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October/13/2011- Comments and forex-analytics from FBS

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October/13/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 13, 2011 4:28 pm

Wells Fargo: forecasts for EUR/USD

Technical analysts at Wells Fargo are neutral/positive on the single currency in the short-term. In their view, among the positive factors there are significant short positions on euro and favorable readings of the technical indicators, such as the momentum ones.

In the longer perspective, however, EUR/USD remains within downtrend due to the euro zone’s economic growth slowdown and potential ECB’s easing.

The strategists expect the pair to drop to $1.3300 in 3 months, to $1.3000 in 6 months, to $1.2900 in 9 months and to hit the $1.2600 level in September 2012.

According to the bank, resistance for the pair is situated at $1.3936 (September 15 maximum), $1.4061 (200-day MA) and $1.4247. Support levels are found at $1.3566, $1.3145 (October minimum) and $1.2874 (January minimum).

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BoA Merrill Lynch: forecast for euro

The single currency has made a significant advance versus the greenback during the last several days. The pair EUR/USD climbed from the 8-month minimum at $1.3145 hit on October 4 to the levels in the $1.3800 area.

Analysts at Bank of America Merrill Lynch explain euro’s gains by squaring of excessive short positions. In their view, the up move is a correction and the European currency won’t be able to grow on the sustainable basis.

The specialists claim that EUR/USD may rise to $1.4000 in the next 1-2 weeks and then the bears will once again take the situation in their hands. So, investors are to look for the chance to resume selling the pair.

The bank also points out that the dynamics of euro is strongly correlated with the oil prices: when the latter increases, oil exporters tend to convert their dollar earnings in euro to keep their assets balanced. As a result, it’s necessary to take into account that as long as China’s economy stays in a good shape and the demand for commodities is high, the single currency will be supported against its US counterpart.

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Re: October/13/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 13, 2011 4:41 pm

Minutes of FOMC September meeting

Last month, the Federal Reserve decided to perform Operation Twist or, in other words, replace $400 billion of Treasuries in the central bank’s portfolio with longer-term debt to reduce borrowing costs.

According to the minutes of the US Federal Open Market Committee’s last meeting that took place on September 20-21, the majority of FOMC members are in favor of unveiling more information about the Fed’s goals and how they influence the central bank’s decisions. In addition, many policymakers think that it’s necessary to establish specific levels of inflation and unemployment as conditions for keeping interest rates near zero.

Some FOMC officials including Fed’s Chairman Ben Bernanke believe that asset purchases would be a more efficient tool than the Operation Twist and that QE should be retained as an option, while others warned that further expansion of the Fed’s balance sheet would more likely raise inflation and inflation expectations than stimulate economic activity. The Fed has also Fed bought $2.3 trillion in housing and government debt in two rounds of QE from December 2008 to June 2011. However, US economy still remains weak.

The FOMC was also discussing the possibility of communicating its decisions through other way than the post-meeting statements.

Analysts at Daiwa Capital Markets America believe that most FOMC members would like to save QE as the last measure in case the economy starts contracting and there is the risk of deflation.

Commerzbank: technical comments on EUR/USD

Technical analysts at Commerzbank expect the single currency to stay today below resistance in the $1.3838/48 area (July minimum/50% Fibonacci retracement of the decline from the August maximum) trading versus US dollar.

If EUR/USD managed to overcome the mentioned levels, it would be able to rise to $1.3936 (September 15 maximum) and $1.4013 (61.8% Fibonacci retracement) before another move down.

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Re: October/13/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Oct 13, 2011 7:02 pm

Society Generale: buy Aussie versus Swiss franc

September was a hard month for risky assets. Never the less, analysts at Society Generale expect the market’s risk sentiment to improve. As a result, the specialists advise investors to return to the higher-yielding currencies.

According to the bank, the good strategy is to buy AUD/CHF in the 0.9050 area stopping below 0.8850 and taking profit at 0.9600.

Among the positive factors for Aussie the strategists cites Australia’s favorable economic data and the potential new policy initiatives in the euro area.

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Inflation will make ECB harder to cut rates

German annual inflation rose from 2.5% in August to 2.9% in September exceeding the estimate of 2.8%.

As a result, it would be hard for the European Central Bank to reduce its benchmark interest rate from the current 1.5% level to support the euro area’s economic growth hurt by the debt crisis.

Last month the ECB revised down the region’s economic growth forecast from 1.9% to 1.6% to 2011 and from 1.7% to 1.3% in 2012. The central bank sees the average inflation at 2.6% this year and 1.7% the next.
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