Comments and forex-analytics from FBS Brokerage Company

[jeshinta]

Spanish government sold 2.9 billion euro of 12/18-month bills out of targeted 2-3 billions. The yields and the cover ratio were slightly worse. See the detail below:

- 2.19 billion euro of May 17 2013 letra, yield 2.985% (last 2.623%), cover 1.8 (from 2.9);

- 0.71 billion euro of October 18 2013 letra, yield 3.302% (last 3.11%), cover 3.2 (from 3.77).



Photo by Pedro Armestre / AFP / Getty Images

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[jeshinta]

Australian dollar has been rapidly falling against the greenback since the beginning of the month. Today AUD/USD hit 0.9963, the minimal level since December 2011.

Analysts at ANZ claim that the attempts of the bulls to push Aussie up versus its US counterpart will be limited by resistance in the $1.0080/1.0110 zone. In their view, the downside risks for the pair will subside only if it overcomes $1.0225. If it happens, one may try returning to AUD longs.

The specialists think that on a broad scale we see consolidation of AUD/USD and recommend closely watching momentum and price action during the pair’s retracements up in order to find ideal entry levels and timings.



Chart. Daily AUD/USD

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[jeshinta]

Weekly GBP/USD

British currency opened the week on the upside versus the greenback after 2-week decline from 2012 maximum in the $1.6300 area.

Pound was supported by the Turning line (1) which is still going up on the weekly chart and the upper border of the descending Ichimoku Cloud (3). The Standard line (2) is moving sideways and pointing at potential consolidation. Among the positive things one should note that the bearish Cloud has narrowed and may switch upwards in the near term reflecting stronger positions of the bulls.

Now everything depends on the ability of the prices to hold above the Cloud. If they manage to do it, the consolidation between the current levels and this year’s highs will likely continue. If they don’t, sterling will ease down to Senkou Span A (4).



Chart. Weekly GBP/USD


Daily GBP/USD

Pound’s currently testing support provided by Kijun-sen (1) ($1.6050). A bit lower, in the $1.6000 area, British currency will be able to count on the support line connecting the minimums of January 13, March 12 and April 16. In addition, the level mentioned above is very important from the psychological point of view.

If this support is breached and the prices head towards Ichimoku Cloud, the downside risks will increase as Kumo is rather thin in that zone. At the same time, there’s a 38.2% Fibonacci retracement level of the advance made by pound this year ($1.5890), which will increase the chances of the prices’ recoiling up (making us expect the “head and shoulders” pattern to form). Although bullish Kumo has started narrowing, it’s too early to speak about the potential reversal of the trend downwards – watch 3 support levels mentioned above.

The main resistance for sterling is provided by Tenkan-sen (2) which has recently turned down and was capping sterling during the whole last week.



Chart. Daily GBP/USD

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[jeshinta]

Analysts at RBS recommend selling the single currency versus British pound targeting 0.7695 (2010 minimum) in the longer term and stopping at 0.8110 (May 3-4 minimums).

The specialists claim that support levels for EUR/GBP lie at 0.7999 (May 10-11 minimum) and 0.7695, while the resistance ones – at 0.8069, 0.8077 (lower border of the gap), 0.8096 (upper border of the gap), 0.8192 (April 19 maximum), 0.8222 (previous significant support) and 0.8500 (61.8% retracement from the pair’s advance after 2008 credit crunch).



Chart. Daily EUR/GBP

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[jeshinta]

Asian session was surprisingly quite. The RBA released its last meeting minutes showing that last month 50 b.p. rate cut was caused by the easing growth and inflation.

The stalemate in Greece persists: Alexis Tsipras, the head of Syriza party which opposes the bailout and austerity, wouldn’t attend a meeting called by President Karolos Papoulias today – no doubt, bad news for risk sentiment.

Moody’s Investors Service downgraded 26 Italian banks including Unicredit SpA and Intesa Sanpaolo SpA citing weakened earnings and the country’s economic prospects.

Yesterday euro area’s industrial production came in even worse than expected contracting by 0.3% in March. Now the markets prepare to hear about the region’s falling into official recession. The forecast is for the currency union’s GDP to contract by 0.2% in the first 3 months of the year (second quarter in a row). Spain and Italy are already suffering from recession. The release is at 9:00 a.m. GMT. France has already reported 0.0% (q/q) change in line with sonsensus forecast. German economy, however, exceeded expectation adding 0.5% (q/q) versus 0.1% estimate. Italian Q1 data (-0.7% previous, -0.6% forecast) is due in 2 hours. In the medium term, the majority of forecasts for euro are bearish.

Also to watch today:

In addition, watch German May ZEW Economic Sentiment and follow the news about ECOFIN Meetings. Newly elected French President Francois Hollande meets German Chancellor Angela Merkel in Berlin. According to German government, Hollande's visit is a "strong signal" regarding the determination of both countries to continue their strong relationship. Euro zone’s leaders are expected to discuss the development of the region's monetary and fiscal policy. As is known, they have contradictory views on austerity.

