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Strategists at Danske Bank note that the market is still focused on Irish debt problems that continue weighting on euro’s rate.

The specialists believe that the single currency isn’t ready to react to some positive unexpected data. After yesterday’s surprisingly strong ZEW the pair EUR/USD rose only by 30 pips.

If Ireland keeps refusing to take financial aid from the European Union, the crisis risks spreading to other indebted euro area’s countries.

Danske analysts also claim that it’s necessary to pay attention to today’s Bank of England’s meeting. According to them, downside risk for British pound is limited as UK central bank is quite unlikely to go into further monetary easing.



Chart. H1 EUR/USD

Yesterday the single currency continued declining versus the greenback. The pair EUR/USD broke through the 55-day MA at 1.3577 to the 50% retracement of the advance from August.

Technical analysts at Commerzbank claim that the near-term consolidation of the pair at the current levels seems to be quite possible as the market attempts to compensate recent losses.

The specialists note that the bulls will face resistance at 1.3645, 1.3765/75, which together with 1.3851 (20 day-ma) will limit the rate on the upside. The European currency risks lowering to 1.3365/35 support (38.2% retracement and the August peak) and then to the 200-day MA at 1.3138.



Chart. H1 EUR/USD

Analysts at Citi advise investors to look forward to more declines of British pound versus the greenback.

According to the bank, even though pound was the best performer among G10 currencies during the last five days, it yesterday’s drop from the day’s maximum at 1.6086 to the minimum at 1.5839 suggests that sterling’s going to catch-up with the drop in other dollar crosses.

If the market’s risk aversion keeps increasing, pound will correct downwards in the near term.



Chart. H1 GBP/USD

Dear clients!

Today in the end of Hajj Muslims throughout the world celebrate Eid al-Adha. It is the most celebrated holiday in Islam. It represents the end of the pilgrimage to the Islamic sacred places and reminds of the eternal values for any confession: justice, kindness, mercy and care.:)

FBS would like to congratulate all our Muslim clients on this important spiritual holiday and wish peace, harmony and happiness to your home. Let your families always have love, respect and prosperity. :)

Hello Everyone!

Good morning from the entire FBS Team :)

Analysts at JPMorgan & Chase Co. are sure that the Federal Reserve’s monetary easing policy is making US dollar the world’s “weakest currency”. The specialists expect that the greenback will fall to 75 yen in 2011. The lowest level of the pair USD/JPY was hit at 79.75 yen in April 1995. The minimal rate since then was at 80.22 yen on November 1.

US, Japanese and European central banks will keep rates next year at the minimal levels in order to spur the growth of their economies, while the Fed is likely to take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market. JPMorgan strategists also reminded that the United States has the world’s largest current-account deficit. Even if the US prolongs easing it won’t increase inflationary pressures as the balance sheets of banks and households are still damaged by the global financial crisis.

According to JPMorgan, 10-year Treasury yields may drop from 2.89% today to 2.25% over the next year and their premium over similar-maturity Japanese yields won’t widen. Loose policy of the key central banks flooding the market with extra liquidity will correspond to 3% advance of the global economy in 2011 as it happened in 2004-2004 when stocks and commodities surged on improving risk appetite and dollar lost 25% versus yen. The rebound of the world’s economy encouraging risk sentiment will make investors reduce their demand for Japanese currency that will decline against other currencies beside the dollar to levels last seen in early 2007.

The analysts also believe that Japan’s monetary authorities won’t intervene again at the currency market as it did on September 15 when the national currency rose to 15-year maximum even if yen appreciates versus US dollar due to the international criticism of foreign-exchange intervention.



Chart. Daily USD/JPY

Analysts at Danske Bank believe that the pair EUR/USD will trade in a month at $1.34.

In their view, there may be several factors that could make the single currency stabilize versus the greenback in the near term. These factors include the solving of Ireland’s funding question and the following decrease of the risk of the crisis’ spreading to other indebted euro zone countries. It’s also important that the global risk sentiment wouldn’t be determined only by the concerns about the situation of the peripheral European nations.

In addition, US yields have to correct lower. The 2-year EUR-USD swap spread has stabilized just below 100 basis points after it narrowed due to the Fed’s announcement about the beginning of QE2.

Danske specialists note that these factors haven’t realized yet, so they believe euro will find itself under negative pressure. That’s why their one-month forecast is for the European currency’s drop to $1.34.



Chart. H4 EUR/USD

The single currency was gaining versus the greenback during the last 2 days. Euro managed to rebound getting above 1.3600. Technical analysts at Commerzbank note, however, that it won’t be able to get much higher and, on the contrary, risks falling to 1.3365/35 (38.2% Fibonacci retracement and the August peak) and then to the 200-day MA at 1.3138.

The specialists claim that the pair EUR/USD will face interim resistance at 1.3645 and 1.3765/75 and its attempts to climb higher will be limited by the 20-day SMA in the 1.3850 zone.



Chart. H4 EUR/USD

Currency strategists at UBS AG expect that the single currency may fall below long-term support at 1.1000 during the coming months.

According to them, euro is likely to trade within the downtrend as the European Central Bank will be forced to keep its monetary policy extremely loose because the euro zone nations will be tightening their fiscal belts. Moreover, a lot of private institutions are increasing short positions on euro encouraging public investment firms to follow their example that’s even more strengthening negative pressure on the pair EUR/USD.

UBS specialists advise investors to buy EUR/USD put-spread with 6-month expiry, strike at $1.1000, $1.000. Recommended trade's cost is 0.9025% with reference spot at 1.2190.



Chart. Monthly EUR/USD

At the beginning of the week the pair EUR/CHF showed a daily reversal signal. However, strategists at Barclays Capital claim that the weekly reversal signal posted 2 weeks ago seems to be stronger. If their assumption is correct the single currency will trade between 1.32 and 1.36 against its Swiss counterpart. The bank advises to sell euro as its rate approaches the upper border of this range.



Chart. H4 EUR/CHF