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AUD/USD upside appears capped at 0.7145/80 – Commerzbank

FXStreet (Edinburgh) – In opinion of Axel Rudolph, Senior Technical Analyst at Commerzbank, the pair’s upside could face strong resistance around 0.7145/80.

Key Quotes

AUD/USD last week tested the 55 day ma at .7145 which continues to cap, and we look for the market to fail here. The 2014-2016 downtrend lies at .7180 and reinforces resistance here”.

“A move back below the .7017 November low should be enough to trigger further weakness”.

“Longer term the risks are on the downside and we target the .6774 2004 low. Nearby support at .6920 guards the .6828/29 recent lows”.

In opinion of Axel Rudolph, Senior Technical Analyst at Commerzbank, the pair’s upside could face strong resistance around 0.7145/80…

(Market News Provided by FXstreet)

BOJ’s negative rates leave banks wondering about where to park cash

FXStreet (Mumbai) – BOJ on 29th January announced a cut in benchmark interest rate below zero. The central banks policy will come into effect on 16the February and from there on 0.1 percent negative rate will be charged for the 10 trillion yen to 30 trillion yen of funds which are parked in current accounts at the BOJ. BOJ’s decision stunned investors. It is not just the investors who were left surprised, lenders who will be charged for the 30 trillion yen ($250 billion) of deposits they have parked with the central bank have been left wondering what they will now do with the cash.

Net interest margins which are among the lowest in the world will further shrink. Banks will therefore have to come up with other areas where they can park their money to make up the loss suffered due to the charges levied on them for leaving their deposit with the central bank.
Banks can now look at aggressively expanding credit to companies and households. However, the problem here is there is not much loan demand in the economy which has grown at an annual 1 percent rate in the third quarter. Bloomberg reported that official data showed substantial slow down in loan growth in the latter half of 2015. Bloomberg quoted UBS Group AG analysts who feels “It is hard to see this negative interest-rate policy leading to any substantial loan growth”.

Banks could also look at buying JGBs. But that too does not seem like a workable option given that the BOJ started buying JGBs under the asset purchase programme and in turn investing them in other assets to raise inflation. Banks have themselves reduced JGB holdings by about 38 percent to 103 trillion yen since April 2013 when Kuroda began easing. Also, banks hesitate to hold longer-maturity debt given the interest-rate risk. 10-year yields which are now less than 0.1 percent are not really lucrative. according to Toyoki Sameshima, an analyst at BNP Paribas SA in Tokyo said via Bloomberg that banks may choose to invest in foreign bonds to earn positive yields. It may also prove beneficial for the banks to invest in domestic real estate investment trusts, corporate bonds and commercial paper.

Ryoji Yoshizawa, a director at Standard & Poor’s in Tokyo opined that banks should consider the possibility of investing in overseas assets. He has however warned of the risks involved saying “Foreign bond investment still comes down to foreign-currency funding”. Japan’s biggest banks including Mitsubishi UFJ Financial Group Inc. have been expanding overseas by expanding credit and taking stakes in lenders in Asia and elsewhere.Lenders could possibly take a cue from Mitsubishi UFJ Financial Group Inc. that has expanded credit in overseas markets and has also bought stakes in lenders in Asia and elsewhere.

Banks possibly can choose to pass on the charges levied on them to their own depositors. However, it is unlikely that a bank would want to do any such thing and jeopardize their reputation. Then again there is a risk posed by global slowdown which cannot be discounted.

Banks can also not opt for salary cuts as that would go against Abe’s goal of increasing wage growth with an objective to boost spending and in turn raise inflation.
Experts seen a possibility of consolidation among regional banks in the wake of the negative interest rate. The regional banks that might not have required money to make up for losses incurred from shrinking rates might opt for consolidation. Thus there is a rising possibility that bigger players might take over the smaller ones.

BOJ on 29th January announced a cut in benchmark interest rate below zero. The central banks policy will come into effect on 16th February and from there on 0.1 percent negative rate will be charged for the 10 trillion yen to 30 trillion yen of funds which are parked in current accounts at the BOJ. BOJ’s decision stunned investors. It is not just the investors who were left surprised, lenders who will be charged for the 30 trillion yen ($250 billion) of deposits they have parked with the central bank have been left wondering what they will now do with the cash.

(Market News Provided by FXstreet)

USD/CNH downside view unchanged – UOB

FXStreet (Edinburgh) – The research team at UOB Group has noted the downside momentum is picking up pace around the pair in the near –term.

Key Quotes

“After trading mostly sideways since middle of last month, there are warning signs that the downside pressure is increasing”.

“That said, only a clear break below 6.5900 would indicate that the start of a bearish phase in USD”.

“Overall, unless this pair can reclaim 6.6300 in the coming days, the downside risk will continue to increase”.

The research team at UOB Group has noted the downside momentum is picking up pace around the pair in the near –term…

(Market News Provided by FXstreet)

EUR/USD looks northwards as US index futures point to risk-off

FXStreet (Mumbai) – The EUR/USD pair is pointing northwards as the major equity indices in the US are pointing to a weak opening.

Resistance at 1.0920 intact

The spot continues its struggle to extend gains over and above 1.0920 amid signs of risk aversion in the US. At the time of writing, the S&P 500 futures were indicating the index is likely to open 13 points or 070% lower.

Hence, the common currency remains bid in early Europe.
The data calendar is light, thus pair is at the mercy of the overall market sentiment. Meanwhile, Fed’s George could influence the demand for the US dollars by commenting on the next move in the interest rates.

EUR/USD Technical Levels

The spot trades around 1.0910 after failing once again to take out 1.0920. A break above 1.0920 could see the pair test a major hurdle at 1.0940 (61.8% of Mar-Aug rally). On the other hand, a break below 1.0890 (38.2% of 1.1495-1.0517) could see the pair slide to 1.0864 (hourly 200-MA).

The EUR/USD pair is pointing northwards as the major equity indices in the US are pointing to a weak opening.

(Market News Provided by FXstreet)

USD/CHF eases from highs, around 1.0210

FXStreet (Edinburgh) – The Swiss franc remains on the defensive vs. the dollar today, sending USD/CHF to test highs near 1.0220 although losing some momentum afterwards.

USD/CHF supported around 1.0150

The pair is recovering part of yesterday’s sharp retracement to the mid-1.0100s in response to a fresh wave of selling pressure that was hitting the dollar across the board.

Today’s softer tone surrounding the safe haven CHF has been pushing spot higher, although the upside seems to be somehow capped around 1.0250, recent highs. SNB’s T.Jordan was on the wires early in Europe, reiterating once again that the franc remains ‘overvalued’ and the central bank is ready to intervene if necessary. Jordan, however, declined to comment whether the SNB has been intervening lately.

USD/CHF relevant levels

At the moment the pair is advancing 0.22% at 1.0213 facing the next hurdle at 1.0262 (high Jan.29) ahead of 1.0300 (psychological level) and finally 1.0335 (high Nov.27). ON the other hand, a break below 1.0107 (low Jan.28) would open the door to 1.0043 (55-day sma) and then 0.9994 (61.8% Fibo of 1.0335-0.9784).

The Swiss franc remains on the defensive vs. the dollar today, sending USD/CHF to test highs near 1.0220 although losing some momentum afterwards…

(Market News Provided by FXstreet)