Market news and trade recommendations by FBS

[FBS]

AUD/USD

AUD/USD recovered to the 55-period MA just below $0.8800. Aussie was supported by higher NAB business confidence. The pair’s trying to rise above the horizontal Kijun-sen. MAs are sloping down. All in all, the pair was quite oversold after hitting a multiyear low last week and it may correct a bit more within the general downtrend. The Ichimoku Cloud represents a hurdle at $0.8825. The upper Bollinger band lies here as well.

Resistance: $0.8800, $0.8825, $0.8865, $0.8890

Support: $0.8758, $0.8740, $0.8700, $0.8663

Chart. H4 AUD/USD

Upcoming events

USD - 13:30 GMT - Core Durable Goods Orders, Durable Goods Orders

USD - 14:00 GMT - S&P/CS Composite-20 HPI

USD - 15:00 GMT - CB Consumer Confidence

AUD - 23:30 GMT - MI Leading Index

 

[FBS]

USD/CAD

USD/CAD is consolidating within its medium-term upward trend. Tenkan-sen and Kijun-sen are horizontal and act as support. USD/CAD is trading around the middle Bollinger band. The pair has made a lower high at 1.1118 and the bulls have lost momentum. They might need a day to gather strength.

Resistance: 1.1118, 1.1175, 1.1230

Support: 1.1050, 1.0100, 1.0950

Chart. H4 USD/CAD

Upcoming events

USD - 13:30 GMT - Core Durable Goods Orders, Durable Goods Orders

USD - 14:00 GMT - S&P/CS Composite-20 HPI

USD - 15:00 GMT - CB Consumer Confidence

 

[FBS]

Jan. 29: Asian session

Asian markets rallied on Wednesday after Turkey raised the benchmark interest rate from 7.75% to 12%, stirring hopes the drastic action would short-circuit a vicious cycle of selling in emerging markets and revive risk appetite generally. MSCI’s broadest index of Asia-Pacific shares outside Japan rose by 1.2% after three sessions of falls.

Nikkei rose by 2.2%. USD/JPY recovered to 103.44. Commodity currencies strengthened on the Turkish rate hike. AUD/USD extends the recovery for a third day in a row. Aussie rose to $0.8830 before retracing in the late Asia. NZD/USD also remains supported, but was unable to overcome the $.8300 handle for now. Investors wait for the RBNZ meeting at 20:00 GMT (an hour after the FOMC announcement). There is a market expectation for a rate hike or at least for a rate hike promise by the RBNZ Governor Wheeler.

EUR/USD is testing $1.3650 to the downside. GBP/USD is little changed in the $1.6575 area.

 

[FBS]

RBA won't cut rates

The recent article in Wall Street Journal argues that the Reserve Bank of Australia wouldn’t cut interest from the record low of 2.5% on Feb. 4.

Recent data showed Australia’s inflation cam at 0.8% in Q4 (forecast: 0.5%). For the full year, inflation ran at 2.7%, toward the top of the RBA’s 2%-3% target band. NAB business confidence showed that business conditions are at their best levels in close to 3 years. Housing construction and house prices also are responding to the low rates, and there’s compelling evidence that retail sales are growing quickly, says WSJ.

Surely, not everything is well. Economic growth this year is still forecast to be below its long-term average of 3.0%. The biggest problem is the slowdown in the mining sector: falling commodity prices have forced mining companies to cancel investment plans, shut mines and lay off workers. Australian payrolls contracted in Dec.

Still, even if the RBA’s still thinking about cutting the benchmark rate it wait for now and take time to plan its next move.

 

[FBS]

Commerzbank on AUD/USD

Commerzbank says AUD/USD visit $0.8870 (20-day MA) before resuming decline.

Analysts say that the pair has reached its interim target at $0.8710/.8671 (the base of the channel in 2011-2014 and the 38.2% retracement of the advance from 2001 to 2011) and is correcting higher.

After visiting $0.8870 AUD/USD will continue its descent to the next target at $.8550 (50% retracement of the move from 2008) and then to $.8068 and $0.7950/25. The outlook for Aussie will remain negative as long as it’s trading below the resistance line at $0.8957.

