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September/29/2011- Comments and forex-analytics from FBS

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September/29/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Sep 29, 2011 3:52 pm

Euro’s gaining ahead of German vote

German parliament votes on the changes to the European Financial Stability Fund (EFSF) at 9:00 a.m. GMT.

Euro is strengthening versus the majority of its counterparts as investors believe that German Chancellor Angela Merkel will get enough support for the ratification as main opposition Social Democrats and Greens have said they will vote with Merkel’s government.

Analysts at Bank of Tokyo-Mitsubishi UFJ expect the outcome to be positive. In their view, the single currency is rebounding as traders cover shorts.

At the same time, higher EUR/USD levels will likely be used as the selling opportunity. One should also be cautious ahead of Italian debt auction later today.

The pair is up from today’s minimum in the $1.3500 area to the levels around $1.3660.

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Commerzbank, MIG Bank: euro’s decline will resume

Euro rose from the 8-month minimum at $1.3362 hit on Monday to the levels around $1.3660.

Technical analysts at Commerzbank claim that the single currency may rise to $1.3732 or even $1.3937 before returning down to $1.3515 and slumping to the recent minimums at $1.3428 and $1.3360.

Strategists at MIG Bank are even more bearish. The specialists think that euro will resume its downtrend towards $1.3000 and $1.2800. The sell-off will occur if EUR/USD moves below $1.3362 (September 26 minimum). According to the bank, resistance for the pair is found at $1.3795 (September 21 maximum), $1.3937 (September 15 maximum) and $1.4000 (psychological level).

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Re: September/29/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Sep 29, 2011 4:10 pm

Commerzbank: comments on AUD/USD

Technical analysts at Commerzbank think that Aussie’s correction from the 10-month minimum at $0.9621 hit on September 26 reached its target at $0.9967.

The specialists don’t rule out the possibility of some more retracement to $1.0180/1.0200, but expect AUD/USD to resume its downtrend. In their view, if the pair breaks below $0.9835, it will be poised down to the recent minimum at $0.9621 and $0.9407/0.9390 (late 2009 and early 2010 maximums).

According to the bank, resistance for Australian dollar is provided by the downtrend line from $1.0503.

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Bernanke: unemployment may lead to the “national crisis”

Federal Reserve Chairman Ben Bernanke warned yesterday that the United States finds itself under threat of a “national crisis”.

Bernanke underlines that the situation at the labor market remains intense: the unemployment rate stays at or above 9% since April 2009 and almost 45% of the unemployed are jobless for already 6 months or more.

The Fed’s head reiterated that monetary policy along can’t solve the country’s problems and spur its sluggish economic growth. In his view, it’s very important to breathe life in the housing markets. Bernanke also pointed out that the US should use the experience of many emerging market economies supporting strong economic growth through “disciplined fiscal policies”, “encouraging private capital formation and undertaking necessary public investments”, reports Bloomberg.

Last week American central bank decided to lengthen long-term interest rates by replacing $400 billion of short-term debt in its portfolio with longer-term Treasuries. At the same time, 3 members of the FOMC opposed this decision and spoke against further monetary stimulus. Despite 2 rounds of quantitative easing, which cost the Fed $2.3 trillion, US growth has stalled.
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Re: September/29/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Sep 29, 2011 4:13 pm

Citigroup reduced global economic forecast

Analysts at Citigroup revised down their global economic growth forecasts for the second time in less than a month. The specialists lowered 2011 growth estimate from 3.2% to 3.0% and the 2012 one – from 3.7% to only 2.9%. According to the classification of the IMF and the World Bank, 2% global growth means is considered as global recession.

The bank cut China's 2012 GDP growth rate from 9% to 8.7%. The outlooks for the United States, Europe, Japan, Canada and the UK were also reduced.

Citigroup expects a long period of negative real interest rates in the main advanced economies. The analysts think that the ECB is likely to cut the borrowing costs, while the Bank of England will start the second round of quantitative easing in the next 1-2 months. In their view, Moody's and Standard & Poor's will keep downgrading euro zone nations such as Italy, Spain, Greece, Portugal and Cyprus.

All in all, the economists advise investors to be cautious, avoid risks and favor US dollar and Japanese yen.

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Deutsche Bank: recommendation for EUR/USD

Analysts at Deutsche Bank note that there’s 84% correlation between the size of the Eurosystem's consolidated balance sheet and the dynamics of the single currency versus the greenback. So, when the balance sheet expands, EUR/USD weakens and vice versa.

However, the specialists say that as the 2 rates are moving in tandem rather than one reacting to the other – that makes it difficult to use this relationship for trading strategies. There may be the case, though, when this information will be quite useful – if European debt crisis is solved by some kind of balance sheet expansion.

The specialists think that the odds of such outcome are high. In their view, the euro area will either use the stabilization fund or the ECB will continue buying debt of the peripheral countries. As a result, most ways which don’t involve immediate sovereign ratings implications lead to a continuation of the ESCB’s balance sheet expansion and, consequently, to euro’s depreciation.

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Re: September/29/2011- Comments and forex-analytics from FBS

Postby vanvirtue » Thu Sep 29, 2011 4:17 pm

Germany gave green light for EFSF

The single currency keeps trading on the upside as German parliament approved the expansion of the European Financial Stability Fund (EFSF) – there were 523 in favor of legislation versus 85 votes against it. Tomorrow there will be another vote in the upper house, or Bundesrat.

The bill enables EFSF to buy the bonds of the indebted peripheral nations and offer emergency loans to governments. The fund is boosted from 440 to 780 billion euro, the amount guaranteed by Germany increased from 123 to 211 billion euro.

The EFSF extension has been already ratified in Slovenia, Belgium, Greece, Ireland, Italy, Luxembourg, Spain, France, Portugal and Finland.

Analysts at JPMorgan Chase expect euro to continue its “remarkable resilience” until the end of the year and end 2011 at $1.38. Strategists at Lloyds Bank say that the risk of the currency union’s disorderly breakup decreased. In their view, EUR/USD will finish 2011 at $1.40, though the specialists don’t rule out the possibility of euro’s slump to $1.32 before that.

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