The following is from Barclays as provided via eFXPlus:
Barclays Research discusses EUR/USD tactical outlook into the European elections.
"We expect EUR/USD to remain heavy into the European Parliament (EP) elections (23-26 May), which likely will reinforce concerns about Europe's medium-term outlook. Yet, without significant surprises, we think it is unlikely that the election results will roil markets," Barclays argues.
"In that context, the roughly 25bp breakeven move priced into EUR/USD options over the election dates appears broadly fair. This is not to say that the bad news is in the price, but rather that EUR faces 'realization' risk as market fears of the interaction between Europe's increasing political fracture and rising threats to near-term growth and to long-run stability are confirmed.
Furthermore, the skew around realization clearly is to the downside, in our view: a worse performance by 'alternative' parties is unlikely to benefit the EUR, but stronger-than-expected gains will accentuate markets' concerns and engender knock-on electoral risks in Italy that have negative implications for the EUR,"Barclays adds.
First appeared on eFXplus on May 21 - 03:30 PM
This post was reposted from the eFXplus service. eFXplus provides daily price-based FX data 24/5 derived from banks and institutions and Thomson Reuters IFR Markets.
Credit Suisse discusses EUR/USD technical outlook and flags an important bullish wedge reversal pattern that has been in the making over the past couple of months.
"The immediate test for EURUSD remains at its 55-day average and price resistance at 1.1309/32, a close above which is needed to add weight to the bull “wedge” roadmap, with key resistance then seen at the March high and 200-day average at 1.1443/48.
Ultimately, a close above here is needed to confirm an important bullish “wedge” reversal, as well as a “double bottom” base, which would suggest the core trend has turned higher. Resistance would then be seen next at 1.1515, before the 1.1571 high for the year and 61.8% retracement of the fall from last September," CS notes.
"Bigger picture, above here in due course can see resistance back at 1.1703/20 – the 38.2% retracement of the entire 2018/2019 fall and “double bottom objective," CS adds.
First appeared on eFXplus on May 03 - 12:45 PM
Nordea Research discusses GBP outlook in light of today's BoE decision and sees a scope for downside risk through the Summer.
"The GBP is weaker on the heels of the updated forecasts from Bank of England, but the reaction is overall muted. It is though notable that Bank of England is not as clearly backing the case for a stronger GBP, as they did when EUR/GBP traded above 0.90 in August 2018. In 2018, when core CPI ran above target, it was easy to see that Bank of England held a low tolerance for a weaker GBP (due to the pass-through to CPI). They wanted an unchanged or even stronger GBP in order to rein in inflation. That is far from clear that it is still the case," Nordea notes.
"The GBP now seems relatively free to weaken compared to in H2 2018. We see downside risks for GBP, as Theresa May could end up throwing in the towel over the summer," Nordea adds.
First appeared on eFXplus on May 02 - 03:20 PM
First appeared on eFXplus on May 02 - 12:00 AM
24-HOUR VIEW: Weakness in EUR could test 1.1170 first before a recovery can be expected. After edging to a high of 1.1265, EUR plunged and hit a low of 1.1186 during late-NY hours. While the sharp and rapid decline appears to be running ahead of itself, the down-move is not showing sign of stabilizing. From here, EUR could test the 1.1170 support first before a recovery can be expected. For today, the next support at 1.1145 is not expected to come into the picture. On the upside, only a move above 1.1240 would indicate that the current weakness has stabilized (minor resistance is at 1.1220).
1-3 WEEKS VIEW: EUR is expected to trade sideways. EUR cracked the 1.1210 ‘key resistance’ on Tuesday (30 Apr) before extending its gain to a 2-week high of 1.1265 yesterday (01 May). The up-move was however short-lived as it dropped sharply after FOMC announcement and ended the day lower by -0.18% (NY close of 1.1194). The inability to extend its weakness below 1.1100 (last week low of 1.1110) and the rapid pull-back from the 1.1265 trend-line resistance suggest the current movement is likely part of a consolidation phase. In other words, EUR is expected to trade sideways.
NAB Research discusses USD/JPY tactical outlook and flags a scope for upside after the end of the Golden Week holidays in Japan.
"We noted that Japanese retail FX traders were running extended net long TRY/JPY (and ZAR/JPY) positions into the start of Golden Week - a 6-day holiday period during which the TFE, Gaitame.com and other margin trading exchanges will remain open. This is seen to entail some risk of a repeat of the January 3rd JPY-related ‘flash crashes’ in the event we see violent moves in TRY (or ZAR) this week. But maybe more pertinent is that retail investors are running record short USD/JPY positions on the TFE - perhaps in part as a defensive strategy during Golden Week (or indeed to benefit from another flash crash event)," NAB notes.