 

[FBS]

NZD/USD: 2 meetings ahead

NZD/USD was initially supported by the decision of the Turkish central bank to make an aggressive rate hike. However, the pair’s vulnerable to uncertainty ahead of the Fed’s decision (19:00 GMT) and the Reserve bank of New Zealand’s meeting (20:00 GMT).

There’s some speculation about a possible rate hike in New Zealand. However, consensus is that the RNBZ will keep benchmark rate at 2.50%. Note though that the regulator’s governor Graeme Wheeler may hint on plans to begin the tightening cycle in March. We’ll examine the prospects of the FOMC announcement in a different article.

Resistance is at $0.8295, $0.8345, $0.8400. Support is at $0.8245, $0.8215, $0.8178. As you may see from the chart the pair will soon have to move beyond either support or resistance.

 

[FBS]

ANZ: long-term bulls on USD/JPY

According to ANZ strategists, USD/JPY remains in a long-term rising trend. However, a close above 103.65 would be required to provide some conviction that the uptrend with a next target of 106.50 might have resumed.

"A resumption of the uptrend should allow for a push through the 105.50-106.50 area (retracement and downtrend) within a push towards the broader retracement level of 111.50 (50% of the range of the past 20 years)," ANZ projects.

 

[FBS]

USD/CAD: ahead of the new highs

USD/CAD bulls made another go at multi-year highs above 1.1170, but then were pulled back to the 1.1140 area. The pair has been rising during the recent month on the divergence between more hawking stance of the Fed and the dovish inclinations of the Bank of Canada.

If the Fed reduces QE, as expected, USD/CAD may reach the psychological mark of 1.1200. TD Securities says that intraday support in the 1.1115/20 area now and note that short-term, bullish trend momentum signals are picking up again and aligning with the still bullishly-oriented longer-term signals. The outlook will remain positive as long as the pair is above 1.1050. “The technical signals look to have the makings of another powerful leg higher in USD/CAD”, said the specialists.

 

[FBS]

BofA: USD index will rise

The US dollar Index keeps consolidating in its 3-month 81.48/79.68 range, notes Bank of America Merrill Lynch.

"Odds continue to favor an upside resolution to 82.55/82.15 but it could take some time to play out. This scenario is invalidated below 79.68," BofA projects.

 

[FBS]

Carney will discuss GBP currency union
By Kira Iukhtenko, FX BAZOOKA analyst

The BoE Governor Marc Carney will meet the Scottish First Minister Alex Salmond in Edinburgh today in order to discuss the challenges presented by a potential sterling currency union. Mr. Carney will hold a speech hold a speech today at 12:15 GMT at the Scottish Council for Development.

The issue of Scotland's independance remains on the table - there are less than 9 months left before the September 18 referendum. The voters will be asked the yes/no question: "Should Scotland be an independent country?". There will be another important question to be answered if there is a "Yes" vote: will Scotland be alowed to keep using the pound?

UK Government oficially questions whether such an arrangement will be possible. According to the Chancellor of the Exchequer George Osbourne, it is “unlikely” the rest of the UK would welcome such a currency union. The Edinburgh meeting comes a day after Mr. Salmond said Carney's predecessor as a BoE Governor Sir Mervin King told that the Treasury would adopt an "entirely different" approach to Scottish issues if there was a "Yes" vote in the referendum.

Earlier this week Mr. Carney warned of the dangers of currency unions, referring to the euro zone's example. “It’s one of the factors that affects the outlook for the UK economy, has affected us over the last five years, affects us going forward – the challenges of having a currency union without certain institutional structures.”

 

[FBS]

FOMC's expected to cut QE

The Federal Reserve’s decision will be announced today at 19:00 GMT. Many economists expect that the central bank will announce another reduction of its bond buying program by $10 billion to $65 billion a month. Nomura thinks that the problems at emerging markets won’t prevent the Fed from tapering, because the regulator will explain them by local developments.

Some specialists say that such outcome is already priced in USD. On Jan. 21 a Wall Street Journal article by widely followed Fed watcher Jon Hilsenrath has predicted that. So, the key will be the central bank’s comments on US growth as the recent data was mixed. Barclays expects the Fed to upgrade its assessment of the economy citing the strengthening of activity data since Dec. Lloyds says that USD will be in “good shape.”

