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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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"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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"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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"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.

Image from http://seoklass.ru

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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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"Greece: update from the battle-front"(2012-05-21)

Greece: update from the battle-front




Greece’s future remains extremely cloudy. Opinion polls differ. According to one, the distribution of votes will be the following:

28% - for Coalition of the Radical Left (SYRIZA);

24% - for conservative New Democracy;

15% - for socialist PASOK;

8% - for the Independent Greeks, a right-wing anti-bailout party;

7% - for pro-European but anti-austerity party.

According to another survey, ND is ahead of SYRIZA. New Democracy and PASOK signed Greece’s debt deal with socialist PASOK but has long pushed for a renegotiation of the terms of the agreement. Alexis Tsipras, the leader of SYRIZA, started 2-day visit to Paris and Berlin today. Yesterday Tsipras claimed that his party’s opposition to Greece’s debt deal would not mean a euro zone exit, while ND leader Antonis Samaras accused him of making empty promises.

REUTERS/Yannis Behrakis



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"Ichimoku. Weekly forecast. GBP/USD"(2012-05-21)

Ichimoku. Weekly forecast. GBP/USD





Weekly GBP/USD

Last week sterling experienced a big slump versus its US counterpart. The pair GBP/USD tested the levels below weekly Ichimoku Cloud, but then ultimately closed the week right at Senkou Span A. The new trading week was opened with a gap lower – the bulls are trying to close it, but the bearish Cloud is acting as resistance.

The prices breached support of the Turning line (2), so they are currently helped by the Standard line (1). Kijun-sen is moving horizontally and pointing at sideways trend – note that it may be in a rather broad range with the recent developments hinting at the fact that it may take place below the Cloud. Kumo is thin (3), so neither bulls, nor bears are really sure in themselves. All in all, the technical picture looks more negative than positive (GBP/USD returned below 200-week MA) and British currency is vulnerable for another leg lower in case Kijun-sen is breached.

Chart. Weekly GBP/USD

Daily GBP/USD

On the daily chart pound also breached important support levels – Kijun-sen (1), the support line connecting the minimums of January 13, March 12 and April 16 and the Ichimoku Cloud to consolidate below the latter. Kumo significantly narrowed in comparison to what we saw a week ago (3). The Turning line (2) dived below the Standard one (1) forming weak, but “dead cross”.

We don’t think that pound will be able to return above psychological level of $1.6000 in the coming weeks as it seems that the pair has topped on April 30. We expect sterling to trade this week between $1.5780 and $1.5950/6000 showing a kind of consolidative recovery ahead of further declines.

Chart. Daily GBP/USD



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"Fidelity: likely scenario for euro"(2012-05-21)

Fidelity: likely scenario for euro




According to analysts at Fidelity Worldwide Investment, Greece is certain to leave the euro zone, but its exit is unlikely to collapse the whole system.

Specialists forecast Spain to ask for assistance in the recapitalisation of its banks from both the ECB and the IMF in the coming months, but then the situation is expected to improve. In their view, Spain and Italy have all the chances to avoid expulsion, despite the fact that the austerity programs in these countries have been losing support over the last few months.

The Greece’s cautionary example may illustrate the importance of the austerity measures and the probable consequences of non-cooperation with the EU. Analysts are convinced that Europe will never find a way out from crisis without a tight collaboration and political stability.

Analysts recommend investors to focus on capital preservation. The best strategy is not to put priority on income, but to invest in low volatility instruments.

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"Spain: struggle with deficit and recession"(2012-05-21)

Spain: struggle with deficit and recession



The Finance Ministry reported on Friday the Spain’s 2011 budget deficit could be revised to 8.9% of GDP from initial 8.5% after four of its 17 regions overshot their expected budgets. However, the Ministry still expects to meet the target of 5.3% for 2012 budget deficit. Spain’s authorities forecast the Spanish GDP to shrink by 0.3% in Q2 2012. Recession in Spain, therefore, continues for the third consecutive quarter (in Q4 and Q1 economy also contracted by 0.3%).

