Analytics from FBS Holdings Inc.

[Dmitry Shagardin]

BNP Paribas: sell pound at its advance to $1.51

British currency was rising today versus the greenback. Sterling was helped by the positive UK housing market data and advance in British stocks.

Nationwide Building Society announced that the average cost of a home rose in May by 0.5% to the maximal level in almost 2 years. British government managed to sell 2 billion pounds ($2.9 billion) of securities maturing in 2034. FTSE 100 Index extended by 1.7%. Analysts at Royal Bank of Canada in London note that there’s some slight evidence of the country’s economic recovery.

Specialists at BNP Paribas SA expect that pound may climb to $1.51. Never the less, the specialists believe that the data is not encouraging enough for making British currency rise in the long-term. As a result, they advise investors to use pound’s advance to sell sterling.

US: jobless claims

According to the data for the week before May 29, the number of initial jobless claims diminished by 7,000 and got equal to 453,000. The four-week average rose slightly to 459,000. As for continuing claims, they increased by 31,000 to 4.666 million at the week before May 22.

The Department of Labor figures show that the situation in the labor market didn’t get much better as the level of claims keeps being high.

Standard Bank: euro will decline to C$1.2230

Strategists at Standard Bank Plc expect that euro will decline versus Canadian dollar getting down to C$1.2230. As a result, the specialists advise investors to sell the single currency versus loonie. The pair EUR/CAD is currently trading at 1.2720/30 area.

In addition, New Zealand dollar’s dollar is expected to climb versus the greenback to 70.60 U.S. cents, so Standard Bank also recommends starting kiwi purchases. The pair NZD/USD is currently trading at 0.6860 area.

BNP Paribas: SNB will start interventions at 1.4110

According to strategists at BNP Paribas SA, the Swiss National Bank (SNB) is likely to keep intervening at the foreign exchange market to prevent franc’s excessive strengthening versus the single currency.

The specialists expect that the Switzerland’s central bank will be selling national currency versus euro when the franc is approaching the key technical level at 1.4110.
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[Dmitry Shagardin]

Westpac: euro will reverse at $1.16/20 and begin rising

Analysts at Westpac Banking Corp. in Wellington claim that the single currency seems to be oversold. According to the specialists, euro entered strong support zone between $1.16 and $1.20 where it may reverse its trend and begin rising.

In addition the European currency’s relative strength index went down yesterday below the level of 30 that means that the pace of its decline was too high and it is very likely to switch upwards.

RBC: euro will fall to $1.15 by the end of 2010

Strategists at Royal Bank of Canada in Hong Kong expect the single currency to fall to $1.15 by the end of 2010. The forecast is based on the market’s expectations that the Federal Reserve may lift up rates faster than the ECB.

According to Bloomberg survey, ECB won’t conduct any actions at this direction until the second quarter of 2011. At the same time Ben Bernanke says that the Fed will raise its key interest rate from the minimal level before the US reaches full employment or inflation gets higher.

Eisuke Sakakibara, the former Ministry of Finance official, believes that the European currency may decrease by 20% versus the greenback and drop below 100 yen during the next few months. The economist supposes that euro’s decline will resume as investors are still worrying that the situation in Europe will worsen.

Estonia will enter euro area

European finance ministers are for Estonia entering the euro zone without regarding that the country will have to make many efforts in order to restrain the inflation. Estonia that used to be Soviet republic and joined the European Union in 2004 will begin to use the single currency since January 1 2011.

The country’s inflation rate was equal to 2.5% in April and this figure is projected to rise in the coming years as Estonia’s economic growth pace is above euro area’s average. Estonia’s economic output is only 14 billion euro ($17 billion), so it will be the second-smallest economy of the area ahead of Malta.

As a result, the EU demonstrates that the Greek crisis won’t stir the currency union’s enlargement to the east. Yesterday’s endorsement will be reviewed by government leaders at a June 17 summit, with a formal decision by finance ministers on July 13.

BNY Mellon: pound declined due to Fitch Ratings comments

British currency was losing to its major counterparts as demand for safer assets grew after Fitch Ratings noted that the country’s facing serious fiscal problems to be solved.
The greenback rebounded versus sterling as Federal Reserve Chairman Ben Bernanke announced that US economic rebound won’t be very rapid.

Currency strategist at Bank of New York Mellon Corp. in London believe that the market was very fast reacting on Fitch’s information that means that it’s extremely sensitive to all developments of the debt issue. According to the specialists, the market’s still dominated by the uncertainty.
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[Dmitry Shagardin]

HSBC: AUD/USD forecast dropped

Analysts at HSBC Plc dropped their forecast that Aussie will rise to the parity with the greenback by the end of 2010. Last year Australian currency managed to gain 28% following Chinese economic growth. Now China that’s Australia’s main trade partner is acting in order to restrain property prices that jumped in April by 12.8%.

Chinese government rose mortgage rates and the payment requirements. HSBC expects significant slowdown in the development of this market. If China’s property bubble deflates, this may harm the banks of South Pacific region. According to the specialists, Aussie will trade at 85 US cents by December.

Mizuho Corporate Bank: “falling wedge” on EUR/USD

The single currency keeps consolidating in narrow range below 1.2000 in its trade versus the greenback. Technical analysts at Mizuho Corporate Bank claim that the pair EUR/USD is forming a “falling wedge” with minimal volumes.

According to the specialists, 9-day MA interflows the top of the "wedge", while 26-day average is declining.

The analysts place resistance at 1.1978, 1.2010 and 1.2025. Support levels are set at 1.1900, 1.1876/1.1868 and 1.1850/1.1826.

UBS AG: demand for Swiss franc will stay high till 2020

Analysts at UBS AG expect that high demand for Swiss franc will define its upward dynamics up to 2010 and 2020. The specialists believe that successful performance of Swiss economy led by rising exports to Germany will support Swiss currency providing it a significant advantage in comparison with euro weakened by euro zone’s debt crisis.