Note though, that with the Fed there’s always place for surprise. In case of no QE reduction today, US will broadly fall, especially versus gold.

 

[FBS]

Feb. 3: Asian session

- Asian shares declined

- Lower liquidity, higher volatility

Asian shares declined as strains in emerging markets show little sign of abating. Chinese official Purchasing Managers’ Index (PMI) dipped from December’s 51 to 50.5 in January. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.3%. Japanese Nikkei again led the way with a loss of 1.5% and fell to November lows. Liquidity is lower than usual because of Chinese banks are closed due to the ongoing Lunar New Year holiday.

USD/JPY recovered to 102.40. AUD/USD opened with a bullish gap at $0.8770, faced resistance a bit above this level and then weakened to $0.8750. Aussie has had quite a calm session despite a bunch of statistics from Australia and the downbeat China PMI. RBA is widely expected to leave rates unchanged on the tomorrow’s meeting. NZD/USD strengthened to $0.8115. Kiwi is supported by expectations of an RBNZ rate hike in March.

EUR/USD is little changed in the $1.3480 area near the 10-week low after its fall on Thursday and Friday. GBP/USD is consolidating above $1.6400.

 

[FBS]

Feb. 3: European session

EUR/USD recovered to $1.3500. Euro zone’s final manufacturing PMI for January was revised a bit higher from 53.9 to 54.0. German final January manufacturing PMI was revised up from 56.3 to 56.6. Spanish index came better than expected, but Italian index disappointed though they both were in the positive area above 50.

GBP/USD dropped to $1.6360. UK January manufacturing PMI came below the expectations at 56.7 (forecast: 57.1, prior: revised down to 57.2). EUR/GBP rose to 0.8260.

European shares are on the downside hurt by brewing worries over emerging markets and data showing China’s economy losing momentum.

 

[FBS]

Danthine: EUR/CHF peg still needed

SNB Vice-Chairman Jean-Pierre Danthine told in an interview to a Swiss newspaper that the central bank would only consider scrapping the 1.20 EUR/CHF cap if inflation was much higher and if there was less upward pressure on the currency. He went further, saying there were no inflation risks over the next 3 years, meaning the minimum exchange rate remained the appropriate tool to guarantee price stability for the foreseeable future. Danthine's comments offer a long-term comfort to the CHF bears.

According to the late-January Bloomberg survey, 7of 20 economists predict that the 1.20 cap will be lifted in 2015 and another 7 see that happening in 2016. Only 3 forecast the ceiling being abandoned in 2014 and 3 expects a 2017 exit.

 

[FBS]

Barclays: bearish on GBP/USD

GBP/USD extends the decline on Monday, testing $1.6330.

According to analysts at Barclays, a daily close below $1.6300 will pull the cable down to $1.5850 in the coming weeks. They note that the pair has broken the July trend line to the downside. Analysts point that GBP could find some short-term support in the $1,6300/10 area.

 

[FBS]

EUR/USD: what do the banks say?

We have searched for the fresh EUR/USD recommendations from the major banks and here’s what we’ve found.

Bulls

Nordea: Keep EUR/USD long (from $1.3450), next support area $1.3380/1.3450. Stop loss is at $1.3340, while take profit is at $1.3850. The ECB won’t cut rates, reasons plentiful: the labor market has turned the corner, the credit impulse turned up and the lending survey tone positive, the PMIs and other sentiment/survey data have improved, market-based inflation expectations are rocks solid even with the softer headline CPI.

Bears

SEB Bank: Short-term the minor consolidation since Friday afternoon is seen soon breaking down to a fresh low in the $1.3440/50 area.

JP Morgan: The ongoing straight attack and break below the support at $1.3507/06 to challenge $1.3436 which upon its break would open the way for a deeper decline. Only above $1.3506 would temporally keep the door open for another corrective leg up to $1.3802.

Barclays Capital: Consider selling EUR/USD as a tactical trade to position for the ECB meeting this week. Target is at $1.3400. The ECB will cut rates either in February or in March. Euro will fall anyway.

