Weekly forecast - page 2
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Setups For EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD - Barclays
The following are the latest technical setups for EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD as provided by the technical strategy team at Barclays Capital
EUR/USD: We are bearish and would use upticks towards 1.0765 as an opportunity to sell at better levels. Our targets are near 1.0520 and then the 1.0460 year-to-date lows.
USD/JPY:Monday’s small topping candle signals a breather within the context of the overall rising trend. A move below 122.20 would risk a squeeze lower in range towards 120.80 before buyers resume. For now we would look to buy dips against 122.20 for a move higher through 123.75 towards our targets near the 125.30/125.85 highs.
GBP/USD: A move below our initial targets are near the 1.5025 November lows would encourage our bearish view. Our next targets are towards the 1.4860 area.
AUD/USD:Yesterday’s strong close negates Monday’s topping candle and signals a squeeze higher towards 0.7310 before sellers can emerge ahead of the 0.7385 range highs. We are overall bearish against the 0.7440 lower high and look for a move back below 0.7070 towards targets near 0.7015 and then the 0.6935/0.6895 lows.
NZD/USD: Tuesday’s inside day signals a breather. Overall, we are bearish and would look to sell upticks towards 0.6610 for a move lower through 0.6430. Our targets are near 0.6375 and then the 0.6235 year-to-date lows.
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Gobble Gobble, EUR Wobble; Risk Of A Pause? - Morgan Stanley While Morgan Stanley sees EUR/USD remaining under pressure and forecasts a move to parity next year, MS thinks that the risks of a pause in the near-term have increased.
"Expectations for ECBs easing in December are high, suggesting delivery risks. But we see any EURUSD recovery in the near-term as providing renewed selling opportunities although the anticipated move lower next year is likely to be at a slower pace than seen this year. EURUSD declined 25% from the mid-2014 high to the March low of this year. Downside progress since then has been altogether slower, even with the heightened expectation of greater policy divergence between the ECB and Fed.
While the USD uptrend has remained steady, we suggest that the EUR side of the equation has been far more erratic. Indeed, EUR on a trade weighted basis rebounded 10% April through August. While some EUR “catching-up” on the downside has been seen over the past couple of months as focus on potential further ECB action has intensified, the EUR still remains some way from its March/April trough in tradeweighted terms," MS argues.
"We continue to see EURUSD remaining under pressure, but downside potential is likely to be driven move by the USD side of the equation, we believe. The overall pace of EUR decline compared to many market metrics has been lagging in our view. Even during periods where 2-yield differentials have been pointing sharply lower and equity markets have been stable, providing ideal conditions for a lower EURUSD, we would suggest the downtrend has become more reluctant than these indicators would have implied. EUR bearish positioning has been building, but is not extreme, suggesting further downside potential.
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Is Selling EUR/USD Still Attractive At Current Levels? - Credit Agricole Looking ahead, we believe it is unlikely that the ECB will exceed elevated easing expectations next week. It appears that markets priced in both an extension of QE and reduction of the deposit rate by more than 10bp.
As a bigger than expected cut would most likely increase expectations of the ECB having reached the lower bound in rates, a sell the fact reaction may trigger position squaring-related EUR upside later next week. This is especially true when considering that speculative positioning as indicated by IMM data remains close to elevated territory.
All of the above stands in contrast to the USD. By now it is widespread consensus that the Fed will tighten monetary policy next month, in particular as risk sentiment and inflation expectations as measured by 5y forward breakeven rates have been well supported, irrespective of rising Fed rate expectations. Nevertheless, it must be noted too that the Fed is unlikely welcoming a further appreciating USD from the current levels. Unless growth momentum accelerates from the current levels an even stronger currency may start to dampen price developments more considerably.
All of the above suggests that the USD is facing rising downside correction risk in the weeks to come. As such we advise against selling pair such as EUR/USD around the current levels. If anything we believe that better levels closer to 1.08-1.10 can be reached before new shorts should be considered.
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Week Ahead: RBA, ECB, NFP, EUR Bears Into Draghi's Long Game
Next week will be crucial for the outlook of EUR/USD. The December ECB meeting, Yellen’s speeches at the Economic Club in Washington and the US Congress, as well as the November US NFP are likely to determine whether investors will continue to sell EUR and buy USD.
