Weekly forecast - page 11
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Setups: EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD - Barclays The following are the latest technical setups for EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, and USD/CAD as provided by the technical strategy team at Barclays Capital.
EUR/USD: Yesterday’s low close endorsed Friday’s topping candle and encourages our bearish view. We are looking for a move lower towards nearby targets near 1.1090/60. It would take a move below 1.1060 to signal a deeper setback towards 1.0710.
USD/JPY: We look for selling interest in the 115.05 to provide a cap for a move back in range. Our initial downside targets are in the 110.35/05 area. A move below there would encourage our bearish view towards greater targets near 106.00.
GBP/USD: The move below initial support in the 1.4350 endorses our bearish view and signal further downside. Our targets are towards the 1.4150 area and then the 1.4080 lows.
AUD/USD: We are overall bearish and would look to sell against the 0.7245 range highs. A move below initial targets near 0.7000 would signal lower towards our greater targets in the 0.6915 area.
NZD/USD: A move below support near 0.6560 would trigger a small topping pattern under the 0.6755 highs and encourage our bearish view towards targets near 0.6415 and then the 0.6345 lows.
USD/CAD: Friday’s engulfing candle warns of a short-term dip within range. We prefer to buy against the 1.3640 area and look for a move higher towards initial targets near 1.4105 and then 1.4170.
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Tech Targets: EUR/USD, GBP/USD, AUD/USD, USD/JPY - UOB EUR/USD: Neutral: Corrective pull-back could extend lower to 1.1060.
There is no change to the neutral view. The current movement is viewed as a corrective pull-back which could extend lower to 1.1060.
GBP/USD: Change to Bearish: GBP/USD downtrend has resumed; immediate target at 1.4200.
We have maintained a neutral view for GBP/USD since late January and viewed the rebound from the low of 1.4080 as a corrective recovery. The abrupt and sharp drop below the key 1.4350 support yesterday suggests that GBP/USD has resumed its recent downtrend. The immediate target is for a move to 1.4200 with a reasonable high chance for a retest of the 1.4080 low.
Resistance is at 1.4385 but only a move above 1.4450 would indicate that our bearish view is wrong.
AUD/USD: Neutral: Daily closing above 0.7200 would shift outlook to bullish.
Despite the drop from the high of 0.7182 yesterday, the undertone for AUD/USD still appears positive.
As long as the major 0.7065/70 support continues to hold, another attempt to move clearly above 0.7200 cannot be ruled out just yet (only daily closing above 0.7200 would shift outlook to bullish).
USD/JPY: Neutral: In a broad 112.00/117.00 range for now.
We just shifted to a neutral stance yesterday and there is no change to the view.
The near-term outlook is rather clouded due to the recent spike in volatility and at this stage, we prefer to hold the view that this pair is to trade in a broad 112.00/117.00 range for now.
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Trade Ideas: EUR/USD, USD/JPY, AUD/USD, NZD/USD, USD/CAD - UBS The following are UBS' latest short-term (mostly intraday) trading strategies for EUR/USD, USD/JPY, AUD/USD, NZD/USD, and USD/CAD.
EUR/USD: We would look to establish fresh shorts around 1.1170-1.1200 with stops above 1.1225, for 1.1100.
USD/JPY:The pair can't really go much lower with risk trading as it is, so we prefer playing the range; sell at 114.50, with a stop above 115 and buy at 113.50 with a stop below 113. There should be strong resistance at 116.00/25, and as long as the pair remains below there we are biased to the downside.
AUD/USD: Stick to playing the range. The resistance area from 0.7190 to 0.7250 should hold on the topside and the support area from 0.7080 to 0.7030 should hold on the downside.
NZD/USD: Look to buy on dips towards 0.6550 with a stop below 0.6500, and fade rallies above 0.6700 with a stop above 0.6775.
USD/CAD: price action remains tightly correlated to oil. We expect choppy and volatility price action today, and would therefore look to take profit on shorts at current levels ahead of the support at 1.3580-1.3625, in order to start fading rallies above 1.3800, with a stop above this week's high of 1.3925.
