive any financing only if it holds to the terms of a rescue agreement designed last week.

This is the first time when European leaders raised the prospect of the euro zone splintering. The vote is scheduled on December 4 or 5.

Greek Prime Minister George Papandreou who has initiated the referendum thinks that there’s the necessity of “wider consensus” for the bailout terms expressing confidence that his nation will remain the member of the monetary union. Greek Finance Minister Evangelos Venizelos, on the other hand, argues that such question can’t be submitted to referendum.

The results of the polls show that although the majority of Greeks are against the austerity measures imposed on them by the bailout package they don’t want their country to leave the currency bloc.

It’s also necessary to note that the next 8-billion-euro tranche of the first bailout package will be delayed until the referendum results are announced.


Comment here http://www.fbs.com/analytics/news_markets/view/9012