Weekly forecast - page 4
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Best Technical Trend Trade For 2016: DXY Up, Euro Down - BofA Merrill We recommend staying long US dollar and short euro for the first half of 2016. In 4Q15, the DXY broke up through resistance of a bull flag with upward momentum, and the euro broke down through a descending triangle pattern with downward momentum.
Both breakouts suggest the trends continue in the direction of the break; DXY up and euro down. Fibonacci projections suggest the DXY initially targets 102.53. Additional upside is possible. A larger measured move projection calculated from the break of a long-term trend line starting in 2006 aligns with twice the bull flag projection and historical past pivot points of 108.70.
The euro’s break down through a descending triangle suggests a target of 1.00. Additional downside may be possible if the euro retests the bottom of the channel. The 1.382% descending triangle projection aligns with the bottom of the downward sloping channel in 2Q16 at .9600.
GBP/USD, USD/JPY: Broad Consolidation; Levels & Targets - UOB
The recent bullish phase inGBP/USD has ended with the break below 1.5030 yesterday, notes UOB Group.
"The current movement is likely the early stages of a neutral and broad consolidation. In other words, sideway trading is likely in the next couple of weeks.
Strong support is at the recent low of 1.4900 with equally strong resistance at 1.5160," UOB projects.
Same for USD/JPY where UOB notes that the unexpected sharp drop to a low of 122.69 is likely part of a broader consolidation range and not the start of a sustained down-move.
"We continue to expect this pair to trade between 122.00 and 123.65," UOB adds.
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Quant Signals For EUR/USD, USD/JPY, AUD/USD, & Other Majors - Barclays The following are the latest FX signals from Barclays Capital quantitative analyzer model.
"Our FFV model suggests that EURGBP and NZDUSD are now overvalued. Momentum-wise USDJPY remains oversold," Barclays vnotes
Liftoff A Dec 2015 Sputter, 2016 USD Plus - Citi In its weekly note to clients, CitiFX draws a strong distinction between the immediate USD impact of the Fed's likely liftoff next week and how it will play out in 2016.
"We think the Fed has no incentive to sound hawkish next week and its priority will be to establish that the US economy is robust enough to deal with the beginning of normalization.
We doubt that they want a strong USD to follow immediately on liftoff as it would probably be associated with weaker equities and pressure on asset market during a period of low liquidity.
Once the principle normalization has been established, we think the Fed can revert to a data dependent hiking path which may imply a faster pace of hiking subsequently.
This may not come through immediately in 2016 strengthen as the rate path firms. but as H1 progresses we expect to see the USD strengthen as the rate path firms," Citi argues.
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Turning A Chapter In FX Markets - SocGen The ECB cut rates and the euro rallied. The RBNZ cut rates and the NZD rallied. Now we await the last big market event of 2015 in the form of a much-anticipated (and discounted) ‘dovish hike’ by the FOMC.
Of course, we could get either no hike at all, or a less dovish hike than we expect. But assuming that the hints, nudges and winks have got expectations to the right place, what will matter for the FX market is how other assets are affected.
Currency policy can be a driver of FX markets for long periods, but at cycle turning points, what’s important is how capital flows are affected. That could be pretty dull in the near term for G10 currencies, but it’s pretty scary for emerging market currencies.
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USD: Will The Fed Deliver A Bang Or A Whimper? - BofA Merrill We enter the last full trading week before Christmas with two major central bank meetings ahead of us: the FOMC and the BoJ’s MPB.
We – like the market – do not expect any fireworks from the BoJ. And, with the market ~95% priced for a Fed hike, the FOMC should be uneventful as well.
However, along with the actual rate decision, the FOMC will deliver its latest SEPs, which along with Yellen’s press conference, will determine whether the Fed can successfully pull off a dovish hike
The bar for a dovish hike in FX is high, while rates will also pay close attention to the Nov CPI print.
Together, we will see the USD supported in the wake of the statement, but historical experience makes us cautious about how long the rally can last. In particular, the USD has typically rallied into the first Fed hike only to sell off in the months after. This is largely because the market has fully priced the start of cycle, and expectations for other central bank tightening builds.
With the market still positioned long USD, despite the washout post-ECB, the bar remains high for a further near-term rally, in our view, particularly if equities come under pressure. The latter risk seems more elevated in the wake of the post-ECB and OPEC market volatility. In a risk off situation, being short higher beta commodity currencies still makes sense, though we would avoid funding currencies like EUR, JPY, and CHF.
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USD, JPY, CHF, CAD, AUD, NZD: Weekly Outlook - Morgan Stanley USD: The End of an Era. Bullish.
We believe that USD is likely to outperform into the first Fed hike. The market is not pricing a March hike, and risks are skewed towards the market increasing the chance of a faster pace in the hiking cycle. Outperformance should be focused against commodity currencies and EM, given the downtrend in commodity prices recently and the somewhat hawkish ECB meeting last week.
JPY: G10 Outperformer. Bullish.
We continue to hold a bullish JPY view. Much of the GPIF rebalancing has already occurred, and therefore JPY should lose this headwind. In addition, the GPIF has said that it is ready to hedge its FX exposure to protect against losses, which should offer further support to JPY. Finally, we believe that risk appetite could fade, given the latest slowdown in global trade and the approaching Fed hike.
CHF: Selling CHFJPY. Bearish.