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Week Ahead: High Volatility, Buy USD Dips, Limited GBP downside Risk sentiment improved this week, irrespective of weaker Chinese trade data keeping fears over the need of a further CNY depreciation intact. Considering this week’s FOMC meeting minute’s and Fed members’ more cautious rhetoric, a large part of this week’s improvement can be attributed to decreased Fed rate expectations. This explains too why the greenback failed to appreciate this week.
Looking ahead, we believe that global growth uncertainty is likely to keep cross market volatilities high. This, however, does not exclude further improving sentiment, especially considering that the focus will increasingly shift to the G20 meeting at the end of February.
Although it cannot be excluded that the USD faces more downside risk in the shortterm. We believe dips should be bought. This is especially true as further falling Fed rate expectations would imply policy easing. This appears unlikely unless incoming data weakens considerably.
Commodity currencies performed well by the end of the week. When it comes to the NOK and CAD it will remain about oil price developments to drive these currencies, especially as respective central bank rate expectations have been stabilising. Should the greenback become more supported anew, this is likely to prevent oil prices from correcting considerably higher.
What we’re watching
USD – Next week’s PCE data will be key. Only a considerably weaker than expected outcome may lower rate expectations further.
GBP – Growth data should become a more important currency driver anew. Hence next week’s GDP data will be closely watched. We see limited GBP downside risk from the current levels.
JPY – It remains to be seen if weaker inflation data will drive the JPY lower. This is due to increased uncertainty about the BoJ’s policy stance being efficient in bringing inflation back to target.
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Morgan Stanley FX Chart Of The Week: Momentum Indicators In its technical FX chart of the week, Morgan Stanley provides some insights on the current momentum indicators in the FX market.
"The RSI, or relative strength index, looks at the past 14 days of closing prices and measures whether there were more up days relative to down. Latest data indicated that EURSEK momentum is approaching an extreme to the upside, with USDZAR potentially soon approaching an oversold level (below 30).
The past month has seen strong upside in the RSI for AUDUSD, but not yet at overbought levels," MS notes.
"The FX markets remain volatile with some currencies in particular gaining strong momentum in recent weeks. Looking at moving averages helps to put the moves into context.
USDJPY is now the furthest below the 50, 100 and 200DMA relative to all other pairs. At the other end of the spectrum, EURUSD and EURSEK appear stretched and prone to retrace lower," MS adds.
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USD, EUR, JPY, CHF, CAD, AUD, NZD: Weekly Outlook - Morgan Stanley USD: Buy vs. the Funders. Bullish.
We expect some further legs in the current risk rally, which should keep the USD supported against the funders – EUR, JPY and CHF. Economic data out of the United States have been solid over the last week, with indicators of the labor market, domestic demand, and manufacturing all showing signs of resilience. However, with the Fed likely to remain on the sidelines for now after the sharp tightening of financial conditions to start the year, USD should in the near term lose ground against high yield FX.
EUR: Selling EURUSD. Bearish.
We remain short EUR on both a tactical and structural horizon. Near term, the risk rally that we have been calling for is likely to pressure EUR lower, given that the common currency has evolved as the globe’s funding currency of choice. Medium term, the EUR should remain one of the weaker G10 currencies, given expectations for more aggressive policy easing from the ECB next month.
JPY: Tactical Bearishness. Bearish.
The asset outlook is key to determining the direction of the JPY. Indeed, with domestic stocks falling sharply post BoJ easing, Japanese investors needed to quickly scale back risk exposure. The easiest and most liquid way to perform such an operation is through the FX markets, hedging foreign exposure. As such, with risk markets recovering, this should limit the scale of foreign hedging. We are tactically bearish the JPY, looking for 116 in USDJPY in the coming weeks.
CHF: Still Buying USDCHF. Bearish.
Upside momentum is here for USDCHF and we target 1.03. The risk on environment should continue to support CHF weakness as Swiss investors look for stronger returns abroad. The local investment outlook remains and yield differentials still support investment outside of Switzerland. Our outlook changes if the European banking sector worries start again as this may prompt repatriation back to CHF.
CAD: A Temporary Respite. Neutral.
We believe that CAD may see a temporary respite in an environment of a more cautious Fed and preliminary signs of strength in the non-resources sector. However, our medium-term narrative remains unchanged. The great rotation that the BoC has been hoping for is still questionable. Moreover, the Business Outlook Survey showed the weakest hiring and investment intentions since the crisis.