Going into the ECB meeting, we expect a 10bp deposit rate cut and QE extension until March 2017. Draghi should also keep the door wide open for more easing if needed.This may seem conservative compared with market expectations that have moved towards deeper rate cuts or, indeed, more aggressive asset purchases of late.
The more important point is that we doubt that the ECB will exceed already dovish market expectations. We believe that the Governing Council will try not to disappoint the markets while preserving as much ammunition as possible for the future battles of the global currency war.EUR could squeeze higher more broadly after the meeting.
USD could be in for a correction as well if concerns about the impact of strong USD resurface during the Fed Chair’s speeches next week. In addition, evidence of more subdued payroll and earnings growth in November should highlight that a lot of positives are in the price of USD by now, encouraging investors to take profit.
What we’re watching:
FX Focus –More expensive USD funding rather than portfolio outflows from the Eurozone drove EUR/USD selling of late. We expect the USD to stay in demand against the CHF and JPY. Against the EUR, upside appears limited.
EUR –It may prove difficult for Draghi to exceed already elevated easing expectations. Hence the EUR may be subject to upside risk.
USD – While next week’s payrolls report is unlikely to alter Fed rate expectations, Fed Chair Yellen’s speeches on Tuesday and Wednesday should prove the bigger market driver.
AUD – Given limited room of the RBA turning less dovish on monetary policy, it should be risk sentiment that drives the currency.
CAD –The CAD should stay driven by external factors such as oil prices, which could remain supported ahead of the OPEC meeting on 4 December.
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EUR, JPY, GBP, CHF, AUD, CAD: Weekly Outlook - Morgan Stanley EUR: Draghi’s Time to Shine.
All eyes will be on the ECB this week, as front end rates have been a key driver of the currency. We expect further rate cuts from the ECB, as well as an increase in QE. Removing the ‘floor’ on the deposit rate should open up scope for even more easing in the Euro Area, which should add to EUR weakness. Indeed, this would make EUR even more attractive as a funding currency.
JPY: Gains on Crosses Likely. Bullish.
We remain bullish JPY. Despite surging front-end rates in the US, USD/JPY has only reluctantly moved higher. Declining AUM in Japanese pension funds should provide structural tailwinds for JPY, as foreign holdings have to be reduced. Moreover, the BoJ has become more reluctant about further easing, pushing out the timing for reaching its inflation target and putting the emphasis on the fiscal side. We like playing JPY long on the crosses.
GBP: BoE Supporting Weaker GBP. Bearish.
We continue to hear a dovish tone from the BoE, which is keeping GBP under selling pressure. Fiscal tightening and a looming Brexit debate could also support our bearish currency view. GBP/USD remains sensitive to global risk appetite and rate differentials. Core inflation rising last month is not enough to support GBP we believe, and we favour selling on rallies. This week, we will be watching the GDP and business investment data for any signs of slowing, indicating heightened Brexit concerns.
CHF: Surpassing Pre-Floor Levels. Bearish.
USD/CHF briefly surpassed its high before the EUR/CHF floor was removed, and we still believe that the CHF has upside momentum. Aggressive ECB policy in December may support the SNB cutting rates further in coming months if it sees a risk to EUR/CHF falling too fast. The SNB’s Jordan has emphasized the need to keep monetary policy divergences to weaken the franc. The 3Q GDP release will be in focus this week.
CAD: Watching the BoC. Bearish.
We remain bearish on CAD. The recent fall in oil prices will have a lasting negative impact on the economy, and the central bank may need to respond. Indeed, the rebound seen in the non-commodity sector is fizzling out, evident in manufacturing data and non-commodity exports. With further easing not priced in yet, the currency could weaken if the BoC is forced to take a more dovish tone. We entered a long USD/CAD position last week.
AUD: AUD Tactically an Outperformer. Neutral.
AUD has proven remarkably resilient given the recent decline in its terms of trade. This is largely due to a more constructive outlook from the RBA and the pricing out of expected easing. As Chinese data respond to fiscal and monetary stimulus, expect AUD to continue its outperformance against its commodity currency peers in NZD and CAD. Next week will bring plenty of important data including GDP, which will help us evaluate Australia’s ongoing transition away from the resource sector towards more sustainable growth.
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Is Sterling Up To A Test Again? How To Play It? - CIBC
After its hasty retreat during the recession, GBPUSD has been one of the most stable crosses since 2009, notes CIBC World Markets.
