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Buying JPY? - SocGen It makes sense to establish a long yen position from here, advises SocGen.
"There’s nothing new to say about Japan this morning beyond the fact that the Chinese Nikkei PMI came in at 52.6, one of the few to be (marginally) up, while the 3% drop in the Nikkei is the counterpart of the yen’s jump.
We don’t look for a durably lower USD/JPY rate this year, but even that cross can occasionally spark sharply lower. And the yen should outperform AUD, NZD and pretty much all of EM-Asian FX in the coming weeks," SocGen projects,
GBP/USD, EUR/USD: Down-Move Incomplete: Levels & Targets - UOB The current bearish phase in GBP/USD appears incomplete and is expected to extend lower to 1.4600 in the coming days, projects UOB Group.
"The initial rebound in GBP held below 1.4840 (high of 1.4815) before dropping rapidly to reach the target indicated at 1.4660/65 (low of 1.4665)...While the subsequent rebound from the low has dented the downward momentum, another leg lower appears likely," UOB adds.
"Downward momentum is still strong and any rebound is expected to encounter stiff resistance near 1.4760 but only a break above 1.4815 (adjusted lower from 1.4850) would indicate that the bearish phase has ended," UOB adds.
Turning to EUR/USD, UOB argues that the ease of which the strong 1.0800 support was taken out yesterday suggests further downward pressure in the coming days.
"However, downward momentum is not showing the characteristic of an impulsive move and EUR is expected to ratchet lower instead of dropping sharply in the coming days.
Overall, only a move above 1.0945 would indicate that a low is in place but from here, it is likely we will see a move towards 1.0750 first," UOB adds.
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Trade Ideas For EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/CAD - UBS EUR/USD:We prefer the short side, but would only get involved on the extremes. Fade a 50-60 pip move to either side, with a stop below 1.0730 and above 1.0920. We were better sellers yesterday, but volumes were low.
GBP/USD: Cable traded up above 1.4800 yesterday, but didn't remain there for long and sold off aggressively. We prefer selling rallies closer to 1.4780/1.4800, with a stop above yesterday's high, targeting a move towards 1.4635.
AUD/USD: Equities will remain in focus, with very little data due from Australia this week, apart from retail sales on Friday. Stick to selling rallies between 0.7210 and 0.7250, with a stop above 0.7350, targeting a test below 0.7100.
NZD/USD: Remains soft, in line with the broad support for the US dollar. Stick to selling rallies, targeting a move towards 0.6600. The first resistance comes in around 0.6775, followed by 0.6825. Keep a stop above 0.6900.
USD/CAD:price action has been whippy, with the volatility in oil prices. The pair remains in the 1.3770-1.4000 range and we would stick to fading extremes. Sell rallies above 1.3950 with a stop at 1.4010 and buy into dips below 1.3825 with a stop at 1.3760.
ADP Employment: Quick Take - CIBC The following is a quick take on today's ADP Employment report as provided by CIBC World Markets.
Even though signs suggest GDP growth wasn’t particularly strong in Q4, firms continued to hire. The ADP Employment report showed that the economy added 257k jobs in December, well ahead of the consensus of 198k and a nice pickup from last month’s solid 211k. December’s number is the highest in a year and suggest that the pace of hiring continues to be brisk.
Even though this doesn’t have a particularly good correlation with Non-Farm Payrolls (released Friday), this will add some upside pressure to the consensus and our forecast.
If Friday’s release does show the same type of strength, that’s one box that will likely to be ticked for another Fed hike in March
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Setups For EUR/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD - Barclays The following are the latest technical setups for EUR/USD, USD/JPY, USD/CHF, AUD/USD, NZD/USD, and USD/CAD as provided by the technical strategy team at Barclays Capital.
EUR/USD: We are overall bearish and would use upticks towards 1.0950 as an opportunity to sell at better levels. A move below 1.0710 would confirm downside traction towards our targets near 1.0640 and then the 1.0520 range lows.
USD/JPY: A close below our initial downside targets near 118.00 would signal lower towards the greater range lows near 116.15 and then 115.85.
USD/CHF: Wednesday’s small topping candle signals a breather within the context of the overall rising trend. We are looking for a move through 1.0125 to open our targets near the 1.0330 highs. Monday’s 0.9925 low helps to underpin upside traction.
AUD/USD: The move below our targets near the 0.7015 November lows signals further downside towards the 0.6935 area. Beyond there we would look for a move towards support near 0.6770.
NZD/USD: We are bearish and look for further downside through initial targets near 0.6575. Our greater targets are at the 0.6430 November lows and then the 0.6235, 2015 lows.
USD/CAD: Our bullish view was endorsed by the break above resistance near 1.4080. Our initial targets are in the 1.4190 area. Beyond there we are looking towards 1.4665.
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GBP/USD: Daily Channel Next; USD/JPY: Neckline Next - SocGen Having confirmed a head & shoulders (H&S) formation late last year, GBP/USD has embarked on a steady downtrend and is now testing a daily channel and last April’s low of 1.45, notes SocGen.
