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November/09/2011- Comments and forex-analytics from FBS

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November/09/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Nov 09, 2011 11:09 pm

Italy: Berlusconi agreed to step down

Yesterday Italian controversial Prime Minister Silvio Berlusconi didn’t manage to obtain the absolute majority on the routine budget bill as he was supported only by 308 lawmakers out of 630.

As a result, Berlusconi, who seems to have lost political confidence, pledged to leave his post as soon as the nation’s parliament approves austerity measures promised to the EU. The whole matter should be over in the next few weeks.

The market’s reaction, as expected, was optimistic: investors hope that new authorities will be able to find way out of the crisis. Never the less, analysts at RBS warn traders that the relief won’t last long.

Italy now faces technocratic government – the government with limited term meant to carry out specific reforms. It’s likely to be chosen by political leaders and appointed by President Giorgio Napolitano and charged with implementing debt-reduction agenda until April 2013 when the elections are to be held. Conducting new elections on the spot as suggests Berlusconi would delay reforms. Most of the opposition parties have signaled they would support a broader coalition or a technical government.

However, one should realize that the country’s 1.9 trillion euro-debt is very difficult to control, so there are no guarantees that new authorities will do much better than Berlusconi.

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Commerzbank: comments on USD/JPY

Japanese yen keeps gradually strengthening versus the greenback as the concerns about another potential intervention fade.

Technical analysts at Commerzbank believe that USD/JPY is poised down to the level of 50% Fibonacci retracement of the advance made after October 31 intervention at 77.40 yen.

The specialists claim that the outlook for the pair will remain bearish as long as it keeps trading below the 4-year downtrend line at 79.64 yen and 55-week MA at 80.52 yen. If US currency manages to overcome these levels, it will be able to rise to 2011 maximum at 85.53 yen.

According to the bank, support is found at 77.50/40. If dollar breached these levels, it will drop to 76.93 and 76.22/75.94.

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Re: November/09/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Nov 09, 2011 11:14 pm

RBC: sell Swiss franc versus Japanese yen

Analysts at RBC Capital Markets believe that the single currency will stay in a tight range for some time.

Instead, the specialists advise traders to turn to yen and franc as the Swiss National Bank’s and the Bank of Japan’s intervention approaches are different.

The SNB is concerned about deflation risk, so it set specific target for franc in order to reverse its advance versus euro and is successfully defending it. The BOJ has also attempted to stop the appreciation of the national currency, but failed to keep yen from strengthening. So, the latter, according to the bank, lacks determination and the use of specific targets of the former.

As a result, RBC recommends opening shorts on CHF/JPY in the 87.25 area stopping above 89.30 and targeting 83.00 yen.

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MIG Bank: negative outlook for EUR/USD

Currency strategists at MIG Bank note that the single currency is under pressure as Italian 10-year bond yields have surged to the record levels of 7.22% and S&P500 index is down from the recent maximums.

The specialists note that EUR/USD was rejected by 2-year trend-line and expect the pair to slide to $1.3140.

According to the bank, support is found at $1.3145 (October 4 minimum) and $1.3000 (psychological level).

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Re: November/09/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Nov 09, 2011 11:18 pm

UBS, Commerzbank: dollar will gain versus franc

Analysts at UBS advise investors to buy the greenback versus Swiss franc.

The specialists underline that the European Central Bank and the Reserve bank of Australia are decreasing rates and the Bank of England is doing quantitative easing. The Bank of Japan is conducting actual interventions, while the Swiss National bank is doing the verbal ones pledging to act if necessary. Only the Federal Reserve keeps its monetary policy unchanged that makes UBS bullish on the greenback.

The economists don’t choose trading EUR/USD because of high volatility, GBP/USD has chances to gain as sterling may be used as an alternative for euro, and AUD/USD is still expensive for shorts due to the higher borrowing costs in Australia. That brings the bank to choose franc as the currency to sell against US dollar.

Analysts at Commerzbank believe that if USD/CHF overcomes 0.9082, the pair will be poised up to 0.9317 (October maximum) and 0.9341/99.

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RBC on the policy of major central banks

ECB: the central bank surprisingly cut interest rates by 25 basis points in November. The analysts expect to see the same reduction in December.

Bank of England: the MPC will likely announce another 50 billion pounds of asset purchases at its meeting on Thursday, November 10. The minutes from October Meeting showed that all members of the Committee agreed that further monetary stimulus is necessary.

Bank of Canada: the next time the interest rates will be changed to the upside, but this won’t happen until the second half of 2012.

Reserve bank of Australia: there will be another 25-basis-point rate cut in the first quarter of 2011.
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