Morgan Stanley is continuing to make a weekly forecast for the currency pairs making on technical analsysi, fundamental analysis and for some Morgan Stanley's expectation about what they want for us to do for example sorry.
As we see - the expectation for EUR is bearish and for AUD is bearish too (USD is for bullish condition).
USD: "We believe USD strength will be focused against EM and commodity currencies going forwards, with AxJ particularly underperforming. This is largely a result of the CNY move, but also reflects growth differentials and structurally lower commodity prices. However, we would expect the path against other G10 currencies to be driven more by data into September, as the market watches the Fed closely."
EUR: "We believe EUR could benefit from the latest developments in China. CNY moves could spill over into general asset market volatility. This would support currencies with current account surpluses that have been used to fund risky holdings, as investors unwind their risky positions. EUR is such a currency. In addition, many investors have hedged their European equity holdings, and as these positions are unwound, this will lead to buying back of hedges, supporting EUR."
JPY: "We believe JPY is likely to face conflicting forces following the developments in China. On the one hand, this increases deflationary risks for Japan, as a weaker CNY could lead to disinflationary pressure in Japan. It also challenges Japanese competitiveness, given the impact on the REER. On the other hand, uncertainty on CNY is likely to de-stabilize risk appetite, leading to repatriation and supporting JPY. Overall, we expect the latter effect to win out in impact, but recognize the risks."
GBP: "The dovish inflation report and risk appetite getting hit has provided some headwinds for GBP. However with China developments still playing on markets’ minds and the Fed coming back into play, we believe GBPUSD is going to be driven more by the USD side of the pair. The BoE is still one of the central banks heading towards a hike next year so GBP should gain some relative strength. Here we like to buy against the more vulnerable commodity currencies (CAD, NOK and AUD)."
AUD: "We believe AUD is likely to be an underperformer following the developments in China this week, though stabilization in the near term could provide some relief for the currency. However, given China’s close trade relations with China, any CNY weakness will lead to de facto AUD REER appreciation, which may be countered by AUDUSD weakness in order to maintain competitiveness."