The SNB remaining on hold but talking about intervening in FX markets when required has kept CHF weak. The SNB has said that all new money created by the SNB and circled back to the bank is going to be charged at the negative rate as most exceptions have been exhausted. Weak global risk appetite has supported CHF, but we expect this to be temporary effect for CHF in particular, so would use the rebound to sell CHFJPY.
CAD: 3Q a Head Fake? Bearish
We think that the market is still underestimating the fragility of the recovery in Canada and think there is more scope for USDCAD to rise as markets price in a greater chance of BoC easing. Following weak trade data on Friday and Poloz’s speech this week, markets seems to be realizing that 3Q was a likely a head fake and 4Q is not looking good. Furthermore, Canadian oil prices have fallen near the post-crisis lows.
AUD: A Deteriorating Picture. Bearish.
The outlook for AUD continues to deteriorate. Australian terms of trade has maintained its sharp downward trend, with iron ore prices decisively breaking below recent lows. Capital expenditures have fallen in line with this, and are expected to fall in the upcoming fiscal year, with little rotation away from the non-resources sector in Australia. Global trade remains soft, seen in the latest Asian trade numbers. We remain bearish AUD.
NZD: Not as Optimistic as the RBNZ. Bearish.
Weak global risk appetite, low milk prices relative to a year ago and rising funding costs are all negative for NZD. Inflation remains low and terms of trade unfavorable for NZD. This week the market’s reaction to the Fed will be important. NZD is a high-beta currency so in the latter part of the week will likely respond more to the USD side rather than New Zealand events. We remain bearish for the medium term.
EUR/USD: Beware Of An Overlap With Wave-1 Bottom - Goldman Sachs If this is truly a 4th of 5-waves, EUR/USD bears needs to avoid any overlap with the bottom of wave 1 (Sep. 3rd low) at 1.1088, argues Goldman Sachs.
"In other words, as long as the market holds below 1.1088, there’s still a good chance to see at least one more impulsive move lower. This would in turn complete the 5- wave bearish sequence that started at the August high," GS clarifies.
"From current levels, wave 5 has potential to reach a minimum target of 1.0420 (if wave is equal to wave 1). An extended 5 th wave could reach as far as parity (1.618 times the length of wave 1).
Failure to hold below 1.1088 however means that this is in fact not a 4 th of 5-waves but actually part of a more complex corrective sequence," GS argues.
"Bottom line, it means the market likely put in a meaningful low in November. The next retrace levels above are then at 1.1118 and 1.1258 (50% and 61.8% of the decline since August)," GS concludes.
EUR/USD, USD/JPY, AUD/USD: Flows, Techs, Strategies - SFC EUR/USD: Sideways.
-Flows: bids 1.0920/00. More ahead of 1.0860/50. Stops below. Offers 1.0980/1.10. More ahead of 1.1040/50. Stops above.
-S/T tech: Positive above 1.0860 with scope for retest of recent highs.Market seems not to be overly happy with EURUSD staying above 1.10. Respect 1.09-1.1050 range for now. Involve only on the extremes.
-M/T tech: Daily close above 1.10/1.1020 turns our m/t model positive. We do not get excited though and take wait-and-see approach looking for additional confirmation that rally has further room to go.
-Levels to watch: 1.0920/860 on the downside; 1.1030/50 on the upside.
USD/JPY: Off the lows. Support @ 120.50/20 in focus.
-Flows: bids 120.80. More ahead of 120.50. Stops below. Offers 121.60. More ahead of 122.00/20. Stops above.
-S/T tech: Negative below 121.60/122.20 with scope for limited losses ahead. Given the o/s intraday readings and proximity of strong support in 120.80/50 area allow for a period of sideways activity in 120.80-122.00 before next attempt lower. Short @ 122.10/20( 1/2). Reconsider booking profits on downticks or stick to shorts with stops trailed to 121.70; targeting 120.80/50 initially and 120.20 should the decline extend.
-M/T tech: Positive above 120.50/20.Sharp rejection off 123.60 accompanied by a decline below 200D SMA adds a question mark to sustainability of m/t uptrend. Technically pullbacks into 121.50/120.50 seen as an opportunity to reinstate m/t longs. stops<120.20/00.
-Levels to watch:120.50/20 on the downside; 121.60/122.20 on the upside.
AUD/USD: Drifts lower
-Flows: bids 0.7180/60. Stops below. Offers 0.7240/50. More ahead of 0.7280/7300. Stops above.
-S/T tech: Negative below 0.7240/7310 with scope for limited losses ahead. Short strategy off 0.7250 is stil in the money. Reconsider booking profits on downticks or stick to shorts with stops trailed down to entry level, targeting retest of recent lows.
-M/T tech: No change. Positive above m/t support @ 0.7020. Sustained break above 0.7720 opens 0.7380/7440 (partially met)as next targets. Sharp rejection off 0.7380 signals bull exhaustion and possible top in place. Book profits on upticks or trail stops up to 0.7160.
-Levels to watch: 0.7160 on the downside 0.73 on the upside.
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Quant Signals For EUR/USD, USD/JPY, AUD/USD, & Other Majors - Barclays
The following are the latest FX signals from Barclays Capital quantitative analyzer model.
"Our FFV model suggests that EURGBP and NZDUSD are overvalued. Momentum-wise USDJPY remains oversold and market sentiment has turned bearish following the recent risk-off," Barclays notes.