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"Sell EUR/USD on the recovery"(2012-05-15)

Sell EUR/USD on the recovery


The single currency recovered from almost a 4-month minimum in the $1.2810 area to the daily high at $1.2869.

Germany surprised analysts posting 0.5% q/q growth in Q1 – 5 times more than the market had expected. As a result, the concerns about the euro zone’s crisis and its impact on the region’s economic growth have a bit subsided. Note that demand for US dollar is also lower due to the Fed’s April 25 meeting minutes release tomorrow – the Chairman Ben Bernanke said that day that he’s prepared to “do more” to boost the economic recovery and underlined that inflation remains close to target.

The medium-term forecasts for euro are still quite negative. As a result, it looks like a chance to sell on rallies. We see that Italian GDP figures (-0.8% q/q vs. -0.7% expected) have already made EUR/USD pull back a little lower.

Resistance for the pair is situated at $1.2870 (today’s highs) and $1.2935 (May 14 maximum), while support is at $1.2807 (January 17 maximum, $1.2733 (January 18 minimum) and $1.2700.

Chart. Daily EUR/USD

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"GBP enjoys demand vs. EUR and USD"(2012-05-15)

GBP enjoys demand vs. EUR and USD


British pound steadily strengthens against the euro (12% growth since June 2011, new surge in April 2012) and the greenback (5.5% growth since January 2012). What are the reasons for the sterling’s strong performance versus its major peers?

Pound’s status of a “safe haven” tends to attract investors on the back of a total economic and political instability in the euro zone. What is more, speculations about a further QE started to fade after the inflation exceeded the expectations (CPI in March reached 3.5% after previous print 3.4%; annual PPI output in April exceeded estimates of 2.9 % by coming in at 3.3%). According to the BoE governor King, the inflation is still too high.

Moreover, the UK economy attracts foreign investors as the world’s the second largest market for M&A. According to most analysts, M&A inflows contribute to the sterling’s growth and increase the pounds prospects in a longer term. This year foreign investors have bought the biggest amount of the UK assets since 2008 ($32.6 billion-worth).

However, a note from Deutsche Bank warns that the strong pound is already affecting on the poor UK economy which is in a recession itself. For now sterling's crearly appreciating, though it's attactive mainly due to the problems elsewhere. The situation may change quickly enough, so use it while it's still here.

Chart. Daily EUR/GBP

Comment here GBP enjoys demand vs. EUR and USD // FBS Markets Inc.

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"RBS: recommendations for AUD/USD"(2012-05-15)

RBS: recommendations for AUD/USD


Technical analysts at RBS claim that AUD/USD recovered enough and now one may once again go short. In their view, the pair is capped by the 5-day MA which has been limiting the bulls since the beginning of this month.

The banks recommends selling Australian dollar versus its US counterpart at the current levels targeting $0.9860 and then $0.9667 and stopping today at 1.0113 (10-day MA).

According to the specialists, support levels are situated at $0.9860 (December 15 minimum), $0.9715 (2 minimums posted in 2011) and $0.9404. Resistance levels for AUD/USD lie at $1.0095, $1.0140, $1.0436 (the inverse head and shoulders pattern would trigger further upside from here) and $1.0496/1.0509.

Chart. Daily AUD/USD

Comment here RBS: recommendations for AUD/USD // FBS Markets Inc.

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"Euro zone avoided recession… for now"(2012-05-15)

Euro zone avoided recession… for now


Euro area managed to escape recession in Q1 with frat GDP reading (q/q), while the economists were looking forward to 0.2% contraction.

Germany surprised analysts posting 0.5% q/q growth in Q1 – 5 times more than the market had expected. France showed flat results, while Italian economy contracted by 0.8% in the first 3 months of the year vs. projected decline of 0.7%. Even the Netherlands regarded as strong economy experienced economic contraction of 0.2%.

Societe Generale: national GDP releases created the picture of an increasingly divergent euro area with the contrast between the northern and southern economies growing ever starker.

Capital Economics: “The region remains heavily reliant on Germany. Policymakers’ talk of growth seems unlikely to amount to anything in the foreseeable future. The danger of a euro zone break-up is as great as ever.”

ING Bank: “Our base case scenario is still for a gradual return to modestly positive euro zone growth in the second half of this year. But a further escalation of the debt crisis, let alone a Greek euro exit, could well derail the envisaged recovery.”

IHS Global Insight: “There seems a compelling case for the European Central Bank to cut interest rates from the current level of 1%. But we suspect that the bank will remain reluctant to do so.”

The European Commission expects euro zone’s GDP to decline by 0.3% in 2012 and then add 1% the next year.”

Photo by EPA/BGNES

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"Key options expiring today"(2012-05-17)

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).

Here are the key options expiring today:

EUR/USD: $1.2790, $1.2800, $1.2850, $1.2900, $1.3000;
GBP/USD: $1.5850, $1.6100, $1.6200;
EUR/GBP: $0.8085, $0.8060, $0.8085;
USD/JPY: 79.50, 79.75;
USD/CHF: 0.9350;
AUD/USD: $1.0100.