US will release data for April. Economists look forward to a decline in American retail sales (both core and headline), while the CPI growth may slow down from 0.3% to 0.1%, though the core reading is seen unchanged. We will also get info on the demand for US debt: TIC Long-Term Purchases are expected to increase from 19.4B in February to 10.1B in March.

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[jeshinta]

The Australian dollar fell below parity with the greenback for the first time this year on Monday. The uncertainty in Europe doesn’t influence the Aussie directly, but saps the global risk appetite.

According to the RBA meeting minutes, released on Tuesday, last month 50 b.p. rate cut was caused by the easing growth and inflation. Policymakers are still concerned by the weakness in the housing sector; the mining sector, however, performs strongly.

The Aussie is trading on a downside since April 30 after the RBA cut rates to 3.75%. The still-reasonable Chinese FDI data (0.7% annualized drop in April vs. 6.1% drop in March) helped lift the AUD/USD towards session highs.

However, without any positive news from Europe (and who believes in that nowadays?) AUD/USD may fall below the $0.9850, $0.9600 and $0.9400 support levels. Strong resistance lies at $1.0000. These days the pair is trading far below the daily Ichimoku Cloud.

National Australia Bank: AUD/USD may trade at $0.9800 by September instead of at a previously expected $1.0200. By the year's end the pair may trade at $0.9700 instead of at $1.0100.

Commonwealth Bank of Australia: The outlook declined to $0.9800 by June from an originally forecast $1.0800, and to $1.0500 by December instead of $1.0900.

Westpac: The pair may trade at $0.9800 by the end of the September instead of $1.0200, but is retaining $1.0400 as a year-end target. In the near term a test of $0.9900 is likely.



Chart. Daily AUD/USD

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[jeshinta]

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 (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2750, $1.2800, $1.2850, 41.2925, $1.2950;
GBP/USD: $1.6100;
USD/JPY: 79.50, 79.55, 79.75, 80.00;
AUD/USD: $1.0000 (large), $1.0150.



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[jeshinta]

Technical analysts at Commerzbank claim that support for the single currency versus the greenback lies at $1.2809 (78.6% Fibonacci retracement of euro’s advance from January minimum to February maximum). In the longer term, the main downside target remains at $1.2624 (January 16 minimum, 2012 minimum).

As for resistance, the specialists name $1.2911 (May 9 minimum) and $1.2954 (61.8% Fibonacci retracement of the same move). In their view, as long as EUR/USD is trading below $1.3026/33 (minimums of early February and early April) and $1.3055 (50% Fibonacci retracement).



Chart. Daily EUR/USD

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[jeshinta]

The single currency recovered from almost a 4-month minimum in the $1.2810 area to the daily high at $1.2869.

Germany surprised analysts posting 0.5% q/q growth in Q1 – 5 times more than the market had expected. As a result, the concerns about the euro zone’s crisis and its impact on the region’s economic growth have a bit subsided. Note that demand for US dollar is also lower due to the Fed’s April 25 meeting minutes release tomorrow – the Chairman Ben Bernanke said that day that he’s prepared to “do more” to boost the economic recovery and underlined that inflation remains close to target.

The medium-term forecasts for euro are still quite negative. As a result, it looks like a chance to sell on rallies. We see that Italian GDP figures (-0.8% q/q vs. -0.7% expected) have already made EUR/USD pull back a little lower.

Resistance for the pair is situated at $1.2870 (today’s highs) and $1.2935 (May 14 maximum), while support is at $1.2807 (January 17 maximum, $1.2733 (January 18 minimum) and $1.2700.



Chart. Daily EUR/USD

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[jeshinta]

British pound steadily strengthens against the euro (12% growth since June 2011, new surge in April 2012) and the greenback (5.5% growth since January 2012). What are the reasons for the sterling’s strong performance versus its major peers?

Pound’s status of a “safe haven” tends to attract investors on the back of a total economic and political instability in the euro zone. What is more, speculations about a further QE started to fade after the inflation exceeded the expectations (CPI in March reached 3.5% after previous print 3.4%; annual PPI output in April exceeded estimates of 2.9 % by coming in at 3.3%). According to the BoE governor King, the inflation is still too high.

Moreover, the UK economy attracts foreign investors as the world’s the second largest market for M&A. According to most analysts, M&A inflows contribute to the sterling’s growth and increase the pounds prospects in a longer term. This year foreign investors have bought the biggest amount of the UK assets since 2008 ($32.6 billion-worth).

However, a note from Deutsche Bank warns that the strong pound is already affecting on the poor UK economy which is in a recession itself. For now sterling's crearly appreciating, though it's attactive mainly due to the problems elsewhere. The situation may change quickly enough, so use it while it's still here.



Chart. Daily EUR/GBP

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