Franc gained 7.1% versus the single currency since the beginning of 2010 and is regarded now as a safe currency that came after the German mark. In May Swiss National Bank’s interventions raise the country’s foreign-currency reserves to 232.4 billion Swiss francs ($202 billion) that helped to increase its authority .

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[Dmitry Shagardin]

Goldman Sachs: 3-month euro forecast is down to $1.15

Analysts at Goldman Sachs Group Inc. reduced their 3-month forecast for the single currency to $1.15. In a year euro is expected to trade $1.25 in 12 months while the previous estimation was at $1.35. Last week euro lost another 2.5%.

The specialists claim that euro fill stay under the negative pressure as investors keep selling the European currency. Goldman Sachs supposes that the actions of Europe’s policymakers create uncertainty on the market. In addition, the pace of economic growth in the United States is much higher than in the euro zone.

Bank of New Zealand: Australian and New Zealand’s dollars up

New Zealand’s currency reached its maximal level in more than 2 weeks after the country’s central bank raised interest rates. Strategists at Bank of New Zealand Ltd claim that rates will be gradually hiked from minimal to neutral levels. They expect the growth of yield advantage to support New Zealand’s dollar compensating recent risk aversion caused by European debt problems.

Australian dollar was supported by the employment data that exceeded forecasts. The country’s employers hired 26,900 workers in May and the unemployment rate dropped to 5.2%. Economists at St. George Bank Ltd. in Sydney claim that such figures confirm that Australian economy has still encouraging fundamentals that is good for Aussie.

In addition, currencies of South Pacific region were under the positive impact of China’s trade growth that lifted the demand for higher yielding assets. Chinese exports gained 49% and imports added 48% in May from the previous year. Such rising was positive for Australian and New Zealand’s currencies as China is the major trading panther of the first and second-biggest export market of the latter.

Credit Agricole: euro strengthens on the risk appetite

European currency was up today versus US dollar as investors increased the demand for higher-yielding under the impact of growth in the Asia-Pacific region’s economy.

Strategists at Credit Agricole CIB in Hong Kong claim that although euro is supported by the revived risk appetite it still won’t be able to gain much fluctuating near $1.20.
According to the specialists, the second half of the year is full of uncertainty.

Analysts at Ueda Harlow Ltd. in Tokyo believe that as the market expects the advance in stocks, the stimulus to be bearish on euro is not powerful. Dai Xianglong, chairman of the Chinese National Council for Social Security Fund claimed that the single currency will survive euro zone’s debt crisis.

Goldman Sachs: forecast on Asian currencies reduced

Analysts at Goldman Sachs Group Inc. reduced their 3-month forecasts for the currencies Asian emerging economies. The specialists believe that the currencies will rise more slowly than it has expected before.

According to the new forecast, South Korea’s won will trade at 1,150 per dollar (from previous estimation at 1,100), Malaysia’s ringgit – at 3.15 (from 3.10) and Singapore dollar – at S$1.38 (from S$1.36). The prediction for India’s rupee worsened from 44 to 47.50 per US dollar as the country has a big budget gap and current-account deficit.

Goldman Sachs claims the rates of Asian currencies versus US dollar will be affected by the decline of common European currency. In addition, euro’s slump lowers the probability of interest-rate increases in Asia as well as investment riskier assets.
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[Dmitry Shagardin]

Tokyo-Mitsubishi UFJ: dollar may rise to 92 yen

Analysts at Tokyo-Mitsubishi UFJ Ltd believe that the greenback is likely to break out of a “triangle” it has formed since the first week of May trading versus Japanese yen after it managed to rebound in March and April. The specialists expect US dollar to rise to 92 yen.

The maximums and minimums of the pair’s rate create ascending and descending trend lines that tend to meet in one point this month. As a result, support line becomes stronger limiting the downward moves.

In addition, the cloud on the daily ichimoku chart can’t be seen from June 10 to June 21 that means that dollar is trading just below facing weak resistance.

Commerzbank: euro may rise to 1.2440/1.2775

European currency went up from the 4-year minimum getting yesterday above 1.2100. The maximal level of today’s session was set at 1.2148. As a result, technical analysts at Commerzbank claim that we can observe the destruction of the downtrend.

The specialists note that there are some bullish signals for the short-term period. For example, daily RSI has diverged on its way to the new minimum and the long-term MA reversed so far, so it’s possible to await the corrective rebound of EUR/USD. According to Commerzbank, the pair may rebound to 1.2440/1.2775 zone.

However, when the single currency reaches this levels it is likely to drop again and continue declining, believe the analysts. Commerzbank places intraday support at 1.2000, 1.1960 and recent minimum at 1.1876.

Barclays Bank: Australia’s and New Zealand’s dollar declined

Australia’s and New Zealand’s dollars were down decreasing weekly advance versus the greenback. It happened as Chinese inflation pace turned out to be the highest in 19 months with consumer prices gaining 3.1% from the level of 2009 while analysts forecasted only 3% increase.

As a result, the country is expected to take some measures to cool its economy. Such assumptions affect investors’ demand for riskier assets harming Aussie and kiwi.

Strategists at Barclays Bank Plc in Tokyo claim that China’s inflation data can make its monetary authorities to raise interest rates or revaluate yuan earlier than it was expected. According to the specialists, the risk aversion in this case will get higher.

BofT-Mitsubishi: euro won't be able to rise in the long term

The single currency strengthened versus the greenback and yen as the market’s concerns about the euro zone’s debt crisis have eased.

Euro was supported by the stocks’ advance during the fourth consecutive day that diminished the demand for the less risky assets. In addition European Central Bank President Jean-Claude Trichet announced yesterday that offerings of unlimited cash and will government-bond purchases will continue as the measures against the crisis.

Strategist at the Bank of Tokyo-Mitsubishi UFJ Ltd note that although that euro quickly reacted on this positive news the data is not enough to ensure euro’s growth in the longer term.