"As such, if we are spared a stronger JPY this week, there must be a risk that position unwinds by retail investors support a stronger USD/JPY next week and beyond, at a time when the stronger USD environment in any event suggests that the risks to the prevailing ¥110.50 to ¥112.85 range lies to the upside," NAB adds,
First appeared on eFXplus on Apr 30 - 04:15 PM
Citi discusses the USD's current drivers and thinks that the month of May could be a critical juncture for the greenback.
"There now appear to be a mixed set of undercurrents driving FX sentiment. These are:
(1) Strength in US data but with subdued inflation and a dovish Fed - supportive of a more positive risk backdrop and negative for safe haven FX (USD, JPY & CHF);
(2) Euro centric concerns - (a) poor euro zone manufacturing; (b) US-European trade tensions; (c) European parliamentary elctions on May 23 - negative for EUR vs USD;
(3) Market pressure for rate cuts from RBA, RBNZ and BoC due to undershooting inflation - negative for commodity FX vs USD," Citi notes.
"Bottom Line - A relatively positive risk backdrop is negative for USD but euro centric risks and pressure on commodity central banks to cut rates are pulling in the opposite direction and helping support USD against EUR and commodity FX.
FX positioning shows EUR and AUD option vols heavily skewed towards a bearish outlook and potentially suggests some further near-term USD strength can turn quickly on (1) a resolution to the US - China trade deal, (2) resolution of euro centric risks (both possible in May) and (3) pushback by commodity FX central banks on Cutting rates (also in May). May therefore is a key month to watch," Citi argues.
First appeared on eFXplus on Apr 29 - 03:30 PM
Danske Research discusses the EUR / GBP outlook in view of revising its forecasts to account in 3-12 months for a longer range trading period of around 0.85-0.87.
"With a medium to long Brexit extension and no reason to believe that May's deal will pass or that cross-party talks will prove to be successful any time soon, we think it's hard to see much more GBP-strengthening in the near term. Therefore, we've raised our GBP forecasts throughout the forecast horizon and are looking for EUR / GBP to stay range-bound at 0.85-0.87 in 1-3M.
"In the event of a Brexit no deal by the end of October, we still expect EUR / GBP to move towards parity. If May's deal goes through, we would expect EUR / GBP to go down to 0.83. We target the cross at 0.86 in 1 M and 3 M (prev. 0.83), 0.86 in 6 M (0.82) and 0.86 in 12 M (0.83).
First appeared on eFXplus on Apr 23 - 03:00 PM
EUR/USD: EUR has moved into a consolidation phase.
There is not much to add as EUR traded in a quiet manner yesterday and within a narrow range of 1.1234/1.1263 before ending the day just a tad higher at 1.1255 (+0.08%). As highlighted yesterday (22 Apr), EUR has likely “moved into a consolidation phase” and is expected to trade sideways for a couple of weeks, expected to be within a 1.1200/1.1300 range. Looking ahead, only a move above the major 1.1330 resistance level would suggest EUR is ready to challenge the 1.1400 level even though this is unlikely to happen anytime soon.
MUFG Research discusses USD/JPY outlook and maintains a neutral bias, expecting the pair to trade in a 110.50-113 range in the near-term.
"USDJPY has risen slightly. Japanese investors were net sellers of securities by JPY1.6 trillion the first week of April, primarily to take gains on foreign bonds. The second week of April, they turned slight net buyers, by JPY95.8 billion. They are expected to rebuild their portfolios by the third week of April and are expected to be quiet the last week of the month ahead of the 10-day Golden Week holidays," MUFG notes.
"With yen short positions at the CFTC growing, there have been yen buying flows, and the trading range for USDJPY has been narrowing. Over the near term, there are no big indicators coming up, and with the BoJ not expected to make any policy changes next week, USDJPY will probably remain in a narrow trading range. The market does not seem to have factored in speculation of BoJ monetary easing, but JPY could rally a little after the April meeting ends," MUFG adds.
First appeared on eFXplus on Apr 18 - 11:00 AM
Mitsubishi UFJ Financial Group discusses EUR outlook and flags a scope for EUR/USD to stay bid in the near-term on an increased demand as China's data keep improving.
