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September/07/2011- Comments and forex-analytics from FBS

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September/07/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Sep 07, 2011 10:13 am

Wells Fargo lowered Swiss franc's forecast

Analysts at Wells Fargo revised downwards their forecasts for Swiss franc after the Swiss National Bank yesterday pegged franc to euro.

The specialists think that this time Switzerland’s monetary authorities will succeed in stemming franc’s gains – their previous attempt to weaken the national currency led to $21 billion loss last year. At the same time, the economists don’t believe that franc has much room for depreciation as the market remains in the risk-off state.

Wells Fargo increased its 3- and 6-month projection for EUR/CHF from 1.06 to the SNB target level of 1.20. In their view, in 9 months franc will ease to 1.22 per euro.

Strategists at Schneider Foreign Exchange say that SNB’s move was surprising, but now when the central bank has to some extent decreased the safe-haven flows to franc, investors may turn to other currencies such as Norwegian krone.

However, analysts at Lloyds note that though the near-term outlook for franc has changed to the downside, in the longer term the SNB is likely to fail to hold EUR/CHF above 1.20 as the situation in the euro zone may significantly deteriorate.

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Citigroup: EUR/USD may fall to $1.35

Analysts at Citigroup believe that the single currency may fall to the 7-month minimum versus the greenback at $1.35.

The specialists note that investors seek refuge in German government bonds that makes their yields slide. The spread between 2-, 5- and 10-year German bond yields and the similar US debt yields fell to the lowest level since February. During the same period the pair EUR/USD has lost 1.8% but the pace of its decline lagged behind that of the drop in bond spreads. As a result, the bank expects that the market concerns about the euro zone’s debt crisis will soon begin to be more reflected in the currency’s rate.

Citigroup points out that euro closed last week at $1.4205, below the $1.4327 that signals downward reversal.

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Re: September/07/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Sep 07, 2011 10:17 am

ANZ: comments on NZD/USD

New Zealand’s dollar is correcting upwards versus the greenback after its recent decline from August 31 maximum at 0.8572 to yesterday’s minimum in the 0.8200 zone.

Among the drives for NZD/USD the analysts at ANZ cite strong performance of Asian equity markets and better-than-expected Australian GDP figures. In their view, resistance for the pair lies at 0.8320, while support is found at 0.8240.

The MSCI Asia Pacific Index of shares rose by 2.2%. Australia’s economy added 1.2% in the second quarter (q/q) after declining by 0.9% in the first 3 months of 2011, while the economists surveyed by Bloomberg News were looking forward to only 1% increase.

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Commerzbank: comments on EUR/USD

Technical analysts at Commerzbank are bearish on EUR/USD. In their view, yesterday’s spike high to 1.4284 didn’t change the negative prospects of the single currency in the near-term.

The specialists expect the pair to fall to the 2010-2011 uptrend line at $1.3939 noting that the DMI (directional movement indicator) has confirmed the sell signal.

At the same time, the bank sees a lot of divergence on the hourly chart and warns that euro may correct upwards today rising to $1.4193.

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Re: September/07/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Wed Sep 07, 2011 1:06 pm

USD/JPY: fundamental analysis, intervention prospects

Swiss franc and Japanese yen have so far reached the record maximums. Yesterday the Swiss National Bank set the floor for EUR/CHF at 1.20 and many investors now expect the Bank of Japan to take the similar measures in order to weaken yen.

The new Japanese finance minister Jun Azumi said that he will try to convince other G7 nations that strong yen poses a threat to the world's third-biggest economy. Strategists at Credit Suisse think that it might be easier for Japan to defend its position after the SNB’s move.

At the same time, analysts at JPMorgan Securities say that Japanese economy is currently on the rebound and corporate and exporters are doing better than expected. In their view, there’s no national emergency and this fact may hold Japan’s monetary authorities from currency interventions and additional easing.

In addition, while the currency peg was reasonable for the euro area as 70% of Swiss exports go to the European Union, it doesn’t fit Japan as less than 20% of its trade is done with the United States so Japan isn’t likely to follow SNB’s example.

It’s also necessary to note that the BOJ will have more difficulties in stemming the appreciation of the national currency as the size and liquidity of the Japanese government bonds market is actually a lot bigger than that of the Swiss National Bank's one, so they are more attractive for investors, especially domestic.

UBS specialists claim that Japanese government will be more preoccupied with reconstruction problems after March earthquake and tsunami than with forex issues.

BOJ meeting

The BOJ left today its key rate unchanged at the minimal levels below 0.1%, but didn’t announce more easing measures. Last month the Bank of Japan expanded its asset purchase program from 40 to 50 trillion yen. The central bank expects the national economy to return to a moderate recovery path from the second half of the current fiscal year.

Strategists at Mizuho Securities claim that the BOJ may ease its policy at its next meeting on October 6-7 or conducts an emergency meeting and it will happen even sooner. The easing move may be catalyzed by FOMC meeting on September 20-21, weak Tankan business sentiment survey and rising demand for yen.

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Re: September/07/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Sep 08, 2011 3:10 am

UBS increased GBP/USD forecast

Analysts at UBS increased 3-month forecast for British pound’s rate versus the greenback from $1.6200 to $1.6500 keeping the 6-month estimate at $1.6800 and the 12-month projection at $1.7500.

The specialists claim that, on the one hand, pound is attractive in comparison with the single currency and the greenback due to the debt problems of the euro area and the United States, but on the other hand, it may be affected by the effects of another round of quantitative easing by the Bank of England.

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BMO: BOJ intervention scenarios

Analysts at BMO Capital Markets note that despite the fact that yen has been seen as a safe haven, the pair USD/JPY has stayed above 76.50 during the entire August except drop to the record minimum of 75.94 on August 19.

The specialists think that the reason why US dollar has been able to consolidate is the clandestine intervention of Japan’s monetary authorities.

The strategists see 3 possible scenarios of further BOJ actions and give the following trading recommendations:

- If this covert policy ends under the new Japanese government, sell USD/JPY.

- If this covert policy continues, sell Japanese yen and buy Swiss francs.

- If the BOJ begins an overt policy to buy US dollars like in 2004, buy USD/JPY.

The specialists believe that Japan will be forced to step in the forex market openly, so the third so they are looking forward to the realization of the third scenario.

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