Analysts at Brown Brothers Harriman in New York claim that one more positive factor for the European currency was German court's rejection of a challenge to Germany's contribution to the nearly $1 trillion European Union-International Monetary Fund-led rescue plan.

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[Dmitry Shagardin]

Commerzbank: euro will rebound to 1.2445/1.2570

European currency managed to climb from the 4-year minimum at 1.1875 verus the greenback last Monday ending the week above 1.2100. Technical analysts at Commerzbank forecast that the pair EUR/USD may show upward correction to 1.2330 and 1.2445.

The specialists expect that euro will rebound to 1.2445/1.2570 zone representing long-term pivot and 50% retracement. Then the short-term trend is likely to reverse and begin declining. Commerzbank advises to buy at 1.2045 and 1.2000 placing stops at 1.1945.

Saxo bank: daily currency forecast

EUR/USD: it’s recommended to buy euro from 1.2105 to 1.2150 as the pair is likely to advance to 1.2225/75.

USD/JPY: the trend for the pair seems to be neutral, so the analysts expect the greenback to trade in range between 91.30 and 92.00.

EUR/JPY: the pair may try to stay above 112.0. On the upside, resistance is found at 112.25, while support lies at 111.20/30.

GBP/USD: it’s necessary to buy sterling from 1.1555 to 1.4600 as the pair is likely to advance to 1.4660.

AUD/USD: if Aussie manages to get above 0.8580, it will rise to 0.8625. Otherwise, the pair will trade in range 0.8515/75.

USD/CAD: support at 1.0295 is likely to keep its strength. If it’s broken, US dollar will fall to 1.0260. Anyway, the pair won’t be able to rise above 1.0370.

 

[Dmitry Shagardin]

George Soros: euro area will face recession in 2011

According to well-known billionaire investor George Soros, euro area will face recession in 2011. The economist believes that the crisis is the fault of European lawmakers. The measures conducted to fight the crisis resulted in exclusive circle.

Mistakes made during the launching of the single currency become now clear. Soros thinks that euro crisis may provoke the crisis of the whole European Union. The main problem is in absence of adjustment mechanism or plan letting the countries leave the European Economic and Monetary Union.

Germany made other countries adopt the mechanism of using $1 trillion to bailout euro zone economies and forces the rest of the euro region to agree to its standards of trade surplus and high savings for all European countries. However, it’s not possible to act as a lender and have trade surplus without another country to get a deficit. Here is the danger of the current situation: budget discipline intrusion in time when demand is insufficient and banking system remains weak leads to the exclusive circle, notes Soros.

Germany in this case won’t have any problems as weak euro will help the economy, but the rest of Europe will suffer from the long-term stagnation. European banking system will have to deal with confidence crisis. Soros doesn’t eliminate the possibility of euro zone’s collapse.

Jim Rogers: buying euro and oil

Well-known investor Jim Rogers confessed today that he bought the single currency on Friday and Monday making this decision on the euro’s rebound that followed yesterday stock markets growth.

According to the specialist, reforms should cover not only the country level, but also the level of the entire union. In addition, Rogers recommended buying oil for the long-term period as the demand for it will increase due to the reduction of drilling opportunities since US administration is thinking about restricting offshore operations after huge BP oil spill.

Euro managed to reach 2-week maximum versus the greenback at the beginning of the European session. Never the less, investors were worried about the situation in Spain and, as a result, Europe’s authorities had to reassure the market that the EU, the International Monetary Fund and the US Treasury weren’t regarding the possibility of providing a credit line for the country. Economist Nouriel Roubini claimed yesterday that Spanish crisis could be much more dangerous than the Greek one as Spain is one of the four largest EU economies with such serious problems as 20% unemployment.

UBS: demand for yen increased

Japanese currency was gaining versus the majority of its counterparts as investors raise demand for it as a safer asset. It happened due to the concerns about euro zone’s debt crisis and the expectations that the pace of US economic rebound will reduce.

Strategists at UBS AG in Stamford claim that bad news have now much stronger impact on the market that the positive ones.

US dollar is down against yen for the third consecutive day. Housing starts decreased by 10% showing the most significant decline since March 2009. Building permits surprisingly dropped to one-year minimum.
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[Dmitry Shagardin]

Goldman Sachs: the SNB left the key rate at minimum

The Swiss central bank (SNB) decided to leave its key interest rate at 0.25% in line with economists’ forecasts.

In addition, the SNB loosened its policy that previously focused on preventing franc from excessive appreciation versus the single currency as the deflation risk seems to be down. Switzerland’s monetary authorities claim that even though strong franc affects the country’s exports, the advance of the national currency is compensated by the growth in foreign demand. Franc gained 8% versus euro during the past six months.

Economists at Goldman Sachs Holdings Inc. in Frankfurt note that it’s possible to see the need of rate increase in terms of the current Swiss levels inflation and economic growth. However, European environment makes it necessary for the SNB continue monetary easing.

According to the forecast of the central bank, Switzerland’s economic growth will be equal in 2010 to 2%, while the average inflation level – to 0.9%.

Mizuho: euro should rise above 1.2300

European currency rose from last week’s minimum at 1.1875 and reached 1.2355 level on Wednesday.

Technical analysts at Mizuho claim that if the pair EUR/USD rises above 1.2300, it would be much easier for the pair to show further advance. The specialists forecast that the single currency will consolidate in its current trading area. If the week is closed above 1.2300, euro will rise higher.

If euro’s rate goes up, resistance levels will be found at 1.2338, 1.2355 and 1.2388. If the pair declines, support levels will be 1.2255, 1.2200 and 1.2168/1.2140.

Pimco: the Fed won't change rates in the long term

Economists at Pacific Investment Management Co. believe that the Federal Reserve will leave its key interest rates at the current levels for a very long period of time.