"The key beneficiary of a global pick-up is going to be Germany. The largest exporter has been hit hard by the China slowdown along with the recession in Italy and the financial crisis in Turkey last year. Good news from China adds to better industrial production data from Italy (Feb IP gained m/m for second consecutive m/m increase, the best growth since the end of 2017) and from Turkey. Italy, Turkey and China were three of the five biggest drags on exports from Germany in the year to Q1 2019. Finally, the removal of imminent Brexit risks will probably add to better business condition in Germany," MUFG notes.
"EUR/USD dropped from 1.1800 in September to the recent lows around 1.1200 and there is building evidence to argue for some reversal in that decline. Adding support for this reversal to unfold is the break in USD/CNY below the 6.7000 level for the first time since 20th March.
Conditions are ripe for some increased EUR demand over the near-term but expect market caution today ahead of the key advance PMI readings tomorrow," MUFG argues.
First appeared on eFXplus on Apr 17 - 08:33 AM
First appeared on eFXplus on Apr 16 - 12:00 AM
EUR/USD: A NY close above 1.1330 would suggest EUR is ready to tackle 1.1400.
There is not much to add as EUR traded in a quiet manner before ending the day marginally higher at 1.1307 (+0.06%). As highlighted yesterday (15 Apr, spot at 1.1300), upward momentum has improved and the risk for a higher EUR has increased. From here, if EUR could close above 1.1330 in NY within these few days, it would be a strong indication that EUR is ready to tackle the next resistance at 1.1400. On the downside, only a break of the 1.1240 ‘key support’ (no change in level) would suggest that the current upward pressure has eased.
Bank of America Merrill Lynch Research discusses its expectations for this week's ECB April policy meeting on Wednesday.
"We expect no action from the ECB this week, but the attention will likely be drawn to questions about targeted longer-term refinancing operations (TLTROs), tiering, low for longer, and room for further cuts. We would not expect many answers at this point, but we may get some hints of what lies ahead on timing and details of TLTROs, sideeffects of monetary policy on banks, tiering, and potential cuts," BofAML projects.
"The EUR has weakened following a dovish tone in recent ECB meetings and this is also a risk this week. However, the impact has not been sustained. The main driver of the EUR has been the weak Eurozone data. The ECB tone and policies are data-driven and this is what will determine the EUR outlook for the rest of the year...Bottom line, data are still the main driver and we expect Eurozone data to improve from a low base in the months ahead," BofAML adds.
First appeared on eFXplus on Apr 09 - 10:00 AM
More and more investment banks are getting bearish on the Canadian Dollar, especially after Friday's employment reports confirmed the economy might be in for a slowdown in the period ahead. Here, we provide the view on USDCAD from Canada's TD Securities, as provided via the eFXPlus Premium Service:
TD Securities adopts a structural bearish bias (on Canadian Dollar) over through year-end. TD official forecast for USDCAD is 1.3500 - 1.3600 through year-end but sees risks skewed to the upside.
"The outlook for the Canadian Dollar has shifted considerably to the downside following a deeper slowdown to growth than initially expected. Coupled with the expectation that the Bank of Canada has completed its tightening cycle, the CAD's return profile is asymmetrically skewed to the downside," TD notes.
"Not only does the domestic economy look woeful, but external dynamics (awful Balance of Payments) should put the Loonie on a path of broad and sustained depreciation. Risks are skewed to 1.35 - 1.40 for the USDCAD pair this year," TD adds.
First appeared on eFXplus on Apr 04 - 02:00 PM
National Australia Bank Research discusses NZD/USD outlook and maintains a neutral bias in the near-term, but looks to higher ranger over the coming months. NAB sees NZD/USD around 0.67 in the near-term, and close t0 0.70 by year-end."
The NZD continues to track within the 0.6650-0.6950 trading range it has been stuck in since early November, owing to conflicting forces. We expect more of the same as debate about the global economic outlook rages on,' NAB notes.
"As market participants debate the economic outlook, a tug of war on the NZD is operating, allowing the NZD to track sideways in a fairly narrow range. Until there is more clarity on the outlook, this state of affairs is expected to continue. As the year progresses, we see more positive influences on the NZD prevailing and a higher trading range emerging," NAB adds.
First appeared on eFXplus on Apr 04 - 12:30 PM
EUR/USD: Short-term bottom in place; EUR is expected to trade with an upside bias.
