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

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

Postby vanvirtue » Tue Sep 13, 2011 4:45 pm

UBS: bullish outlook for US dollar

Analysts at UBS note that despite US credit downgrade, the greenback has become the ultimate safe haven as other traditional refuges – Japanese yen and Swiss franc – are undermined by the efforts of Japan and Switzerland to weaken their national currencies.

The specialists underline that the European Central Bank and the Bank of England are seen easing their monetary policies. As a result, UBS claims that unless the Federal Reserve starts the third round of quantitative easing US dollar will keep strengthening against euro and pound.

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Deutsche Bank: ECB rate forecast

Analysts at Deutsche Bank believe that the European Central Bank will leave its benchmark rate at 1% until the end of the year.

Then they expect the ECB to cut the borrowing costs in December by 50 basis points in line with lowered growth and inflation forecasts.

The specialists note that there will be a lot of political pressure in November as Mario Draghi takes office as the ECB President after Jean-Claude Trichet. In their view, the ECB will take a long pause after reducing rates in December.

At the same time, the bank warns that one shouldn’t entirely rule out the possibility of October rate cut.

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

Postby vanvirtue » Tue Sep 13, 2011 4:50 pm

Danske Bank: trading recommendations on USD/CHF

Technical analysts at Danske Bank claim that though the greenback is showing sharp rebound versus Swiss franc it remains within the longer-term bearish channel.

The specialists note that USD/CHF is facing resistance at 0.8848 (38.2% Fibonacci retracement of the decline from 2010 maximum of 1.1730 to the all-time low of 0.7067), 0.8947 (May 13 maximum) and 0.9370/0.9399 (May 7 maximum and 50% Fibonacci retracement). In their view, the pair may dip to 0.7711 (September 2 minimum) and retest the record minimum at 0.7067.

According to the bank, it’s necessary to sell dollars versus francs at 0.9370/0.9399 stopping above 0.9784 or 1.0067.

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Major banks’ forecasts for euro

Some major banks are revising downwards their forecasts for the single currency versus the greenback as the euro zone’s debt crisis deepens and the pair EUR/USD hit yesterday 7-month minimum in the $1.3500 area. For example, UBS is reviewing its current estimate of euro’s rate by the end of the year at $1.35 and J.P. Morgan – the one at $1.36.

However, other banks think that it’s still too early to make significant changes to the outlook.

Deutsche Bank is already quite bearish on the European currency expecting it to fall to $1.30 by the end of 2011. Barclays Capital keeps its $1.46 year-end view, though its representatives claim that the bank is always considering revisions. HSBC is looking forward to $1.44 by the end of the year and points out that from the fundamental point of view nothing has changed as the market is perfectly aware of the seriousness of European debt issues.

The most bullish view on euro’s prospects has Goldman Sachs which reiterated EUR/USD forecast at $1.50 by the end of March. Bank of America-Merrill Lynch names $1.45 as the target for the end of 2011, Credit Suisse sticks to $1.40 in 3 months, though conceding the possibility of the lower levels in the near term.

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

Postby vanvirtue » Tue Sep 13, 2011 4:54 pm

Standard Bank: sell EUR/JPY

Currency strategists at Standard Bank advise investors to sell the single currency versus Japanese yen at 104.90 targeting 103.50 and 100.40. The specialists recommend placing stops at 108.10.

The pair EUR/JPY lost 9.2% during the past 3 months hitting yesterday 10-year minimum at 103.88.

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J.P. Morgan, UniCredit warn about pound’s weakness

Currency strategists at J.P. Morgan note that investors are generally negative on sterling. It’s possible to give several reasons for that:

- UK weak economic outlook (although annual inflation rose from 4.4% in July to 4.5% in August, the risk of double-dip recession isn’t ruled out; the housing market remains in trouble);

- The looming possibility of more quantitative easing by the Bank of England (finance minister George Osborne claimed that he object’t against additional bond purchases);

- The risk of UK financial institutions’ credit rating downgrade (British banks are exposed to Greece and the euro-zone banking community). The nation’s banks are on review of Moody's Investors Service since May.

As a result, sterling is seen falling like euro has been doing so far rather than getting support as a safe haven like the greenback. Strategists at UniCredit expect GBP/USD to slide to $1.55.

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