Weekly forecast - page 5
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Keep Buying The USD On Dips Against This Currency - Credit Agricole The USD has been in demand in response to yesterday’s Fed monetary policy announcement.
This is regardless of the latest development being in line with expectations and although the Fed reiterated that inflation expectations will be cautiously watched. Most importantly, the central bank did not make a case of lowering rate expectations for the coming year while stressing that the pace of tightening will be data dependent.
From that angle there seems to be additional room of rising rate expectations to the benefit of the greenback, especially if inflation expectations start to pick up. This may be on the back of stabilizing commodity price developments or further improving domestic demand conditions.
Under the above outlined conditions we expect USD dips to remain a buy, for instance against the CHF.
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, and NZD/USD as provided by the technical strategy team at Barclays Capital.
EUR/USD: Our bearish view was encouraged by Wednesday’s low close. We are looking for a move below last week’s 1.0795 low to confirm downside traction towards 1.0730 and then the 1.0520 range lows.
USD/JPY: The break above resistance near 122.25 endorses our bullish view. We expect further gains towards our targets near 123.75 and then the 125.85 year-to-date highs.
GBP/USD: Wednesday’s break below support near 1.4955 encourages our bearish view. We are looking for a move below initial targets near 1.4895 to open our next targets near 1.4855.
AUD/USD: We are bearish and look for a break below support near 0.7160 to confirm lower towards our targets near 0.7070 and then the 0.7015 November lows.
NZD/USD: Selling interest near the 0.6900 range highs is expected to cap upticks and helps to keep us bearish. We are looking for a move lower towards 0.6575 and then targets near 0.6430 and the 0.6235 year-to-date low further out.
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Major Currencies Forecasts - ANZ
USD, EUR, JPY, CAD, AUD, NZD: Weekly Outlook - Morgan Stanley
USD: The End of an Era. Bullish.
We stick to our bullish USD call. Into year end, strength may be focused against lower-yielding currencies such as EUR and GBP, but we believe that USD will emerge to outperform against EM and high beta currencies as well. Commodity prices remain soft, and it will be hard for EM and commodity currencies to rally sustainably in this environment.
EUR: Watching Equities. Neutral.
The EUR is currently driven by the global risk environment. Over the past year the EUR has been turned into a global funding currency, strengthening when risk sells off. In general, the fall in the oil price and commodities more broadly has put pressure on the credit markets in the US. There appears to be no sign of a turnaround in oil markets, suggesting that EUR downside may be limited. We watch for the point at which Draghi becomes worried about inflation once again for the EUR to turn lower.
JPY: G10 Outperformer. Bullish.
We stick to our bullish JPY view, particularly on the crosses. We do not expect the BoJ to ease further, as the central bank puts the onus on the fiscal side of the equation to boost growth. Furthermore, we are encouraged by the shift in trend in the trade balance, which already bottomed and continues to move higher. Within the G10, the JPY is the most highly correlated with equity markets suggesting that it may continue to benefit should risk stay weak.
CAD: Stick to Bearish View. Bearish.
We remain bearish CAD, though recognize it could see some relief into year end. Despite BoC Governor’s neutral tone in recent comments, we expect the central bank will shift towards a more dovish stance in January, weighing on CAD. What’s more, with oil prices continuing to make new lows, Canada will need to adjust to a new growth model, which could weigh on the currency. (MS maintains a long USD/CAD from around 1.3287, with a revised target at 1.45, and a revised profit-stop at 1.3750).
AUD: A Deteriorating Picture: Bearish.
Iron ore prices continue to weaken but this has so far only had a limited weakening impact on the AUD. We expect the currency to catch up so remain bearish. House prices in the mining communities have started to show weakness and we expect this to spillover to more regions, meaning the RBA can be loose with monetary policy. As global risk stays weak and trade soft we see further downside for the AUD.
NZD: Longer Term Sell. Bearish.
The NZD has been strengthening recently as markets are reducing expectations for further rate cuts next year. In addition, the dairy prices (via futures and auctions) have stabilised somewhat. We believe that the effect is temporary and remain bearish over the longer term. In general, weak global risk appetite should weigh negatively on the NZD too. The RBNZ is concerned about high debt levels in the farming sector, which may be at risk should global funding costs rise.
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Buy USD/CAD Dips; Canada's Retail Sales Key This Week - Credit Agricole The CAD has been among the weakest currencies of late, mainly on the back of weak oil prices and strongly capped BoC monetary policy expectations.
According to Friday’s data, inflation remains well below the central bank’s 2% target. At the same time core prices fell. This in turn may be taken as a confirmation of still muted domestic conditions.
In that respect the focus turns to this week’s retail sales release. Any indication of further slowing domestic demand conditions should come to the detriment of medium-term inflation expectations and therefore keep the currency subject to downside risk.
If anything we remain of the view that the CAD should be sold on rallies, for instance against the USD
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Trade Ideas For USD/JPY, EUR/CHF, GBP/USD - UBS The following are UBS' latest short-term (mostly intraday) trading strategies for USD/JPY, EUR/CHF, and GBP/USD.
USD/JPY:Sell the pair around 121.50/75, with a stop above 122, targeting a move towards 120.85.
EUR/CHF: Sell at 1.0850, with a stop above 1.0860, targeting 1.0810/20.
GBP/USD: Sell rallies to 1.4910/20, with a stop above 1.4930, targeting 1.4880.
SNB's Jordan says it was the right decision to lift the CHF cap
SNB president Thomas Jordan speaking to SonntagsZeitung published earlier today
Jordan still justifying the carnage he created almost a year on from the event. Earlier in December he had this and this to say following the SNB's decision to leave interest rates on hold
This Chart Explains EUR/USD Price-Action Again - SocGen
The chart shows the correlation between EUR/USD and interest rate differentials– which collapsed at the start of 2015 but has now recovered, and in Q4, it’s the short rates which are once again dominant.
Correlation isn’t the same as causation, but we are back in a similar world to the one we saw before this year, when a 1% move in 2-year rates was associated with a 12-figure move in EUR/USD.
On this super-simple measure, it would take a move in 2-year US rates to 2%, to drag EUR/USD to parity. That should happen in H2.
Kit Juckes - SocGen
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Buy CHF, USD, NOK And Sell CAD, SEK, AUD This Week - G10 FX Scorecard This week the scorecard recommends buying CHF, USD and NOK while selling CAD, SEK and AUD (see suggested weights in portfolio in table below).
Last week’s signals resulted in a 0.6% loss. Especially the short AUD position was expensive while the long EUR and CHF positions performed well.
Next scorecard signals will be sent out on 4 January 2016.
FX Signals From Month-End Fixing Models - Barclays, Citi The following are the FX signals from Barclays Capital and CitiFX month-end fixing models. Month-end fixing models provide signals for trading FX on the last day of the month (Thursday December 31).
Barclays: We expect the passive rebalancing of hedges at month-end to lead to USD buying interest. Moderate signals were generated against EUR and AUD, while there were more modest signals against all the other major currencies.
"Equity markets lost some ground across developed economies as the ECB delivered less easing than anticipated, while the Fed finally started its hiking cycle. In dollar terms, the US markets underperformed as the greenback weakened against most G10 currencies, except GBP and CAD, during the month. Bond markets remained relatively stable across the board, but outperformed in dollar terms in Europe and Japan," Barclays clarifies.
Barclays' model provides signals from '+++' through neutral to '---' to indicate the strength of this month's signal relative to its own history.
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