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"Analysts: outlook for EUR/USD"(2012-05-17)

Analysts: outlook for EUR/USD




The euro rebounded, paring a four-day decline against the dollar, as the currency’s 14-day relative strength index (RSI) fell to 22 yesterday, below the 30 level that some traders see as signaling an asset may reverse direction.

Analysts at Bank of America are strongly bearish on EUR/USD in a long term, but expect a little upside correction these days. They recommend entering the trade at $1.2800 with a stop at $1.2870 and targeting at $1.2520. According to analysts, the pair may reach the target price in a week or two.

Strategists at Danske Bank see EUR/USD at $1.2500 in one month time (forecast revised from $1.2900). In their view, the crisis dynamic is highly uncertain and a significant bigger move lower cannot be ruled out.

According to CBA specialists, the euro will be falling gradually due to the time-expanded Greek issue: new elections will be held in a month, but there is no guarantee of a positive outcome.

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Comment here Analysts: outlook for EUR/USD // FBS Markets Inc.

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"Barclays Capital: comments on AUD/USD"(2012-05-17)

Barclays Capital: comments on AUD/USD




According to analysts at Barclays Capital, a combination of global and domestic factors pulls AUD/USD below parity. However, in a short term the Aussie may enjoy a rally on the back of the postponed Greek elections and the softening tone of EU pro-austerity leaders.

Specialists at Barclays Capital lowered their monthly forecast for AUD/USD from $1.0400 to $0.9600. They also cut their three-, six- and twelve-month forecasts to $0.9900, $1.0100 and $1.0200 respectively. Analysts believe the cross will get a yield-support after the middle of June.

According to technical specialists, the pair may touch its 1.5-year lows in the $0.9385/0.9655 area in the medium term. The cross is still trading below the 50-,100- and 200-day MAs and below the daily Ichimoku Cloud.

Chart. Daily AUD/USD


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Comment here Barclays Capital: comments on AUD/USD // FBS Markets Inc.

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"Analysts agree: AUD will suffer more"(2012-05-17)

Analysts agree: AUD will suffer more




On Monday Australian dollar dived below the parity versus its US counterpart. Analysts say it will stay down there for a time being.

NAB reduced forecast for AUD/USD in September from $1.0200 to $0.9800 due to negative domestic factors. The specialists think that the Reserve bank of Australia will cut borrowing costs 2 times more by 25 bps each time and possibly more if the economy keeps deteriorating. Australian federal budget, announced last week, will lower the nation’s GDP growth in the year to June 30 by a percentage point (the RBA cut benchmark rate by 50 bps to 3.75% on May 1: the nation’s economy added 2.3% last year).

CBA lowered AUD forecast from $1.0800 to $0.9800 by June and from $1.0900 to $1.0500 by December citing the same reason for the revision – fiscal contraction and interest-rate cuts.

ANZ underlines that without positive news from China or Europe, AUD/USD rebounds will allow for tactical shorts to be built for a series of technical targets at $0.9850, $0.9600 and $0.9400 before a long-term base develops.

UBS says that the bias for AUD/USD is clearly bearish. In their view, the pair will to trade at $0.9800 in the coming weeks.

Westpac cut AUD/USD forecast from $1.0200 to $0.9800 by September keeping the year-end at $1.0400.

Chart. Daily AUD/USD


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Comment here Analysts agree: AUD will suffer more // FBS Markets Inc.

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"Key options expiring today"(2012-05-21)

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).

Here are the key options expiring today:

EUR/USD: $1.2700, $1.2780, $1.2800, $1.2900 and $1.3000;

USD/JPY: 79.50, 79.75 and 80.00;

GBP/USD: $1.5785, $1.5880 and $1.5900;

EUR/GBP: 0.8000.

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Comment here Key options expiring today // FBS Markets Inc.

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"Nomura: short-term economic outlook"(2012-05-21)

Nomura: short-term economic outlook


Global:

• China‘s growth re-accelerates in the second half after a first half slowdown to just above 8%.
• Downside risks: an oil price spike; a euro-area flare up; the US end-2012 fiscal cliff effect; a China investment slump.
• Upside risks: US consumers shrug off post-crisis blues, releasing pent-up demand; oil prices drop; euro tensions ease further.

U.S.

• Healthier labor market will continue supporting a revival of pent-up consumer demand in 2012.
• Look for the FOMC to maintain its current policy for now, but to respond quickly if downside risks intensify.
• Policymakers won’t act until after the election to avert the effects of severe fiscal tightening scheduled to begin in 2013.

Europe

• Look for the European Central Bank to cut the refinance rate to 0.50% in July with risks skewed towards less and later.
• Assume the euro zone crisis will escalate and expect a new round of QE.

Asia

• Reconstruction is set to spur Japanese growth in the first half of 2012 even with slowing overseas economies.

Source: Forbes

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Comment here Nomura: short-term economic outlook // FBS Markets Inc.