EUR/NOK Downside Attractive, Avoid GBP/USD, USD/Asia Trendless – Deutsche Bank

EUR/NOK Downside Attractive, Avoid GBP/USD, USD/Asia Trendless – Deutsche Bank

Oliver Harvey, Macro strategist at Deutsche Bank, suggests that the EUR/USD is still their top scoring currency pair as it is moderately trending and breaking new ground (to the upside).

Key Quotes

“The cross is the smoothest in G10, reflecting low vol and is not at all stretched. EUR/NOK breached resistance to the downside making it our top trending currency pair. Both VHF and ‘newgroundiness’ are above the 80th percentile, suggesting that the move lower should be followed.

With respect to the commodities currencies, AUD and NZD strength is reflected in a high score on the ‘new groundiness’ measure. GBP/USD has low levels of trendiness and high volatility as measured by implied and realized volatility. USD/CHF is breaking new ground to the downside at 82nd percentile. The cross is not particularly stretched from RSI, but very stretched from risk reversal point of view. In terms of volatility, the pair has low realized volatility although its risk premia is on the higher side.

EM FX

Trendiness in the EM space continues to be weak with average VHF at 33rd percentile. USD/CZK tops our currency scorecard due to the pair’s low level of stretchiness as measured by RSI (100th percentile) and smooth price action as per realized volatility (89th percentile).

USDZAR is the top trending pair (to the downside) with VHF at 77% percentile. It is not particularly stretched and has a smooth price action suggesting that the move below can be followed. A majority of the Asian currencies have displayed slow momentum with VHF in the low percentiles suggesting that the currencies are not as attractive to trade.”