Danske Bank: We would not be surprised to see such a move and continue to see downward pressure on both EUR/USD that fell below 1.35 on Friday and EUR/GBP the next couple of days

Commerzbank: It’s likely to sell off further towards initially the 200-day MA at $1.3376. We have a minor support en route at $1.3423, the 78.6% retracement of the move up from November. Very near term we would allow for a small near term rebound, however intraday rallies should now find resistance at 1.3525/55. Above $1.3640 the key resistance is the $1.3740/46 recent high and Fibo retracement.

TD Securities: EUR/USD short-term view is bearish, with a potential target of $1.3174 achievable.

 

[FBS]

Feb. 14: Asian session

Japanese Topix index slid 1.2%, while the Nikkei 225 dropped 1.3%. The MSCI Asia Pacific Index of shares was little changed after falling as much as 0.2% earlier today.

USD/JPY slid to 101.56. Demand for safe havens increased making yen appreciate. AUD/USD tested $0.9030 during the Asian trading hours after consumer prices increased in China, the nation’s biggest trading partner, but then returned below $0.9000. NZD/USD tested $0.8367 before easing down to $0.8338.

EUR/USD is consolidating in the $1.3680 area after it rose by about 90 pips yesterday. GBP/USD is consolidating below yesterday’s high at $1.6673, the highest level since May 2011.

 

[FBS]

Italy will have new government

Italy’ Prime Minister Enrico Letta will step down today as the leadership of his centre-left party deserted him for Matteo Renzi (136 votes to 16).

Critics say that Letta hasn’t been able to carry out much-needed administrative reforms and stimulate economic growth. Italy is suffering from near-record levels of unemployment a public debt of more than 2 trillion euro. The nation’s GDP shrank by 9% in 7 years.

Renzi, 39, is now expected to be asked by the President Napolitano to form a new government. He will be Italy’s third unelected premier in as many years.

 

[FBS]

Mar. 10: Asian session

Asian shares fell after reports showed the biggest drop in Chinese exports since 2009 and tensions in Ukraine continue. MSCI Asia Pacific Index dropped by 1%. Japanese Nikkei is also down by 1%. The market’s sentiment was hurt as well as Chinese yuan fell on the central bank’s decision to cut the reference rate by the most in 1 1/2 years.

USD/JPY is testing 103.00 to the downside after peaking to 103.76 on Friday. Japanese GDP grew in Q4 an annualized 0.7% from the previous quarter, less than a preliminary estimate of 1%. The current-account deficit widened to the maximum since 1985.

Commodity currencies extend the downside after having peaked on Friday. The key bearish factors are the upbeat US NFP on Friday and weak China trade data (29B trade deficit vs. expected surplus of 14B) released on Saturday. AUD/USD opened the week with a bearish gap and weakened below $0.9040 after having faced resistance at $0.9135 on Friday. NZD/USD opened with a gap to the upside, but closed it by weakening to $0.8460. Kiwi remains pressured after hitting a 4-month top of $0.8520

EUR/USD rose to $1.3892, but is trading below Friday’s peak at $1.3915. GBP/USD edged up to $1.6440, but is trading below Friday’s peak at $1.6785.


Key option levels (Mar. 10)

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3800, $1.3840, $1.3850 (large), $1.3900;

GBP/USD: $1.6675;

USD/JPY: 102.00 (large), 102.05, 102.20, 102.50 (large), 103.00 (large), 103.50 (large);

AUD/USD: $0.8925, $0.8930, $0.8940, $0.9000, $0.9080, $0.9105 (large), $0.9110, $0.9130 $0.9150;

NZD/USD: $0.8360, $0.8370, $0.8415, $0.8430, $0.8440;

USD/CAD: 1.1050 (large), 1.1100, 1.1150, 1.1200;

EUR/JPY: 143.00 (large);

EUR/CHF: 1.2205, 1.2210;

EUR/GBP: 0.8180, 0.8350.

EUR/USD holds below the $1.3915 peak

EUR/USD strengthened towards the $1.3900 mark in the Asian morning, but holds below the Friday’s 2-year peak of $1.3915. Better-than-expected US NFP on Friday hindered the continuation of EUR-rally. On Monday French industrial production disappointed the markets, contracting by 0.2%. The pair will likely wait until Tuesday for more decisive moves.

Technically, the pair approached a strong resistance in the $1.3900/4000 area. This is the 2008-2014 resistance trend line and the top of the monthly Ichimoku. The ECB-driven move brought the pair into this area, but was not strong enough to overcome it.