"Butit’s close to testing the bottom of its range once again. Technical analysis would suggest that a break below 1.50 could see cable fall well below that level.
However, there have been a number of attempted breaks below that level already, none of which has stuck. And we need to keep in mind why sterling has weakened—people have pushed back expectations for BoE rate hikes at the same time as bringing forward expectations for the Fed.
However, as we have previously shown, the UK labour market is probably tighter than that of the US, meaning rate hikes may be more imminent than policymakers currently think," CIBC argues.
"We would see any break below 1.50 as a buying opportunity," CIBC advises.
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Barclays Trades Of The Week: Sell EUR/USD & Buy USD/CHF Currency investors should consider selling EUR/USD and buying USD/CHF this week, advises Barclays Capital in its weekly FX pick to clients. The trades are macro-technical driven and are in line with Barclays' positions in its strategic portfolio.
On the macro-front, Barclays' rationale is as follows:
"We expect the ECB to deliver a stimulatory policy package including a time extension of QE and a 10bp deposit rate cut. Given how much is already priced in, we see a risk that the ECB surprises market expectations to the upside; therefore, we remain short EURUSD.
Moreover, given the pressure that additional ECB easing will add on the SNB, we recommend staying long USDCHF spot," Barclays advises.
Stay Short EUR/USD, Short AUD/USD...& Other FX Plays - RBS "We expect the ECB to over-deliver this week as the central bank attempts to "raise inflation quickly" and defend its mandate-chasing credibility. A weaker EUR needs to be part of that mission. With the Fed likely to raise rates in December, policy divergence prospers. Stay short EUR/USD.
A very weak investment survey lays bare Australia’s growth challenge. We look beyond the December RBA meeting and stay short AUD/USD. We square USD/MYR longs on some positioning fatigue (but still like USD/MYR higher multi month view).
With BoE still taking a back seat in the Currency War, we stay short EUR/GBP into this week’s ECB meeting.
ECB has seized Currency War leadership from Japan. Stay short EUR/JPY.
A busy data calendar could help highlight Korea’s vulnerability to a more richly valued exchange rate. Stay long JPY/KRW."
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Major News Cacophony Ahead; A Reactive & Choppy Market Inevitable - SocGen The CNY is expected to be elevated to the SDR club today; The ECB is expected to increase asset purchases and cut rates further on Thursday and PEC meets Friday, notes SocGen.
"In between that lot, we have a packed economic calendar going from German CPI data today, UK PMI and US ISM tomorrow, Australian Q3 GDP on Wednesday, and the US and Canadian employment reports on Friday. And the ECB is not the only policy-setting group that meets, as we have central bank meetings in Australia and India tomorrow, Poland and Canada on Wednesday," SocGen adds.
"With so much noise to come at it from so many different directions, it isn’t surprising the FX market is quiet this morning, hiding under the duvet for as long as possible, probably.
...We expect a dollar correction after the FOMC meeting on December 16. For now, the bullish bias survives, though with so much news to come, a reactive and choppy market seems inevitable," SocGen projects.
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Trade Ideas For EUR/USD, GBP/USD, NZD/USD, USD/CAD - UBS
The following are UBS' latest short-term trading strategies for EUR/USD, GBP/USD, NZD/USD, and USD/CAD.
EUR/USD: The support at 1.0565/70 held three times last week, so there could be a small squeeze towards 1.0670/90. The euro is likely to remain under pressure, however, and we prefer selling, with a stop above 1.0700, targeting a move towards 1.0570.
GBP/USD: Cable is holding above 1.5000. The market is waiting on Thursday's ECB meeting and there is unlikely to be much action until then. The BoE's Financial Stability Report is due at 8:00am CET tomorrow, followed by PMI data for the rest of the week. We prefer selling the cross on rallies heading into Thursday
NZD/USD:has lacked clear direction for the past two weeks and continues to trade sideways. Look to play the range, with 0.6460/0.6500 likely to hold on the downside and 0.6625/0.6675 capping the upside. The GDT auction will be held tomorrow.
USD/CAD: reversed an early move lower on Friday after disappointing producer prices data. The pair climbed to a fresh high of 1.3375 with oil prices under renewed pressure. USDCAD remains driven by price action in crude. Stick to shorts, with a stop above 1.34.