According to the specialists, global demand will be harmed by the euro zone’s austerity measures and deflationary fiscal policy.

Pimco managing $1.1 trillion of assets expects that the world’s economic growth will be below average, while the regulation will be strengthening and unemployment staying above natural rate during the next 3-5 years.

The Federal Open Market Committee’s meeting will take place on June 22-23 in Washington.

Commerzbank AG: dollar may rise to 93.50 yen

Technical analysts at Commerzbank AG claim that the greenback may rise to 93.50 (78.6% Fibonacci retracement of May decline) trading versus yen if it manages to stay above support area between 90.97 (support line inclined upwards) and 90.85 yen (last week’s minimum). If the pair is able to overcome 93.50 level, it may advance to 95.00.
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[Dmitry Shagardin]

Ueda Harlow: pound may rise to 137 yen

Analysts at Ueda Harlow Ltd. claim that British pound may rise to one-month maximum at 137 yen representing the bottom line of the ichimoku cloud if it overcomes the key 136.40 yen level.

The specialists note that there are growth signals on the ichimoku chart such as short-term conversion line at 133.20 yen crossing a longer-term baseline at 131.60.
Sterling can possibly strengthen getting above the neckline to 139 yen level, but it may have difficulties as the economic fundamentals will create downward pressure on the pair in the long-term period.

ANZ National Bank: AUD and NZD gain

Australian and New Zealand’s currencies approached today maximal levels versus the greenback as investor’s sentiment about the situation in Europe improved.

Economists at ANZ National Bank Ltd. in Wellington note that the strong positive driver was provided by the decision of European authorities to release the information about banking system’s conditions announcing banks stress tests’ results.

Strategists at National Australia Bank Ltd. in Sydney claim that Australian dollar needs increases in copper prices and US stocks to rise above key resistance at 87.25 cents.

This week Aussie gained 2.1% against US dollar, while kiwi managed to add 2%.

Standard Bank: gold may rise to $1,300 an ounce

Analysts at Standard Bank Plc expect gold to rise in 2010 to the record maximum at $1,300 an ounce.

According to the specialists, investor’s demand for euro and dollar will decline as developed economies may show worse growth pace than the emerging ones such as China. Standard Bank economists believe that the United States will never regain its dominance in the world economy, while billionaire investor George Soros foresees severe recession in Europe.

As a result, due to the absence of immediate replacement for the greenback and the single currency market players are likely to turn to gold. Concerns over the value of American and European currencies may induce Russian, Chinese and Indian central banks to add gold to their reserves.
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[Dmitry Shagardin]

UBS: yuan finally rose

The People’s Bank of China finally ended 2-year period of yuan’s peg to the greenback. As a result, the currency gained 0.42% rising to 6.7976 per dollar as of 5:30 p.m. in Hong Kong. The yuan reference rate was kept at 6.8275 to prevent short-term
speculative capital moves and excessive fluctuations. Chinese currency is now let to diverge by 0.5% from the official rate making the rate more flexible.

According to Chinese central bank, yuan’s growth will help to restrain inflation and turn investment from export-manufacturing to service industries. In addition, such actions of the bank will decrease critical attitude of the USA and G-20 that accused China of using undervalued currency to stimulate exports.

Strategists at UBS AG expect yuan to add nearly 4% this year and 5% next year. The 14 analysts surveyed yesterday by Bloomberg claim that yuan is likely to advance by 1.5% against the dollar to 6.7 by the end of 2010.

Philippine central bank Governor Amando Tetangco commented that the change in monetary policy reflects the recovery of China’s economy that may have a very positive impact on the entire Asian region attracting more foreign capital.

Citigroup: euro zone will fight the crisis

Economists at Citigroup Inc. claim that the European Union’s bailout program is the evidence that European leaders are really trying to stop the debt crisis and restore confidence in euro. The specialists are quite optimistic and believe that in the end the euro zone will be able to solve its financial problems.

According to Citigroup, Europe’s governments made a right step deciding to release the information of banks’ stress tests citing the fact that similar measures were very helpful in the United States in 2008.

Citigroup: euro will lose 9% in case of Greece’s default

Economists at Citigroup Inc. expect that the single currency will lose approximately 9% versus the greenback in case of the Greece’s default. Such assumption is made on the basis of quanto credit swaps analysis with the help of which it’s possible to bet on currency volatility and sovereign debt risk.

According to the specialists, investors may use quanto swaps to bet that euro will fall. They can benefit from buying insurance on euro zone’s government debt in dollars and selling protection on the same bonds in the European currency.

The European authorities are regarding the possibility of forbidding default swaps as they are thought to strengthen the fiscal crisis. Citigroup analysts project that if France doesn’t manage to pay back investors euro may contract by 28|%, if Spain – by 20%, Italy – by 17% and if Germany – by 25 %.

Bank of Montreal: CAD rose to 5-week high versus USD

Canadian currency rose to the 5-week maximum versus the greenback. The demand for loonie as the asset linked to growth was helped by the confidence in the world’s economic rebound that increased after China allowed yuan to appreciate. In addition Canada finds itself in the centre of attention due to the G-20 and the G-8 summits.

Traders at Bank of Montreal in Toronto claim that China’s actions resulted in the revival of risk appetite. The commodities gained with crude oil, Canada’s largest export, rising to 6-week maximum at $78.87 a barrel. Gold for immediate delivery set today new absolute maximum at $1,265.30 an ounce and copper added 1.8% to $6,548.5 a metric ton.
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[Dmitry Shagardin]

Societe Generale: buy yuan options

Analysts at Societe Generale SA recommend investors to use options in order to benefit from the volatility of Chinese currency in the next month caused by the euro zone’s debt crisis.

According to the specialists, the possibilities of yuan’s decline and advance are equal, so it’s necessary to buy straddles that unite call and put options. On Monday yuan had the biggest gain since 2005, while yesterday it survived the most significant fall in 18 months.