After eking out ‘fresh’ lows for several days in a row, EUR staged a relatively strong rebound and tested our 1.1255 ‘key resistance’ (EUR touched 1.1255 during London hours). We have held the same view since last Friday (29 Mar) that EUR could revisit the 07 Mar low of 1.1174. That said, we have highlighted that “downward momentum is lackluster and the prospect for a sustained decline below 1.1174 is not high”. After yesterday’s price action, it is likely that EUR has registered a short-term bottom at 1.1181 on Tuesday (02 Apr). However, it is premature to expect a sustained up-move. The current movement is viewed as a corrective recovery and EUR is expected to trade with an upside bias towards 1.1300. At this stage, the probability for a move beyond the next resistance at 1.1330 is low. On the downside, 1.1174 is expected to remain unchallenged, at least for the next one week or so.
Australia and New Zealand Banking Group adopts a bearish bias for EURUSD in Q2 - targeting a move towards 1.08.
"Despite the prolonged narrow range-trading in EUR/USD, we view the risks as skewed towards EUR downside in coming months. Both the US Fed and European Central Bank (ECB) moderated forward guidance on interest rates last month, removing expectations that interest rates will rise this year. That has contributed to falling volatility, but we are unconvinced that this can last much longer," ANZ notes.
"The yield curve inversion cannot be ignored, but unlike previously, US wages, inflation and confidence measures are strong. We think the inversion has more to do with a reach for duration than a downturn in growth expectations. On current and expected developments, we don’t see the Fed cutting interest rates this year. As US growth and interest rate expectations recover, we could see USD outperformance," ANZ dds.
First appeared on eFXplus on Apr 01 - 04:45 PM
EUR/USD: EUR is likely to trade sideways.
While EUR is still trading within the expected 1.1220/1.1400 range that we indicated on Monday (25 Mar, spot at 1.1295), the relatively weak price action over the past couple of days has resulted in a build-up in downward pressure. For now, we continue to hold the view that EUR “is likely to trade sideways” but if EUR were to close below 1.1220 in NY, it would indicate that it is ready to revisit the 07 Mar low of 1.1174. At this stage, the probability for such a scenario is not high but it would continue to increase unless EUR can move back above 1.1330.
Nordea Research discusses AUD outlook and flags a scope of tactical rebound on a relief in liquidity. Nordea maintains promoting long AUD/NZD to express this view.
"The eagerly awaited announcement of the end-date to QT is now a reality, and hence we find it timely to look at how some of the most “sensible” G10 USD pairs price versus the new outlook for developments in USD excess liquidity.
AUD is the currency that would most obviously gain from a liquidity relief within G10, as i) positioning is super short in AUD, ii) Market pricing of RBA is very gloomy (yes, we acknowledge that the domestic Australian outlook is anything but impressive) and iii) AUD is most obviously linked to the credit cycle," Nordea argues.
"We though opt to play such a potential for an AUD positive rebound against NZD still, as NZD prices higher relative to the liquidity outlook already," Nordea adds.
First appeared on eFXplus on Mar 25 - 02:00 PM
The British Pound continues to be volatile due to Brexit developments, and here we provide an insight from MUFG on the latest developments:
"The recent pound sell off has been triggered by the outlining of both the EU’s and UK’s demands for an extension to Article 50 beyond the end of March. Prime Minister May has chosen the higher risk option of asking for just a short extension until the end of June...At the same time, the EU have clarified that they would be open to a short extension but only if PM May is able to pass her Brexit deal," MUFG notes.
"The best outcome for the pound in the near-term would be if the intensified pressure proves successful in passing a Brexit deal by the end of this month. It could lift cable lift towards the 1.3600 level and lower EUR/GBP further below the 0.8500-level....
However, the odds currently do not look good for such a favourable outcome. It is more likely that MPs will continue to reject PM May’s Brexit deal, and then both the UK and EU will have to more seriously weigh up the alternative options of a “No Deal” Brexit or a longer extension to Article 50. The heightened risk of a “No Deal” Brexit could see cable briefly fall back towards the 1.3000-level and EUR/GBP rise back towards the 0.8800-level in the week ahead," MUFG argues.
First appeared on eFXplus on Mar 21 - 08:52 AM
NAB discusses AUD/USD technical outlook and maintains a neutral bias in the near-term.
"Since mid-January, range breakouts, both up and down, have been quickly reversed. As such a daily close above the mid-February low at 0.7054 would imply another failed interim decline. Price has broken below the daily cloud base (0.7068) this week, after multiple attempts in the recent weeks. Interim resistance now at 0.7065/75...A weekly close at or above 0.7085 will be cause to maintain our modestly bullish forecasts," NAB notes.
"From a technical analysis perspective this is a difficult point in time with much conflict in the charts. Hoping to see some clarity in the weekly close," NAB adds.
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