Hedge Funds Are Long Or Short The USD - BofA Merrill - General

thenews 2015.09.30 07:18 #311

Are Hedge Funds Long Or Short The USD? - BofA Merrill

"Since mid-2010, the US Commodities Futures Trading Commission (CFTC) has published the Traders in Financial Futures (TFF) weekly report alongside the legacy Commitment of Traders (COT) report. The new report disaggregates traders into sub-categories, including “asset manager” and “leveraged fund.” The data go back to mid-2006, and provide an additional layer of insight that was not available in the legacy COT report.

In the recent data, hedge funds have been selling NZDJPY, while asset managers have been buying GBPJPY.

Moreover, with both long and short positioning being reduced for several currencies, there is evidence of reduced conviction especially among hedge funds.

...In the most recent weekly data as of 25 September, hedge funds are flat USD while asset managers remain somewhat long reflecting the uncertainty about Fed policy."

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thenews 2015.09.30 17:42 #312

EUR/USD S-Curve: 4 States; Don't Throw-In The Towel - Deutsche Bank

In a recent note to clients, Deutsche Bank argues that now is not the time to ‘throw in the towel’ on the strong US dollar trade that in broad USD trade weighted terms likely has at least another 10% to go.

"It’s still far too early to throw in the ‘strong USD towel’. In the big picture, dollar strength continues to migrate. It started with the yen, moved to ‘the Fragile 5’, the EUR, commodity currencies, and the spotlight is now shining brightly on non-Japan Asia FX, with serious ramifications for most EM and commodity currencies," DB argues.

DB outlines a framework for thinking about the USD, EUR/USD targets, and the differentiation between different states of risk appetite. The following are the 4 states constituting this framework along with DB's EUR/USD forecasts over the coming months.

State 1: This state is risk neutral/positive. "The working assumption for much of the year was that the risk environment would not derail a Fed tightening cycle. In State 1, the data and risk appetite is constructive enough to allow for Fed tightening, while other G3 Central Banks are on hold. EUR/USD is then assumed to very roughly conform to the past response of going down ~10 big figures for every 100bp move in the 2yr USD – EUR spread," DB argues.

State 2: has been the environment we have largely been operating in for the last few months. "Here risk related to market volatility is such that it delays the Fed, but is not sufficient to get the ECB and BoJ to add to their respective QE programs. In this instance EUR/USD tracks essentially sideways in the recent 1.08 to 1.15 range. Wide daily ranges prevail, but longer-term weekly/monthly ranges for G4 currency pairs prove relatively narrow. State 2 is when the EUR is negatively correlated with risky assets (like equities), but this will not last a shift into State 1 or State 3. In contrast, Commodity and EM underperform all G4 majors, and display elevated volatility," DB adds.

State 3: is when risk is consistently negative - enough that not only does it keep the Fed steady but it propels the ECB and BOJ into action with more QE accommodation. "In this case EUR/USD tests the cycle low and probably extends to parity. Risk trades mostly negative, except immediately after the policy response. Note State 3 and State 2 may initially be difficult to separate. In State 3, the EUR is now hurt when risk is negative," DB argues.

State 4: is if Risk Appetite turns exceedingly negative to the point where the Fed is driven to ease, quite possibly with QE4 and/or negative interest rates. "The BOJ and ECB also ease. The probability of entering this state is still a low delta. This resembles aspects of 2008, where the USD initially does very well in the ‘risk off’ phase, then weakens sharply with the Fed policy response, especially if it includes negative rates. EM FX does the reverse of the USD. EUR/USD goes to parity then back up above 1.20, and FX vol for both G10 and EM goes crazy," DB projects.

DB targets EUR/USD at 1.05 by the end of the year, and at 0.98 by the end of Q1 2016.

Major Currencies Forecasts EUR/USD: Not Enough High Market Views For 2016

thenews 2015.10.01 04:23 #313

EUR/USD: Consolidation Intact; S/T Drop Incomplete - UOB

EUR/USD sharp drop from the high of 1.1261 appears incomplete and is expected to extend lower, says UOB Group.

"However, last week’s low near 1.1100/05 is a major support and this level is unlikely to come under threat. Only a move back above 1.1210 would indicate that the downward pressure has eased," UOB projects.

On a longer time-frame (1-3 wks), UOB continues to view the current movement as part of a broad consolidation.

"The recent short-term upward pressure fizzled out quickly with the sharp drop yesterday. However, we continue to view the current movement as part of a broad consolidation phase and only a clear break below 1.1085 would indicate the start of a bearish phase," UOB adds.

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thenews 2015.10.01 17:48 #314

EUR: Fed Hike & ECB QE2; October Outlook & Forecast - BofA Merrill

The following is Bank of America Merrill Lynch's comprehensive October outlook for the EUR including the single currency's current major themes, strategies, forecasts, and risks.