Societe Generale strategists claim that the pair USD/CHY will trade the same way as the other dollar pairs if the concerns about the severe European situation rise again.

Deutsche Bank: euro will fall to 1.10 in a year

Analysts at Deutsche Bank FX research team expect the European currency to fall to 1.2000 during the next 3 months and to 1.1000 area in a year.

Euro has already hit the 4-year minimum below 1.19 and the specialists claim that we observe the long-term downtrend. Further depreciation seems to be quite likely as the cheap levels aren’t attained yet. Deutsche Bank says that euro’s purchasing power parity versus the greenback is equal to 1.15-1.20 that is close to the current trading area. When the single currency was launched its rate began from 1.18 zone.

In addition, interest rate differentials between the United States and the European Union are thought to go up in the middle term as the FED may raise rates faster than the ECB. As a result, this will have a negative impact on euro as well.

BNP Paribas: euro will decline in the middle term

The single currency dropped to one-week minimum versus the greenback and yen. It happened due to the groeth of investors’ concerns about financial condition of the European banks. French bank Credit Agricole SA claimed that will write down the value of its stake in Greek Emporiki Bank by 400 million euro ($490 million). On June 21 Standard & Poor’s Ratings Services outlined that Spanish banks will have many difficulties in 2010 and 2011 due to the rise in credit losses and weak revenue generation.

The data released today by Markit Economics showed that the composite index based on a survey of euro-area purchasing managers in services and manufacturing declined from 56.4 in May to 56.

Strategists at BNP Paribas SA in London bet on euro’s decline in the middle term. They note that the demand for yen is rising as it represents less risky asset.
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[Dmitry Shagardin]

John Taylor: bailout won't save Europe

March forecast of John Taylor, famous investor managing the world’s largest currency hedge fund FX Concepts LLC, has come true as US dollar strengthened from $1.35 to $1.20 per euro.

Now Taylor believes that US currency may take pause for some time before the new surge that may come if it’ll become clear that the European bailout isn’t helping euro region to get out of the crisis.

The plan of financial help for the indebted euro zone’s countries creates false confidence among the investors that will lead to the serious shock in September. The economist predicts that be the end of 2010 euro will fall to $1. According to his estimates, the holders of euro will be very lucky if the rebound of the single currency lasts during July.

Millennium Asset Management: dollar won’t rise versus euro

Specialists at Millennium Asset Management in London claim that $1.20 level corresponds to the fair value of euro. As a result, they’ve removed one of the arguments in favor of euro’s depreciation.

More than that, note the specialists, the greenback’s growth prospects were connected with the outstanding performance of American economy that isn’t realizing. On the other hand, investors seem to be concerned about possible double dip recession in the United States.

According to Commerce Department’s data released on June 25, US first quarter economic growth pace of was equal only to 2.7% in comparison with 3% last month’s consensus. The underlying problems of the country’s economy are in smaller advance in consumer spending and a bigger trade deficit.

Westpac: Aussie will decline to 84 cents

Analysts at Westpac Banking Corp. expect Australia’s currency to lose 4% against US dollar dropping to 84 cents. As a result, the specialists recommend selling Aussie versus the greenback on its current advance to 88.15 cents. The trade should be stopped if AUD exceeds 89 cent level.

According to Westpac, the decline of Australian dollar may be caused by the slowdown of Chinese economy.

BNP Paribas: euro will decline on fiscal tightening

Strategists at BNP Paribas SA believe that the efforts of euro area’s governments to conduct fiscal tightening measures while the United States keeps being loyal to monetary easing will result in euro’s decline.

The specialists believe that to assure European economic and fiscal recovery relatively more powerful economies will need to accept higher exchange rates. The single currency is likely to be used for funding while Asian and commodity currencies are going to benefit. The analysts claim that any euro’s attempt to rise above $1.24 would represent selling opportunity for investors.
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[Dmitry Shagardin]

Standard Chartered: dollar forecast is cut

Analysts at Standard Chartered Plc reduced their forecast for US dollar as the premium provided by American rates decreased under the impact of Treasuries’ advance.

The yield differential between 10-year Treasuries and the same Japanese government bonds narrowed, so investors haven’t much stimulus to prefer the first. In addition, Group of 20 meeting established the target for decreasing budget deficits and inflation remains weak. For Switzerland, on the contrary, deflation risks have almost disappeared and the Swiss National Bank won’t need to intervene to the market.

As a result, the specialists lowered projection for USD/JPY from 98 yen in the third quarter and 100 yen by the end of 2010 to 93.5 and 95 yen respectively and from 1.25 francs by September 30 and 1.23 francs by December to 1.19 and 1.17 respectively. The specialists underline that Japanese yen and Swiss Franc will benefit helped by market volatility and uncertainty.

Commerzbank: EUR/CHF will keep falling

Analysts at Commerzbank AG expect Swiss franc to rise to the record maximum versus the single currency. Such forecast is based on the assumption that the country’s central bank won’t intervene in the market selling the national currency as inflationary risks strengthen.

Money supply surged in May and Swiss economy keeps recovering, so the concerns about possible deflation have vanished and EUR/CHF is projected to trade within downtrend. Swiss franc has already extended by 6.9% versus euro during this quarter.

JPMorgan: euro will decline till the end of 2010

Specialists at JPMorgan expect that the greenback will trade at $1.20 per euro by the end of 2010. US dollar will decline against its Australian and Canadian counterparts to 92 and to 95 cents respectively.

JPMorgan’s second-quarter client survey showed that American, European and Japanese companies suppose that euro’s downtrend versus US currency will prolong through the rest of 2010. The majority of respondents believe that the single currency will stay below$1.30, while the average estimate lowered from $1.34 in the March to $1.22.

