Euro Dollar Rate Forecasts for 2014-2015 - page 20
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EUR/USD: Breakout Or Not? – Nomura, Barclays, SocGen
EUR/USD lost the 1.0915 level, but is still holding above the May low of 1.0820. What does this mean?
Here are views from three banks:
Here is their view, courtesy of eFXnews:
As EUR/USD is drifting lower, technical strategy teams at Nomura, Barclays Capital, and SocGen provide their views on whether this move constitutes a breakout or still part of a broader range.
Nomura: Euro sold off to and broke 1.0916 support and that leaves a vacuum of support to 1.0819. The reason we are not pushing a more bearish case is twofold: first, the move from 1.1436 looks like an Elliott correction not an impulse and second, momentum is still constructive.
From an Elliott perspective, the decline from 1.1216 is a 5-wave decline that is nearing completion. We favor that this is wave-(c) of a larger 3-wave correction from 1.1436; holding above 1.0819 is critical to this count. Key upside resistance to better is 1.0916 followed by 1.0966 and 1.1083.
Barclays: The break below our initial downside targets near 1.0915 endorses our bearish view.
We are now looking for a move towards the 1.0815 range lows. Our greater targets are towards the 1.0460 year-to-date lows.
SocGen: EUR/USD is piercing below an upward trend and earlier highlighted intermittent support (1.0950). Daily RSI too is breaching a support.
However the broader consolidation zone still persists and 1.0885/1.08 will decide if the revisit of multi decadal channel at 1.05/1.04 happens.
USD, EUR, JPY, GBP, AUD: Outlooks For The Coming Week - Morgan Stanley
"USD: Focus Returns to Fed. Bullish.
With risks from Greece and China diminishing, we believe that the market will once more focus on Fed rate hikes. In Yellen’s latest comments, she reiterated that the central bank remains data-dependent and flexible. With the market still pricing the first hike in six months, we see scope for this to be brought forward if US data come in on the strong side, boosting USD. We expect USD to continue to outperform.
EUR: Path Clear for Sell-Off. Bearish.
With uncertainty regarding Greece diminished, we believe that investors will feel more comfortable reinitiating EUR shorts, as evidenced by the latest break in EURUSD below the 100 DMA. Draghi has reiterated that the ECB stands ready to act if needed, which could be enough to weigh on EUR, particularly if it supports equities, given the inverse relationship between European stocks and EUR.
JPY: Still Look for Strength. Bullish.
We expect JPY weakness to reverse, and maintain our bullish view, despite the recent pick-up in equity markets. Recent data from Japanese pension funds point to the reallocation process being largely complete, suggesting that foreign outflows from Japan could slow. The latest developments in Japanese politics pose a risk to Abenomics, which could be a near-term source of support for JPY, though we believe that in the longer term this could be more concerning.
GBP: GBP Supported for Now. Neutral.
GBP has been an outperformer over the past week, driven by UK rate expectations. Carney’s comments concerning the timing of the first rate hike helped GBP to rally, and we expect to see continued strength in the near term. However, the bigger shift has been from Miles, who has been the long-time dove. This could be a reflection of the center ground at the MPC starting to shift towards the hawkish camp. The UK economic performance remains strong, and this should help to support GBP.
AUD: A China Proxy. Bearish.
Watch: RBA minutes, CPI AUDUSD reached a six-year low this week on the back of fears surrounding the Chinese economy. Despite better-thanexpected Chinese economic growth data, AUD should continue to come under pressure as a result of persistently weak commodity prices and the significant terms of trade shock it is facing. The RBA minutes and the CPI print should both help to determine if the market should price in a higher chance of a rate cut. We remain bearish AUD."
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Euro is bearish for a long time - the question is can we trade using that same MM as MS
This was strong support 2 months ago - it will give up just like that
This Could Be Behind The Temporary Pause Of EUR Bears - SocGen
It feels as though summer has arrived in markets, notes SocGen.