"More importantly, this is also a monthly channel limit. The undercurrent is clearly weak, as highlighted by the monthly MACD, which is languishing in negative territory.
A rebound, if any, is likely to be of a corrective nature, and the neckline of the pattern at 1.5170/1.5230 should block it," SocGen projects.
"1.45 is likely to be only an intermittent support, and eventually a test of the 2010 low at 1.42 looks on the cards," SocGen argues.
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What Is SocGen FX Quant Fund Buying & Selling Now? The SG FX Enhanced Risk Premia has switched fully to a risk-off positioning. The dollar remains the biggest long position, complemented by a long in JPY.
The most sizeable shorts are in CAD, GBP and AUD. The short position in GBP/USD, EUR/USD and the long position in USD/CAD are the USD crosses with the strongest combined momentum and IR-driven FX signals.
The static SG Sentiment indicator has moved into risk-averse territory. Based on the adaptive (tailored) version of the sentiment indicators and the relevant time-series signals, we have a short exposure to both G10 and EM carry, while the Asian carry basket is closed.
The risk of the aggregate strategy is below target and is close to 7% annualised volatility. The strategy is up 1% over the week.
Enough Pounding: 2 Reasons Why GBP Selloff Is Overdone - Credit Agricole
Against the background of still unsettled markets, it may be a good time to turn to trades that offer intrinsic value that transcends the daily risk on/ risk off swings. GBP seems to be one such currency. The pound got pummelled of late as fears about a potential Brexit and the BoP crisis it could trigger gripped the markets. It didn't help the GBP the fact that at ca 5% of GDP the UK CA deficit is the largest in G10. The GBP selloff is starting to look overdone, however:
1/ The Brexit-inspired GBP-bearishness seems premature given that there is no set date for the EU referendum yet. Worth highlighting that PM Cameron will have a chance to reach a compromise with his EU counterparts on his reform proposals at the upcoming summits - in February, March and, if needed, June. Depending on the outcome of the negotiations, polls could swing with the scope for a change in sentiment still significant given the share of undecided voters. With the FX markets now starting to look further into H2 16 for the date of the EU referendum, chances are that some of the GBP-bears will start taking profit.
2/ The Brexit fears need not significantly impact the BoE outlook just yet.Indeed, while some of the activity data out of the UK disappointed of late, other releases like the retail sales, employment and lending remained resilient. Today, markets will focus on the IP and MP for December. While not necessarily forward looking, potential positive surprises from the data would increase the scope for an upward revision of the Q4 GDP. The January BoE meeting on Thursday could be even more important in that it will highlight that the views at the MPC changed little despite the recent data disappointments and growing Brexit concerns. This could be perceived as hawkish relative to the market expectations and support GBP.
We remain bullish GBP/AUD is our portfolio and think that GBP could do well against low yielding currencies like EUR in the near term. The contrast between the dovish ECB minutes and the still constructive BoE economic outlook could highlight the downside risks for the cross. In addition, we note the decoupling between the FX spot and the short-term FX fair value for the cross, which we estimate to come close to 0.72 at present.
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Fed's Rosengren: ECB negative rates as the Fed hikes complicates things Fed's Rosengren:
I like the sound of more volatility.
But the real big moves will come when the Fed abandons its pledge to hike rates because inflation isn't coming.
Trade Ideas For EUR/USD, EUR/CHF, GBP/USD, AUD/USD, NZD/USD - UBS
The following are UBS' latest short-term (mostly intraday) trading strategies for EUR/USD, EUR/CHF, GBP/USD, AUD/USD, and NZD/USD.
EUR/USD: is holding the familiar levels. We prefer to keep it tight and play the intraday moves. The pair is still holding the lows from the last US NFP day after testing that level on Wednesday. We expect sellers to show up on any move above 1.0950. EURUSD should eventually head lower but for now range play remains strong. We have seen decent buying interest this week but rather limited reaction.
EUR/CHF: was in focus for once as it broke through a downtrend line at 1.0990 and seemed to attract good buying interest up to 1.0960. The cross has little resistance until the September high of 1.1050, which clearly is the target of this current move. Buy on dips to 1.0920-30 today and go long.
GBP/USD: Stay flexible intraday, but buy cable on dips to 1.4375-70 initially with a close stop below and fade 1.4500-25.
AUD/USD:failed to rally Wednesday morning when oil and equities tried to rebound, and headed lower when risk turned in the afternoon. Australia jobs data was slightly better than expected but the bounce was short-lived. The markets remain very nervous and price action should remain choppy with risk to the downside; we expect the pressure to increase on a break below 0.6900. Intraday resistance comes in at 0.6990-0.7010. Fade rallies towards that level and stick to shorts provided the pair remains below 0.7100.
NZD/USD: been trading in sync with AUDUSD, being caped at 0.6580-00 all week. NZDUSD broke below support at 0.6490-00 on risk selling in Asia and touched a low of 0.6568. Stay short if the pair remains below 0.6640. Intraday resistance comes in at 0.6525.
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