Strategists at Standard Bank Plc expect that the single currency will decline not only versus the greenback, but against several currencies. Euro dropped by 0.45% versus US dollar in June and lost 2.4% against its main competitors as show Bloomberg Correlation-Weighted Currency Indices.
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[Dmitry Shagardin]

RBC Capital Markets: euro will have to struggle to gain

Analysts at RBC Capital Markets believe that more successful than expected European Central Bank’s tenders may improve market’s sentiment about the single currency and make investors stop betting on euro’s decline.

Never the less, the specialists keep forecasting the downtrend on euro and expect European currency to struggle. RBC Capital Markets notes that the tenders switched from macro and model accounts on EUR/USD, EUR/CAD and EUR/AUD into wholesale short covering.

Deloitte: concerns about British recession rise

The survey conducted by Deloitte LLP showed that the confidence of chief financial officers at major British currency companies dropped to 12-month minimum due to the fears that the budgets reduction with spending cuts and tax increases of 113 billion pounds ($172 billion) will lead to economic recession.

Only 24% of CFOs seem to be optimistic, while in the first quarter this figure was equal to 40%. In addition, 38% of respondents believe that double-dip recession is possible, while at the beginning of the year such opinion was shared by 33%. However, it’s necessary to mention that CFOs’ sentiment about the availability of credit went up almost to maximal level since 2007.

Deloitte specialists comment that the results of survey demonstrate the increase in concerns about further growth of British economy accompanied by better corporate credit and liquidity outlook.

UBS: EUR/CHF rebound won't last long

Strategists at UBS AG expect that the single currency’s recovery versus Swiss franc won’t last long. It may happen due to the central banks’ demand for franc as a reserve currency and Switzerland’s better fiscal outlook and economic growth in comparison with euro zone's countries. In addition, the risk that the Swiss National Bank will intervene to the market has almost disappeared.

On July 1 the pair EUR/CHF fell to the absolute minimum since 1999 at 1.3074 francs and recovered rising today above 1.33. UBS analysts keep their 3-month euro forecast at 1.35 francs, although they see the risks of decline. All in all, European currency dropped by 10% versus franc since the beginning of 2010.

ACM Markets: USD/JPY in narrow range at 87.75 area

The pair USD/JPY is trading in the narrow range with 87.75 in the centre. It’s likely to keep fluctuating this way as US trade is closed because of the Independence Day. US dollar started rising at the Asian session but didn’t manage to get above 88.00. The following 40 pips decline drove the greenback to the daily minimum at 87.62.

Strategists at ACM Markets claim that Friday’s doji candle may mean that the bearish dynamics of the past 2 week can be a correction.

Resistance levels lie at 88.35 (back side of 3-month downtrend), 88.95 (20 May minimum and recent pivot), then 89.50 (28-29 June maximum). Support levels are found at 87.33 (reaction minimum after Friday’s payrolls data), 86.97 (Thursday’s minimum and 84.82 (2009 minimum).

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[Dmitry Shagardin]

TD Securities: euro will fall to $1.13 in the third quarter

Currency strategists at TD Securities Inc. in Toronto expect that the single currency will keep declining. According to the specialists, it’s possible that euro hits parity with the greenback. This may happen because as the European Central Bank is increasing the volumes of government bond purchases. The ECB started buying bonds on May 10 realizing a part of the rescue package in order to help indebted euro zone countries to get out of the crisis.

TD Securities forecasts euro to fall to $1.13 in the third quarter, to $1.08 – by the end of 2010, approach $1 in 2011 and then rebound. The analysts note that it will be very difficult for the European economies to raise their internal competitiveness level.

Deutsche Bank: central banks' demand for euro declined

Strategists at Deutsche Bank AG in London note that many central banks switched to other currencies than euro while forming their currency reserves. According to the specialists, since the single currency was launched it was supported by the demand of the central banks that were trying to diversify their reserves. Now the pair EUR/USD will be left without such support for the next few years.

Standard Chartered: euro will fall to $1.10-$1.12 in the third quarter

Analysts at Standard Chartered in Singapore claim that the recent rebound of the single currency doesn’t mean that the market’s sentiment has changed. Investors are simply getting ready to renew their bearish bets.

In addition, claim the specialists, euro rate will be affected by the slow economic growth of the European region in result of the fiscal tightening measures. Standard Chartered underlines that week euro will be profitable for North European exporters.

According to the analysts’ forecast, the common currency will fall to $1.10-$1.12 in the third quarter and then rebound to $1.30 by 2012.
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[Dmitry Shagardin]

Westpac: dollar may rise to 90 yen

Analysts at Westpac Banking Corp. expect the greenback to gain versus Japanese yen. Such forecast may be explained by the yield differential between Treasuries and Japanese government bonds. 2-year US yield exceeds the similar Japanese rate by more than 50 basis points.

As a result, the specialists advise investors to buy dollars as American currency is likely to rise to 90 yen. It will be necessary to stop trading if US dollar falls to 86 yen level.

Bank of Montreal: CAD won’t deviate from its current range

Canadian dollar gained today against its American counterpart for the first time in three days after falling close to C$1.0680. Loonie as the currency connected with growth was helped by the increase in global equity and commodity markets.

Analysts at Bank of Montreal in Toronto believe that initial support will be found at C$1.0550. The specialists claim that the pair USD/CAD isn’t likely to deviate much from its current range ahead of the Bank of Canada’s rate announcement on July 20. In June Canadian key interest rate was lifted up from 0.25% to 0.5%.

Strategists at CanadianForex Ltd. expect Canadian dollar to trade between C$1.02 and C$1.08 during the next three months.

Bank of Korea: Greek default's very possible

Economists at the Bank of Korea are sure that it’s very possible that Greece won’t be able to repay its obligations as its economy’s contracting making the country’s debt being too high. Korean analysts expect the borrowings of European country to reach 149% of GDP by the end of 2013 that is more that Greek government will be able to maintain. In 2010 Greece’s borrowing will be equal to 133% of GDP.