We believe EUR/USD still has a potential to hit $1.4000, but there is a clear need for the market to correct lower. Key support lies at $1.3830 and $1.3780 – look to buy euro on dips. Slide below $1.3700 would return the negative outlook.

EUR/USD: Elliott waves (Mar. 10)

Weekly. The pair keeps forming of the rising correctional wave [D], which is close to completion.

Chart. Weekly EUR/USD

Daily. The wave [D] is a double Zigzag w-x-y. Euro’s now forming the final wave of the second Zigzag [C].

Chart. Daily EUR/USD

H4. We are probably seeing the beginning of construction of wave (5). In the coming days the pair will continue rising within the impulse 3, the market will generate a horizontal correction, after which the growth in the wave 5 will continue. The approximate trajectory is shown at the picture.

Chart. H4 EUR/USD

 

[FBS]

Mar. 17: Asian session

Asian stocks mostly fell on Monday as concerns over Ukraine escalated after the Crimea referendum on Sunday. Russian exit polls show that 95.5% of Crimeans voted to break away from Ukraine and join the Russian Federation. Investors nervously await for the West’s response to Crimea’s vote, which has drawn international condemnation. MSCI Asia Pacific Index recovered by 0.18% in the session, while Nikkei 225 lost 0.35%. USD/JPY strengthened from the Friday's low of 101.20 to 101.65. Chinese shares rose as the yuan dropped after the government widened the currency’s trading band.

Commodity currencies are trading a bit higher. AUD/USD recovered to $0.9065. Westpac economists revised their forecasts for the RBA monetary policy: they no longer see RBA cutting rates in 2014. NZD/USD is trading around $0.8550, extending the consolidation in the $0.8520/60 range. Gold hit a fresh 6-month high in the early Asia, strengthening to $1388.

EUR/USD is trading a little lower around the $1.3900 mark. GBP/USD sitting at $1.6640.


CFTC: USD longs keep falling

Here are the essentials of the latest Commitments of Traders (COT) report, released on March 14 by the Commodity Futures Trading Commission (CFTC) for a week ended on March 11.

According to the report, large speculators decreased their overall USD bullish position from $11.6 billion in the week ended on March 4 to $10.6 billion in the week ended on March 11. USD longs keep on falling for a fifth week in a row. The US dollar aggregate position remains at the lowest level since Nov. 5, 2013 ($7 billion).


Trade signals from Danske Bank (Mar. 17)

*Danske Bank uses trailing stop orders (moved together with the price)

EUR/USD: Buy at $1.3859 with a target of $1.4000 and a stop at $1.3831

USD/JPY: Short at 101.75 with a target of 100.76 and a stop at 102.43

GBP/USD: Long at $1.6603 with a target of $1.6719 and a stop at $1.6565

USD/CHF: Short at 0.8759 with a target of 0.8632 and a stop at 0.8807

AUD/USD: Long at $0.9035 with a target of $0.9204 and a stop at $0.8975

USD/CAD: Buy at 1.1035 with a target of 1.1225 and a stop at 1.0950


What to expect from EUR/USD?
Kira Iukhtenko, FX BAZOOKA analyst

EUR/USD extended the upside over the past week. At the beginning of the week euro paused a little, but bounced from the $1.3830 support and moved to the upside with renewed energy. The pair hit a fresh high of $1.3966 on Thursday – highest since 2011. Rally slowed later in the day as better-than-expected US data increased the QE tapering expectations on the March 19 meeting.

All in all, the market remains quite optimistic on the EUR/USD prospects, despite the attempts of the European officials to calm the demand spurred by Draghi on a March meeting. We see a good chance to test the $1.4250 area in the coming weeks, but this week we still expect a bearish correction to extend towards the $1.3720 support.

Technical factors confirm the need for retracement. The pair keeps on testing the major resistance area $1.3900/4000 and lacks an immediate power to break above it. This is the 2008-2014 resistance line and the upper boarder of the monthly Ichimoku Cloud. There is a MACD divergence on the weekly chart.

Near-term support lies at $1.3830 (61.8% Fibo from the 2011-2012 decline) and $1.3800. The market will remain bullish until the $1.3720 holds.