These days the country is on a thin ice: the indebtedness is growing aggressively and the GDP is slowing down, leaving the euro zone’s economy under the threat. All eyes on the EU leaders: will they manage to balance austerity with growth?

French President Francois Hollande said on Saturday he would make proposals for Eurobonds at an upcoming European summit in Brussels on May 23. German Chancellor Angela Merkel is opposed to euro zone bonds in a short-term prospect. Hollande, however, is determined to persuade Berlin to lift its veto on issuing common bonds in order to get instruments to stimulate growth in the region.

Photo: AP




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"EUR/USD: bulls vs. bears"(2012-05-21)

EUR/USD: bulls vs. bears


The common currency resumed a bullish correction vs. the greenback on Monday. The G8 meeting, held on May 18-19, didn’t give any clear answers, but the leaders expressed hope that Greece manages to stay in the euro zone. The G8 countries also stressed that their "imperative is to promote growth and jobs", giving a hint they are turning away from austerity.

Growth is expected to be the main topic of the EU meeting on Wednesday (May 23), where French President Francois Hollande is expected to call for Eurobonds. According to analysts, focus on growth means the higher ECB involvement, “dovish” monetary policy and a weaker euro.

The uncertainty in Europe persists: investors remain concerned about the possible consequences of the so-called “Grexit” (Greece may be forced to leave the euro zone if the anti-austerity party wins the elections in June) and about the situation in Spain’s banking sector (the country is expected to ask for bailout soon, 10-year bond yields increased to 6.29%).

Bulls dominate the market on Monday; however, most analysts believe it's a short-time correction. EUR/USD still trades far below the 55-, 100- and 200-days MAs. MACD stays on the negative territory and below its signal line, giving sell-signals. The pair trades far below the daily Ichimoku Cloud.

The bullish trend may strengthen if the pair manages to fix above the strong $1.2812 resistance (today’s maximum). Further resistance lies at $1.2845, $1.2880, $1.2910, $1.2930, $1.2950, $1.2970 and $1.3010, while support – at $1.2750, $1.2710, $1.2680, $1.2665 (May 17 minimum), $1.2640 (May 18 minimum).

Chart. Daily EUR/USD




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May 22: economic background
Tuesday, May 22, 2012 - 06:30

EUR/USD shows a two-day advance ahead of the EU summit on Wednesday, which is expected to show who stands where among the European leaders. German Chancellor Angela Merkel said yesterday that good cooperation “doesn’t exclude differing positions” referring to Francois Hollande’s intention to push through the idea of Eurobonds.

US session was positive with S&P 500 rising by 1.6%. Asian stocks added 1.2% today (MSCI Asia Pacific Index). Risk sentiment managed to improve, though the markets lack momentum. Commodity currencies got slightly higher versus the greenback. Demand for the New Zealand dollar and for the Aussie was supported as Asian stocks extended a global rally.

US dollar itself gained a bit against Japanese yen and Swiss franc. On Wednesday the markets will be eyeing the Bank of Japan’s meeting. The benchmark rate is seen unchanged at 0.10% level, though the central bank may be forced to do more easing.

Events to watch:

• Great Britain: Consumer Price Index (CPI) in April is forecasted to grow by 3.1% (a decline in comparison with a 3.5% growth in March, but still much higher, than a 2% BoE target). It’s possible, however, that the rate falls to 3% (the lowest since February 2010) saving the BoE Governor Sir Mervyn King from issuing the inflation letter (the letter is only required if the inflation is below 1% or above 3% and is written to explain why inflation has overshot the target). Public sector net borrowing in April may decline to minus 5.4B vs. 15.9B in March.

• U.S.: Annualized number of existing home sales – the main gauge of housing market conditions – may increase from 4.48M in March to 4.65M in April supporting the idea of the nation’s economic rebound. The labor market is America’s weakest spot and many investors go the US nowadays only because it’s better than Europe.

• Europe: Consumer confidence in the euro area will likely remain low. Don’t wait for any surprises here. Spain will sell 3- and 6-month bills.

• The OECD (Organization of Economic Cooperation and Development) will release its global growth forecast.

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