According to the Bank of Korea, although default is not inevitable, it will certainly result in severe turmoil on the world’s financial markets.
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[Dmitry Shagardin]

ICAP: Australian rates will be raised in August

Australian currency climbed to one-week maximum versus US dollar. Aussie advanced as the growth of country’s employment beat the forecast exceeding it in 3 times. Australia’s employment rolls increased in June by 45,900, while the economists surveyed by Bloomberg News were looking forward only to 15,000 gain.

Labor market improvement may raise inflation pace. According to the Reserve Bank of Australia’s estimate, inflation is likely to exceed its target. As a result, economists at ICAP Australia Ltd. in Sydney are sure that Australian central will lift up interest rates possibly in August.

Strategists at Australia & New Zealand Banking Group Ltd. in Sydney claim that the country’s economy keeps extending and the positive growth dynamics will help Australia since there are poor advance prospects for the world’s economy and make the national currency benefit.

Bank of Tokyo-Mitsubishi: euro won't exceed $1.30 level

Analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. in London claim that the single currency may stop gaining as it’s getting close to a very strong resistance made by euro’s 16% decline since December at $1.2750.

As a result, the specialists believe that European currency won’t manage to get above $1.30 level. Bank of Tokyo-Mitsubishi is bearish on euro in the long-term. According to the analysts, the common currency will possibly drop below parity with the greenback if Greece or had to restructure its debt or one of the euro zone countries left the monetary block.

KBC Bank: EUR/USD will gain above 1.2454

Analysts at KBC Market research Desk claim that the pair EUR/USD is gaining strength as it managed to climb to the 2-month maximum at 1.2695 zone.

The specialists note that the single currency’s now approaching the key resistance at 1.2695/ 1.2702 area representing daily channel top of December maximum/broken daily flag bottom of year’s minimum). KBC expects that while euro’s trading above 1.2454 the pair will grow.

Support is found at 1.2601 (daily short-term MA), 1.2566/1.2553 (daily envelope bottom/hourly reaction minimum), 1.2479/1.2467 (this week’s minimum/previous reaction maximum) and 1.2419/1.2405 (weekly envelope bottom/daily Medium Term Moving Average/ break-up hourly).

Goldman Sachs: Aussie will rise to 95 Canadian cents

Economists at Goldman Sachs Group Inc. claim that Australian dollar may gain against Canadian one as Australia will benefit from Chinese economic growth, while Canada may be affected by the slowdown of US economy.

As a result, the specialists advise investors to buy Aussie looking forward to its advance to 95 Canadian cents. It’s necessary to place stops below 88.5 Canadian cents.
According to Goldman forecast, Australian central bank will raise its key rate from the current level of 4.5% by 25 basis points in 2010 and 75 basis points more in 2011.

Commerzbank: dollar may rise to 90.60

Technical analysts at Commerzbank AG claim that the greenback may strengthen to 90.60 yen if it manages to hold above support area between 87.15 representing December 2008 and January 2009 minimums and 87.00 yen that is 78.6% Fibo retracement of the growth from November 2009 to May 2010. The pair USD/JPY may climb to 89.23/89.93 where 38.2% and 50% Fibo retracements of the decline from the June maximum are found.
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[Dmitry Shagardin]

Bank of Tokyo-Mitsubishi: dollar may rise to 90 yen

Analysts at Bank of Tokyo-Mitsubishi UFJ Ltd. claim that the greenback is likely to advance to the maximal level since June 23 at 90 yen in case it overcomes the key area between 88 and 89 yen.

The specialists claim that US dollar has rebounded from its 7-month minimum and become supported by its 5-day MA that turned upwards.

American currency will face the main resistance in July at 88.86 yen level representing 23.6% Fibo retracement of a decline from May 5 maximum of 94.99 yen to the July 1 minimum at 86.97 yen. The next target level of USD/JPY is at 89.65 yen (21-day MA) and 90.03 yen (38.2% Fibo retracement).

If the 5-day MA intersects above the 21-day one making the “golden cross” formation, the pair’s upward trend will strengthen moving towards the 200-day MA at 90.78 yen.

TD Securities: AUD advances as risk appetite improves

Australian currency’s showing the biggest weekly 4.3% advance in 9 months versus the greenback as the market’s sentiment towards the rebound of the world’s economy improved lifting up the demand for riskier higher-yielding assets. New Zealand’s dollar’s also up adding 3.3% this week that’s the most since May 2009.

Investors’ concerns about economic recovery also eased after ECB’s President Jean-Caude Trichet claimed that euro zone’s economy is strong enough and there’s no need for pessimism.

Analysts at TD Securities Ltd. in Singapore expect that the interest rates in Australia will be raised in the near-term and this information will make the national currency benefit as it isn’t yet included in price.

Mizuho: EUR/JPY may advance to 113.43

Technical analysts at Mizuho Corporate Bank expect that Japanese currency will be trading in 88.50 area, particularly, inside a ‘rectangle’ formed by 87.00 and 88.50/89.00 levels. The pair USD/JPY was showing lower maximums and minimums during last 3 weeks. The specialists believe that it may advance before further slump in July.

As for EUR/JPY, notes Mizuho, the trade seems to be rather volatile. According to the analysts’ forecast, the European currency will demonstrate corrective rebound against the trend on the bears’ market. As a result, the pair may attempt to rise to June’s maximum at 113.43.

BNP Paribas: euro under negative pressure

The single currency went down from its 2-month maximum versus the greenback. Strategists at BNP Paribas note that euro’s recovery began to lose its pace. The specialists claim that the pair EUR/USD will meet rather strong resistance at $1.27 level.

According to BNP Paribas, the outlook for the European currency’s negative. In the medium term euro will be under pressure of concerns about the growth of European economy and euro zone banks’ stress tests.

One more negative factor for euro that is regarded as a funding currency is the demand for high-yielding commodity currencies, for example, Australian dollar.

