Euro Dollar Rate Forecasts for 2014-2015 - page 23
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USD, EUR, JPY, GBP, AUD: Outlooks For The Coming Week - Morgan Stanley
"USD: Keeping September on the Table. Bullish.
We stick to our bullish USD view. Recent comments from Fed Governor Lockhart suggest that September is still very much in play, and as markets bring the timing of the first hike forward, this should support USD. With a central bank that is data dependent, we will be watching releases closely in August and expect USD to be extra data sensitive.
EUR: Watching the Fed for the Path. Bearish.
The EUR has been difficult to trade recently given that European stories such as Greece or the ECB have gone away from the market’s focus. Instead we expect EURUSD to trade lower on more optimism on the Fed. The US side of the story will dominate trading this pair. EURUSD continues to trade inversely with risk appetite so we continue to monitor the local equity markets. We note that data from the periphery is starting to turn around, in particular Spanish PMI beating expectations.
JPY: Reflation Rebound. Neutral.
We remain bullish on JPY for a few reasons. First, we continue to see signs of domestic reflation that could bring the BoJ closer to tightening. We expect strong wage growth in July because bonuses usually paid in June migrated to July. This should offer support to JPY. Second, with commodity currencies falling, the risk environment may be pressured, which will also support JPY. The main risk here would be a China stimulus which supports risk and weighs on JPY.
GBP: BoE Votes 8-1. Neutral.
The inflation report was more dovish than the market was expecting, causing GBPUSD to move below 1.55. This has now broken a previous triangular support area and has provided a bearish signal. For the path of GBPUSD over coming weeks we put most emphasis on the USD side. With Lockhart putting a September rate hike firmly in the market’s mind now, as rate expectations rise, this should support the USD side. We are still bullish on GBP on the crosses, especially with commodity currencies.
AUD: Sell on Rallies. Bearish.
Commodities are likely to weigh on AUD, and we retain our medium term bearish AUD view. However, we see two possible legs of support in the near term. First, the RBA has raised the bar for cuts, and as the market digests this, the currency may benefit. Second, any growth supportive fiscal stimulus in China would likely benefit AUD the most within the G10 space. We would look to sell on rallies."
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EUR To Re-Approach This Year's Lows Soon; Sell Rallies - Credit Agricole
We remain of the view that EUR rallies should be sold in the weeks to come. This remains on the back of strongly capped ECB monetary policy expectations.
In terms of events, investors’ focus will turn to the German ZEW economic sentiment survey and growth data for the Eurozone as a whole. However, as ECB President Draghi stressed repeatedly that QE will run its course regardless of improving growth prospects we see little currency upside risk in relation to next week’s releases.
On the contrary, inflation expectations that are back to multi-month lows may put the central bank in a position to consider an even more aggressive stance, at least verbally. As slowing price developments seem to be mostly driven by lower commodity prices further slowing inflation cannot be excluded given additional USD upside and intact uncertainty related to China.
Last but not least, less elevated speculative EUR short positioning has been decreasing position squaring-related upside risk markedly.
Hence, the EUR may re-approach this year’s lows soon.
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Market makers wrong again
EUR/USD: No Direction; Range Breakout Still Needed - JP Morgan
Markets once again refrained from providing the necessary breaks to establish new or resume persisting trends, says JP Morgan.
Specifically in EUR/USD. JPM notes that the market keeps on bouncing back and forth in a range between 1.1071 (daily triangle resistance) and 1.0772/44 (daily triangle support/int. 76.4 %), which needs to be broken to receive fresh directions.
"A break above 1.071 would on the other hand be needed to open the door for a minimum recovery to 1.1288 (minor 76.4 %),"JPM argues.
"A break below the main T-zone at 1.0772/44 would re-open Pandora's Box in terms of resuming the long-term downtrend. In this case 1.0072 (76.4 % of the 2000-2008 rally) would only be a minimum target," JPM adds.
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Don't forget SNB - they already dumped 50 billion to save the Euro - and they are continuing. Printing machines in Switzerland are working 24/7
USD: Fed Expectations Set Back By China, But Dudley Views Key - BNPP
Fed expectations have been pushed back significantly to March 2016 as a result of continued CNY devaluation, notes BNP Paribas.
"The Fed funds futures contract is down about 3bp in the very front-end, and the implied yield on the October contract has retraced last week’s gains. We would highlight that today’s additional CNY depreciation may further reduce US yields," BNPP clarifies.
"Key FOMC member Bill Dudley will have an opportunity to share his views on the policy outlook and CNY impact when he speaks to the Rochester Business Alliance at 12:30 GMT today. We suspect he will stop well short of signalling support for September lift-off, which should still leave the USD vulnerable vs. core low-yielding currencies," BNPP projects.
"We reiterate our call for December lift-off, but USD strength is likely to be muted in the near term," BNPP advises.
EUR/USD Breakout Attempt: Levels & Targets - JP Morgan
The Euro managed to extend its gains across the board this week and is now challenging key-resistance barriers, notes JP Morgan.
"These have to be cleared though in order to confirm a scale jump in favour of a broader recovery," JPM argues.
Specifically in EUR/USD, JPM thinks that breaks above 1.1288 are needed to get into clear positive territory.
"The latest break above 1.1058 (daily trend, now support) is certainly improving prospects of a broader recovery unfolding," JPM adds.
"In case the latter would be taken out we’d still need a confirming break above 1.1288 (int. 76.4 % on higher scale) to constitute a scale jump in favor of a broader recovery towards 1.1699/1.1811 (int. 38.2 % on highest scales)," JPM projects.
"Particularly back below 1.1129 though, key-support at 1.0778/44 (daily trend/int. 76.4 %) remains in focus and at risk," JPM adds.
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USD: Any Momentum Recovery? - BNPP
We head into US July retail sales data Thursday with Fed expectations having been set back by overseas developments, Notes BNP Paribas.
"We do not expect the Thursday data to be firm enough to move the needle much in the USD’s favour. Our estimates are a bit shy of consensus, with control group sales likely to have rebounded 0.4% after last month’s 0.1% decline, a bit below the 0.5% consensus," BNPP projects.
"We remain patiently bullish USD, but a momentum recovery vs. low-yielder currencies seems increasingly unlikely in the near term,"BNPP adds.
There will be no momentum recovery - ever since it became clear that FED is playing a political game and that it will not hike rates this year
Patience Is A Virtue For USD Bulls - BNPP
The Fed will still hike this year, but patience needed for USD bulls, says BNP Paribas.
"While we do not expect this week’s China developments to ultimately prevent the Fed from hiking rates this year, the uncertainty generated by the moves does support our expectation that hikes will not begin until December," BNPP argues.
"Data has also been too mixed this month to support September rate hike hopes. Yesterday’s upward revisions to June retail sales led our economists to push up their forecast for Q2 GDP to a 3.4% annualized rate, well up from the 2.3% first reported by the Commerce Department. However, the softer July reading suggests a bit less momentum for Q3," BNPP adds.
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