Themes: waiting for the first Fed hike and ECB QE2. The Fed surprised markets by not hiking in Sept and by delivering a dovish message. The market was expecting the Fed to be on hold, but was also expecting a relatively hawkish tone. By emphasizing the external environment, the US inflation outlook and the need for even more improvements in the labor market, the Fed’s message was that things had to get better, both domestically and externally, before hiking. This could take a while. In the meantime, the ECB has started preparing the ground for QE2. We expect the ECB to announce as early as October that they will continue with QE even after September next year. They have already admitted that they will miss their medium-term inflation target based on the current QE, suggesting that they need more policy easing. Although the ECB does not target the exchange rate directly, indirectly they do, as they cannot afford a strong currency at a time when they are missing their inflation target.

Forecasts: Parity, next year. We revised our EUR/USD end-2015 projection to 1.05 from parity after the Fed meeting. Our projection assumes that the Fed will start hiking rates in December and the ECB will announce that it will extend QE for after Sept 2016. In this scenario, we would expect EUR/USD to reach parity next year, most likely by the end of Q1.

Risks: Fed, ECB, China. Our projections have upside risks in the short-term (this year), but we feel more confident about them in the longer term (next year). If the Fed does not hike at all this year and the ECB does not commit to extend QE yet, EUR/USD could appreciate above 1.15. However, this will not be sustainable. 1/ It will be well above the ECB’s FX assumptions in its inflation projections (EUR/USD at 1.12). 2/ The ECB has in the recent past talked the Euro down whenever EUR/USD crossed 1.15, as such a level increases risks to its inflation path. And 3/ such a EUR/USD level would be above our estimate of equilibrium, which is 1.16, and would be inconsistent with the diverging US and Eurozone business cycles.

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Weekly forecast Market Views For 2016 EUR/USD: Not Enough High

thenews 2015.10.02 04:59 #315

EUR/USD: Directionless For Now; Monitor Key Levels - UOB

EUR/USD major support at 1.1100/05 was unthreatened, and the strong rebound from the low of 1.1130/35 still suggests that the downward pressure has eased and the current movement is likely part of a consolidation phase, says UOB Group.

"EUR continues to trade in a listless manner and at this stage, we still prefer to hold a neutral view. Only a clear move beyond the key levels of 1.1085 or 1.1295 would suggests the start of a directional movement in the coming weeks," UOB adds.

For today, UOB expects sideways trading, likely between 1.1145 and 1.1245.

Press review Market Condition Evaluation based EURUSD Technical Analysis 2015,

thenews 2015.10.03 14:15 #316

Citigroup says weak jobs data will see USD depreciate

Bloomberg carrying a report by the world's largest FX trader by volume and one that foresaw the weaker NFPs yesterday"The last trades going into the number were going the wrong way, so that basically exacerbates the impact,"

So says Steven Englander, global head of G10 foreign exchange strategy in New York at Citigroup.

"Emerging markets are going nowhere and Europe and Japan are appreciating."

yesterday's data will cause the U.S. currency to depreciate. With the Federal Reserve less likely to raise interest rates amid global economic growth concern, the bank sees refuge currencies including the yen and the euro benefiting.
the weak employment data means the ECB and the BOJ won't be able to wait for the Fed to boost interest rates before they have to take additional measures to stabilize their currencies
the NFP data is good for G5 safe-haven currencies -- yen, euro, Swiss franc, British pound -- they have their own worries, but the dollar is on back foot until they show a policy hand

Bloomberg has more here

Major Currencies Forecasts Eur/usd Morgan Stanley Warns Currency

thenews 2015.10.03 19:39 #317

GUNDLACH: 'There's going to be another wave down'

DoubleLine Capital cofounder Jeffrey Gundlach, widely followed for his investment calls, warned after a weak nonfarm payrolls report Friday that the US equity market as well as other risk markets, including high-yield "junk" bonds, face another round of selling pressure.

"The reason the markets aren't going lower is people are holding and hoping," Gundlach told Reuters in a telephone interview. "The market bottoms out when people are selling and sold out — not when they are holding and hoping. I don't think you've seen real selling in risk assets broadly. Markets need buying to go up and they need volume to go up. They can fall just on gravity."

Investors piled into government bonds Friday, sending the 10-year Treasury yield below 2%, after the US Labor Department said employers hired 142,000 workers last month, far below the 203,000 forecasters had expected, and August figures were revised sharply lower to show only 136,000 jobs added.

Gundlach said junk bonds are vulnerable: "I'll think about buying when it stops going down every single day."

He added: "People are acting like everything is great. Junk bonds are at a four-year low. Emerging markets are at a six-year low and commodities are at a multi-year low — same level as in 1995 ... GDP is not growing at a nominal basis."

Gundlach, whose Los Angeles-based DoubleLine was overseeing $81 billion in assets under management as of the end of the third quarter, said: "Clearly what's happening is people are waking up to the idea that global growth is not what they thought it was."

Euro Dollar Rate Forecasts for 2014-2015 - page 32