Comments and forex-analytics from FBS Brokerage Company

[FallenDC]

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I'm glad to present in this thread the analytics of FBS brokerage company.

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[FallenDC]

The Federal Open Market Committee is expected to become more dovish due to the annual rotation. As a result, the Federal Reserve Chairman Ben Bernanke will get chance to pursue his active loose monetary policy if he thinks that American economy needs help.

The FOMC consists of 12 members – 7 Fed board governors and the president of the New York Federal Reserve Bank have – permanent vote, while the 4 remaining seats are shared by the other 11 FRB presidents which change places on the annual basis.

This year 3 out of the 4 rotating seats was occupied by the hawks – Richard Fisher, the president of the Dallas Federal Reserve Bank, Charles Plosser of Philadelphia, Narayana Kocherlakota of Minneapolis. That means that these policymakers don’t think that monetary policy can be used to stabilize economic conditions and would prefer setting long-term target for inflation. Doves, on the other hand, believe that the central bank has to keep interest rates low to support the national economy. Fisher, Plosser and Kocherlakota voted against the pledge to keep short-term rates close to 0 until the middle of 2013 and against the Operation Twist.

The old distinction, with hawks concerned about inflation and doves worried about weak growth, has subsided over the past 20 years. Fed officials agree that keeping inflation low and stable is a necessary precondition of good economic performance.

This year, a “tough group” of hawks occupied. These officials had little sympathy for the Fed’s innovative efforts to try to lower long-term interest rates, said Brian Bethune, a Fed expert at Amherst College in Massachusetts.

In 2012, the Fed is losing 3 hawks and only getting one: Jeffrey Lacker, the president of the Richmond Fed. The other 3 new members: John Williams, the president of the San Francisco Fed, Dennis Lockhart, the president of the Atlanta Fed, Sandra Pianalto of Cleveland are viewed as more consensus-minded and likely to vote with Bernanke.

[FallenDC]

Analysts at Brown Brothers Harriman believe that in the first quarter of 2012 the demand for Japanese yen will remain high.

In their view, yen will remain among the top performers in the G10 in the first quarter of the next year due to such factors as:

- demand for safe havens;

- Japan’s inability to recycle its current account surplus.

According to BBH, the Bank of Japan could conduct new currency interventions. At the same time, the specialists don’t expect the BOJ to establish a definitive floor in the USD/JPY.

[FallenDC]

Analysts at BMO Capital Markets say that Canadian dollar has been influenced by 2 things:
- investors' risk sentiment;
- outlook for Bank of Canada’s policy.
The specialists think that Canadian dollar will weaken versus its US counterpart. In their view, the pair USD/CAD will rise to 1.0600 in the first half of the next year as the market will be dominated by the risk aversion and significant possibility of BoC rate cuts.
In the second part of 2012 risk sentiment will improve and prospects for BoC rate hikes mount, so that loonie will likely get chance to reverse and USD/CAD will slide to the parity level.

[FallenDC]

Analysts at Raiffeisen think that the single currency will fall versus US dollar in the first quarter of the next year below $1.30, staying around this level by the middle of 2012.

Then EUR/USD will rise and its average rate in the second half of the year will be at $1.35.

The specialists say that the exchange rate will likely overshoot or undershoot the targets by up to 10 cents in between due to renewed escalation in the euro-zone debt crisis and/or further Fed’s monetary policy easing. In their view, these deviations from the path of the interest rate differential will be only temporary and offer good trading opportunities.

[FallenDC]

Technical analysts at ANZ claim that as the European currency didn’t manage to rise to $1.33/1.35 during the past week, it’s now under severe technical pressure and risks sliding lower to $1.25 or even to $1.23.

The specialists claim that euro’s rate versus the greenback has so far been relatively high in comparison with the single currency’s fair value.

The bank underlines that years there were some aggressive selloffs over the past few years. In their view, the same may happen now. According to ANZ, EUR/USD may hit the minimums of late 2008 or even 2010 (at $1.1875). The strategists also expect euro to weaken versus Australian dollar heading down towards 1.20.

[FallenDC]

Analysts at Societe Generale talk about the prospects of the single currency.

Kit Juckes, chief currency strategist: “There will be reticence to put money to work in anything as risky as a BTP this side of the year-end, at least. This is the time for window-dressing, if nothing else. Positioning data Tuesday showed euro shorts down a touch but still extreme, while the price action and news flow won't really shake anyone out. There is not much about to help euro as the market is focused on Italian auctions on Wednesday and Thursday. New Year spike can't start until EUR/USD closes above $1.3150 or so.”

Willie Williams, director of institutional derivative sales: “At this time of year, it's important to be looking at tactical trades. As the European Central Bank has provided close to 500 euro of financing to the European banks, and another money tender on tap for early 2012, that removes a lot of the short-term disorderly risk in Europe. Apart from the financing aid, plenty of the bad news for the euro is already out there. While it's possible that a recession in Europe could hurt the single currency, investor positioning should help. On a short-term basis, given how short the market is on euro, I think a rally from $1.30 to $1.33 is perfectly reasonable, in particular as we go into the end of the year. Buy euro at $1.30 with a stop at $1.29 and a target of $1.33.”

[FallenDC]

According to the data released today, Switzerland's KOF Economic Barometer, which measures the level of a composite index based on 12 economic indicators, was equal to only 0.01 in December versus the forecast level of 0.25.

Analysts at ING claim that the figures signal negative in the fourth quarter. In their view, the “double-dip” scenario for the Swiss economy can't be excluded any more. As a result, the Swiss National Bank is extremely unlikely to tighten policy in the foreseeable future.

[FallenDC]

Italy has managed to sell today 9 billion euro ($11.8 billion) of 6-month bonds at an average yield of 3.25%. The nation’s funding costs declined from 6.5% at November auction.

The country also sold 1.733 billion euro of 2013 notes to yield 4.853%, compared with a yield of 7.814% at the last auction on November 25.

Be ready as tomorrow Italy will auction 4 different securities, including a 10-year bond.

The yield on the 10-year Italian benchmark fell from the levels above the critical point of 7% to 6.80%.

[FallenDC]

The pair EUR/JPY fell to 10-year minimum at 100.30 yen, the pair EUR/USD dropped to the minimal level since January at $1.2887.

Investors are concerned that European Central Bank will inject more cash into the financial system to avoid a credit crunch from the region’s debt crisis. The ECB announced yesterday that after last week’s lending to the euro zone’s banks its balance sheet climbed to the record level of 2.73 trillion euro.

Analysts at Westpac think that euro will stay under pressure due to the signs of more formal quantitative easing.