CAD jumped as jobless rate decreased

Canadian dollar bounced after the data showed that the country’s unemployment rate dropped by 0.20% and became equal to 7.9% that’s the minimum in 1.5 years. As a result new increase in Canada’s interest rates became more possible.

The greenback lost 0.75% falling versus loonie from 1.0416 at today’s opening to hit the minimum at 1.0334. CAD/JPY rose from 84.72 at the trade opening to new 2-week maximum at 85.66 zone. EUR/CAD slumped by 110 pips to new 1-week minimum at 1.3102.
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[Dmitry Shagardin]

Ueda Harlow: Prime Minister Naoto Kan lost elections

Japanese currency hit 2-week minimum versus the greenback. It happened after the election results showed that Democratic Party of Japan headed by Prime Minister Naoto Kan that got 44 seats in the upper house of parliament lost to the opposition Liberal Democratic Party that won 51 seats.

The main reason of Kan’s losing voters’ confidence was the proposition to increase 5% sales tax that put the problems of huge national debt in the center of attention.

Specialists at Standard & Poor’s say that such situation can possibly affect Japan’s debt rating making it more difficult for the authorities to conduct necessary reforms of the public sector and the taxation system.

Analysts at Ueda Harlow Ltd. in Tokyo claim that foreign investors may start selling yen at the signs of political instability.

UBS: sterling will fall to $1.40

Analysts at UBS expect sterling to fall to $1.40 versus the greenback. As a result, the specialists advise investors to sell pounds against dollars stopping the trade if British currency appreciates getting higher than $1.5270.

UBS claims that there are many factors to make investors being bearish on sterling. According to the analysts, the Bank of England isn’t likely to lift up interest rates as the rest members of the Monetary Policy Committee won’t support Andrew Sentence’s initiative.

In addition, last month’s positive influence of the new budget is already included in pounds rate and can support it no more. More than that, the predicted amounts of budget reduction will affect the pace of UK economic growth.

Mizuho: euro may appreciate to 1.28

Technical analysts at Mizuho Corporate Bank claim that last week the single currency was struggling hard versus the greenback and managed to close on Friday at 1.2638 that’s above the 9-week MA and first Fibonacci resistance.

The specialists suppose that the pair will be following a rather stable road upwards. This week EUR/USD is likely to consolidate in 1.2600 area. It’s possible that euro will gradually appreciate to 1.2800.

As for the pair EUR/JPY, the specialists believe that this week it will trade sideways above 109.50 but won’t rise above 114.00.

Capital Economics: Europe will benefit from euro zone’s collapse

Specialists at Capital Economics believe that euro zone’s collapse will stimulate the economies of the European countries saving them from stagnation. Currency union’s break up would help to raise competitiveness and economic growth pace not only for its weaker members, but for the region as a whole.

Indebted Europe’s nations are now suffering from austerity measures needed to reduce huge budget deficits. If Italy, Spain, Ireland, Portugal and Greece drop euro and return to their national currencies, they would be able to let the latter depreciate helping to increase the amounts of exports, claim Capital Economics.

In Germany’s case restored deutsche mark would gain, so the domestic demand would also advance having a positive impact on employment and economic growth. As a result, imports from euro countries will be also supported and European economy will get rebalanced.
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[Dmitry Shagardin]

JPMorgan Chase: AUD и NZD will rise to 9-week maximums

Analysts at JPMorgan Chase & Co. claim that Australian and New Zealand’s dollars are likely to advance to 9-week maximums or even more in case they manage to get above June maximums.

Aussie is expected to rise to 200-day MA at 89.76 US cents and then toward 90.78 cents close to 76.4% Fibo retracement of decline from 2010 maximum in April to the minimum in May. The currency meets important resistance close to June maximum at 88.59 cents.

Kiwi may strengthen to 72.15 cents and then to 73.30 cents close to the April maximum. The New Zealand’s dollar’s 200-day MA lies at 71.19 cents and it exceeded last month’s maximum of 71.60 cents on June 23. Resistance for the currency is situated between 71.20 and 71.60 cents.

Pimco: US bonds are safer than European

Specialists at Pacific Investment Management Co. admitted to have been transferring funds from European debt to US Treasuries during several past months as they regard the latter as safer assets. In addition, Pimco advises investors to turn to the bonds in Canada, Australia, China, South Korea, Brazil and Mexico avoiding the ones of Greece, Portugal, Spain and Italy.

According to the analysts, the United Stated is still regarded as flight-to-quality country, while the greenback keeps being the world’s most important reserve currency and it’s very unlikely that the situation may change in favor of euro.

Treasuries’ 2010 advance was due to concern about possible defaults in some euro zone countries and US inflation rate that hit the minimal level in four decades that helps to preserve the value of a bond’s fixed payments.

Mizuho: yen's trading sideways

Technical analysts at Mizuho corporate Bank note that Japanese currency was trading sideways during the last 5 days versus all of its counterparts. According to the specialists yen’s rate is likely to continue moving in the same manner.

The specialists think that the pair USD/JPY will be trading above 87.00. Yesterday’s small spike maximum against first Fibo resistance means the temporary maximum in 89.00 area, while daily and weekly MAs suggest a short position.

As for the pair EUR/JPY, it’s also stuck in rather small zone and will be trading flat above 109.50, but not higher than 114.00.

Moody's: Portugal's credit rating’s decreased

The single currency survived significant decline today after ratings agency Moody's decreased Portugal’s credit rating by 2 steps to A1 that means growing debt burden and weak economic growth prospects. As a result, the concerns about indebted peripheral euro zone countries strengthened again.

Currency strategists at Royal Bank of Canada Europe Ltd. claim that the downgrade will once again turn the market’s attention to the European debt problems. Even though this information didn’t shock investors it made a negative pressure on euro.

In addition, German investor confidence declined for a third month in July. ZEW index of investor and analyst expectations fell from 28.7 in June to a 15-month low of 21.2, while economists surveyed by Bloomberg were looking forward only for a decline to 25.3%.