"That can happen, on Monday morning, and change pretty quickly but the calendar is largely empty, the Greek crisis is taking a brief time out, Chinese equity prices are trading in a narrower range than for a while," SocGen adds.
"The key to further Euro weakness may now be economic data. The close correlation between the Euro and Euro (as opposed to US) rates should given bears some temporary cause to pause," SocGen argues.
"Flash PMIs on Friday will dictate the near-term mood unless the Greek parliament gets itself back into the headlines this week," SocGen adds.
The summer is here - so is the "rumors trading"
As Rates Move In USD Favor, Quant Models Confirm USD Gains - BNPP
The US data calendar is exceedingly quiet this week, but US front-end yields have continued to drift higher, supporting the dollar, notes BNP Paribas.
"Speaking on Monday, St. Louis Fed President Bullard indicated that he believes odds of a September rate hike are greater than 50%. Markets are priced for a bit less than 50% chance of a hike by September, so there is room for yields to gain more ground if markets adjust to or beyond Bullard’s view," BNPP adds.
"Rate markets have already begun to readjust in the USD’s favour this week, and our STEER framework signals USD gains vs. the EUR, JPY and CAD are fully consistent with moves in rates and other key drivers," BNPP notes.
"We view that the USD has plenty of room to run and we remain short EURUSD," BNPP projects.
Industrial production is falling since the start of 2015 in the US. There shall be no rate hike. US is sliding into another recession (same as EU but the EU was known, while FED came with fairy tales that all is peachy in the US - while it is nothing of a sort)
EUR/USD: Make Or Break Level; GBP/USD: In No Man's Land - JP Morgan
Having produced a classical 3-step countertrend decline to 1.0809 and already penetrated key-resistance at 1.0955/58 (pivot/minor 38.2 %), the odds of EUR/USD having launching a broader C-wave up to 1.0815 (C = A) are not too bad, says JP Morgan.
"But unless the market displays a decisive hourly close above 1.0958 (minor 38.2 %, i.e. above 1.0980), we are missing stronger evidence that the key-support cluster at 1.0744/33 (int. 76.4 %/daily trend) is out of the danger zone," JPM argues.
"Above 1.0958/80 though, 1.1161 (d. trend) could be tested next before 1.1288 (minor 76.4 %) could be tested," JPM projects.
Turning to GBP/USD, JPM notes that it becomes obvious that the market is currently stuck right in the middle of the decisive barriers at 1.5788/1.5815 (minor 76.4 %/left shoulder) and at 1.5390 (daily neckline).
"A failure to clear the upper barrier would leave the H & S topping pattern intact, which implies that the market is at least missing a stronger C-wave down into 1.4951/1.4887 (pivot/76.4 % on higher scale)," JPM argues.
"Above 1.5815 though, we'd see 1.6052 (pivot) back in focus whereas a break below 1.5390 would hand over full control to the bears," JPM projects.
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EUR/USD: No Parity; Higher Forecast Path - Credit Agricole
While we may have to wait for an agreement on the third Greek bailout, we think that Grexit risks could continue to abate for now. We also suspect that the recent positive correlation between EUR and risk aversion could persist and support the single currency during a potential risk sell-off on the back of the Fed lift-off.
We therefore revise our forecast path for EUR/USD and the EUR-crosses to the upside.
While policy divergence between the hawkish Fed and the dovish ECB should keep the risks for EUR/USD on the downside, we doubt that parity will be within reach and expect the pair to bottom out at close to recent lows around 1.05 by year-end and recover further towards 1.10 and beyond in 2016.
Over the longer-term, EUR should be underpinned by the continuing recovery in the Eurozone as well as the cautious return of HICP inflation before long. All that should weaken the prospects for further aggressive ECB easing beyond September 2016 and make EUR a less attractive funding currency.
That said, the risk of a Grexit need not disappear completely and that could temper any EUR-gains over the longer term.
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