AUD: Picking Up Carry. Bullish.
The Chinese authorities have brought back a period of calm, keeping the USDCNY fix stable over the past week. Coupled with liquidity injections ahead of the Lunar New Year, this dampening of volatility is likely to temporarily support carry trades. This week’s private capital expenditures report will be one of the most important data points to watch. Specifically, the ABS will be reporting a first look into firms’ capex intentions for the 2016-17 fiscal year – this is the number to focus on.
NZD: Weak Inflation Expectations. Neutral.
The divergence between rising iron ore prices and falling milk prices supports a higher AUDNZD. Inflation expectations have fallen to a low since 1994, supporting further RBNZ easing. The risk rally may however support NZDUSD further this week making trades for short NZD on the crosses more attractive. Longer term we are bearish on NZDUSD as suppressed milk prices reduces the incomes of farmers.
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USD: Trading This Week's Data - Credit Agricole Better US data of late to the benefit of rate expectations has kept USD supported. OIS futures pricing improved markedly in the past week on the back of positive data releases and upgrades to Q1 growth expectations.
We have another slew of data releases in the coming week but currency upside remains capped amid unstable risk sentiment and dovish rhetoric from Fed officials ahead of the March FOMC.
The key US release is PCE inflation, which is expected to show weak month-onmonth changes. As the Fed expects inflation to run low in the near-term, the impact is likely to be limited.
Markets should also shrug off a downward revision to Q4 GDP as a solid rebound in Q1 is projected across current analyst estimates.
Looking ahead, a further improvement in domestic demand conditions should be supportive but the currency remains prone to risk-off, China- and oilrelated market moves.
Quant FX Signals: The Biggest Long & The Biggest Short - SocGen The SG FX Enhanced Risk Premia has reinstated the long dollar position during the week.
The biggest longs are in JPY and USD. The most sizeable shorts are in NZD, EUR and GBP. The short positions in GBP/USD and USD/CAD are the USD crosses with the strongest combined momentum and IR-driven FX signals.
The static SG Sentiment indicator has stayed in the risk-averse zone. Based on the adaptive (tailored) version of the sentiment indicators and the relevant time-series signals, we continue to keep a short exposure to both G10 and EM carry using 30% of the respective risk budgets. The Asian carry basket remains closed.
The risk of the aggregate strategy remains limited and is close to 4% annualised volatility.
Here Are The 3 Strongest Quant Signals This Week - SEB Short USD/JPY, short USD/CAD, and short EUR/PLN are the top three trend trades this week,data from SEB's FX-o-meters showed on Monday.
"All three top trend traded delivered last week, even as the downtrend in USD/JPY already is severely long-term stretched on the downside," SEB clarifies.
Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY - UOB EUR/USD: Neutral: Daily closing below 1.0990 would shift outlook to bearish.
EUR edged below 1.0990 (low of 1.0987) but closed higher at 1.1015. As highlighted yesterday, only a daily closing below 1.0990 would indicate further EUR weakness towards the next support at 1.0850. Overall, this pair is expected to remain under pressure unless it can reclaim 1.1130 in the next few days.
GBP/USD: Bearish: Take profit at 1.3930.
There is nothing much to add as GBP continues with its down-move. As mentioned yesterday, shorts should take partial profit at 1.3930 (seeing short-term support at 1.3950/55).
AUD/USD: Bullish: Immediate target at 0.7325/30.
We just turned bullish AUD yesterday and there is no change to the view. As long as 0.7130 is intact, we believe the current AUD strength can extend higher to 0.7325/30
NZD/USD: Neutral: In a broad 0.6560/0.6750 range.
The sharp drop yesterday has greatly diminished the odds for a move above the major 0.6750 resistance. From here, there is no chance to the neutral view and we expect NZD to trade between 0.6560 and 0.6750 in the coming days.
USD/JPY: Neutral: Daily closing below 112.00 would shift outlook to bearish.
While the short-term pressure is clearly on the downside, we prefer to see a daily closing below 112.00 before adopting a bearish stance. In the meanwhile, USD is expected to remain under pressure unless it can reclaim.