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Nova Scotia: loonie may rise versus Aussie
Technical analysts at Bank of Nova Scotia (BNS) expect the Canadian currency to advance against the Australian.
Specialists are bearish on the currency pair because of the Momentum indicator and as MACD dropped further below the center line.
The decline in AUS/CAD is provoked by the global economic trends. Data from China, the Australian biggest trade partner, show the cutback in manufacturing. Canada, quite the opposite, is benefiting from the rebounding U.S. economy.
According to analysts, if AUS/CAD consolidates below C$1.0337, the chances for further drop to C$1.0260 will increase. Today the currency pair is trading in the C$1.0323 area.
Aussie’s down after China’s PMI; technical levels
Australian dollar is once again affected by Chinese data. HSBC flash PMI signaled that manufacturing may shrink in China for a fifth month in a row. The economists will now expect Chinese authorities to ease monetary policy, though the risk of building inflation will surely complicate such decision.
Aussie is very dependent on economic situation in China, its key export partner. AUD/USD slid this week from Monday’s maximum of $1.0636 to the levels below $1.0400. Australian currency depreciated by 4% in March due to the general strengthening of US dollar.
Today the pair tested the levels under 200-day MA at $1.0400 and touched 100-day MA at $1.0372. These together with the base of the daily Ichimoku Cloud at $1.0353 are the key support levels to hold Aussie from further slump in the near term.
As for the longer term, analysts at Pimco expect AUD/USD to slide to 0.0900 by the year-end.
Yen strengthened: analysts’ comments
On Thursday yen went up against other major currencies on the backdrop of the unexpected positive data on Japan’s export. The trade balance in February came to a surplus of 32.9 billion yen ($393 million) regardless the expected deficit of 120 billion yen. Exports dropped only by 2.7% from the previous year instead of the 6.5% forecasted decline.
Forecast Pte: The data suggest that Japan’s economy is doing better. From a fundamental perspective, this is likely to be positive for the yen.
J.P. Morgan analysts refer the yen’s strengthening to yesterday’s “bearish reversal” at USD/JPY chart where the dollar failed to break through the 84.10 resistance area. A breach below 82.85/65 support zone will prove the retracement.
Brown Brothers Harriman: Momentum and other technical indicators warn the market is stretched, after the dollar has rallied more than 10% against the yen since the end of January. A break of the 83.00 area is needed to confirm a top is in place.
Danske Bank analysts advised earlier to open long positions at 83.65 yen, targeting at 84.78 and with a stop-order at 83.01. USD/JPY is now trading at 83.14.
Analysts’ comments on EUR/USD
Rabobank: “The calming of markets in the last few months has come from policy measures, and the ability of policy makers to continue delivering supportive packages in large part stems from the strength of Germany. In the near-term the euro may be supported.”
UBS: “We’re seeing a tussle between investors who think this is a risk-on environment and therefore euro-dollar should go higher, and those that recognize balance sheet expansion by the European Central Bank will likely weaken the euro. A growing number of investors are looking at “the relative policy stance” of the ECB and the Fed.”
Pimco: the specialists are bullish on the greenback and expect EUR/USD to fall below $1.15 this year.
On the odds of additional QE in the US
RBS: if US economy evolves as outlined in the median FOMC forecast released in January, the odds of QE3 this year are about 0.25%. However, given the risks around that forecast, the (unconditional) probability of QE3 is much higher, around 40%.
BarCap: forecasts for AUD/USD revised down
Analysts at Barclays Capital believe that in April AUD/USD will be trading around the current levels supported by high oil prices on the one side and capped by Chinese economic slowdown on the other side.
As a result, the specialists think that Australian dollar will be trading sideways versus its US counterpart in range between $1.04 and $1.07.
The bank revised down its forecasts for Aussie from $1.07 to $1.06 in a month, from $1.08 to $1.05 in 3 months and from $1.10 to $1.07 in a year.
Euro slipped due to declining industry activity
The single currency sank versus the greenback due to weaker than expected PMI data released in Europe today.
According to forecasts, flash Manufacturing PMIs in France and Germany, the leading euro zone’s economies, for March were to post readings above 50 (the actual index above 50.0 indicates industry expansion, below indicates contraction). However, neither of these predictions came true: we see 47.6 for France (down from 50.0 in February) and 48.1 for Germany (down from 50.2 in February). Euro area’s industry activity is also declining – flash Manufacturing PMI was at 47.7 versus the estimate of 49.6 (down from 49.0 in February).
As we see, the economic conditions in the region are far from favorable. Weak European data will fuel concerns about European and global growth outlook.
EUR/USD dropped from $1.3250 to test $1.3130 (support: 50-day MA at $1.3144). Consolidation during the next trading hours seems likely with sales at $1.3175.
The next important release today is the publication of US unemployment claims at 12:30 p.m. GMT.
Westpac: Australia’s exports will survive
This week negative news Chinese manufacturing prospects put a downward pressure on the Australian currency because of the drop of demand on iron ore. China is the most important Australia’s trading partner.
Westpac analysts, however, are convinced the outlook on the Aussie is not so dismal. They explain the investors missed the fact that Australian energy exports will increase significantly over a 5-year period. The return on enormous investments being made into liquefied natural gas plants (LNG) will start to be seen soon, taking into consideration the perpetual demand from Japan. LNG is expected to become Australia’s second largest commodity export by 2016-17.
US dollar: up or down?
US dollar has been the one of best performing G10 currencies so far. The greenback’s advance was driven by strong US economic figures (retail sales, labor market, Empire State index and the Philly manufacturing index) and rising Treasury yields. 15 out of 19 American banking giants successfully passed stress tests. Another QE in the near future seems unlikely.
Many experts think that dollar is switching from being a safe haven (counter-cyclical) currency to a growth-related (pro-cyclical) one. However, in the periods of concerns about the global economy which will certainly occur more or less often, investors will still tend to abandon higher-yielding currencies for dollar perceiving the latter as a refuge.
US economy looks much healthier than European and Japanese ones, so it stands out promising more profits than the euro area or Japan and more safety than Australia or Canada. Rising oil prices may contribute to dollar’s appreciation: firstly, expensive oil will increase inflation pressures – an argument against more QE, secondly, further oil price hike can hinder the global economic rebound encouraging safe-haven demand for dollar.
Analysts at RBC Capital Markets warn that as investors start to expect better and better US economic performance, constant increase in the nation’s economic figures will be needed to satisfy the market’s appetite. As a result, traders may get quite disappointed if the further data from the United States doesn’t meet their expectations or if there is some bad news.
Despite all the talk about the potential advance of US dollar, there are the risks associated with being bullish on the greenback. For example, strategists at Merk Investments remind that as Treasury yields rise, their prices decline. In less than a month the US 30-year bond has fallen by about 8.5% in value. This is a negative factor for those who already hold Treasuries. The specialists think that the emergence of Treasury bear market could cause foreign investors to liquidate their US debt holdings repatriating funds or investing them in non-dollar assets. In this case the greenback would weaken.
Analysts at Goldman Sachs think that US dollar’s advance was due to only a few reasons. In their view, when a currency move is narrowly based, not much has to happen for it to change course. As a result, the specialists think that broad dollar’s weakness will resume.
8 posts • Page 1 of 1
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